Formalizing Impact - Deciding the “How” Behind Your Giving
We are living in an era where for-profit companies are not just acknowledging the importance of contributing to societal and environmental betterment but are making it a mainstream commitment. This shift is becoming a significant lever for creating value for both shareholders and customers alike. The narrative is clear: businesses that prioritize social impact initiatives are better positioned to attract investment, foster customer loyalty, and enhance their brand reputation in a competitive market.
However, while the decision to engage in philanthropy and set aside budgetary allocations for impact is a commendable first step (for those able to even do that), it marks the beginning of a more complex journey. The critical next phase for these companies is deciphering the "how" of their giving strategies. It's about formalizing their impact efforts in a way that not only aligns with their corporate values but also maximizes the efficacy and reach of their contributions.
It is often complex to structure these philanthropic or impact-related endeavors effectively and logically, navigating the myriad of options available, and making informed choices that resonate with the company’s long-term strategic objectives. Below, we will explore some of the various pathways companies can take to formalize their impact efforts, making their journey from intention to implementation both seamless and impactful.
Company Private Foundation
A company private foundation is a type of 501(c)(3) organization primarily funded and controlled by a single corporation. It allows a company to manage its charitable activities, such as grantmaking to nonprofits, under a formal structure.
—> Some examples: Walmart, Coca-Cola, Bank of America - the big companies.
Donor Advised Fund (DAF) - read our deep-dive blog post on DAFs here
Donor-advised funds are a unique philanthropic tool that allow companies to establish and fund a charitable account with a sponsoring organization that will be used later to support charitable or impact-focused activities. For example, Okta established the Okta for Good Fund, a donor-advised fund through the Tides Foundation, to enable strategic grantmaking via Okta’s pre-IPO equity commitment.
—> Some examples: Twilio, Riot Games, Okta
Fiscal Sponsorship
Our favorite here at RTV! Fiscal sponsorship is a formal arrangement in which a nonprofit organization offers its legal and tax-exempt status to a group or project engaged in activities related to the sponsor's mission.
—> Some examples: Rise Together portfolio companies, like Origin and Flexport!
B Corp Certification - read our deep-dive blog post on B Corp here
Certified B Corporations are verified (by B Lab) as meeting certain standards of social and environmental performance, accountability and transparency. They evaluate their impact on all stakeholders (employees, communities, environment, etc.), not just shareholders.
—> Some examples: Ben & Jerry’s, Patagonia, Needed (RTV portfolio company)
So, how do you decide which one is best for you? We’ve put together a high-level matrix of things to think through as a company decides which path is best:
In summary, there are many considerations when a for-profit wants to engage in impact or giving back. There is no singular right answer for all companies, but fortunately an increasing number of options so each company can choose the best one.