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Business, charitable sectors are blurring

GVSU study finds social responsibility is having an impact.

March 8, 2019
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Once strictly separate, the business and philanthropic sectors continuously are blurring as more people embrace the potential positive results.

Historically, some stark capitalists insisted the free market would be undermined if businesses added “social responsibility” to their bottom lines, but those values are increasingly considered by many as ineffective and old-school, according to a recent study by Michael Moody of Grand Valley State University’s Johnson Center for Philanthropy.

As consumer demand for corporate social responsibility increases, companies without double or triple bottom lines can no longer compete, he said. In the nonprofit world, new profitable revenue streams increasingly are being implemented.

Corporate sustainability

For a long time, many companies have been dedicated to corporate giving through associated foundations, for example.

People generally believe the free market is an effective and efficient way of achieving economic success, so that line of thinking carries over into the way of “doing good” in the world.

“That's been an argument for why capitalism and free market is good for society — if you allow the invisible hand of the marketplace and allow free markets to work, then they'll lift all boats,” Moody said.

But this has been changing gradually over the past few decades, most broadly culminating in the recent push for corporate sustainability — a business strategy that focuses on ethical, social, environmental, cultural, and economic measurements and impacts.

“What's different now is they don't separate the giving from the core business work,” Moody said.

This means manufacturers, for example, are checking their supply chains to ensure resources are environmentally friendly or businesses are implementing diversity and inclusion practices.

In a competitive market where accessible information is readily available, he said consumers often can obtain specific information on the impact of companies.

“There's a bit more pressure on companies to be socially responsible,” Moody said.

Those same companies’ leaders with a passion for a cause often are creating other types of social enterprises rather than traditional nonprofits, he said.

On the world stage, founders of companies like eBay, Facebook and Amazon all have used their fortunes for giving across multiple sectors — beyond setting up foundations that give strictly to nonprofits, they have established other socially responsible companies and funded various advocacy and political activities. Ben and Jerry’s pioneered as a company with social responsibility as a primary goal.

Companies officially dedicated to corporate sustainability can become a Certified B Corporation through the nonprofit B Lab. There are nine Grand Rapids businesses certified: Swift Printing and Communications, Atomic Object, Highland Group, The Image Shoppe, The GFB, Catalyst Partners, Bazzani Building Company, Brewery Vivant and Cascade Engineering.

Moody highlighted Cascade Engineering as one of the most notable examples in the country, saying its “innovative” practices are an example to other companies.

Besides manufacturing products for the auto industry, Cascade Engineering has a division that creates sand-based water filters for developing countries. There is a workforce training and hiring program for formerly incarcerated people.

“All aspects of the business are being driven by this triple bottom-line approach, and they're formally committed to it as a B Corporation,” he said.

B Corp certification is earned through an assessment and implementation of plans to improve impact. Michigan businesses can take a simplified version of the initial assessment designed through Local First, at localfirst.com/sustainability/measure-what-matters.

Nonprofit revenues

Starting with one or two pioneers, nonprofits increasingly have found ways to create their own revenue. Goodwill is a good example of one doing it for a while, Moody said.

Other nonprofits may offer paid training or have a gift shop, bakery or side consulting business.

He said many grant-makers these days expect the nonprofits they fund to create their own revenue streams and not be funded solely from grants and donations.

When fundraising, he said development professionals have been encouraged to market donations as investments, using business-related terms like “due diligence.”

Foundations more often are issuing nonprofits low-interest loans rather than grants, he said. In the case of an affordable housing organization, that would allow it to fund projects that could potentially leverage more capital in the long run.

The dangers of overblurring

While Moody said he believes there is value in blurring the lines between business and philanthropy, he said there could be danger in too much of it.

“If we blur them too much and philanthropy disappears, we will have lost something that's very valuable,” he said.

The critics say corporate responsibility is just a marketing ploy. That could be true for some companies, he said, but not ones like Cascade Engineering.

But, if philanthropy disappears and corporations are left to carry out their efforts alone, Moody said recognizing the difference between genuine responsibility and marketing ploys may become more difficult.

“Just because you say you're socially responsible as a company doesn't mean that you live that in the ways that we would want,” he said.

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