Posted: August 6th, 2022

week 10

1) Summarize “case study 13” into 4 paragraphs; and Respond to the 3 questions on page 510 (1 paragraph for each question)    

1. How has Patagonia been able to promote sustainability among other businesses?

2. Do you think it is beneficial for Patagonia to branch out into ventures other than apparel?

3. Does Patagonia—a privately held, debt-free company— have an advantage over public companies with shareholders by being socially responsible?

2)  Discuss Sexual Harassment as discuss in the text book and how does it differ in today’s work place.  (require 2 paragraphs)

 Ch8: p228-230 

3)  Discuss in detail Community Stakeholders and its responsibilities (require 5 paragraphs) (focus more from textbook)

Ch10: p276-281 & p281-286

508 Case 13 Corporate Social Responsibility from the Outside In at Patagonia

This case was prepared by Mark Zekoff and Sarah Sawayda for and under the direction of O.C. Ferrell and Linda Ferrell, © 2019. It was prepared for
classroom discussion rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal decision by management. All
sources used for this case were obtained through publicly available material.

Introduction
How can businesses make a difference in a world
of decreasing resources? Patagonia, a privately held
outdoor clothing company based out of Ventura,
California, is working toward finding an answer to that
question. Patagonia’s clothing has been developed and
marketed toward a variety of outdoor sports, travel,
and everyday wear. The company has integrated core
beliefs and values into every product they produce and is
known for their innovative designs, exceptional quality,
and environmental ingenuity. Their high integrity and
commitment to the environment has regularly placed
Patagonia on the Ethisphere Institute’s “World’s Most
Ethical Companies” list.

History of Patagonia
Like many successful companies, Patagonia stems from
one entrepreneur’s passion. In 1953, Yvon Chouinard,
founder of Patagonia, developed a passion for rock
climbing. His passion brought him West to the San
Fernando Valley in California, where he became an
expert at climbing and rappelling. Unfortunately, his
passion was limited by a lack of appropriate climbing
gear. The only available climbing gear were pitons, metal
spikes that were driven into cracks or seams in rocks.
These pitons were left in the rock, meaning that a long
climb could require hundreds of these tools.

Recognizing a need for better, more environmentally
friendly equipment, Chouinard began to make his
own reusable pitons that were stronger than what
was currently on the market. Word of Chouinard’s
invention spread and he began selling his pitons out of
the back of his car for $1.50 each. By 1965, Chouinard
decided to partner with Tom Frost to create Chouinard
Equipment. For nearly a decade, Chouinard and Frost
made improvements on nearly every climbing tool. Soon
Chouinard and his wife Malinda were selling clothing
as a way to support the hardware business. By 1972,
the clothing line had expanded to become a business
venture. The name of the line was Patagonia and was
intended to reflect the mysticism of far-off lands and
adventurous places located beyond the map.

The clothing line was successful for many years.
Financial hardships, coupled with Chouinard’s strong

focus on the environment, resulted in a change in the
product material. The company switched to more expen-
sive and durable organic cotton in 1996, a risky business
move considering it increased the firm’s supply costs.
The more durable the product, the fewer customers need
to purchase from the company. However, the change had
a net positive effect; consumers were more willing to do
business with Patagonia due to their environmental con-
sciousness and the fact that they could trust Patagonia’s
products to last a long time.

As the change to organic cotton shows, Patagonia
puts the values of integrity, accountability, and trust
into practice in their business by backing their mission
with action. As of late 2019, recycled materials account
for 69 percent of their clothing. The company plans to
hit 100 percent by 2025. Patagonia’s environmentally
friendly fibers include hemp, organic cotton, recycled
nylon, 100% recycled down, recycled polyester, recycled
wool, Yulex, reclaimed cotton, denim made from organic
cotton, sustainably source wool, and cellulose-based
fibers REFIBRA lyocell and TENCEL lyocell. In addi-
tion to clothing, Patagonia has also spoken out about
sustainability practices in other areas. For example, the
company has produced films about the environmental
impacts of common business practices. One of these
films, Artifishal, discusses the need for more natural
salmon fishing rather than reliance on the controversial
practices of fish hatcheries.

Today Patagonia is debt-free and is still willing to
bend the rules. For instance, the firm—which constantly
remarks that they place the environment over profits—
has embarked upon a “Buy Less” campaign, among
other initiatives that seem like they might discourage
revenue growth. On the contrary, annual revenue has hit
$1 billion in recent years.

Patagonia’s Purpose and Core
Values
When Patagonia was first developed, Yvon and Malinda
agreed that the company would produce only products
of the highest quality and manufactured in the most
responsible way. They selected the following mission
statement for the company: “Build the best product,
cause no unnecessary harm, use business to inspire

Corporate Social Responsibility from the Outside In
at Patagonia

CASE 13

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Case 13 Corporate Social Responsibility from the Outside In at Patagonia 509

and implement solutions to the environmental crisis.”
Patagonia strives to live out their mission statement
every day. To make their mission into a reality, Patagonia
has adopted four core guiding principles for their
operations: quality, integrity, environmentalism, and not
bound by convention.

For Patagonia, this means working with friends,
hiring self-motivated, intelligent employees, and giving
them flexible time to enjoy surfing, climbing, and spend-
ing time with their families. Another important value
involves finding ways to be responsible by restoring
or reusing, which has prompted the company to open
retail locations in old buildings that have been restored.
After the company nearly went out of business during
the 1990s, Yvon Chouinard vowed to never again stray
from the core values that he had adopted to develop
Patagonia. These values are strongly embedded into all
company operations and activities.

Patagonia’s Leadership And
Management Style
Yvon Chouinard set out to create a company that
was proactive in their approach to how business is
conducted by embracing a progressive corporate culture.
As stated, Patagonia believes that employees should be
out enjoying nature or tending their children when sick.
Such a culture has made the company widely popular
with employees and has steered the company toward
innovation and success on a global platform.

Although Yvon Chouinard owns Patagonia, he sur-
rounds himself with talented leaders to help advance the
company’s goals. Patagonia’s leadership is well-known
for ethical conduct and for guiding the company accord-
ing to their corporate mission and values. Patagonia’s
CEO, Rose Marcario, is committed to Patagonia’s vision
of environmentalism and is one of Business Insider’s
100 “People Transforming Business.” Originally the
company’s CFO in 2008, she earned the CEO position
in 2014. She has been influential in driving the company
to continue pursuing their environmental and social
responsibility goals.

Environmental Initiatives
Over the years, Patagonia has teamed up with other
corporations to develop and create initiatives aimed at
reducing the environmental footprint businesses leave
behind. They have pioneered revolutions in clothing
technology development and manufacturing. Patagonia
has also been an innovative force in creating programs
that deal with the environmental crisis head-on.

1% for the Planet
The organization 1% for the Planet is an alliance
of businesses that donate part of their proceeds to

environmental organizations to support sustainability
and the preservation of the environment. Since 1985,
Patagonia has committed to donate 1 percent of their sales
to environmental organizations around the world that
work to conserve and restore the natural environment.
Since they started to support 1% for the Planet, Patagonia
has contributed $74 million in donations. In addition
to 1% for the Planet, Patagonia regularly contributes
additional dollars to environmental groups. For example,
in 2018, following corporate tax cuts, Patagonia took the
money they saved and donated $10 million to non-profit
environmental organizations.

Worn Wear Initiative
After years of hosting Worn Wear pop-up events where
customers could bring used clothing for either repair or
exchange, Patagonia launched a permanent Worn Wear
store on their site in 2017. Now, customers can buy, sell,
and trade Patagonia gear second-hand. Patagonia also
educates their customers on how to repair their purchases.
This initiative embraces the concept of extending the life
of each product, allowing customers to reuse, recycle,
repair, resell, or recycle to keep products out of the landfill.

Conservation Alliance
The Conservation Alliance was co-founded by Patagonia
in 1989. The purpose of the Conservation Alliance
is to encourage businesses in the outdoor industry to
contribute to environmental organizations. Throughout
the years, the Conservation Alliance has grown beyond
their four founders to include 180 businesses. The
Conservation Alliance has donated over $10 million and
Patagonia remains actively involved with the alliance,
maintaining a seat of the board.

