Corporate giving behaviour increasingly crucial to societal challenges

More and larger philanthropic initiatives

Research by, among others, Vrije Universiteit Amsterdam and our own practical experience show that the importance of business in the field of philanthropy has increased  in recent years. Companies are setting up philanthropic initiatives on an increasingly larger scale. Think of the large-scale voluntary initiatives and fundraising campaigns of companies during the corona crisis and the conflict in Ukraine. The number of corporate foundations and family funds in our country is also rising and these institutions are being given larger budgets.

ESG increasingly prominent in corporate strategy and activities

We also see that more and more companies are using philanthropy as a means of achieving ESG objectives and making a contribution to important current social issues, around themes such as climate change, diversity and inclusiveness.

The increased attention to ESG is an important and necessary transformation for companies to remain competitive and relevant. Employees, clients, shareholders and financiers attach increasing importance to these non-financial indicators. As a result, ESG is gaining an increasingly prominent place in the strategy and activities of companies.

The announced introduction of the 'Corporate Sustainability Reporting Directive' will also put extra pressure on the formulation and implementation of ESG policy, as large and listed companies will have to report on non-financial parameters.

In order to realise ESG ambitions, philanthropy can be a very suitable resource. For example, employees may be encouraged to volunteer, to contribute during working hours to corporate sustainability projects or to work through a specially established independent corporate or family foundation.

Tips for setting up your own charity

Establishing or redesigning your ‘own’ charity involves a critical balancing of social, business and stakeholder interests. You need to choose the objectives and activities of the charity in such a way that there is a link with the core values of your company and the expectations of stakeholders. This will increase the commitment of your company and its stakeholders to the selected social objectives, thus creating a win-win situation.

An example of this is an IT company that has set up a charity to support programmes that create a level playing field for the next generation of IT professionals based on diversity and inclusion. In doing so, the company stays close to its core business and directly supports social interest through the charity. In the future, the company itself can also benefit from the charity's activities, as more educated IT professionals enter the already scarce labour market of this industry.

There are advantages to giving employees an active(er) role in the design and activities of the charity. After all, existing and potential employees are important stakeholders in shaping ESG policies, as they increasingly expect their (future) employers to place social aspects at the heart of their business. Giving employees an active voice in the design of the charity and the projects to which the fund allocates resources will increase their satisfaction. In addition, employees become directly involved in the roll-out of your ESG policy.

The initiatives supported by the charity can be social or charitable activities in which employees can be involved in their free time. Supporting family or relatives of employees in an emergency situation is also possible. Please note that the tax authorities do not consider this latter situation to be the pursuit of a private interest rather than a public interest. This could jeopardise the tax and financial desirability of the charity obtaining the status of a public benefit organisation (‘algemeen nut beogende instelling’; ANBI).

An even more far-reaching step is having employees make (monthly) donations directly from their salary. In the United States and the United Kingdom, this form of giving (payroll giving) has existed for some time, with companies sometimes increasing the donations of their employees. Companies considering this instrument should seek prior advice, given the many tax and administrative aspects involved in setting up payroll giving. Consultation  with the tax authorities is also necessary in this respect.

Finally, many (family) businesses wish to retain control of their own corporate or family foundation. In practice, there are various possibilities for this, whereby it remains important to monitor that the charity behaves sufficiently 'independently' in achieving its generally useful objectives. In other words, the interference of your company must not become too great. This requires a careful balance, in which you must of course take the civil and tax requirements into account.