The business of giving

Small operations have big hearts, accounting for about half of the total of business’s contributions to charity. There are many reasons to be generous. By LUCINDA SCHMIDT.

By Lucinda Schmidt

Every Christmas, Sydney business TC Communications donates toys to a local children’s charity. For 2006, its 35 staff raised $540 through a raffle, and the company kicked in another $540 to buy Xboxes, DVDs, craft kits and other toys for the nearby Westmead Children’s Hospital.

“It’s a corporate conscious thing,” says Diana Minglis, TC Communication’s marketing manager. “We have a bit of a culture of giving back to the community we’re based in,” she says, and that the company’s regular employee surveys show that helping the community is important to staff.

TC Communications is one of a growing band of SMEs that sees philanthropy – giving money, time, information, goods or services to improve community well-being – as an important part of their business.

Most of the surveys and reports into corporate philanthropy focus on the big end of town; large ASX-listed companies with complex policies on corporate social responsibility put together by teams of marketers. At the other end of the scale, cash-strapped, time-poor small businesses, which manage to scrape together some goods for the local school raffle or a few hundred dollars for a neighbourhood charity, often don’t feature on the philanthropy radar.

The research available shows that SMEs make a big – if somewhat ad hoc – philanthropic contribution. The latest SmartCompany Opinion Leaders Poll, done in conjunction Roy Morgan Research, found 64% engage in philanthropic activity.

The Federal Government’s 2006 report Giving Australia found that businesses with just one to 10 employees gave the largest amount overall – $1.5 billion or 47% – of all business giving.

And the February 2007 Sensis Business Index found that 86% of Australia’s 1.3 million SMEs donated or participated in charitable activities in 2006. Of those that gave, the biggest proportion (70%) donated cash; 46% gave products or services; and 36% donated their time or staff time as volunteers. The most common value of donations was $101 to $500.

Gina Anderson, the chief executive of Philanthropy Australia, says the SME sector has historically shown close links and involvement with their local communities. These businesses are more likely to see philanthropy as a personal or private responsibility and may be strongly influenced by the personal values of owner.

The debate that is now emerging for SME philanthropy is whether smaller businesses should follow the lead of major corporates, in making their donations more strategic and targeted, or whether the typical informal approach is better.

Anderson says that for companies at the medium rather than small end of the SME scale, a more strategic approach to philanthropy can make sense (see below). But for small companies, she says philanthropy should not become tied up in bureaucratic policies.

“The last thing anyone needs who is running a small business is another box to tick,” she says. “A small business with three staff is not going to do a CSR (corporate social responsibility) agenda.”

Brisbane post-production company Cutting Edge has taken a fairly informal approach to its philanthropic activities, responding to an average of one request a week for pro bono production work on charities’ television ads.

“Until now, we’ve tried to do them all,” says general manager Kylee Ratz. “It’s a bit of a good citizen thing, and we’re all a bit of a soft touch.” She also says the staff enjoy doing charity jobs, because it gives them more creative freedom than when following the dictates of a paying client. But Ratz says the sheer volume of requests means the company is now starting to say no to some.

Two charities, Youngcare and the Cerebral Palsy League of Queensland, receive ongoing help from Cutting Edge to produce corporate videos and ads.

Youngcare, which provides housing for young people with high care needs, has a personal connection to Cutting Edge, which is often typical for SME philanthropy; one of the company’s directors helped found Youngcare after a friend’s wife was diagnosed with MS at 32 and the only accommodation available was an aged care home.

Cutting Edge also has 35 of its 135 staff participating in an automatic payroll deduction scheme run through the Charities Aid Foundation. The money, usually $2 to $10 per fortnight from each participant, goes to CAF, which distributes it to a charity nominated by the staff member.

As part of the debate about the type and amount of philanthropic activities that SMEs undertake, and how they should go about it, the Victorian Government is holding an inquiry into the involvement of small and medium businesses in corporate social responsibility. The inquiry, run by the Family and Community Development Committee, is taking submissions and executive officer Paul Bourke says he is keen to hear from SMEs.

Overseas, small business philanthropy is getting a lot more attention. In Britain, for example, a new on-line guide to responsible entrepreneurship aims to help make corporate responsibility accessible to business of any size. It suggests having staff volunteer in the local community to develop their skills and increase morale, and supporting a social cause that is relevant to your business or sector.

Closer to home, Victorian mortgage broker Donation Home Loans has taken its philanthropy one step further, donating half the monthly commissions it receives from banks to a charity nominated by the borrower. The company’s donations have now reached $12,000 a month, to more than 200 charities, and its goal is to donate $1 million a year.

“Every business has an obligation to support the community it operates in,” say the company’s founders, Mark O’Donnell and David Philipsen.

Ensuring your giving does the most good

1. Making moment-by-moment small decisions about what to do with your philanthropic funds is not efficient.
2. Think about what you would like to achieve and aggregate the funds for a cause that in some way reflects your business activity or industry and mirrors your corporate values.
3. Apply corporate processes to not-for-profit activities – look at inputs and, as far as possible, measure outputs.
4. Talk to your accountant about tax-effective giving.

SmartCompany Opinion Leaders Poll – survey of 329 SMEs

• 64% engaged in some philanthropic activity.
• 50% preferred to deal with companies involved in philanthropic activities.
• 38% used “good deeds” in their marketing/PR activities.
• 49% believe corporate Australia is becoming more philanthropic.