The bluesign® System
Patagonia has worked with bluesign technologies in
their quest to reduce resource consumption since 2000
and became the first official bluesign system partner
in 2007. For those resources that cannot be reduced,
bluesign helps Patagonia use more sustainable resources
that will have less of a negative impact on the environ-
ment. Patagonia’s goal is to have “bluesign approved
fabrics” on 100 percent of their products in the future.
There are now more than 400 partners of the bluesign
System including brands, manufacturers, and suppliers.

Corporate Social Responsibility
In addition to their many environmental initiatives sat-
isfying stakeholder groups throughout the community,
Patagonia also focuses on satisfying their employees.
As described earlier, Patagonia believes in a work/life
balance philosophy. Because of this strong relationship

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510 Case 13 Corporate Social Responsibility from the Outside In at Patagonia

with their workforce, the company has a 4 percent
turnover rate compared to the industry average of 13
percent. Patagonia averages 900 applications per job
opening, providing them with the opportunity to hire the
best talent. Patagonia also works with factories to ensure
that their products are being produced in alignment
with Patagonia’s corporate values and environmental
integrity. In 1990, Patagonia developed the Contractor
Relationship Assessment, a scorecard used to rate a fac-
tory’s performance. In 1996, Patagonia became a found-
ing member of the FLA (Fair Labor Association), which
conducts audits and training on factory conditions. In
2007, the firm joined the Fair Factory Clearinghouse
(FLC), which is a database that helps Patagonia collect
and manage supplier data that deals with social and
environmental issues. This information is shared with
other firms in Patagonia’s industry and can help establish
benchmarks for best practices.

Patagonia keeps a close eye on their supply chain
with regular factory audits. They also score factories
based on how they measure up to social responsibility
and environmental goals. For their materials suppliers
such as mills, Patagonia has Environmental Health
and Safety requirements as well as a Raw Materials
Social Responsibility program. Under this program,
Patagonia’s materials suppliers must audit their factories
to measure whether they are compliant with safety,
social responsibility, and environmental criteria as well
as areas of improvement. By raising the bar for social and
environmental responsibility among their suppliers and
factories, Patagonia is attempting to incorporate corpo-
rate social responsibility among all of their stakeholders.

In 2019, Patagonia made a controversial decision
to limit the sales of their custom vests, only selling them
to companies that “prioritize the planet,” according to
the company’s announcement. The vests, which have
become trendy among business people often feature
company logos on the chest opposite the Patagonia
logo. The move, which only impacts new partners,
protects the Patagonia brand from being associated with
environmentally-unfriendly companies and holds other
companies to a higher standard.

What the Future Holds for Patagonia
Patagonia shows no signs of slowing down and
neither does Yvon Chouinard. The company remains
dedicated to advancing environmental awareness among
businesses—even if it entails partnering with some
unlikely companies. For instance, Patagonia partnered
with Walmart and Adidas to form the Sustainable
Apparel Coalition. Patagonia realizes that to create last-
ing change, they must not only improve their sustainabil-
ity operations but also assist in helping other businesses
learn how to reduce their impact on the environment. By
2025, Patagonia hopes to be carbon neutral and would
like to be carbon positive in the future.

Chouinard continues to see himself as an innovator
rather than just an inventor. Under his influence and
the influence of company leaders such as CEO Rose
Marcario, Patagonia seeks to make a difference and
create a revolution in how businesses view sustainability.
Rather than taking from the environment, the goal for
Patagonia is to educate consumers and businesses about
how they can help to preserve it. Patagonia demonstrates
how strong corporate values and ethical leadership can
create a company that is both successful and a role
model for those who desire to make a positive difference.

Questions for Discussion
1. How has Patagonia been able to promote sustainability

among other businesses?
2. Do you think it is beneficial for Patagonia to branch

out into ventures other than apparel?
3. Does Patagonia—a privately held, debt-free company—

have an advantage over public companies with
shareholders by being socially responsible?

Sources
Ashley Lutz, “A Clothing Company Discourages Customers from

Buying Its Stuff—and Business Is Booming,” 14, Business
Insider, September, 2016, 1–2 (accessed October 31, 2017).

Associated Press, “Patagonia Gives $10 Million GOP Tax
Windfall to Environmental Groups,” CNBC, November 29,
2018, https://www.nbcnews.com/business/business-news/
update-patagonia-gives-gop-tax-windfall-environmental-
groups-n941551 (accessed October 25, 2019).

Bradford Wieners, “Solving Climate Change with Beer from
Patagonia’s Food Startup,” Bloomberg Business Week,
October 3, 2016, https://www.bloomberg.com/news/
features/2016-10-03/solving-climate-change-with-beer-from-
patagonia-sfood-startup (accessed October 31, 2017).

Daniel Bentley, “Doing Good and Making a Profit: These Apparel
Companies Are Proving They Aren’t Mutually Exclusive,”
Fortune, January 23, 2019, http://fortune.com/2019/01/23/
patagonia-art-eden-sustainability/ (accessed August 10, 2019).

Daniela Sirtori-Cortina, “From Climber to Billionaire: How Yvon
Chouinard Built Patagonia into a Powerhouse in Own Way,”
Forbes, March 20, 2017, 1, https://www.forbes.com/sites/
danielasirtori/2017/03/20/from-climber-to-billionaire-how-
yvon-chouinard-builtpatagonia-into-a-powerhouse-his-own-
way/#387feacf275c (accessed November 2, 2017).

Hailey Gunderson, “Patagonia’s Strategic Management,
“Patagonia’s Code of Ethics,” Blog, 25, April, 2012, 1, http://
hrgunderson08.blogspot.com/ (accessed August 10, 2019).

Hailey Gunderson, Patagonia’s Strategic Management, “How
Patagonia Satisfies Customer Wants,” Blog, 01, May, 2012,
1. http://hrgunderson08.blogspot.com/ (accessed August 10,
2019).

J. B. MacKinnon, “Patagonia’s Anti-Growth Strategy,” The New
Yorker, 21, May, 2017, 1–2). https://www.newyorker.com/
business/currency/patagonias-anti-growth-strategy (accessed
August 10, 2019).

Jeff Beer, “How Patagonia Grows Every Time It Amplifies
Its Social Mission,” Fast Company, February 21,
2018, https://www.fastcompany.com/40525452/

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228 Business and Society

continually decreased over the years.64 Figure 8.2 depicts the number of complaints
and resolutions of pregnancy discrimination cases from 2015 through 2018.

These legal imperatives require that companies formalize employment prac-
tices to ensure that no discrimination is occurring. Thus, managers must be fully
aware of the types of practices that constitute discrimination and work to ensure
that hiring, promotion, annual evaluation, and other procedures are fair and based
on merit. The spread of HIV and AIDS has prompted multinational firms with
operations in Africa to distribute educational literature and launch prevention
programs. Some companies work with internal and external stakeholders and even
fund medical facilities that help prevent the disease and treat HIV/AIDS patients.
Another component to their initiatives involves education on fair treatment of
employees with the disease. Multinational companies in Mexico, for instance,
produced a written commitment to eliminate the stigma and discrimination that
often surrounds HIV/AIDS in the workplace.65

To ensure that they build balanced workforces, many companies have initiated
affirmative action programs, which involve efforts to recruit, hire, train, and promote
qualified individuals from groups that have traditionally been discriminated against
on the basis of race, sex, or other characteristics. Coca-Cola established a program
to create a level foundation so that all employees have access to the same informa-
tion and development opportunities.66 A key goal of these programs is to reduce any
bias that may exist in hiring, evaluating, and promoting employees. A special type of
discrimination, sexual harassment, is also prohibited through Title VII.

