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7 months ago

WHY should corporates adopt a purpose led approach to giving?

The Why, What and How of Purpose Led Corporate Giving This is part 1 in a three part series distilling our research and what we’ve heard around three key questions 1. WHY should corporates adopt a purpose led approach to giving? 2. WHAT does best practice, purpose led corporate giving look like? 3. HOW can corporates embed social purpose within their organisations?

THE BUSINESS CASE IN

THE BUSINESS CASE IN PRACTICE Loyal and more profitable customers + engaged employees = greater shareholder value Now that you have research backed business case drivers, let’s use a hypothetical example to bring this business case to life. Here we compare two similar paper manufacturing businesses, Paper for Profit and Paper for Purpose. Paper for Profit has been around for 25 years and traditionally monopolised the paper manufacturing industry in the region. Five years ago a new competitor Paper for Purpose emerged, offering the same product but in an environmentally responsible manner, and has managed to attract a number of customers as a result. Both organisations now have the same number of customers and employees, however Paper for Profit focusses purely on maximising short term profits. Paper for Purpose on the other hand, has a social purpose embedded into its organisation’s DNA - to regenerate more forest than their paper manufacturing consumes. They want to leave the planet in a better place than when they started. Paper for Purpose make their intent extremely clear in all marketing efforts, and in turn, have attracted an extremely loyal customer base who understand that a responsible product often comes at a price. Regardless, their consumers are happy to pay more for their product as it serves their social conscience. Recognised for its efforts, Paper for Purpose quickly became the region’s employer of choice, with people lining up to work for them. They attract and retain the best talent on offer, those who are more productive, creative and ethical - who also put in higher levels of discretionary effort. The passion their workforce has for their company brand and the work they do is impressive, especially given their product, paper, isn’t the most innovative on the market. As a result, Paper for Purpose realises less employee turnover, lower employee onboarding costs and higher rates of knowledge retention than its competitor. Have a look at the following table to see how the two organisations compare from a revenue, organisational efficiency and social outcome perspective. 14

Financial Outcomes Social Outcomes Paper for Purpose planted the equivalent of $10M Paper for Purpose generates $10M more shareholder value than its non socially minded competitor, realising a 235% ROI on their Social Investment 337k Trees 674 international rugby fields of trees last year, delivering on their purpose to regenerate more forest than their paper manufacturing consumes Paper for Profit Paper for Purpose Has Social Investment Program No Yes Social Investment Corporate donations $0 $3,010,000 Employee donations $0 $180,000 Corporate matching employee donations $0 $180,000 Volunteering (days) 0 1,500 Volunteer value (time away from office) $0 $625,000 Goods & services value N/A N/A Cost to manage program (FTE, Tech etc) $0 $450,000 TOTAL Social Investment $0 $4,265,000 Organisation Return CUSTOMER LOYALTY Number of customers 80,000 80,000 Customer churn rate (pa) 10% 5% Customer acquisition savings $0 $4,252,000 EMPLOYER OF CHOICE Number of employees 5,000 5,000 Volunteering participation rate 0% 30% Employee turnover (pa) 12% 9% Employee turnover savings $0 $6,450,000 Employee productivity savings $0 $3,600,000 TOTAL Organisation Return $0 $14,302,000 Paper for Profit Paper for Purpose Has Social Investment Program No Yes Social Outcome Assumptions Cost to plant (fully loaded per tree) 0 $10 Trees per Hectare 0 500 CO 2 tonnes captured p/Ha tree lifetime 50 yr $0 $14,300,000 Social Outcomes Trees planted 0 337,000 Football fields of reforestation 0 674 Captured Carbon (tonnes) 0 67,400 This hypothetical examples assumes the following - Employee volunteering efforts are focussed on planting trees - Does not include the social value generated from the donation of goods and services - Does not factor in any assumptions around the price premium which could be applied for ethical products - Organisational revenue $1,700M - Corporate donations pa 1% of profit - Organisational profit 319M - Employee donation participation 12% - Customer acqusition cost $1,063 - Avg employee donation $300 - New employee onboarding costs $43,000 - Avg volunteer commitment 1 day - Volunteer productivity savings $2,400 - Avg employee wage pa $100k ROI Profitability Uplift $0 3% Improved Shareholder Value $0 $10,037,000 Return on Investment N/A 235% IMPORTANT As with any business case, never over promise to under deliver - your reputation is at stake! While the turnover costs and productivity gains used in this model are based on solid research, if the benefits look unrealistic, dial them back. Every organisation is different so If you don’t feel these drivers or assumptions reflect your organisation’s situation, work with your HR and Finance leaders to determine figures relevant for your company. It will give you the valuable opportunity to engage them early, to get their input and support for your business case. Gaining the necessary cross functional support for an initiative like this is a crucial ingredient for success. 15