In Search of Impact – Corporate Philanthropy as a Driver for Change

Introduction

I often wonder whether, in search of impact, companies sometimes overcomplicate matters.

There are, of course, some companies where positive impact is clear to identify and even quantify. Green energy producers, for example, always jump to mind. By producing X MWh of energy from wind and solar, an energy producer can power homes and businesses while preventing the Y tCO2e of greenhouse gas emissions that would otherwise have been generated by burning gas or coal.

Likewise, companies providing affordable medical treatments to those who could not have previously accessed them are another prime example. If every product sold is a condition cured or managed, then that is a clear win.

But what about the companies that provide us with the things we need (and do so while minimising negative externalities), but don’t have such a clear positive impact? How can they prove to the ever-growing pool of impact investors that they are a worthy candidate for their funds and portfolios?

A Case in Point

Imagine for a moment a UK company producing kitchen equipment. Not the most exciting, but something we in the developed world nearly all use. To attract potential investors, this company has spent £500,000 hiring material scientists, consultants, and designers to develop a new hyper-efficient oven, the likes of which the market has never seen before.

This oven is X% more energy efficient than the average model used by UK households, and users can save X kWh in energy (and Y tCO2e in GHG emissions) each year over its 20-year life span, assuming they use grid energy, and assuming a standard grid mix of X, Y, and Z.

The company has reported that sales of these ovens represented 10% of its total sales in the most recent fiscal year, meaning potential investors can see quantifiable impact linked to revenues, which is a gold-standard when it comes to impact assessment.

However, what the company has failed to mention is that their state of the art, hyper-efficient super-oven is far, far above the average consumer’s budget, and that they (and all of their other products, for that matter) most often find themselves in the homes of the wealthy. As for that 10% of revenue, that was from the sale of only 50 units.
 
Those energy savings could make a great difference to the lives of low-income households, but less so here. As for those tCO2e savings, they could be much more significant if the model of oven in question was more widely used.

An Alternative Option

So, what could this company have done instead, if it wanted to use its business as a force for good? Well, it may not be linked to product sales, but it could’ve donated half of that £500,000 (or even just a proportion of its revenue) to a charity which works to insulate the homes of low-income families, and the remaining £250,000 (or, again, just a proportion of their revenue) to another charity which is developing micro-grids designed to provide isolated communities in the developing world with access to electricity.

This way, the company would’ve helped low-income families in the UK to save on energy use, reduce their emissions, and also save money. In terms of the isolated communities in developing countries, it would’ve helped them to access electricity, and transition away from using wood and other combustibles for cooking, for example. This would likely have resulted in greater emissions savings than the new oven, too, given the potential scale of energy savings, and the fewer direct emissions from combustion.

These actions could also have helped to improve health outcomes by preventing mould from cropping up in the homes of families in the UK who struggle to keep their homes dry over the winter, and by reducing the number of smoke-filled rooms in the developing world.

Final Thoughts

To cut a long-story short, corporate philanthropy can have true impact when used correctly, and may even have greater impact than the sale of a new product designed to be more energy efficient. If companies also commit to donating a certain percentage of profits or cash-flows to such causes each year, this will allow investors to quantify the impact of these activities in the longer-term, provided details regarding supported causes are also provided.

Oh, and another thing, the company in question could also close its subsidiaries in the Cayman Islands, and start paying more tax in the UK, but that’s a story for another day.

Cameron Barker - Communications and Marketing Lead