Sexual Harassment The flood of women into the workplace during the last
half of the twentieth century brought new challenges and opportunities for
organizations. Although harassment has probably always existed in the workplace,
the presence of both genders in roughly equal numbers changed norms and
expectations of behavior. When men dominated the workplace, photos of partially
nude women or sexually suggestive materials may have been posted on walls or
in lockers. Today, such materials could be viewed as illegal if they contribute to
a work environment that is intimidating, offensive, or otherwise interfering with
an employee’s work performance. The U.S. government indicates the nature of
this illegal activity: unwelcome sexual advances, requests for sexual favors, and

Figure 8.2 Growth in Filings and Resolutions of Pregnancy Discrimination Act Complaints
to the EEOC

Source: U.S. Equal Employment Opportunity Commission, “Pregnancy Discrimination Charges,” https://www.eeoc.gov/
eeoc/statistics/enforcement/pregnancy_new.cfm (accessed June 19, 2019).

Receipts Resolutions
0

500

1000

1500

2000

2500

3000

3500

4000

2015
2016

2017
2018

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Chapter 8 Employee Relations 229

other verbal or physical conduct of a sexual nature constitutes sexual harassment
when submission to or rejection of this conduct explicitly or implicitly affects
an individual’s employment, unreasonably interferes with an individual’s work
performance, or creates an intimidating, hostile, or offensive work environment.67

Prior to 1986, sexual harassment was not a specific violation of federal law
in the United States. In Meritor Savings Bank v. Vinson, the U.S. Supreme Court
ruled that sexual harassment creates a “hostile environment” that violates Title
VII of the Civil Rights Act, even in the absence of economic harm or demand for
sexual favors in exchange for promotions, raises, or related work incentives.68
In other countries, sexual harassment in the workplace is considered an illegal
act, although the specific conditions may vary by legal and social culture. Until
recently, Mexican sexual harassment law protected public-sector employees only
if their jobs were jeopardized on the basis of the exchange of sexual favors or
relations. In the European Union (EU), sexual harassment legislation focuses on
the liability that employers carry when they fail to create a workplace culture free
of harassment and other forms of discrimination. The EU has strengthened its
rules on sexual harassment, including definitions of direct and indirect harassment,
the removal of an upper limit on victim compensation, and the requirement that
businesses develop and make “equality reports” available to employees.69

There are two general categories of sexual harassment: quid pro quo and
hostile work environment.70 Quid pro quo sexual harassment is a type of sexual
extortion where there is a proposed or explicit exchange of job benefits for sexual
favors. For example, telling an employee, “You will get the promotion if you
spend the weekend with me in Las Vegas,” is a direct form of sexual harassment.
Usually, the person making such a statement is in a position of authority over the
harassed employee, and thus, the threat of job loss is real. One incident of quid
pro quo harassment may create a justifiable legal claim. Hostile work environment
sexual harassment is less direct than quid pro quo harassment and can involve
epithets, slurs, negative stereotyping, intimidating acts, graphic materials that
show hostility toward an individual or group, and other types of conduct that
affect the employment situation. For example, at one automobile manufacturing
plant, male employees drew inappropriate sexually explicit pictures on cars before
they were painted. This was found to be sexual harassment. An email containing
sexually explicit jokes that is sent out to employees could be viewed as contribut-
ing to a hostile work environment. Some hostile work environment harassment is
nonsexual, meaning the harassing conduct is based on gender without explicit ref-
erence to sexual acts. For example, in Campbell v. Kansas State University (1991),
the U.S. District Court for the District of Kansas found repeated remarks about
women “being intellectually inferior to men” to be part of a hostile environment.
Unlike quid pro quo cases, one incident may not justify a legal claim. Instead, the
courts will examine a range of acts and circumstances to determine if the work
environment was intolerable and the victim’s job performance was impaired.71

From a social responsibility perspective, a key issue in both types of sexual
harassment is the employing organization’s knowledge and tolerance of these
types of behaviors. A number of court cases have shed more light on the issues
that constitute sexual harassment and organizations’ responsibility in this regard.

In Harris v. Forklift Systems (1993), Teresa Harris claimed that her boss
at Forklift Systems made suggestive sexual remarks, asked her to retrieve coins
from his pants pocket, and joked that they should go to a motel to “negotiate
her raise.” Courts at the state level threw out her case because she did not suffer
major psychological injury. The U.S. Supreme Court overturned these decisions,
though, ruling that employers can be forced to pay damages even if the worker
suffered no proven psychological harm. This case brought about the “reasonable
person” standard in evaluating what conduct constitutes sexual harassment. From
this case, juries now evaluate the alleged conduct with respect to commonly held
beliefs and expectations.72

sexual harassment
unwelcome sexual advances,
requests for sexual favors, and
other verbal or physical conduct
of a sexual nature which,
when submitted to or rejected,
explicitly or implicitly affects
an individual’s employment,
unreasonably interferes with an
individual’s work performance, or
creates an intimidating, hostile,
or offensive work environment

quid pro quo sexual harassment
a type of sexual extortion where
there is a proposed or explicit
exchange of job benefits for
sexual favors

hostile work environment sexual
harassment
a type of sexual harassment that
involves epithets, slurs, negative
stereotyping, intimidating acts,
graphic materials that show
hostility toward an individual or
group, and other types of conduct
that affect the employment
situation

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230 Business and Society

Several firms have been embroiled in sexual harassment suits. For example,
Sterling Jewelers, the parent company of Kay Jewelers and Jared the Galleria
of Jewelry, is accused of discrimination against women for a period of over ten
years. The class-action suit, which at one point involved about 70,000 women,
could result in substantial punitive damages and fines.73 In another case, a jury
awarded the victim $95 million in damages due to years of experiencing severe
sexual harassment by a manager at the furniture rent-to-own store, Aarons Inc.
The manager’s behavior encouraged other male employees to harass the victim as
well, creating a hostile workplace. To make matters worse, the company neglected
to respond to the victim when she left a message on their hotline.74

U.S. Supreme Court decisions on sexual harassment cases indicate that
(1) employers are liable for the acts of supervisors; (2) employers are liable for
sexual harassment by supervisors that culminates in a tangible employment action
(loss of job, demotion, etc.); (3) employers are liable for a hostile environment
created by a supervisor but may escape liability if they demonstrate that they
exercised reasonable care to prevent and promptly correct any sexually harassing
behavior and that the plaintiff employee unreasonably failed to take advantage of
any preventive or corrective measures offered by the employer; and (4) claims of
hostile environment sexual harassment must be severe and pervasive to be viewed
as actionable by the courts.75

Much like the underlying philosophy of the Federal Sentencing Guidelines
for Organizations (FSGO) that we discussed in earlier chapters, these decisions
require top managers in organizations to take the detection and prevention of
sexual harassment seriously. To this end, many firms have implemented programs
on sexual harassment. To satisfy current legal standards and set a higher standard
for social responsibility, employees, supervisors, and other close business partners
should be educated on the company’s zero tolerance policy against harassment.
Employees must also be educated on the policy prohibiting harassment, including
the types of behaviors that constitute harassment, how offenders will be punished,
and what employees should do if they experience harassment. Just like an organi-
zational compliance program, employees must be assured of confidentiality and no
retaliation for reporting harassment.

Training on sexual harassment should be balanced in terms of legal definitions
and practical tips and tools. Although employees need to be aware of the legal
issues and ramifications, they also may need assistance in learning to recognize
and avoid behaviors that may constitute quid pro quo harassment, create a hostile
environment, or appear to be retaliatory in nature. In fact, retaliation claims have
more than doubled since the early 1990s, prompting many companies to incor-
porate this element into sexual harassment training. Finally, employees should
be aware that same-sex conduct may also constitute sexual harassment.76 Sexual
harassment from women to their male subordinates is yet another issue. One law
enforcement officer in Texas won a lawsuit against his female boss after claiming
that she frequently wanted sexual favors and touched him inappropriately.77
Table 8.6 lists facts about sexual harassment that should be used in company
communication and training on this workplace issue.

