Private Sector as a Force for Good
I had the privilege of attending the June 2023 session themed "Private Sector as a Force for Good," and what unfolded was a narrative that reshaped my understanding of how corporations can truly make a difference.
Redefining Business Philanthropy
The morning began with an immersive discussion led by Elizabeth Coit of EA Coit Consulting, Inc., and Kathy Pedrotti Hays of Pedrotti Hays, Inc. We were challenged to understand the evolving factors at the intersection of business and philanthropy and the resultant impact on both sectors. The expansion of corporate social responsibility (CSR) is not a trend; it's a shift in the corporate ethos, embracing sustainability, ethical employee relations, responsible supply chain sourcing, and proactive community participation.
A Collaborative Force
Amidst robust dialogue, Coit and Hays emphasized the potential of non-profits and corporations coming together to foster a culture that benefits both entities. This collaborative approach necessitates introspection, leadership buy-in, operational audits, stakeholder engagement, goal specificity, and impactful storytelling.
Exploring Social Enterprise
We explored innovative models and emerging social enterprise trends wherein traditional nonprofits, start-ups, and traditional businesses seek to maximize financial and social returns. A social enterprise for traditional nonprofits can be a powerful complement to other activities when it advances the organization’s social mission and financial sustainability.
Social enterprise allows new start-ups to bake social impact and financial sustainability into the organization’s DNA. Traditional businesses, meanwhile, use social enterprise initiatives to integrate social impact into business operations and prioritize social goals alongside financial returns. Examples of social enterprises include:
• Opportunity employment – organizations that employ people who have significant barriers to mainstream employment
• Transformative Products/Services – organizations that create social or environmental impact through innovative products and services
• Donate back – organizations that contribute a portion of their profits to nonprofits that address basic unmet needs.
Conscious Capitalism: A New Paradigm
We next discussed trends, including conscious capitalism: a movement, philosophy, and framework that supports business leaders as they elevate humanity through good, ethical, noble, and heroic business practices to continue the positive historical trajectory capitalism has afforded society. This particular trend of doing well—while doing good—leads conscious companies to outperform the market financially and boast higher customer and employee satisfaction.
The ESG Investing Conundrum
Janet Sweet and Gavin Stephens (Goelzer Investment Management) joined our afternoon session for “ESG Investing: What, Why & Considerations for Successful Implementation.” Sweet started the presentation by introducing ESG, an investment discipline/process that considers environmental, social, and corporate governance criteria in the investment portfolio construction process.
Sweet said ESG is not a separate asset class, an “all-or-nothing” discipline, the same for all investors, or an absolute metric for being an attractive investment. ESG is not new. It has been around for decades, evident by the extensive and growing list of potential ESG issues.
Sweet reviewed ESG investment strategies, which included:
• Impact investing – investments made to generate some return
• Thematic investing – social impact, faith-based value, and socially responsible investing
• Best-in-class investing – rank companies with the highest ranking from an ESG perspective
• ESG integration – incorporate ESG factors into the portfolio construction process; tends to incorporate quantitative and qualitative measures
ESG is unique and based on each investor’s perspective and circumstance. Sweet advised that investors should define terms, establish clear goals, and weigh the merits and consequences to ensure the desired outcomes of ESG integration. ESG investing considerations often include philosophies, preferences, priorities, beliefs and opinions, asset size and capabilities, desired impact/result, governance and regulation, and other unique circumstances.
When asked why ESG should be incorporated into a portfolio, Sweet said most incorporate ESG to align investments with priorities/values, fiduciary responsibility, and stakeholder concerns. An interesting note: across the globe, an average of 81 percent, across generations and asset levels, said they want investments to match personal values.
ESG in the Face of Regulation
However, Stephens noted that investment in ESG declined in 2022 compared to 2021 and 2020. He stated that US regulatory attention and involvement (DOL and SEC) on ESG has fluctuated from neutral to actively discouraging it. Accordingly, careful governance and fiduciary duties exist when considering ESG investing, such as:
• Loyalty – act in the best interests of the entity
• Duty of Care – manage assets as a prudent person would, keeping in mind the charity’s purpose
• Duty of Obedience – carry out charitable purposes, making decisions with the mission in mind, honoring donor intent
• UPMIFA – governs all investment decisions by charitable corporations
Stephens also discussed the challenges involved with incorporating ESG into a portfolio, such as:
• Requires thoughtful & deliverable planning
• Additional layer of monitoring/evaluation required
• Consistency of execution is evolving
• Requires long-term discipline/perspective
He noted that, as with all investment strategies, ESG performance should be considered based on investment philosophy, portfolio construction, and strategy execution. Lastly, but just as important, donor acceptance could vary from embracing to indifferent to concerned. He suggested proactive communication to donors regarding the merits, goals, and objectives and anticipated long-term benefits to manage donor expectations and written investment policies following best practices.
Seeding Innovation Through Philanthropy
Ting Gootee (president/CEO of TechPoint) and Jonathan Jones (senior director of Social Innovation of United Way of Central Indiana) joined us to discuss philanthropy’s role in seeding innovation. The panel discussion was moderated by Ryan Locke (vice president of venture finance at the Indiana Economic Development Corporation).
Locke asked what innovation means to your organization. Gootee said technological innovation is vital to pursue new processes, products, and services and to stay competitive in the economy. Approximately 87 percent of companies in the world expect digital innovation, and over 90 percent of jobs globally expect digital technical skills.
Jones noted that innovation allows us to be more thoughtful and strategic about what communities want to impact instead of having innovation disrupt our communities.
Locke then asked the two: when looking at innovation you seek to create in organizations, what timeline are you looking at for long-lasting impact on the community?
Jones said that innovation was impossible without risk. Gootee agreed that people must take risks to make a financial or economic impact. He advised looking at short-term innovation versus long-term sustainable innovation portfolio to see what’s working, along with the community partners at hand to build a stable portfolio.
Corporate Leaders on Philanthropic Frontlines
Wrapping up the afternoon, several individuals—Courtney Arango (director of government affairs at AES Indiana), John T. Thompson (CEO/president of First Electric Supply, Thompson Distribution Company, and CMID Engineering and Beyond Countertops), Ashley Parker (director of philanthropy at Buckingham Foundation), and Brock Hesler (vice president of membership & foundation relations at the Indiana Chamber)—joined us to discuss their philanthropic roles as corporate and community leaders in Indiana.
Hesler defined CSR or corporate citizenship as a self-regulating business model that helps a company be socially responsible to its company and stakeholders. Arango noted that ESG and corporate strategies (CSR) intertwine.
Because United Way of Central Indiana serves the community so broadly and Lilly Endowment Inc. pays their overhead, Thompson said 100 percent of United Way funding goes into the communities.
The panel was asked how they foster an environment of volunteerism. Parker said their employees are asked to give $5 or more from every paycheck to contribute toward their community grants. They also provide volunteer time-off (12 hours per year) and plan volunteer employee initiatives and employee days of service for service projects selected by employees as a group project.
Arango noted that their organizational engagement consists mainly of marquee event sponsorships in the Indianapolis area. They are selective about what they give, who they give, and why, as it connects with their organization’s mission.
Conclusion
As the Mutz Philanthropic Leadership Institute's session concluded, it was clear that the private sector's role in societal advancement is evolving into a more complex and integrated model with philanthropy. This is not just about donations—it's about embedding ethical, sustainable, and impactful practices into the very DNA of business operations.
We are inspired to be that force for good, leveraging the lessons learned to foster a philanthropic culture that supports and leads community transformation.
Let's be the architects of a future where business and philanthropy unite for the greater good.