July 13, 2024

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How Companies Can Partner with Nonprofits

How Companies Can Partner with Nonprofits

In today’s ESG-focused world, there is no taboo about corporations seeking advice and partnership opportunities with nonprofits. Unfortunately, many corporations don’t know where to start. What contact they have had with nonprofits has usually been through their corporate giving or corporate social responsibility programs. Three main opportunities exist for collaboration: using nonprofits to support product launches, going to market through a company’s nonprofit arm, use nonprofits to help form coalitions with other companies.

Fifteen years ago, if Goldman Sachs went looking for financial advice, a small, green nonprofit might be the last place it looked. Today, the firm and a host of other Wall St. giants don’t think twice about partnering with JUST Capital, a nonprofit that provides third-party data, tools, and insights to help measure and improve corporate performance on stakeholder and ESG issues.

The partnership is part of a growing trend in which for-profit firms are finding value in partnering with ESG-minded nonprofits they once may have shunned. And why not? The very best nonprofits have much to teach corporations. They have a purpose-driven focus that permeates their DNA — something corporations are increasingly seeking out for themselves.

Nonprofits also have constant dialogue and connection with their stakeholders, and effectively engage their boards. In contrast many corporations struggle in these areas. Only 20% of organizations believe they successfully communicate their strategy to a broad set of external stakeholders. And only 60% say that their boards understand their core technology and business model. In light of these challenges, nonprofits provide skills, experience, and partnership opportunities corporations could tap into on their ESG journey.

Unfortunately, many corporations don’t know where to start. What contact they have had with nonprofits has usually been through their corporate giving or Corporate Social Responsibility Programs — or even their PR department in cases where they are deflecting criticism from NGOs. Recently, we set out with the help of Giulia Siccardo, a partner at McKinsey & Company, to sketch out the areas of opportunity for corporations to partner with nonprofits.

Opportunity #1: Consider nonprofit partnerships to support product launches.

Collaborations allow corporations to leverage nonprofits’ capabilities and reputation when launching new products and services. According to Nonprofits Source, 90% of corporations say they gain trust when partnering with reputable nonprofit organizations, and 89% believe such partnerships enhance their ability to drive societal impact.

To be absolutely clear, nonprofit partnerships are not a substitute for foundational change. To truly accelerate a corporate ESG journey, nonprofit partnerships need to go way beyond PR or branding. Corporations need to ensure their core businesses deliver holistic impact while they engage nonprofits on the issues and business lines where they aspire to develop and deepen influence. In that context these partnerships can elevate impact and drive value as part of a transformational corporate ESG strategy.

Opportunity #2: Go to market with your nonprofit arm.

Corporate nonprofit and for-profit arms can work productively together as long as their roles and sandboxes are crystal clear. Excessive overlap creates confusion and — potentially — consumer suspicion. However, when nonprofit and for-profit arms have their own clear sandboxes and work synergistically, there is the potential for enhanced impact. Tomorrow.io provides a persuasive example.

Tomorrow.io is a leading weather and climate security platform. It provides highly accurate, location-specific weather intelligence up to two weeks out. This enables “weather sensitive” industries to make better decisions related to, for example, irrigation, field maintenance, event management, and building controls, as well as deliver operational and ESG benefits. While Tomorrow.io provides meaningful insights for companies, its TomorrowNow.org branch leverages Tomorrow.io’s commercial technologies to provide early warning of extreme weather events to underrepresented communities and focus on weather education and community building. For example, its Tomorrow Locust Project is helping to anticipate and manage locust swarms in Africa. TomorrowNow.org & Tomorrow.io represent a unique hybrid model whereby a for-profit, nonprofit feedback loop enables “shared purpose, catalytic solutions, and accelerated impact.”

NGOs are also sharpening their approach when it comes to leveraging for-profit activity to further their purpose-driven mission, vision and values — ultimately showcasing that hybrid synergies exist whether an organization is for-profit or nonprofit at its core.

Cleveland Clinic is an example. It operates synergistic, for-profit businesses to contribute to the NGO’s mission. Cleveland Clinic is a nonprofit medical center that integrates clinical and hospital care with research and education. Its business lines range from Executive Health and Concierge Medicine clinical services, to Advisory Services in the ESG space that provide collaboration opportunities with for-profit entities to yield distinct social intelligence and insights for corporations. Meanwhile, the Cleveland Clinic Ventures arm has launched more than 80 startup companies that have provided economic returns while furthering the nonprofit’s ambitions.

Opportunity #3: Address market gaps with nonprofit coalitions of for-profit companies.

In facing ESG challenges, companies can work together to share information, create standards, and even send market signals. In 2022, Alphabet, Meta, Shopify, Stripe, and McKinsey created an almost $1 billion advance market commitment (AMC) and built Frontier, a public benefit corporation – effectively a nonprofit with an ownership structure to accelerate innovation and rapidly scale an affordable carbon removal market. Carbon removals will be required to neutralize unavoidable emissions and meet the global net zero commitments by 2050 as stipulated in the Paris Agreement. None of these companies could unilaterally make a large enough commitment to create a market. But together, through a nonprofit like vehicle, they can.

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Despite the inherent paradox, businesses have much to learn from nonprofit models, and much to gain from partnering with NGOs. Strategic nonprofit relationships and partnerships when well executed, are extremely powerful. They reduce risk, drive speed and growth, increase shareholder value, and enhance societal impact. If your organization is embarking on an ESG journey or wants to improve ESG performance, nonprofit partnerships are an untapped opportunity worth exploring.