Whistleblowing An employee who reports individual or company wrong- doing to
either internal or external sources is considered a whistleblower.78 Whistleblowers
usually focus on issues or behaviors that need corrective action, although managers
and other employees may not appreciate reports that expose company weaknesses,
raise embarrassing questions, or otherwise detract from organizational tasks.
Although not all whistleblowing activity leads to an extreme reaction, whistleblowers
have been retaliated against, demoted, fired, and subject to even worse consequences
as a result of their actions.79 For example, Eddie Garcia, an energy specialist work-
ing for Santa Fe County in New Mexico, was accused of grand larceny and was
fired from his job after pointing out improper conduct on the part of an exclusive

zero tolerance
the practice of applying penalties
to even minor infractions of policy

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276 Business and Society

oogle, like most organizations with operational expertise and other core
competencies, can also focus on implementing social responsibility and
satisfying stakeholder groups. From a social responsibility perspective,

the key challenge is how an organization assesses its stakeholders’ needs, integrates
them with company strategy, reconciles differences between stakeholders’ needs,
strives for better relationships with stakeholders, achieves mutual understandings
with them, and finds solutions for problems. In this chapter, we explore com-
munity stakeholders and how organizations deal with stakeholder needs through
philanthropic initiatives. We explore the relationship with communities and the
economic, legal, ethical, and philanthropic responsibilities that must be addressed
by business. We define strategic philanthropy and integrate this concept with
other elements of social responsibility. Next, we trace the evolution of corporate
philanthropy and distinguish the concept from cause-related marketing. We also
provide examples of best practices of addressing stakeholders’ interests that meet
our definition of strategic philanthropy. From there, we define social entrepreneur-
ship and explain how it relates to strategic philanthropy and social responsibility.
Then we consider the benefits of investing in strategic philanthropy to satisfy
both stakeholders and corporate objectives. Finally, we examine the process of
implementing strategic philanthropy in business. Our approach in this chapter is to
demonstrate how companies can link strategic philanthropy with economic, legal,
and ethical concerns for the benefit of all stakeholders.

Community Stakeholders
The concept of community has many varying characteristics that make it a
challenge to define. The community does not always receive the same level of
acceptance as other stakeholders. Some people even wonder how a company
determines who is in the community. Is a community defined by city or county
boundaries? What if the firm operates in multiple locations? Or is a community
prescribed by the interactions a firm has with various constituents who do not
fit neatly into other stakeholder categories? For a small restaurant in a large city,
the owner may define the community as the immediate neighborhood where most
patrons live. The restaurant may demonstrate social responsibility by hiring people
from the neighborhood, participating in the neighborhood crime watch program,
donating food to the elementary school’s annual parent-teacher meetings, or
sponsoring a neighborhood Little League team. For example, JPMorgan Chase &
Co. has instituted a program called Corporate Challenge, a global initiative that
invites employees and others to participate in running events for charity. Today,
participants in the Corporate Challenge include teams from many other organiza-
tions although employees of JPMorgan Chase still produce the largest participa-
tion from a single company. One of the events, which took place in Syracuse, New
York, hosted over 28,000 runners and walkers from more than 350 companies.
The proceeds supported the local nonprofit Hillside Work-Scholarship Connection.
Now in its 43rd year, the challenge recently included 9,000 JP Morgan Chase
employees in seven countries and provided donations to causes around the world.
In the last few years, causes included support for indigenous Australians, a youth
foundation in China, sports in South Africa, and veterans.2 For a corporation with
facilities in North and South America, Europe, and Africa, the community may be
viewed as virtually the entire world. To focus its social responsibility efforts, the
multinational corporation might employ a community relations officer in each
facility who reports to and coordinates with the company’s head office.

Under our social responsibility philosophy, the term community should be
viewed from a global perspective, beyond the immediate town, city, or state where

G

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Chapter 10 Community Relations and Strategic Philanthropy 277

a business is located. Thus, we define community as those members
of society who are aware of, concerned with, or in some way affected
by the operations and output of an organization. With information
technology, high-speed travel, and the emergence of global business
interests, the community as a constituency can be geographically,
culturally, and attitudinally quite diverse. Issues that could become
important include pollution of the environment, land use, economic
advantages to the region, and discrimination within the community,
as well as exploitation of workers, natural resources, or consumers.

From a positive perspective, an organization can significantly improve the
quality of life for people in a community through employment opportunities, eco-
nomic development, and financial contributions for educational, health, cultural,
and recreational activities. Quality of life is a broad concept, typically associated
with the social, physical, economic, and environmental health conditions that affect
an individual or group. U.S. News and World Report conducts an annual survey
of 20,000 citizens of 80 countries to determine its Best Country rankings. Part of
the survey relates to quality of life, which considers the quality of healthcare and
public education, political and economic stability, and other factors. Table 10.1
lists the highest- and lowest-rated countries for quality of life.3

Countries with the highest ratings are known for their social safety nets,
progressive policies, and commitment to public health and education. Countries
at the bottom of the list have experienced years of strife, often brought on by war,
corruption, and unemployment. As discussed in earlier chapters, business both
affects society and is affected by it. The intersection of business and society, as
well as managerial attention and actions toward the intersection, lie at the heart of
the social responsibility orientation discussed in this book. Even a company with
a past reputation for damaging the quality of life in its community may be able to
overcome criticism and begin to forge a healthier relationship with its stakeholders.

The story of Asia Pulp & Paper (APP) demonstrates the power that stakehold-
ers have in changing corporate perspectives. Based in Indonesia, APP is one of
the largest producers of pulp and paper products in the world, with operations in
120 countries spread over six continents. For many years, critics of the company
pointed to its supply-chain practices and lack of consideration for the environment
and communities in which it operated. The Indonesian company was named in a
scathing report issued by Greenpeace about illegal logging activity in Indonesia
and its devastating effects on rainforests. The report, Partners in Crime, also took
aim at the companies that purchased from APP. When Greenpeace activists learned
that Mattel was using APP paperboard generated from rainforests to package its
popular Barbie doll, they draped a banner of
Ken, Barbie’s love interest, from the roof of
Mattel’s headquarters in California. Ken wore
a disapproving look amid the phrases, “Barbie,
it’s over. I don’t date girls that are into defor-
estation.” These efforts, and many more, led
hundreds of companies to stop doing business
with APP. Before long, company executives
committed to a host of sustainability policies
and action plans, including the involvement
of the local community. Today, APP has a
full-fledged management approach to social
responsibility. While some critics still ques-
tion the company’s motives and outcomes,
other observers point to evidence of APP’s
turnaround. For example, APP has established
schools in several towns and cities to serve

community
members of society who are
aware of, concerned with, or
in some way affected by the
operations and output of an
organizatio

n

quality of lif

e

a measure of social, physical,
economic, and environmental
health conditions affecting an
individual or group

Table 10.1 Highest- and Lowest-Rated
Countries for Quality of Life
1. Canada
2. Sweden
3. Denmark
4. Norway
5. Switzerland

76. Angola
77. Jordan
78. Lebanon
79. Iran
80. Iraq

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278 Business and Society

local children, many of whom would have gone without much formal education.
The school curriculum includes science, engineering, forestry, and computing.
While the APP schools certainly change lives through education, they also ensure
the company is developing a strong future workforce.4

Through long-term efforts, a firm may become a neighbor of choice, an orga-
nization that builds and sustains trust with the community.5 To become a neighbor
of choice, a company should strive for positive and sustainable relationships with
key individuals, groups, and organizations; demonstrate sensitivity to community
concerns and issues; and design and implement programs that improve the quality
of community life, while promoting the company’s long-term business strategies
and goals.6 Merck’s Neighbor of Choice program interacts with organizations
and initiatives that are in line with the company’s mission on well-being. The
program is dedicated to finding solutions to health and social issues where the
company is located, improving healthcare quality, and increasing access to care
for underserved populations in the areas of Alzheimer’s disease, cancer, diabetes,
heart disease, hepatitis C, HIV/AIDS, and maternal health. The company awards
grants to local nonprofit organizations in health, education, social services, and
international issues. In one year alone, 130 grants infused $3.1 million, along with
a cadre of employee volunteers, into communities around the world.7

