It’s time to rethink the business of Giving
By Jeremy Cohen,
Senior Partner
Think back to when the COVID crisis kicked off. For a while we saw businesses and their leaders step up and step in. Volunteerism, donations on a meaningful scale, and redirection of core corporate skills such as logistics were all deployed to help society get through an unprecedented modern crisis. The cost-of-living crisis is pressuring the most needy every bit as much as COVID but this time business is – with some notable exceptions – missing in action.
This action gap speaks to much that is wrong with Philanthropy and Giving today. There’s no lack of money. Giving (in all its forms) and volunteering (in its cash equivalent) combined make up a staggering 10% of global GDP – approximately $10 trillion (estimates do vary). That is more than commercial banking, more than tourism, and more than clothing or coal. And there’s no lack of willingness to give. Last week’s Giving Tuesday raised a record $3.1 billion worldwide in just 24 hours, with 27 million Americans participating alone. The data indicates the greater the wealth gap in a nation, the greater the willingness to give to those in need.
But there are three glaring problems with Giving and Philanthropy:
1) The “reputation” of Philanthropy and Charity: From Jeff Bezos’ billionaire giveaway and the associated tax right-offs, to far too many corruption and abuse scandals involving charities. From the Oxfam abuse scandal(s) to the Trump “Foundation”. This is a sector that raises as many questions as it answers
2) Overheads: a conservative average of 30-40% (sometimes more than half) of all Giving gets sucked up in administration. This issue is more complex than it sometimes seems. If that overhead means greater impact and more effective fundraising…leading to again greater impact, more power to these causes. But it is also the case that inefficiency and waste is far too prevalent. Greater transparency – read as honesty and a little humility – would go a long way to reducing some of the well-earned skepticism here
3) Access to funding: finally, we come to the most significant issue of the three. How to connect the gift with the causes and communities that can really deliver impact for those whose lives can be changed by the generosity of others. If you run a small community charity teaching young minorities from low-income homes basic job application skills, for example, how will you ever access funding from a global corporate foundation which is itself looking to help fund job skills development?
Corporate Giving remains an old-fashioned network at best, a private members club at worst. It’s a who-you-know, complicated, and very formal process of grant applications, selection boards, and occasional champagne receptions. As companies have started pulling their arms-length Foundations back into the corporate-fold, the problem is getting worse. Staffing has been downgraded and funding has been stagnating.
Meanwhile there is $2 trillion of philanthropic funding committed – but not distributed – in the world today. For the reasons outlined above and others, grant awarding is an incredibly cautious process. And at the same time, the frustrations about creating access and impact are shared by the grant givers. Paralysis ensues.
So we need a new – or at least a refreshed – approach. Effective Altruism, the philosophical and social movement, encapsulates the requirements clearly and simply: “using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis”. For us at Blurred, this means applying the same approach to Giving as we take to other parts of ESG strategy development:
Use Materiality to map impact
Create pathways between a client’s ESG strategy and Giving strategy
Use Philanthropy to experiment and innovate
Introduce new technological solutions (e.g. Blockchain) to close the gaps
Or, putting it more tangibly: focus, increase access, speed up decision making, measure impact; repeat.
If we can turn the page, there’s the opportunity to redirect 10% of the world’s GDP for impact. The flawed philanthropy of Ford, Carnegie, Getty, and Rockefeller changed lives, just as the Gates Foundation does today. But we can do much better. $2 trillion “stranded” philanthropy. £3 billion in unclaimed dividends in the UK, $26 billion in the U.S. That’s quite a potential war chest. As the cost-of-living crisis bites deeper, leaving that war chest untouched would be a scandal. But distributing those funds to the same old charities in the same old way would be equally scandalous.