Charities Aid Foundation is a Business Reporter client.
Corporate giving has the power to change the world, but how much should companies donate to make a difference?
If all FTSE 100 companies donated a minimum of 1 per cent of pre-tax profits in the last financial year, an estimated total of £3.13 billion would have been donated to the charitable sector*. This represents an increase of more than two-thirds of donations made in 2022.
Committing to at least 1 percent is one way for companies to protect people and the planet. There are many reasons why companies donate to charitable or community causes. Generate a positive impact, demonstrate your commitment to being a responsible company, generate loyalty, and help attract and retain employees and customers.
With household incomes reduced and charity finances strained due to the cost of living crisis, the role businesses can play through corporate giving has never been more important. By offering a minimum of 1 percent pre-tax profit, companies can help drive real change in society.
Why do charities need business support?
We recently surveyed over 650 charities as part of our Charity Resilience Index, which tracks how charities are experiencing and responding to the cost of living crisis in the UK. Almost two-thirds (65 per cent) of charities say demand for their services has increased compared to a year ago, and only half of charities have high levels of confidence in their ability to meet demand for their services. services, both now (49 percent) and over the next 12 months (48 percent).
Beyond the UK, charities are also pushing their resources to the limits: from war zones to the plight of natural disasters; from improving access to education to supporting the fight against climate change. Increased demand, lower revenues and inflated costs are having an impact on the charity sector's ability to deliver.
How much should you commit to be a responsible business?
At Charities Aid Foundation (CAF), we believe companies should demonstrate their commitment by donating at least 1 percent of their pre-tax profits to address society's biggest challenges. This should be seen as a minimum and budgets and programs should be reviewed periodically, as Lucy Mantella, CAF Senior Corporate Advisor, explains.
“It's about making sure your giving budget is in line with the scale and size of your business,” he says. “Best practice is at least 1 percent, so as your business grows, so should the amount donated. “It is important that programs and budgets do not remain static and grow to align with the increased expectations placed on responsible business teams.”
Dedicating at least 1 percent of pre-tax profits, Mantella says, will not only confirm your credentials as a responsible company, but will also provide a meaningful and tangible commitment that will be an example for others to follow. “You either choose to lead the way, collaborate for collective impact, or look to your peer group.”
How much have companies committed?
According to our latest research, FTSE 100 companies donated £1.85 billion to charities last year, compared to £2.51 billion in 2013, showing a 26 per cent drop over the last decade.
A quarter of major UK-listed companies donated at least 1 per cent of their pre-tax profits in 2022, with GSK being the most generous, donating 5.47 per cent of profits.
When major publicly traded companies take the lead, it can inspire companies of all sizes to act as well. Companies such as TSG (Technology Services Group), which is outside the FTSE 100, have committed to a 2 per cent share of pre-tax profits, with a determination to increase that percentage as the business grows.
How can companies use the 1 percent guide to raise more funding?
It is important to ensure that impact is at the heart of any corporate giving strategy, as well as a business case that clearly sets out the reasons for giving more.
Committing to at least 1 percent of pre-tax profits, as a best practice, is a useful goal to aim for when designing or developing your corporate giving program, or making the case for expanding it further in line with health of the business. .
“All companies are at different stages in their journey when it comes to corporate giving,” Mantella says. “Many have established programs, while others are looking to change or redesign them. Some are right at the beginning.
“No matter what stage of your journey you are at, you need to ensure your financial commitments align with the impact you want to achieve.
“If an organization cannot commit, this can be a sign of how serious the problem really is. Starting with at least 1 percent is a tangible benchmark to facilitate discussions when building your business case.”
Access the right support when implementing an impactful corporate giving program.
At Charities Aid Foundation, we have the expertise to support businesses at every stage of their corporate giving journey. Whether you are looking for advice on how to manage your budget in a tax-efficient manner or need help determining the best way to use your funds safely and in the most impactful way, we are here to help.
Learn more at: cafonline.org.
*Charities Aid Foundation made this estimate using the following assumptions:
When profitable companies donated less than 1 percent of pretax profits, donation values were rounded up to 1 percent. Actual donation amounts were used for companies that donated less than 1 percent. Those companies that made losses but still donated were included using their actual donation amount (when known).