Similar to other areas of life, the relationship between a business and the com-
munity should be symbiotic. A business may support educational opportunities in
the community because the owners feel it is the right thing to do, but it also helps
develop the human resources (HR) and consumer skills necessary to operate the
business. Customers and employees are also community members who benefit
from contributions supporting recreational activities, environmental initiatives,
safety, and education. Many firms rely on universities and community colleges
to provide support for ongoing education of their employees, as well as advances
in research. The Dow Chemical Company, for example, committed to an annual
investment of $250 million over the course of 10 years to universities for research
purposes. For example, Dow partnered with University of California, Santa Barbara, to
design a laboratory safety program that applies to both university settings and corporate
laboratories. Beyond that, the company has working relationships with faculty,
students, and other academicians to apply the research and create useful solutions
to pressing issues, including renewable energy.8

To build and support these initiatives, companies may invest in community
relations, the organizational function dedicated to building and maintaining
relationships and trust with the community. In the past, most businesses have
not viewed community relations as strategically important or associated them
with the firm’s ultimate performance. Although the community relations depart-
ment interacted with the community and often doled out large sums of money
to charities, it essentially served as a buffer between the organization and its
immediate community. Today, community relations activities have achieved greater
prominence and responsibility within most companies, especially due to the rise
of stakeholder power and global business interests. The function has gained
strategic importance through linking to overall business goals, professionalizing
its staff and their knowledge of business and community issues, assessing its
performance in quantitative and qualitative terms, and recognizing the breadth
of stakeholders to which the organization is accountable.9 Community relations
also assist in short-term crisis situations, such as disaster relief. The humanitarian
aid organization Direct Relief was given an Excellence Award by the Committee
Encouraging Corporate Philanthropy (CECP) for its collaboration with FedEx to
bring health services to people and places stricken by disaster. When a typhoon hit
the Philippines, more than 250,000 people received needed medical supplies. Direct
Relief and FedEx brought medications and other relief to Paraguay after flooding
left 70,000 people without shelter, food, and water. Additionally, the partnership

neighbor of choice
an organization that builds
and sustains trust with the
community through employment
opportunities, economic
development, and financial
contribution to education, health,
artistic, and recreational activities
of the community

community relatio

ns

the organizational function
dedicated to building and
maintaining relationships and
trust with the community

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Chapter 10 Community Relations and Strategic Philanthropy 279

Table 10.2 Community Mission Statements
Organization Community Mission Statement

Capital One At Capital One, we have always believed that as business leaders, we have
a unique opportunity to create value in the communities where we live and
work. Applying the same principles we use in our business of innovation,
collaboration, and empowerment to our investments in the community helps
leverage our investment of time and money to fuel new ideas and inspire
others to act.

Education
Advisory Board
(EAB)

EAB’s mission to make education smarter and our communities stronger
infuses everything we do—especially our active, intentional approach to
corporate social responsibility. It’s by design that our work with our members
and our communities intertwine: it allows us to have an outsized, positive
impact. This service orientation strengthens our own organization, too—by
ensuring we hire staff attuned to our members’ missions, by creating skill-
development opportunities beyond our office walls, and by giving employees
the fulfillment of serving communities where they live and work.

Eli Lilly and
Company

We have a long, proud heritage of strengthening the communities where we
work and live. We do this through giving, volunteering, and focusing on key
issues that affect our business, such as education. At the heart of our efforts
to strengthen communities are our employees, who donate their time, talent
and treasure in countless ways. As a company, we actively encourage our
employees to volunteer and give, and we develop programs that allow them to
help improve communities at home and around the world. We view this as an
important investment that connects us more deeply with the people we serve,
which helps make us a better company.

Pinnacol
Assurance

We have a policy of serving people. It’s pretty simple. We love our community.
For more than 100 years, our job has been all about protecting the health
and safety of!people on their jobs. And that sense of caring extends to the
communities where we live and work. We donate time, money and support
through grants, sponsorships, our employee volunteer program and the
Pinnacol Foundation’s scholarship program.

UnitedHealth
Group

The people of UnitedHealth Group are working together in support of local
communities. UnitedHealth Group’s year-round giving!program supports
employees’ desires and efforts to give back to the communities where they
live and work, across the nation and around the world. Through charitable
contributions and volunteering, our people are deeply and personally involved
in improving the health and welfare of their neighbors. The United Health
Foundation matches employee contributions, dollar for dollar, to nearly all
nonprofit organizations, doubling their impact. Employees have the ability to
give whenever, wherever and however they choose.

Volvo Group For the Volvo Group, creating shared value involves moving both our business
and society forward. We enhance our competitiveness while simultaneously
advancing the economic, environmental and social conditions of the societies
in which we operate. The highest potential for mutual benefit is where our
business significantly interacts with society. Therefore, our selected focus areas
are:
• Education and skills development
• Traffic and worksite safety
• Environmental sustainability

Sources: Capital One, “Capital One Community Involvement Report,” https://www.capitalone.com/media/doc/about/
capitalone-sustainability-report (accessed June 30, 2019); EAB, “Corporate Citizenship,” https://www.eab.com/
careers/corporate-citizenship (accessed June 30, 2019); Lilly, “Strengthening Communities,” https://www.lilly.com/caring/
strengthening-communities (accessed June 19, 2019); Pinnacol, “Community Relations,” https://www.pinnacol.com/
community-relations (accessed June 29, 2019); UnitedHealth Group, “Our People,” https://www.unitedhealthgroup.com/
social-responsibility/giving.html (accessed June 15, 2019); Volvo Group, “Societal Engagement,” https://www.volvogroup.
com/en-en/about-us/csr-and-sustainability/moving-business-and-society-forward.html (accessed June 29, 2019).

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280 Business and Society

has provided over 10 million Americans with approximately $400 million in
necessary medications.10 Progressive companies manage community relations with
partnership in mind. They seek out community partners for a range of interests and
activities—philanthropy, volunteerism, creating a quality educational system and a
qualified workforce, appropriate roads and infrastructure, affordable housing, and
other community assets.

Over the past two decades, corporate support for philanthropy has been steadily
growing. According to Giving USA Foundation, corporate giving totaled more than
$20 billion in 2018. This number increased by 5.4 percent from the year before. The
sluggish recovery of the economy since the Great Recession had an effect on corporate
giving, but as the economy recovers corporate giving has begun to increase once more.
PepsiCo, for instance, has a matching gifts program and is involved in a number of
sustainability initiatives. The company donated a $1 million grant to Kiva, a nonprofit
organization that provides small loans to entrepreneurs in developing countries to
start their own businesses.11 Even before the economic downtown, corporate giving
was becoming more effective and strategic. Companies are working to align their
stakeholder interests and develop partnerships that are more closely aligned to busi-
ness goals, community interests, and sustainable activities.12

In a diverse society, however, there is no general agreement as to what
constitutes the ideal model of business responsibility to the community. Businesses
are likely to experience conflicts among stakeholders as to what constitutes a
real commitment to the community. Therefore, the community relations function
should cooperate with various internal and external constituents to develop
community mission statements and assess opportunities and develop priorities
for the types of contributions it will make to the community. Table 10.2 provides
several examples of company missions and programs with respect to community
involvement. As you can see, these missions are specific to the needs of the

Table 10.3 Community Needs Assessment

Community Issues Exceptional Adequate Inadequate Don’t Know

Parks

3 2 1 0

Culinary water system 3 2 1 0

Street maintenance 3 2 1 0

Garbage collection 3 2 1 0

Snow removal 3 2 1 0

Fire protection 3 2 1 0

Police protection 3 2 1 0

Ambulance service 3 2 1 0

Building inspection 3 2 1 0

Animal control 3 2 1 0

Other code enforcement
(weeds, junk cars, etc.)

3 2 1 0

Arts 3 2 1 0

Street lighting 3 2 1 0

Other issues that can be evaluated: grocery stores, pharmacies, clothing stores, fast-food
restaurants, entertainment, hardware/lumber stores, auto services, banking/financial services,
affordable housing, business offices, warehouses, convenience stores, community colleges,
higher education satellite campuses.

