In the season of giving, corporations aren't particularly charitable

Given the record profits that companies have enjoyed in recent years, it's perhaps alarming that there isn't a greater share of philanthropic funding coming from the business sector. That's why BuchhaltungsButler and research experts at DataPulse Research teamed up to uncover what's happening behind the scenes.  

The team analyzed historical data from Giving USA, which publishes an annual report on the country's giving trends in conjunction with the Lilly Family School of Philanthropy at Indiana University, and data from the business council Chief Executives for Corporate Purpose, or CECP. The team also pulled insights from studies and research by Urban Institute, NonProfit Source, America's Charities, and Double the Donation. 

Here are the topline findings from the analysis.

The amount of charitable giving generally mimics the strength of the U.S. economy. Despite some dips, such as during the great recession of 2008-09, overall donations have grown significantly, even when adjusted for inflation. American entities and individuals gave today's equivalent of $200 billion in 1983; they gave $550 billion in 2023.

Corporations have contributed to that overall increase, boosting their donations from around $13 billion in the '80s to $37 billion in 2023. Indeed, both corporate giving and overall giving have tripled over the last 40 years. (That's in line with the country's GDP growth, which has also tripled during that period.)

Companies should be setting aside 1% of pre-tax profits for "community investment," according to CECP, an organization that has benchmarked corporate giving over the last 23 years by analyzing data of multi-billion-dollar companies. The firms they've tracked include AT&T, Google, Best Buy, Hasbro, Kroger, Walmart, Bank of America, Cigna, CVS, FedEx, Dow, Microsoft, Dell, and some 600 others across many industries. In CECP's latest report, which was based on a survey of 219 companies, the median giving amount was $22 million, and the median share was 0.92% of pre-tax profit—which falls short of that 1% standard. 

However, extremely successful businesses perform a little better. Among the 49 companies on the Fortune 100 list, the median giving amount was about $82 million and the median share was 1.22%. The dollar amount reflects cash and non-cash giving, such as product donations and pro-bono services.

Historical records indicate that donating at least 1% of pre-tax profits was more commonplace before the turn of the century.

Between 1983 and 2003, U.S. companies consistently donated between 1% and 2% of their pre-tax profits to charitable causes. But in all but four of the last 20 years, businesses have fallen short of that target, according to an analysis of data from Giving USA, an organization that estimates corporate donations in the U.S. using IRS records and other sources.

Even in the few years when companies have met the goal, they've done so only by a hair. In 2023, for example, corporate giving amounted to 1.03% of pre-tax profits.

In general, when profits go down, so too do charitable donations. It makes sense. When the economy is contracting, companies become more conservative and discretionary spending takes a hit. However, that same logic doesn't track during periods of economic growth; especially in recent decades, corporate giving hasn't increased during more prosperous times.

In the 1980s and '90s, companies donated at least 1% of their pre-tax profits regardless of whether the economy was experiencing an upturn or a downturn. In fact, there were several years when donations went up even as profits went down. That trend changed in the bubble leading into the Great Recession. During the boom—the early 2000s—corporate giving did not increase in tandem with profits. Then the recession hit and companies pulled back even more. Things didn't get better from there; corporate giving remained low during the economic recovery period of the early 2010s.

In 2019 and 2020, corporate giving finally looked like it might catch-up. Donations jumped in those years, despite profits being fairly flat. The following year donations jumped for a third time, but profits also surged, widening the gap once again.

In a big picture sense, total charitable giving in the United States has grown over the decades, and corporate donations have no doubt played a role in that growth. Even during the last two decades, when businesses have generally been giving less than 1% of their profits, the actual dollar amounts donated have increased.

What's more, corporate giving has shot up to record highs in just a half decade. Adjusted for inflation, donations had ticked up gradually from $11 billion in 1983 to $23 billion in2018. Donations have also surpassed $35 billion in each of the last three years.

Despite this largesse, there's still the question of what more companies can do. The answer seems apparent, if companies look to the past.

In a seemingly bygone era, charitable giving was simply a bigger part of the balance sheet. After years in the weeds, corporate America finally seems to be on track to meet the recommended standard of giving away 1% of its pre-tax profits. Perhaps a season of giving could be upon us once again.