Corporate philanthropy is often highly publicised by some of Australia’s largest and most influential companies, but recent studies show we may know very little about the model’s true popularity.
Corporate donation models
As part of its review of the broader philanthropy sector, the Productivity Commission’s draft report, Future foundations for giving, gives a sense of its opacity. While donations data provided to the Australian Taxation Office (ATO) offers some input, studies like McLeod’s 2020 analysis estimate corporate donations to charities at around $5b annually, nearly 40 per cent of total donations. This figure aligns closely with the $6.2b estimated by the 2016 Giving Australia study. However, it’s important to note that monetary donations represent just a fraction of corporate community support, with non-commercial sponsorships and partnerships playing a significant role, especially among large businesses.
Corporate philanthropy models also have positive side effects extending beyond impact. The Productivity Commission report referred to research conducted by the Business Council of Australia, Strive Philanthropy and GivingLarge, which analyse these incentives.
“Several studies have highlighted that business giving is often driven by an imperative to establish a social licence by giving to the community in which the business operates; promote employee recruitment, retention and engagement; and meet shareholder expectations about corporate social responsibility,” the report stated. “Some businesses are incorporating nudges to increase donations to charitable causes.”
GivingLarge and other submitters are advocating for increased transparency in corporate reporting on philanthropic activities to enhance shareholder and consumer expectations, underscoring the need for directors considering these arrangements to develop a greater understanding of the risks and opportunities for what’s out there.
“I am encouraged by the commitment of Australia’s corporate community to invest in delivering better outcomes for the communities they operate within,” says HSBC Australia chief executive Antony Shaw MAICD.
“Returning to Australia in 2022 after more than 20 years living abroad, it was a change that I noticed immediately.”
Long-term commitment to giving
The company’s 22-year partnership with Barnardos exemplifies the evolution of the sector with a diverse range of arrangements. “Since 2012, we have expanded this relationship through the Barnardos Yurungai Learning Centre in Waterloo, where as well as providing a financial commitment we now also provide opportunities for our staff to volunteer their time,” says Shaw. “As a result of volunteer initiatives executed in partnership with Barnardos — such as the HSBC Homework Club — we have had positive feedback from our staff.”
That relationship is a piece in the company’s stakeholder engagement puzzle. “Our relationship with Barnardos and the children of the Yurungai Learning Centre also plays a role in contributing to our broader reconciliation commitments, “ says Shaw. “This includes providing us with the opportunity to help our people understand the potential of First Nations youth and how we can support them to succeed.”
While Shaw notes that the company has made good progress, he says there is always more work to do. “We continue to explore how we can improve our community engagement work.”
Focusing on long-term support and volunteer opportunities aids the children at the centre, the intended recipients of the support, but also resonates strongly with HSBC’s core values. “As a relationship-driven organisation, we strive to build and maintain long-term partnerships,” says Shaw.
The program is structured to include not only financial support for the Yurungai Centre and the education of children there, but also offers tangible volunteer opportunities for HSBC staff. “Our partnership with Barnardos provides an opportunity for our team to see the children at the centre flourish, something that is critical to the engagement of our people,” he says.
For directors considering long-term philanthropic partnerships, he links the potential to HSBC’s organisational purpose. “Successful partnerships such as ours with Barnardos are an important part of how we deliver on our purpose and create meaning for critical stakeholders, including our people. We are fortunate to work with passionate, values-driven staff who want to give back to the community they work in. Our partnership with Barnardos creates opportunity for them to do so.”
Corporate largesse
Another example of big corporate giving is Woolworths Group, which aligns its philanthropic giving to core objectives with a focus on healthy eating, food rescue and other areas, including a substantial $122m donation in FY23. The company also has partnerships with organisations such as WIRES and involvement in programs like Woolworths Junior Landcare Grants and grassroots sports sponsorships.
The NIB FY23 community foundation results highlight how corporate philanthropy can align with broader organisational objectives. NIB partnerships and programs involve $6.6m in community funding and significant contributions to health and wellbeing initiatives. This approach not only benefits the community, but also aligns with some of the company’s core purposes, including connecting people to essential services and promoting healthy lifestyles.
