Measuring the Value of Corporate Philanthropy: Social impact, business benefits, and investor returns

In answer to the challenges that face corporate philanthropy in identifying a shared definition of impact measurement, the author sets out to assess current measurement practices, clarify what is needed in terms of impact evidence, and identify next steps. The article is organized into three conversations between key stakeholders engaged in corporate philanthropy. Although this piece is written specifically for those involved in corporate philanthropy, it provides useful insights for cultural agents about measurement and outcomes of key concern to corporations with which they may partner or which may invest in arts for change work. Conversation One: Between the grant recipient and the giving officer: First, Lim offers a theory of change or logic model (Figure 1) to assess if grantees are achieving intended results. He then reviews three measurement approaches: formal impact evaluation, outcomes measurement, and impact-achievement potential assessment (see these approaches in table format in Figure 2). Figure 3 offers a decision-making map that program managers can use to determine the best measurement approach. Second, Lim addresses, “how to measure the return on social investment from grants?” He reviews three return on investment (ROI) techniques: cost-effectiveness analysis (where benefits are not monetized), cost-benefit analysis (where benefits are monetized), and estimating leverage effects. Figure 5 offers a decision framework for guiding the choice of measurement approach. There are limitations to these methods, however, in that they require significant amounts of data collection and rely on assumptions and value judgments as part of the analysis. Conversation Two: Between the giving officer and the executive officer: This section focuses on measuring business benefits and making a business case. After all, in corporate philanthropy business concerns are often as important as social ones. Based on previous literature, Lim suggests four ways in which philanthropic activities can lead to business value: employee engagement, customer loyalty, managing reputation risk, innovation and growth opportunities. Conversation Three: Between the executive officer and the investor community: In this section, Lim reviews scholarship that addresses the question of “how to measure the value of corporate philanthropy for traditional investors?” He suggests that more research is necessary because there are mixed reports that tie corporate philanthropy to increased financial performance. Next, to address the question of how to attract responsible investors, Lim discusses socially responsible investing (SRI) and the movement from funding investors’ personal values to the incorporation of social and environmental concerns within traditional investment-making processes. A useful glossary of terms and annotated references to accompany some of those terms concludes the article. The reader may benefit from understanding definitions that cross the corporate and nonprofit environments in this arena of socially responsible corporate philanthropy. The Committee Encouraging Corporate Philanthropy is the only international forum of business CEOs and chairpersons focused exclusively on corporate philanthropy. 
CECP’s mission is to lead the business community in raising the level and quality of corporate philanthropy. For more information, visit corporatephilanthropy.org.