Why philanthropy should be part of every business plan

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Kodari Securities chief executive officer Michael Kodari. Source: Supplied.

Philanthropy is essential in a modern society and it is very important for all businesses to contribute where they can. Yet, in Australia, many businesses, including many profitable small- and medium-sized firms, don’t consider giving as a business goal.

Philanthropy is important in any society. While charity focuses on giving to those who are suffering, philanthropy focuses on eliminating the causes of the suffering, whether it is poverty, illness, illiteracy or some other social problem. Philanthropy is, in short, more proactive than charity, as it involves actively looking for solutions to problems.

According to the most recent statistics from Philanthropy Australia, in 2015-16, large business gave $9 billion, while small and medium enterprises gave $8.5 billion, totalling $17.5 billion.

While those numbers are dated, they pale in comparison to the profits that Australian businesses make. According to the most recent statistics from the Australian Bureau of Statistics (ABS), gross company operating profits in the December 2018 quarter alone struck $97.8 billion. Over 2018, they totalled $354.5 billion. Giving away just 0.5% of that to philanthropic causes would amount to $1.75 billion.

Arguably, all profitable businesses should set aside some of their resources for serving their community or the common good. We live in a rich society, where many of us want for nothing. The health of our business sector is strong, as the profit numbers above attest. It’s important for all businesses to give back to the community. If not in dollars, then in time or resources, such as by creating education programs or offering work training opportunities for young Australians.

Globally, there are some well-known corporate philanthropists who set amazing examples. Warren Buffett is one of the best known. According to his Giving Pledge, more than 99% of Buffett’s wealth will go to philanthropy during his lifetime or at his death.

Buffett says holding on to his wealth won’t serve much purpose to enhancing his own wellbeing. But giving it away can make a huge difference to others who are less fortunate than he himself is.

“Were we to use more than 1% of my claim checks on ourselves, neither our happiness nor our wellbeing would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others. That reality sets an obvious course for me and my family,” Buffett has said.

Other famous philanthropists include Bill and Melinda Gates, who last year were named the most generous philanthropists in the US in an annual list by The Chronicle of Philanthropy. Through the Bill and Melinda Gates Foundation, the couple has focused on global health, education and alleviating poverty. Like Buffett, Gates aims to give away all of his wealth to philanthropic causes.

Less well known is Alex Shih, the heir to the biggest real estate agency in Hong Kong. The Washington Post recently reported that Shih doesn’t own a house. Nor will he inherit his father’s stake in Centaline Group, estimated to be worth about $US400 million ($564 million), because his father, Wing-Ching Shih, has already donated his fortune to charity and philanthropic causes.

In Australia, many larger listed companies often embed philanthropy into their corporate goals or their environmental, social and governance (ESG) policies. ESG guidelines are becoming entrenched in large listed companies — investors expect good corporate conduct to include good community conduct.

Some well-known examples of corporate giving in Australia include Coles and Woolworths, involving the supermarket giants working with local communities to donate a portion of their sales to local schools. Woolworths says its Earn and Learn is coming back in 2019 — when it ran the program in 2017, more than 15,000 schools benefitted. Coles ran its school-for-sports program last year, which saw it donate sports equipment to schools.

Small businesses too can give and embed philanthropic policies into their business plans.

Since inception, my own business has continuously sought to contribute to good causes, charities and community events, through supporting a number of universities and student societies. The key point is it doesn’t involve much sacrifice on my business’ behalf to give back to the community, but it can make a big difference to others. And that’s why all successful business people should get more involved to boost the social good.  

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