Other players in the sector say there’s further evolution to come, like medical humanitarian charity Médecins Sans Frontières (MSF) Australia, which highlights the diverse benefits of corporate partnerships beyond monetary donations. When a charity forms a relationship with a business, a corporate partnership develops, but it doesn’t have to be only a dollar donation of funds, says MSF partnerships manager Alice Briggs. Some of the most practical ways businesses can partner with an NFP can be through offering IT, marketing or logistics services to the charity, or pro bono expertise to the board of directors. Briggs says a partnership investment can bring many benefits to a business. While every dollar makes a tangible difference in helping save the lives of people affected by conflicts, natural disasters and epidemics, partnering with MSF is a good way to demonstrate a commitment to social environment issues, she says.
“Employees can feel good about working for a company, knowing it is helping others to achieve something positive and overcome challenges.”
A company’s support for environmental and social causes is often a win-win. It can help to increase employee engagement and loyalty within a business — and it can also help to build brand awareness and consumer trust. “We have a regular supporter base of over 110,000 people in New Zealand and Australia, and we are a trusted organisation,” says Briggs. “Partnering is a big opportunity for businesses to create a positive social licence through our supporters.”
Transparency and accountability
However, there are areas of improvement for policymakers to consider, with Productivity Commission inquiry submitters urging the government to mandate listed companies to report detailed information on donations. The ATO’s role is crucial in this, with a push for it to require distinct reporting of charitable donations in tax returns. This move would not only provide valuable data for researchers, but also inform policy and regulatory work on corporate giving.
Tax incentives can play a pivotal role in corporate giving. Corporations can claim deductions for donations to entities with DGR (deductible gift recipient) status or for contributions towards advertising and promotion. Despite these incentives, a data gap persists, hindering a clear understanding of the relationship between corporate giving and its incentives. Addressing this gap is essential for improving transparency and accountability in the sector.
Equity structures
Innovative corporate philanthropy models are gaining momentum in Australia, encapsulated by the Pledge 1% movement, which encourages companies to donate one per cent of their time, equity, product and profit to the community. This initiative, co-founded by Atlassian and supported by the Tides Foundation, is reshaping how businesses approach community investment.
Philanthropy Australia analysis reveals that the top 50 corporates contributed $1.33b to community investment in 2021, amounting to 0.80 per cent of their pre-tax profit. This is slightly lower than the 0.90 per cent rate in the US, but is a significant contribution.
Mark Reading, head of the Atlassian Foundation and chair of the Pledge 1% advisory board, plays a pivotal role. The Atlassian Foundation submitted to the Productivity Commission report that, “Since being established late in 2014, the Pledge 1% movement has mobilised over US$2b in philanthropic capital”.
The movement primarily targets early-stage private businesses. Atlassian co- founders Scott Farquhar and Mike Cannon-Brookes have exemplified this commitment by pledging four types of resources.
However, translating this pledge into practice has its complexities. A significant challenge is ensuring that the pledge remains binding despite changes in company circumstances, such as shifts in directorship or shareholding. To address this, the Founder Deed of Equity Gift was developed in 2020 with PwC Australia’s pro bono support. This deed allows founders to make a legally binding commitment to donate pledged shares to Australian non-profits with DGR (deductible gift recipient) registration. Cangler founder Andrew Herbert was one of the first to seek clarity on tax issues related to this initiative, obtaining a PBR (private binding ruling) from the ATO in 2021.
Directors, particularly founders, should consider complexity around equity dilution due to capital raisings. To counter this, the Company Deed of Equity Gift was developed in 2021. This deed allows companies to make legally binding commitments to donate an amount equal to one per cent of their equity. However, complex tax issues, such as the “value shifting rules” outlined in the Income Tax Assessment Act 1997, pose significant hurdles. These rules — which apply when there is a “direct value shift” under a “scheme involving equity or loan interests in an entity” — have impeded companies like cleantech startup Greener for Business from executing the Company Deed of Equity Gift.
While the Pledge 1% movement has made substantial strides in encouraging corporate philanthropy in Australia, it faces ongoing challenges in ensuring that pledges are practical and legally binding. The development of the deeds is a step towards overcoming these challenges, but the journey to effective and sustainable corporate philanthropy continues.
Some companies mentioned in this feature may have advertised in Company Director, but have had no involvement in determining editorial content.
This article first appeared under the headline 'Investing in Community’ in the March 2024 issue of Company Director magazine.
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