Source: Community Tool Box, “Community Needs Assessment Survey Guide,” https://ctb.ku.edu/en/table-of-contents/
assessment/assessing-community-needs-and-resources/conducting-needs-assessment-surveys/main (accessed June 27,
2019).

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Chapter 10 Community Relations and Strategic Philanthropy 281

people and areas in which the companies operate and are usually aligned with the
competencies of the organizations involved and their employees.

Community mission statements are likely to change as needs are met and new
issues emerge. For example, as the Japan-based Takeda Pharmaceutical Company
Ltd. continues to expand operations throughout the world, their community
involvement also expands to meet the needs of each community. In Brazil, the
company focuses on renovating orphanages, while in South Africa, they have
initiatives teaching children to make blankets. When global communities experi-
ence unexpected disasters, such as flooding in Australia, Takeda has been there
to assist with the recovery. On its website, Takeda proudly displays recognition
as a top employer in most countries where it operates, including awards granted
in Ecuador, Spain, Russia, Ukraine, and the United States.13 Thus, as stakeholder
needs and concerns change, the organization will need to adapt its community
relations efforts. To determine key areas that require support and to refine the
mission statement, a company should periodically conduct a community needs
assessment, like the one presented in Table 10.3.14

Responsibilities to the Community
It is important for a company to view community stakeholders in a trusting man-
ner, recognizing the potential mutual benefit to each party. In a networked world,
much about a company can be learned with a few clicks of a mouse. Activists
and disgruntled individuals have used websites to publicize the questionable
activities of some companies. Target and Ryanair have been the focus of “hate”
websites that broadcast concerns about the company’s treatment of employees,
pricing strategies, and marketing and advertising tactics.15 Because of the visibility
of business activities and the desire for strategic social responsibility, successful
companies strive to build long-term mutually beneficial relationships with relevant
communities. Achieving these relationships may involve some trial and error.
Table 10.4 illustrates some of the common myths about community relations.
A positive example, on the other hand, is Lilly Pharmaceuticals’ strong support
for the Indianapolis Symphony Orchestra. In return, the orchestra stages private
concerts for Eli Lilly employees. Dell Computer has a similar relationship with
the Round Rock Express, a minor-league baseball team. A community focus can
be integrated with concerns for employees and consumers. Chapter 1 provided
evidence that satisfied customers and employees are correlated with improved
organizational performance.

Table 10.4 Common Myths About Community Relations
Support of political and regulatory officials is not needed.

We will cause a problem for our company if we engage in community relations.

The community has no expertise on our decisions and actions.

Engaging the community will delay us in finding the right solution.

Community officials have no concern for the cost of solutions to issues.

We serve the community simply through employment opportunities and paying taxes.

Our only focus is national and global relationships.

Community relationships involve only public relations.

The local community does not impact our success.

Spending time with the community distracts from the economic success of the firm.

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282 Business and Society

Economic Issues
From an economic perspective, business is absolutely vital to a community.
Companies play a major role in community economic development by bringing
jobs to the community and allowing employees to support themselves and their
families. These companies also buy supplies, raw materials, utilities, advertising
services, and other goods and services from area firms; this in turn produces
more economic effects. In communities with few employers, an organization that
expands in or moves to the area can reduce some of the burden on community
services and other subsidized support. Even in large cities with many employers,
some companies choose to address social problems that tax the community. In
countries with developing economies, a business or industry can also provide many
benefits. A new company brings not only jobs, but also new technology, related
businesses, improvements to infrastructure, and other positive factors. Conversely,
globalization has incited criticism regarding the effects of U.S. businesses on other
parts of the world, namely developing countries. For example, Sig Sauer, a New
Hampshire-based manufacturer of a full range of firearms and ammunition, has
been condemned in the media for continuing to sell weapons in Mexico. The
company is the largest seller of firearms in Mexico and its customers include
federal, state, and local police. Given the rate of violence, organized crime, and
police corruption in the country, critics question why neither the U.S. government
nor Sig Sauer have put an end to shipping thousands of weapons across America’s
southern border. Similarly, Nestlé has been criticized for marketing baby formula
to nursing mothers in Turkey, claiming that their offspring will receive more nutri-
tion from the formula than from their mothers; aggressive selling of bottled water
in developing parts of the world, which is said to be expensive for consumers and
works as a deterrent to governments to solve water sanitation issues; and for child
labor accusations in African cocoa farms. The company has committed to “The
Nestlé Cocoa Plan,” which involves building schools and providing cocoa trees to
farmers with the aim of contributing to the betterment of the local community.16

Interactions with suppliers and other vendors also stimulate the economy.
Some companies are even dedicated to finding local or regional business partners
in an effort to enhance their economic responsibility. For example, Starbucks, in
an unprecedented move for the company, began franchising locations in Europe.
By having locals run the coffee chains’ stores, the company hopes to further its
influence in the region.17 Furthermore, there is often a contagion effect when one
business moves into an area: By virtue of its prestige or business relationships,
such a move can signal to other firms that the area is a viable and attractive
place for others to locate. There are parts of the United States that are highly
concentrated with automotive manufacturing, financial services, or technology.
Local chambers of commerce and economic development organizations often
entice new firms to a region because of the positive reputation and economic
contagion it brings. Finally, business contributions to local health, education, and
recreation projects not only benefit local residents and employees, but also may
bring additional revenue into the community from tourism and other businesses
that appreciate the region’s quality of life. AT&T, for example, has hosted the
Pebble Beach National Pro-Am golf tournament for more than 30 years. The
annual event honors influential groups each year and has raised more than $110
million that the Monterey Peninsula Foundation provides to local charities in
the counties that surround Monterey, California. After the event, tournament
banners are upcycled into backpacks, then stuffed with school supplies for area
schoolchildren in need.18

Just as a business brings positive economic effects by expanding in or relocating
to an area, it can also cause financial repercussions when it exits a particular
market or geographical location. Thus, workforce reduction, or downsizing—a

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Chapter 10 Community Relations and Strategic Philanthropy 283

topic discussed in Chapter 8—is a key issue with respect to economic responsibility.
The impact of layoffs due to plant closings and corporate restructuring often
extends well beyond the financial well-being of affected employees. Laid-off
employees typically limit their spending to basic necessities while they look for new
employment, and many may ultimately leave the area altogether. Even employees
who retain their jobs in such a downsizing may suffer from poor morale, distrust,
guilt, and continued anxiety over their own job security, further stifling spending
in a community.

Because companies have such a profound impact on the economic viability
of the communities in which they operate, firms that value social responsibility
consider both the short- and long-term effects on the community of changes in their
workforce. Today, many companies that must reduce their workforce—regardless of
the reasons—strive to give both employees and the community advance notice and
offer placement services to help the community absorb employees who lose their
jobs. Quad/Graphics, one of the largest printers in the United States, closed plants
in Illinois and Minnesota. The company offered to transfer affected employees to
other plants in the nation. However, for those who did not want to transfer, Quad/
Graphics agreed to offer a severance package including pay, career placement
assistance, and extension of benefits.19 Depending on economic circumstances
and business profitability, companies may choose to offer extra compensation
commensurate with an employee’s length of employment that gives laid-off
employees a financial cushion while they find new work. However, the realities of
economic turmoil mean that many employees receive little compensation.

Legal Issues
To conduct business, a company must be granted a “license to operate.” For
many firms, a series of legal and regulatory matters must be resolved before the
first employee is hired or the first customer is served. If you open a restaurant,
for example, most states require a business license and sales tax number. These
documents require basic information, such as business type, ownership structure,
owner information, number of expected employees, and other data.

