Posted by: Nathaniel | July 15, 2008

Question of the week: is donating 1% of pre-tax revenue an appropriate baseline determinant of whether a company is socially responsible?

An article in BusinessWeek online this week posits that, despite PR to the contrary, corporate philanthropy is down from 25% ago, with companies donating just 0.7% of their pre-tax revenue to charitable organizations.

They suggest that:

Badly needed is a meaningful voluntary commitment by the business community to “ante up” a minimum budget for corporate philanthropy. A reasonable requirement for any company that wants to call itself a “good corporate citizen” ought to be to spend at least 1% of its previous year’s pretax profit for philanthropic purposes.

Where the article gets dicey for me is when they begin to assert that philanthropy is a more important fundamental requirement of corporate social responsibility than “fair treatment of employees, making or selling safe products, paying taxes, and complying with environmental standards.”

I think this is a wrong-headed assertion. Bifurcating corporate philanthropy from supply-chain practices and the environment creates the potential (if not the likelihood) of moving one step forward and two steps back when it comes to solving social problems. Indeed, its the sort of greenwashing that many in the nonprofit world worry about. You shouldn’t be able to create millions of dollars in environmental harm to be paid off by future generations and then give a fraction of that back to the problems of today, for example, and still be considered a responsible corporate citizen.

Sharon Schneider points out at The Philanthropic Family that this sounds a whole lot like the Medieval church’s practice of selling ‘indulgences’, or credits that allowed you to sin in exchange for donations.

That said, the general thrust of the article is the right one, I think. The authors recognize that the public relations budgets of many corporations are much larger than their corporate philanthropy budgets. In fact, in many corporate hierarchies, CSR initiatives fall within the Marketing/PR offices. And I do think that establishing some sort of give back baseline – 1% or something else – would be a great part of the picture. I’m just not sure its the fundamental baseline.

What do others think?



  1. One percent.

    That’s a full percentage point away from nothing.

    One percent.

  2. Hey, Nathanial, Thanks for the pingback and for a great post. You sound more articulate and less strident than I did on this topic. Clearly, I think 1% should be part of the picture (or more?) but not a benchmark in itself.

    Can you think of any way to establish what the bigger picture of CSR should look like? For example, i just found this web site called Just Means ( but again, not sure if they are vetting the overall company or just providing a platform for sharing the good news about CSR efforts.

  3. Hi Sharon,

    One interesting approach is, whose tagline is “Qustion your goods. Vote with your wallet.” They’ve developed a color-based rating system that takes into account treatment of workers, human rights and environmental impact in the communities in which they work, and a number of additional factors.

    They say: “The Rating System is an evolving, unscientific method of quantifying corporate activity. It is not meant to be regarded as definitive or to supplant the forming of one’s own opinion about a company. Rather, it is simply meant to provide a quick visual guide that loosely summarizes the information contained in the entry.”

    They have a great Firefox extension which allows you to see color-based ratings when you’re buying things on sites like

    I think its a great start and I like that its not strictly quantified.

  4. My fellow on Facebook shared this link with me and I’m not dissapointed that I came to your blog.

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