There’s much talk lately among foundation leaders and major donors about the need to work in collaboration with business. Proclamations about “harnessing the power of the markets,” “sector agnosticism,” and “blurred boundaries” are now the norm at philanthropy conferences. Everyone nods.
Indeed, out of a list of 24 potentially promising practices for increasing philanthropy’s impact, foundation CEOs rated collaboration with business and other spheres in the top five in a survey conducted last year by the Center for Effective Philanthropy, which I lead. Fifty-nine percent said that “foundations simultaneously collaborating with other foundations, business, government, and nonprofits” holds “a lot of promise” for boosting impact.
But in my work with grant makers and donors over the past 16 years, I have grown worried that too many are naïve about business as a “partner.”
Of course, business plays a crucial role as an employer, a provider of needed (and unneeded) products, and, sometimes, a driver of progress and innovation. Business, big and small, affects all of us. For good or ill (or a mix of both), it influences many of the challenges philanthropists and foundations seek to address. But these statements of the obvious are too often followed by a reflexive declaration that, therefore, “we need to work with business.”
Don’t Believe the Hype
To be sure, doing so sometimes makes sense. The historian Olivier Zunz, in his book Philanthropy in America: A History, chronicles the work of the Russell Sage Foundation, the Rockefeller Foundation, and other entities to address the tuberculosis epidemic 100 years ago. Mr. Zunz notes that “other funding partners in the fight against tuberculosis came from business, labor, and government. ... Metropolitan Life paid for a major study of tuberculosis in Framingham, Massachusetts and underwrote a large education campaign.”
There are contemporary examples, too, of course, including the role both foundations and companies played in the so-called “grand bargain” crafted in Detroit to pull the city out of bankruptcy and put it on a path to financial stability. (It’s worth noting that this effort has its critics.)
But sometimes foundations and donors need to work in opposition to business to achieve their goals. It seems odd to even have to say that, because it feels so self-evident. But I worry that, amid all the hype about the power of working with business, we need to be reminded.
There may be no more successful example of a foundation taking on a highly profitable industry than the work of the Robert Wood Johnson Foundation in the 1990s. There is little doubt that Robert Wood Johnson, through its Center for Tobacco-Free Kids and its SmokeLess States program, played an instrumental role in driving down smoking rates, and it did so in the face of fierce opposition from the tobacco industry. (Disclosure: Robert Wood Johnson is a longstanding supporter and client of the Center for Effective Philanthropy.)
There are many other powerful examples of individual philanthropists, foundations, and nonprofits challenging companies and affecting their practices. Think of the environmental movement, from the campaign to get DDT banned in the 1970s to the effort to convince McDonald’s to stop using foam containers, which it did in 1990.
Profit Motive
Fast forward to 2017 and, too often, the assumption seems to be that collaboration with business and government is preferable to conflict. In the survey in which foundation heads rated working with business among the most promising practices, “challenging business” ranked in the bottom three — with just 21 percent of respondents saying it held “a lot of promise” for increasing impact. (Lowest on the list, at 9 percent? “Foundations divesting their endowments from selected industries.”)
But who will call out businesses for their excesses if not foundations and donors, especially as the Trump administration seems hell-bent on deregulation? In the current climate, the question should not be, “How will we work with business?” but, rather, “How will we work in relationship to business?”
Businesses are not, and will not be, our saviors. This should not be breaking news. After all, philanthropy often works on the very challenges that have defied market solutions, or that were created by market failure. Sometimes, conflict between nonprofits and business is healthy — necessary, even.
While there are amazing companies, like privately held Patagonia, that seem genuinely committed to making their societal impact a primary concern, publicly traded corporations seek to maximize profits. That is what they do. (Duh.) Most publicly traded companies still operate in a way consistent with the famed economist Milton Friedman’s dictum that “there is one and only one social responsibility of business,” and that is “to increase its profits.”
Whether we agree or not, there is evidence all around us that Friedman’s view largely governs corporate decision-making. We should be sober about this fact. Corporate scandals from Wells Fargo to Volkswagen show the degree to which executives feel a trade-off between profit and what’s best for society — and that some bow to the temptation to go over the line.
Boundaries Matter
Those publicly traded companies that seem willing to operate in a way that looks beyond the short-term bottom line, like Athena Health — which provides cloud-based medical records and has mined its vast data trove to identify public-health implications — can find themselves targeted for takeover, as that company has been in recent months. It’s important for donors and foundations to remember that the corporate CEO who makes a great partner today might be forced out by the dissatisfied investors of tomorrow.
So, as the breathless talk of the wonders of “boundary-blurring” intensifies, I continue to believe that boundaries matter. On causes from the environment to obesity to the opioid crisis, donors and foundations’ default position should not be one of collaboration and trust with business any more than it should be one of antagonism and distrust.
Yes, working in close partnership with business is sometimes crucial to achieving impact. But it’s important to be sober. The key question is, what do we need to do to make a difference in pursuit of our goals?
Sometimes, perhaps frequently, the answer will put donors and foundations in a state of healthy tension or even conflict with businesses rather than partnership.
Phil Buchanan is president of the Center for Effective Philanthropy and a regular columnist for The Chronicle.
