Corporate philanthropy is a general term for the actions that businesses take to improve their communities and society in general. Corporate philanthropy can include donations of money or of time and labor at community centers or for improvement projects, or for fundraising for a cause. There are both clear advantages to corporate philanthropy, especially on a large scale, and disadvantages in spending time on the process.
Community Support and Market Creation
A major advantage that companies glean from their philanthropic practices is the support of communities and the surrounding markets. Essentially, by using profits derived from the community to benefit that same community (filled with its customers) businesses can greatly increase their prospects of future revenue flows. Supporting a community can lead to greater local economic success - creating income that can then be used at the business. For impoverished areas or those without experience with particular products, philanthropy can actually be used to create a market.
Market Development Through Reputation
Market development can also occur through the imrpoved reputation of the business. The goodwill that a company can generate through corporate philanthropy can increase customers' interest and favorable opinions of the company. This may lead to increased sales, especially when the philanthropy is combined with effective advertising and co-branding, when businesses advertisement each other's involvement in a cause.
Direct Giving can Hamper Goals
On the downside, philanthropy that is direct, or created through pure donations of money can make it difficult for a business to actually change what it wants to change. A donation to a nonprofit agency may put control of the funds beyond the reach of the business. There is no guarantee that the agency will improve the community or offer any of the benefits that the business can gain from philanthropy.
Time, Cost, and Decisions
If a business decides to take a longer route and invest money in the community itself, then there are other disadvantages. The business must form a team and decide how much money to give and where it should be given to produce the most impact. Decisions affect not only the length of the project, but also any marketing that goes along with it. In the end, the company must be prepared to spend time, money and decision-making power on a project that has no direct benefits.
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