On a fundamental level, society has the ability to dictate what types of organi-
zations are allowed to operate. In exchange for the license to operate, organizations
are expected to uphold all legal obligations and standards. We have discussed many
of these laws throughout this book, although individual cities, counties, and munici-
palities will have additional laws and regulations that firms must obey. For example,
a construction company in Destin, Florida, was
charged with repeated safety violations that have
endangered employees. The leading cause of
fatality in the construction industry is falling, and
the company was found liable for neglecting to
provide employees with protections against this
well-known danger. Despite widespread news
stories and regulatory education about fatal falls,
engineering and construction companies con-
tinue to receive penalties. Two contractors were
assessed penalties of over $150,000 after two
workers were killed when scaffolding collapsed
on an Orlando hotel project.20

Other communities have concerns about
whether and how businesses fit into existing
communities, especially those threatened by
urban sprawl and small towns working to

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284 Business and Society

preserve a traditional way of life. Some states, cities, and counties have enacted
legislation that limits the square footage of stores in an effort to deter “big-box
stores,” such as Walmart and Home Depot, unless local voters specifically
approve their being allowed to build. In most cases, these communities have
called for such legislation to combat the noise and traffic congestion that may
be associated with such stores, to protect neighborhoods, and to preserve the
viability of local small businesses.21 Beyond big-box stores, online competition
is another threat to local businesses. In New York City, the owner of Gold Leaf
Stationers realized the power of community relations when a decrease in annual
sales meant that his store could no longer afford rent of $12,500 per month. The
store is housed in a co-op building controlled by a board of directors. The board,
which included many customers of Gold Leaf, voted to reduce the monthly rent
to $9,500 and capped the store’s share of annual real estate taxes due on the
co-op property. In this case, New York law allows the co-op board to make such
significant decisions. After the decision, the co-op president remarked, “This type
of store adds value to the fabric of the community.”22 Although the importance
of preserving small business, paying living wages, which we discussed in Chapter
8, and restricting store locations may be ethical issues for some communities,
consumers, and businesses, the legal environment may facilitate or restrict these
issues, as well.

Ethical Issues
As more companies view themselves as responsible to the community, they will
contemplate their role and the impact of their decisions on communities as they
make managerial ethical decisions. Many companies have opted to be proactive
on important issues, such as minimum wages and benefits for employees. While
legislative bills have been proposed on raising the minimum wage, it may take
time before any changes to federal law are made in this respect. Amazon, Target,
and Cox Communications, however, raised the minimum wage for employees in
all U.S. locations to $15 per hour because they believe it is the right thing to do.
Employees of Disney’s theme parks are also offered a starting wage of $15 per
hour. Other companies such as Costco have followed suit, raising its minimum
wage to $14 per hour.23 In 2018, Walmart raised wages so that new employees
will receive $11 per hour. The retail giant had been paying $9 to $10 per hour
to new hires, although long-term employees often make more than $14 per hour.
According to a recent social responsibility report, Walmart store managers in the
U.S. earn an average of $175,000 per year.24

Business leaders are increasingly recognizing the significance of the role
their firms play in the community and the need for their leadership in tackling
community problems. Bill Daniels, founder of Cablevision, was an extremely
successful entrepreneur. His approach to ethical decision-making in Cablevision
had a positive impact on the communities. He established the Daniels Fund, which
has a significant impact on business ethics education and other social concerns in
the states of Wyoming, Colorado, New Mexico, and Utah. Millions of dollars have
been donated to causes such as ethics and integrity, education, youth development,
and amateur sports.25

These examples demonstrate that the ethical dimension of community
responsibility can be multifaceted. This dimension and related programs are not
legally mandated but emanate from the particular philosophy of a company and
its top managers. Because many cities have not mandated a living wage, the actions
of Target, Amazon, and Costco are based on an ethical obligation felt toward
employees and the community as well as competition for the best employees. There
are many ways that a company can demonstrate its ethical commitment to the
community. As Bill Daniels’s commitment to business ethics illustrates, a common

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Chapter 10 Community Relations and Strategic Philanthropy 285

extension of “doing the right thing” ethically provides a role model for all political
and civic leaders.

Philanthropic Issues
The community relations function has always been associated with philanthropy,
as one of the main historical roles of community relations was to provide gifts,
grants, and other resources to worthy causes. Today, that thinking has shifted.
Although businesses have the potential to help solve social issues, the success
of a business can be enhanced from the publicity generated by and through
stakeholder acceptance of community activities. For example, Colorado-based
New Belgium Brewing Company donates $1 for every barrel of beer brewed the
prior year to charities within the markets it serves. The brewery divides the funds
among states in proportion to interests and needs, considering environmental,
social, drug and alcohol awareness, and cultural issues. Donation decisions are
made by the firm’s coworker grants committee that, since 1995, has been the
backbone of the philanthropic program. The committee is open to all coworkers
and takes on the task of researching, reviewing and allocating funds to worthy
organizations. To date, the company has provided over $10.5 million in grants
to support efforts in climate change, social equity, smart growth, and sustainable
agriculture.26 However, New Belgium belongs to an industry that some members
of society believe contributes to social problems. Thus, regardless of the positive
contributions such a firm makes to the community, some members will always
have a negative view of the business.

One of the most significant ways that organizations are exercising their
philanthropic responsibilities is through volunteer programs. Volunteerism in the
workplace, when employees spend company-supported time in support of social
causes, has become a routine expectation in companies of all sizes. Each year,
approximately 77.4 million Americans spend nearly 6.9 billion hours supporting
formal volunteer activities. The estimated value of these volunteer efforts is over
$166 billion. The four main activities that volunteers perform are fundraising,
collecting and distributing food, helping with general labor needs, and tutoring
or teaching. These activities are performed for a variety of organizations, with
religious, education, and social service agencies topping the list. Recent research
has examined the factors that either promote or inhibit volunteerism, with
shorter commute times, home ownership, and higher educational levels associ-
ated with higher rates of volunteerism.27 Figure 10.1 shows the states with the

volunteerism
when employees spend
company-supported time in
support of social causes

Figure 10.1 States with Highest Volunteerism Rates

Source: Corporation for National and Community Service, “Volunteering in America: States,” https://www.nationalservice.
gov/serve/via/states (accessed June 25, 2019).

51.0%
40.6%

41.5%

43.2%

45.1%

Utah
Minnesota
Oregon
Iowa
Alaska

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286 Business and Society

highest percentage of their populations who are actively engaged in volunteer
activities.

People who volunteer feel more connected to other people and society and
ultimately have lower mortality rates, greater functional ability, and lower rates
of depression later in life than those who do not volunteer. When volunteering is
a result of employment, benefits of volunteering accrue to both the individual, in
terms of greater motivation, enjoyment, and satisfaction, and to the organization
through employee retention and productivity increases.28 Communities benefit
from the application of new skills and initiatives toward problems, better rela-
tions with business, a greater supply of volunteers, assistance to stretch limited
resources, and social and economic regeneration.29 Philanthropic issues are just
another dimension of voluntary social responsibility and relate to business’s
contributions to stakeholders.

Chicago-based Exelon Energy, for example, instituted their Powering
Communities volunteer engagement program that offers incentives to encourage
employees to volunteer. One of the incentives is the Dollars for Doers program
in which an employee can volunteer either 10, 20, or 40 hours per year at an
organization of his or her choice, and Exelon awards a corresponding grant to the
organization. In 2018, Exelon provided $1.1 million to recognize the volunteer
efforts of its employees. Employees who volunteer more than 50 hours per year are
nominated for the Exelon Employee Volunteer Award, and the recipients are then
recognized during National Volunteer Week. In the most recent year, employees
volunteered for over 240,000 hours, including 5,200 employees who participated
in National Volunteer Week and topped 18,000 hours of service.30

There are several considerations in deciding how to structure a volunteer
program. Attention must be paid to employee values and beliefs; therefore,
political or religious organizations should be supported on the basis of individual
employee initiative and interest. Some companies will partner with nonprofit
organizations as a means to give their employees more options for volunteerism.
For example, World Vision humanitarian organization partners with corporations
for financial, volunteer, and product donations, as well as opportunities for cause-
related marketing. Volunteer opportunities exist in education, sanitation, economic
development, and related areas all over the globe. World Vision even provides
guidance to corporate partners on how to integrate volunteerism and philanthropy
with their business goals.31

Another issue is what to do when some employees do not wish to volunteer. If
the company is not paying for the employees’ time to volunteer and volunteering
is not a condition of employment or an aspect of the job description, it may be dif-
ficult to convince a certain percentage of the workforce to participate. On the other
hand, if the organization is paying for one day a month to allow the employee
exposure to volunteering, then individual compliance is usually expected.

