Charitable Initiatives: The ROI of Giving
While it may seem that social interaction is at an all-time low under the unprecedented circumstances created by COVID-19, the coronavirus crisis has jump-started an era of giving. Communities have come together to perform wonderful acts of kindness such as supporting essential workers and feeding struggling families. As small businesses fight to stay afloat, channeling the charitable feeling that has been trending amongst their customers by getting involved in philanthropy can become an essential step in keeping their doors open.
For example, contemporary casual restaurant Happy + Hale has launched a customer-based giving initiative called the Kindness Bowl, through which customers can pay a small additional fee with their order to have a meal delivered to frontline workers in need during the pandemic. As of April 3rd, Happy + Hale had already delivered 800 Kindness Bowls to various hospitals and was preparing to send several hundred more. Even before COVID-19, businesses were implementing initiatives to actively leave a positive impact on society. These demonstrations of corporate social responsibility were beginning to be more widely recognized as an essential part of commerce.
Benefits of Charitable Initiatives
Charitable ventures taken by businesses have been linked to a tangible ROI. According to research by Salesforce, philanthropy benefits a company in two major ways: through revenue and employee retention. The research team discovered that consumers will pay an average of 6% more for products and services provided by socially responsible companies. Customers are also 63% more likely to try new products from these companies and 64% more likely to recommend them to others. These findings are of utmost importance for small businesses looking to expand their network of loyal customers, especially during a crisis like the current pandemic. Salesforce additionally reported that 50% of people prioritize working for a company that promotes their values, with even higher numbers for millennial and gen Z individuals.
As small businesses look to recruit talented and dedicated employees, they should keep corporate social responsibility in mind to improve employee retention, engagement, and productivity.
In a column written for GreenBiz, corporate social responsibility expert Ellen Weinreb reports that the implementation of corporate social responsibility initiatives led to a 13% increase in employee productivity and significantly increased retention rates, and prospective employees were willing to take 5% lower salaries at these companies. She also highlights IBM’s Corporate Service Corps, an initiative that connects IBM employees to companies in developing nations, as an example of the massive ROI on philanthropic initiatives: IBM has made $600 million on the $200 million it initially invested in this program.
Small businesses can mimic such initiatives on a smaller scale in order to pursue the same positive results. Weinreb ultimately provides four tips for businesses looking to get involved in corporate social responsibility:
Pick a cause that fits in well with the company’s brand.
Commit to treating employees well.
Include employees in the management of initiatives.
Connect the program to company pride and employee values.
However, the added cost of these initiatives can be a concern for cash-strapped small businesses. Business owners frequently struggle with questions of when to start charitable initiatives, the financial feasibility of such initiatives, and whether the benefits outweigh the costs. Research ultimately shows that with reasonable consideration of risks, small businesses can increase consumer and employee engagement when they participate in or create charitable initiatives.
Assessing Risk
As stated by Terence Lim, Ph.D. in the conclusion to a report on the value of corporate philanthropy measured by The Committee Encouraging Corporate Philanthropy, “Philanthropic initiatives provide novel channels through which companies can meet core business goals and create long-term financial value—by increasing employee engagement, customer loyalty, reputational capital, and market opportunities.” Despite these positive returns, small businesses should still thoroughly assess the risks associated with charitable ventures. According to Clifford D. Schlesinger, the managing director of the Goldman Sachs Strategic Wealth Advisory Team, there are concrete ways to minimize risk and thus maximize financial return on charitable giving. It is advisable to:
Determine the level of risk you are willing or able to take.
Budget for unexpected costs.
Foster transparency in all partnerships with charitable organizations.
At the end of the day, if small businesses project the risk of charitable initiatives to be too high, the ROI of customer-based giving may not be high enough to be worth pursuing such ventures. To avoid negative outcomes, businesses considering corporate social responsibility programs must be thorough in assessing risk.
Corporate philanthropy is successful when business owners are outgoing, connect their initiatives to community and company values, enlist a mix of their customers' time, money, and active participation, and most importantly, can handle the associated financial risks.
Conclusion:
Ultimately, charitable initiatives can be hugely successful ventures for businesses, as they have been proven to increase customer interest, employee satisfaction and retention, and community appeal. While small business owners should be conscientious in planning for risk management, if they have the capacity to pursue philanthropic programs, there is a notable potential for promising ROI. Especially in the time of COVID-19 when people are craving connection within communities, customer-based giving initiatives like Happy + Hale’s Kindness Bowl can be an easy way for small businesses to align themselves with consumers and communities with the added bonus of turning a profit.
As a social impact initiative, Rem and Company also offers free consulting services and resources to small businesses and nonprofits impacted by COVID-19. Our pro-bono consulting teams provide small businesses with the opportunity to identify and prioritize issues facing their business, propose innovative strategies, and facilitate execution. If you are a small business or nonprofit in need of assistance, learn more about how we can help.