OPINION: Can trust-based philanthropy become mainstream?

Companies around the world are trying to differentiate themselves in the marketplace, cut through the noise and avoid becoming victims of the “great quit”. A few important trends can help them stay relevant and innovative. Trust-based philanthropy has gained traction alongside transformative corporate philanthropy models over the past decade. These are anchored around fair, long-term partnerships aligned with a company’s purpose and significant resources rather than just a marketing campaign.

Patagonia and Ikea are two examples. These philanthropic approaches seek to address the root causes of inequality and poverty and provide flexible, long-term financing that can also unlock other forms of financing, such as impact investment capital. Such approaches can help companies and their foundations meet their social impact environmental, social and governance (ESG) goals and objectives.

A business case for purposes

Indeed, there is an undeniable business case for a goal, which positively impacts people, the planet, and a company’s bottom line and reputation. Research shows that more and more employees and consumers want to see companies make a difference and take a stand on social and environmental issues. This is especially true for millennials, who will account for 75% of the global workforce by 2025 and billions of dollars spent globally.

Global market research company, Forrester, reported that four out of five millennials prefer a company with a strong vision and voice. And according to Ellevest’s 2022 Financial Wellbeing Survey, more than half (56%) of millennial women would leave their current company if its reproductive rights values ​​didn’t align with theirs. . Tired of what they see as government failure and inaction, this generation believes that business and cross-industry partnerships can be the most effective way to solve global challenges like climate change and gender inequality. the sexes. If companies fail to inspire and lead millennials, they will put a significant portion of their revenue at risk, not to mention struggle to recruit talent.

Additionally, companies with social impact, sustainability and ESG goals will be measurably held accountable by shareholders and market regulators like the SEC and SEBI for how they present themselves. around the world, alongside all their stakeholders. For example, the world’s largest tech company Apple and restaurant chain Chipotle tie executive bonuses to ESG performance, along with these 15 other companies. At the same time, MasterCard has made DEI (Diversity, Equity and Inclusion) a priority for its 25,000 employees. DEI involves more diverse leaders and women in leadership positions, which is associated with higher profits, greater employee engagement, and increased customer satisfaction.

Trust-based philanthropy and new models of corporate philanthropy

These are the reasons why companies and their foundations have incorporated trust-based philanthropy as a corporate strategy to help them achieve their ESG and social impact goals. Trust-based philanthropy is rooted in long-term partnerships and shared power relationships based on transparency, dialogue and mutual learning. On a practical level, this means moving from restrictive one-time donations to unrestricted multi-year funding to support organizational health and adequately address the root causes of systemic issues such as poverty and social exclusion – rather than applying band-aid solutions.

Open Road Alliance found that funder-created barriers account for 46% of the challenges faced by nonprofits, largely due to the strings attached to the funds made available. Instead, unlimited, flexible, catalytic and long-term capital allows organizations to allocate resources where they are needed most, leaving room for innovation, emergence and impact. Alongside companies like Target and Niagara Bottling, Thankyou is an example of a company bringing trust-based philanthropy to life. They fund a number of high-performing global nonprofits with flexible, long-term philanthropic support, including supporting global nonprofit iDE in their mission to end global poverty using a grassroots approach. the market.

It is important to note that trust-based philanthropy does not mean neglecting due diligence. Rather, this form of philanthropy relies on rigorous due diligence that values ​​and respects local ideas and organizations. Funders should fully buy into the idea that trust-based philanthropy encourages innovation and accelerates scale and impact, which most companies appreciate. It can de-risk innovation, seed new ideas and attract additional forms of long-term capital, including impact and ESG investors. Much like how the commercial sector places big bets on new ideas and business models, philanthropy is able to take big bets on an organization’s vision, track record and team, rather than fund projects and micro-manage execution.

It may seem like taking a risk, but it pays to fail quickly and try a different approach that leads to better results. It is a complex challenge. But we need locally-led innovation and the freedom to fail, learn and pivot. Trust-based donations don’t necessarily work for everyone. However, there is an urgent need for flexible, long-term philanthropy that supports people and organizations instead of one-off projects, given the $5 trillion annual funding gap to achieve the United Nations Sustainable Development Goals. the disastrous findings of the IPCC (Intergovernmental Panel on Climate Change) report, and the fact that 300 million people have fallen back into poverty during the pandemic.

There are already enough resources and ingenuity in the world to fight climate change and reduce poverty, and we have an array of capital tools that we can use creatively to reach those living in the world. extreme poverty, create markets that ensure that affordable goods and services fetch low prices. low-income families and reduce dependency on aid. This is where businesses can step in, amplify their impact, and show their customers that they’re really stepping up.

Elizabeth Ellis is the CEO of International Development Enterprises (iDE). Alix Lebec is the founder and CEO of Lebec Consulting and a member of the board of directors of iDE. Peter Yao is the Chief Impact Officer of Thankyou, an Australia-based company.

This column is part of a Business Insider editorial collaboration with the India Climate Collaborative. It is part of a one-year campaign (2022-23) themed
“One Earth: Supporting People, Planet and Prosperity” by
Business Insider India
Sustainability Specialist

Disclaimer: The opinions expressed by the author/interviewee do not necessarily reflect the views of Business Insider India. The article has been partially edited for length and clarity.

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