Philanthropic Contributions
Philanthropy provides four major benefits to society. First, it improves the quality
of life and helps make communities places where people want to do business, raise
families, and enjoy life. Thus, improving the quality of life in a community makes
it easier to attract and retain employees and customers. Second, philanthropy
reduces government involvement by providing assistance to stakeholders. Third,
philanthropy develops employee leadership skills. Many firms, for example, use
campaigns by the United Way and other community service organizations as
leadership- and skill-building exercises for their employees. Philanthropy helps
create an ethical culture and promotes the values that can act as a buffer to

philanthropy
acts such as donations to
charitable organizations to
improve quality of life, reduce
government involvement, develop
employee leadership skills,
and create an ethical culture to
act as buffer to organizational
misconduct

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Chapter 10 Community Relations and Strategic Philanthropy 287

organizational misconduct.32 In the United States, charitable giving has stagnated
at 2.1 percent of gross domestic product (GDP) annually.33

The most common way that businesses demonstrate philanthropy is through
donations to local and national charitable organizations. Corporations gave more
than $20.5 billion to environmental, educational, and social causes in a recent year.
Individual giving, which is always the largest component of charitable contribu-
tions, was an estimated $292.09 billion, or 71 percent of the total. Figure! 10.2
displays the sources of charitable giving. Figure 10.3 displays the major recipients

Figure 10.3 Recipients of Charitable Giving

Source: “Giving USA 2019,” Giving USA, https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in-
2018-amid-complex-year-for-charitable-giving/ (accessed June 27, 2019).

$140.00

$120.00

$100.00

$80.00

$60.00

$40.00

$20.00

$0.00

Billions

$124.54

B
il

l

io
ns

$58.90
$51.54 $50.29

$31.21
$22.88

$40.78

Re
lig

io
us

Ed
uc

at
io

n

Hu
m

an
S

er
vic

e

Fo
un

da
tio

ns

He
alt

h

Pu
bl

ic/
So

cie
ty

In
te

rn
at

io
na

l

Figure 10.2 Sources of Charitable Giving

Source: “Giving USA 2019,” Giving USA, https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in-
2018-amid-complex-year-for-charitable-giving/ (accessed June 27, 2019).

$300.0

$292.09

$20.05

$75.86

$39.71

$250.0

$200.0

$150.0

$100.0

B
ill

io
ns

$50.0

$0.0
Individuals Corporations Foundations Bequests

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288 Business and Society

of the $427 billion in philanthropic donations made in 2018. Religious organiza-
tions received about 30 percent of all contributions, with educational causes col-
lecting 13 percent of the funds While many areas experienced declines, donations
to nonprofits devoted to international affairs, the environment, and animals grew
year over year.34

In a general sense, philanthropy involves any acts of benevolence and goodwill,
such as making gifts to charity, volunteering for community projects, and taking
action to benefit others. For example, your parents may have spent time on
nonwork projects that directly benefited the community or a special population.
Perhaps you have participated in similar activities through work, school groups,
or associations. Have you ever served Thanksgiving dinner at a homeless shelter?
Have you ever raised money for a neighborhood school? Have you ever joined a
social club that volunteered member services to local charities? The Rockefeller
Philanthropy Advisors is a nonprofit group that provides guidance to individuals
on selecting and supporting nonprofits, including the key questions to ask before
making these plans. The first question, “Why are you giving?” sets the stage for
uncovering motivations, values, and interests. Figure 10.4 explores nine primary
motivations for philanthropy. In most cases, philanthropists have multiple reasons
for giving, including those driven by both intrinsic motivation and extrinsic
motivation.

According to the Rockefeller group, individuals within families are increas-
ingly interested in giving as a collective group. Often, the family is motivated
by an ancestor or core values and beliefs. In other cases, philanthropists may be
motivated by recognition and the rewards of being associated with specific efforts
and good works. Still others are looking for ways to minimize taxes and enable
future generations to benefit from estate planning.

Most religious organizations, educational institutions, and arts programs
rely heavily on philanthropic donations from both individuals and organizations.
Philanthropy is a major driver of the nonprofit sector of the economy, as these
organizations rely on the time, money, and talents of both individuals and orga-
nizations to operate and fund their programs. Consider the partnership between
Pampers and UNICEF. These two organizations have had a successful decade-long
partnership, in which Pampers donated a portion of their profits to UNICEF to

intrinsic motivation
wanting to take action based on
internal factors

extrinsic motivation
wanting to take action based on
external factors

Figure 10.4 Motivations for Philanthropy

Why Are You Giving?

Family Legacy Experience Faith Values

Heritage Analysis Financial Recognition

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Chapter 10 Community Relations and Strategic Philanthropy 289

provide tetanus shots for babies around the world. This partnership fits well with
the company’s core product and target market.35

Strategic Philanthropy Defined
Our concept of corporate philanthropy extends beyond financial contributions
and explicitly links company missions, organizational competencies, and various
stakeholders. Thus, we define strategic philanthropy as the synergistic use of
an organization’s core competencies and resources to address key stakehold-
ers’ interests and to achieve both organizational and social benefits. Strategic
philanthropy goes well beyond the traditional benevolent philanthropy of
donating a percentage of sales to social causes by involving employees (utilizing
their core skills), organizational resources and expertise (equipment, knowledge,
and money), and the ability to link employees, customers, suppliers, and social
needs with these key assets. Strategic philanthropy involves both financial and
nonfinancial contributions to stakeholders (employee time, goods and services,
and company technology and equipment as well as facilities), but it also benefits
the company.

Organizations are best suited to deal with social or stakeholder issues in areas
with which they have some experience, knowledge, or expertise. From a business
perspective, companies want to refine their intellectual capital, reinforce their core
competencies, and develop synergies between business and philanthropic activities.
The process of addressing stakeholder concerns through philanthropy should be
strategic to a company’s ongoing development and improvement. For example,
SAP, a global software company, has made financial and product investments
in developing economies such as Mexico and Swaziland. These investments are
beneficial to both parties, as the technology aids economic, educational, and
health advancements for the communities. However, it also allows the company to
identify emerging talent and become established in these economies for their own
growth.36

Some critics would argue that this is not true philanthropy because SAP will
receive business benefits. However, social responsibility takes place on many levels,
and effective philanthropy depends on the synergy between stakeholder needs and
business competencies and goals. Thus, the fact that each partner receives unique
benefits does not diminish the overall good that results from a project. As global
competition escalates, companies are increasingly responsible to stakeholders in
justifying their philanthropic endeavors. This ultimately requires greater planning
and alignment of philanthropic efforts with overall strategic goals. Table 10.5
provides additional examples of philanthropic activities.

strategic philanthropy
the synergistic use of an
organization’s core competencies
and resources to address key
stakeholders’ interests and to
achieve both organizational and
social benefits

Table 10.5 Examples of Strategic Philanthropy
Target donates 5 percent of its pretax income to charity.

Patagonia donates 1 percent of profits to 1 Percent for the Planet, a global movement that
donates the proceeds to environmental organizations.

Salesforce.com donates 1 percent of its technology, 1 percent of its resources, and 1 percent of its
people (employees can take off six days a year to volunteer) to nonprofits and to their communities.

Home Depot has a strong partnership with the nonprofit Habitat for Humanity, spending
significant time and resources in its mission to build homes for those in need.

New Belgium Brewing engages in extensive philanthropy grants, product donations, and
sponsorships to support the community.

Whole Foods holds a number of community giving days in which 5 percent of the day’s net
revenue goes toward nonprofits or education.

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