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Philanthropic Investment in CED
Philanthropic investments in community economic development
(CED) involve targeting philanthropic dollars and resources
for activities that stimulate wealth and job creation
in underserved or economically disadvantaged communities.
Companies are becoming more effective at using philanthropic
assets, such as financial contributions, employee volunteerism,
product and facility donation and mentoring programs,
to foster economic stability, thus creating stronger economies
in which to do business. Many companies are also using
operating assets such as purchasing, hiring, and siting
facilities to benefit historically distressed neighborhoods,
and some are combining these efforts with philanthropic
investments, integrating their giving with other business
and community investment strategies. Companies have begun
to recognize the business benefits of this integrated
strategy through increased access to new markets, improved
brand image and healthier economies in communities where
they do business.
Companies' philanthropic investments in CED have focused
in a number of areas of community need including job readiness
training, affordable housing, small business development
and expansion, economic revitalization, and investment
in youth education and school-to-work programs. Leadership
companies have taken a comprehensive approach to economic
development by supporting initiatives that involve multiple
areas of CED. Various strategies include: donating money
to community development organizations, partnering with
non profit agencies, spearheading economic revitalization
programs that involve community groups and multiple stakeholders.
Several factors motivate philanthropic investment in
community economic development initiatives. CED can contribute
to a stronger economy, which not only helps the community
residents, but also provides a healthy economic environment
in which to do business. Other benefits of CED include
supporting market entry or expansion strategies, improving
brand image and customer loyalty, recruiting and retaining
the most qualified employees, protecting a company's physical
assets, and achieving more sustainable community benefits.
- Support market entry or expansion: CED initiatives
in underserved communities can build relationships that
positively impact a company's efforts to enter new markets
or expand its operations. CED initiatives can also facilitate
site selection efforts and open up new distribution
channels. Developing relationships with strong community
partners can help companies identify sites, navigate
local politics and development policies, and develop
relationships with local suppliers, distributors, and
customers.
- Improve brand image and increase customer loyalty:
Consumers increasingly consider a company's general
business practices, including its level of community
involvement, when making their purchasing decisions.
Companies that are positively identified with their
community involvement activities are able to differentiate
themselves from competitors. This is particularly relevant
in underserved communities where many companies do not
have an established presence.
- Recruit and retain talented employees: A company's
ability to attract and retain the highest quality employees
is affected by conditions outside of the immediate work
environment. Issues such as employee safety and quality
of life in a community factor into employees' decisions
to accept or stay in a job. Therefore, some companies
provide philanthropic support to build the infrastructure
in a community, which not only creates improvements
for residents, but also makes a community more attractive
for employees.
- Protect physical assets: Companies have large
financial investments in their headquarters communities
and other locations. In cases where these communities
are distressed, efforts to promote a healthier economy
can protect these investments and avoid the costs of
relocation. Philanthropic investments in CED can help
increase property values, reduce crime, and attract
more businesses to the area.
- Achieve sustainable benefits: CED investments
can lead to sustainable community benefits because they
focus on long-term economic gains. Job creation, business
development, and wealth creation are all outcomes that
continue beyond a company's initial financial contribution.
A growing number of companies are focusing on community
economic development issues and recognizing the business
benefits of utilizing philanthropic dollars to support
CED initiatives. Companies are utilizing several strategies
to strengthen their commitment to underserved communities
and to support their business interests. This is a description
of such strategies.
- Place-based strategies: While some companies
focus their philanthropic giving on specific programs
or initiatives, many focus their philanthropic involvement
on specific locations. The reasons for this include:
to better leverage assets through a concentrated giving
strategy; to support investments in headquarters communities;
to support communities where a company has plants or
facilities; and to invest in communities where a company
is downsizing in order to help mitigate potential economic
impacts.
- Strategic philanthropy: Overall, corporations
are increasingly aligning their philanthropy with their
business interests. They are limiting donations to areas
that take advantage of their core competencies and support
issues that correspond to their business objectives.
Philanthropic investment in CED is a growing component
of this larger trend. For example, clothing retailer
Mervyn's California created the Mervyn's California
Community Closet to donate clothes to underserved women
in the communities in which it operates. In the first
year of the program Mervyn's donated clothes to 1,000
women.
- Measurement: As companies become more strategic
with their philanthropic contributions, companies are
also increasingly concerned with measuring the impacts
of their philanthropic investments. Companies are finding
that the benefits of CED programs lend themselves to
quantifiable outcomes. The outcomes of employment programs
can be measured according to the number of jobs created
and rates of retention. Investments in economic revitalization
can be measured in several ways including the number
of businesses created or attracted to an area as a result
of a particular initiative, impacts on crime rates,
and positive impacts on property values.
- Global CED investments: Many companies have
global operations and have an interest in the economic
health of communities where they purchase supplies and
distribute their products and services. Companies are
increasingly using philanthropic investments to address
the CED needs of their communities. Companies have contributed
to education initiatives, donated products to local
organizations, provided business training and expertise
to business partners, and provided financial assistance
to local entrepreneurs.
- Profit-making ventures: Some companies are
focusing philanthropic investments on social entrepreneurship
and profit-making ventures. This focus allows a company
to leverage its business expertise to help non-profit
organizations develop self-sustaining sources of revenue.
- Non-financial philanthropic investments in CED:
Many companies engage in a more comprehensive approach
to giving that supplements cash contributions with non-cash
assets. Companies have contributed to CED initiatives
in this way by providing volunteer support for organizations,
by offering mentoring programs to at-risk youth, through
loaned executives to economic development organizations,
and product and facility donation to revitalize a community
or benefit an economic development organization.
Philanthropic investments in community economic development
vary widely by topic area among companies. Listed below
are some general guidelines culled from the practices
of several leadership giving programs:
- Conduct a community needs assessment: A community
needs assessment can help a company determine where
a community's needs and the company's business goals
overlap. This allows a company to focus its business
expertise, target its philanthropic resources, and address
relevant community needs.
- Develop and communicate CED goals: Developing
a CED plan can help a company articulate the goals of
its CED activities, and connect these to its overall
business goals. Companies can communicate these goals
to employees, investors, potential CED partners and
communities. Goals can help create a clear understanding
both internally and externally of what a company hopes
to accomplish with its CED activities and provide a
point of reference when evaluating the outcomes of CED
initiatives.
- Integrate CED with other philanthropic initiatives:
Companies establishing philanthropic investment programs
in CED may benefit from adapting their current philanthropic
goals and initiatives. Companies can assess their current
philanthropic goals and apply these to their work in
underserved communities. For example, one of Home Depot's
broad philanthropic goals is to improve the lives of
children. To achieve this goal in underserved communities,
the company is involved with YouthBuild USA, an organization
focused on helping at-risk youth complete their education
while participating in the construction of affordable
housing.
- Partner with community-based organizations:
Many companies find it advantageous to partner with
community-based organizations in the implementation
of philanthropic programs. Community-based organizations
provide content expertise and can support program implementation
efforts.
- Conduct benchmarking studies: Benchmarking
studies of leadership companies and other companies
in similar industries can help a company evaluate its
current practices and policies. This type of information
can help a company learn from its peers and competitors
and develop a perspective about its internal level of
knowledge and expertise on CED. Benchmarking can also
provide a company with ideas about programs and initiatives
it can become involved in.
By Business for Social Responsibility (BSR)
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