The Competitive Advantage of Corporate Philanthropy

Michael Porter and Mark Kramer

This 2002 Harvard Business Review article argues that when it comes to philanthropy, executives increasingly see themselves as caught between critics demanding ever higher levels of corporate social responsibility and investors applying pressure to maximize short-term profits. Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company's image through high-profile sponsorships.

But there is a more truly strategic way to think about philanthropy. Corporations can use their charitable efforts to improve their competitive context, the quality of the business environment in the locations where they operate. Using philanthropy to enhance competitive context aligns social and economic goals and improves a company's long-term business prospects. Addressing context enables a company not only to give money but also to leverage its capabilities and relationships in support of charitable causes.

Taking this new direction requires a far more disciplined approach than is prevalent today. But it can make a company's philanthropic activities far more effective.

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