Corporate philanthropy, a business’s efforts to support charitable causes, is one of the oldest and most common forms of corporate social responsibility (CSR). It comes in many forms, including direct financial donations, in-kind contributions, employee volunteerism and pro-bono services. The practice continues to grow — in 2024, companies gave $44.4 billion to nonprofits, a 9.1% increase from the year before, reaching a 40-year high[1].
Good for business
As corporate philanthropy has grown, it has evolved from a peripheral activity isolated to ad-hoc donations into an integral part of corporate strategy. By aligning their philanthropic activities with their core values, mission and long-term objectives, many companies have realized the dual role CSR can play in advancing both their social impact and business goals.
Research indicates that the motivations behind philanthropy extend beyond direct financial implications, such as tax relief. For example, evidence suggests engaging in corporate philanthropy can boost a company’s competitive advantage, with customers preferring to do business with organizations possessing a strong CSR profile.
From the inside out
In addition to boosting brand reputation and consumer loyalty, aligning philanthropy with business goals helps companies attract and retain talent. Workplace giving programs, in which companies provide ways for employees to donate to charitable organizations through things like payroll deductions, matching campaigns and volunteer opportunities, can play a key role in employee engagement. According to a Project ROI CSR Report, a company which employes a CSR program may see their employee recruitment efforts increase as much as 69%, turnover decrease as much as 57% and employee morale and engagement increase by 57%.[2]
For example, in partnership with the nonprofit DonorsChoose, the PNC Foundation allocated $25 to each of their approximately 52,000 employees to donate to the preschool classroom of their choosing as part of its $500 million, multi-year initiative to support early childhood education. Further, some businesses administer scholarship programs for their employees and their families or disaster relief grants for employees impacted by a crisis. For instance, the Greater Houston Community Foundation sponsors an employee disaster relief fund with 70 corporate partners including Kinder Morgan.
Involving your employees in the donation process and supporting them directly are great ways to increase their pride in and loyalty to your company.
Philanthropic Platforms
Once a company decides to pursue corporate philanthropy, it generally selects one of three popular options: direct giving, donor-advised funds (DAFs) or private foundations. Table 1 outlines the defining characteristics of the different approaches.
Table 1: Corporate Philanthropy Options
|
Direct Giving |
DAF |
Corporate Foundation |
Implementation |
Company staff manages administrative process (vetting grantees, reporting, etc.) |
Administration managed by DAF sponsoring organization |
Requires legal services and administrative staff |
Administrative and Compliance Costs |
Minimal |
Administrative and investment management fees |
Ongoing legal, tax and accounting fees; investment management fees |
Ownership |
Full control |
Funds wholly owned by DAF sponsor, but some advisory privileges retained |
Full control |
Privacy |
Controlled by company |
DAF sponsor will follow the company’s wishes |
Disclosed on Form 990 or Form 990-PF |
Longevity |
Ad hoc |
Ad hoc unless otherwise mandated by sponsoring organization |
Recurring annual distribution requirements |
Source: PNC
Direct giving
Direct giving is gifting money or assets directly to a nonprofit organization in the form of cash donations or in-kind gifts. Direct giving often occurs in response to one-off requests from charitable organizations or as part of an employee giving program and may not lead to a coordinated long-term philanthropic campaign.
DAFs
A DAF is a separately identified fund, maintained and operated exclusively by a section 501(c)(3) charitable organization or a sponsoring organization such as a community foundation. Once a company contributes to the DAF, the sponsoring organization has legal control over the contribution. However, the corporate donor is usually granted advisory privileges concerning the distribution of funds and the investment of assets in the account.[3] The advantage of this approach is the sponsoring organization, not the corporation, is responsible for administration and compliance. The company can recognize the tax deduction upon granting the funds to the sponsoring organization and not when distributions are made from the DAF account to nonprofit beneficiaries.
Public charities and private foundations
The third option is for the corporation to create its own 501(c)(3) organization in the form of a private foundation or public charity. While this structure requires a long-term commitment with higher financial and administrative costs, the benefits and impact can be worthwhile.
The large majority of 501(c)(3) organizations created by corporations will be private foundations due to the single source of funding — the company. To earn public charity status, an organization must meet the public support test, meaning at least 33.3% of their support comes from the general public, the government or other public charities. A private foundation can be funded with cash, company stock or appreciated assets and the staff can be employed by the company or the foundation. It is common for a corporate foundation to have a lean staff and small board, with many also holding roles in the company. Private foundations are required to make qualified distributions (approximately 5% of their assets) annually toward philanthropic causes consistent with the foundation’s charitable purpose. The foundation will continue in perpetuity or until the assets of the foundation are fully distributed.
Compared to direct giving and DAFs, a private foundation allows a company to maintain control of the assets in a tax-advantaged structure. Some companies contribute funds to the foundation each year, while others create an endowed fund that allows them to make distributions in perpetuity.
Mission and strategy
Regardless of the structure or tactics used, it is helpful for a company to have a philanthropic mission and strategy to which all their activities align. For example, the PNC Foundation focuses on early childhood education so that they can dedicate the majority of their resources for a greater impact around a single cause. Salesforce has publicly committed to leveraging the company’s resources (equity, products and employee time) to improving education, sustainability and equality. Having a clear mission and strategy helps a company decide which causes to support and develop their philanthropic brand.
Oversight and compliance
Additionally, a company’s philanthropic activities should have a certain level of oversight. While a corporate foundation will likely have a board of directors who oversees activities, a direct-giving program will likely have a staff member, team or committee dedicated to this responsibility. As with a stated mission, written policies can help a company align their philanthropic activities with their mission and values while also complying with legal requirements. This is particularly important when managing a corporate foundation that must adhere to private foundation rules to maintain 501(c)(3) status.
The new corporate mandate
Corporate philanthropy has evolved into a strategic tool that enables companies to make a meaningful impact on society while simultaneously advancing their business objectives. Whether through direct giving, DAFs or private foundations, businesses now have a variety of models to administer their philanthropic efforts. By engaging employees, supporting communities and investing in causes that matter, companies not only enhance their brand reputation and customer loyalty, but also foster a more committed and purpose-driven workforce. As the landscape of corporate giving continues to grow, the principle of “doing good while doing well” is proving to be more than a slogan—it is a sustainable business strategy.
