Corporate philanthropy, for better or worse, at Solar City and Coca-Cola

SolarCity's Alex Webster explains solar energy to students in Matate, Kenya.

Corporate philanthropy is a tricky business. Whether charitable donations come directly from a company or from a company-sponsored foundation, they ought to serve not just the charity but the company's business interests. Companies, after all, are giving away other people's money, namely, money that they have been entrusted with by shareholders seeking financial return.

Fearful of controversy, most companies play it safe with their giving. As Michael E. Porter and Mark R. Kramer wrote in The Competitive Advantage of Corporate Philanthropy, a 2002 article in the Harvard Business Review:

The majority of corporate contribution programs are diffuse and unfocused. Most consist of numerous small cash donations given to aid local civic causes or provide general operating support to universities and national charities in the hope of generating goodwill among employees, customers and the local community. Rather than being tied to well thought-out social or business objectives, the contributions often reflect the personal beliefs and values of executives and employees.

Things have improved since then, in part because Porter and Kramer went on to make a case for what they called "strategic philanthropy," a focused approach designed both to improve society and deliver a competitive edge to the company. IBM's Corporate Service Corps, for example, lends top-performing employees to consult for a month with governments, nonprofits and businesses in poor countries; if all goes well, the program delivers value to organizations and communities, develops leadership skills among IBMers and helps IBM and its people better understand emerging markets.Lots of money is in play.

Corporations gave away $17.7 billion last year, according to Giving USA, far less than individuals ($258.5B) or foundations ($54B) but still a hefty sum which, if smartly deployed, can have an outsized impact. Or not.

For better

Philanthropy at Solar City, the fast-growing Silicon Valley firm that sells solar energy to homeowners and businesses, focuses on a big issue: energy poverty in the global south. This month, Solar City announced that its charitable arm, the GivePower Foundation, has become a 501(c)(3) public charity, allowing it to accept donations from others. It promptly accepted a $500,000 donation from the Bank of America Charitable Foundation, which will help GivePower deliver solar lighting to more than 1,000 schools in poor countries this year, after installing solar at 500 schools last year. GivePower has set a goal of providing light to a school in a developing country for each megawatt of solar power that Solar City installs in the US.

Solar City has grown rapidly since it was founded in 2006 by brothers Lyndon and Peter Rive, with a little help from their cousin, Elon Musk, who is Solar City's board chairman (and a founder of PayPal and Tesla.) Its charitable giving began after the Deepwater Horizon oil spill when, with the help of Musk's personal foundation, the company donated a solar panel and battery backup to a hurricane response center in Coden, Alabama, a commercial fishing town. Other disaster relief work followed.

Two years ago, the company turned its attention to schools in poor countries after acquiring Paramount Energy Solutions, a startup led by Hayes Bernard, who became Solar City's chief revenue officer. Bernard had earlier taken his executive team to Mali to build a school with buildOn, a nonprofit that, among other things, builds schools in Burkina Faso, Haiti, Mali, Malawi, Nepal, Nicaragua and Senegal. He was headed to a school-building project in Nicaragua as the deal was being consummated and invited Lyndon Rive to come along. There, they came up with the plan for GivePower, and soon after hired a director for the foundation. Solar City has grown to employ 13,000 people but it can still move quickly, like a startup.The benefits to poor people in the developing world are obvious. Electrifying and lighting schools "gives the entire community a place to gather at night," Bernard tells me, by phone, The program is aligned with Solar City's brand and core business. It also functions as an employee perk; this year, the company expects to send 10-15 of its people to six projects where they will install solar on a school. Volunteering in a poor country can be a "life-changing, transformative experience," Bernard says. "People who join Solar City are driven by meaning," he says. "We are competing for top talent with the Googles and other world-class companies out there." GivePower should help Solar City attract and retain good people.

For worse

Coca-Cola last year donated $1.5 million to help university-based scientists start a nonprofit called the Global Energy Balance Network, as The New York Times recently reported, following up on the work of doctor and blogger Yoni Freedhoff. There's nothing inherently wrong with the idea of "energy balance," which says that weight gain or loss is determined by calories consumed (energy in) and physical activity (energy out).

But the Coke-funded nonprofit seems designed to shift the focus away from consumption, and particularly consumption of sugary sodas. One of the network's founders argued that the way to tackle the obesity crisis is to get more exercise (sure!) and worry less about calorie intake (wrong!), a message that serves the interests of Coca Cola, as the Times reported:

“Most of the focus in the popular media and in the scientific press is, ‘Oh they’re eating too much, eating too much, eating too much’ — blaming fast food, blaming sugary drinks and so on,” the group’s vice president, Steven N. Blair, an exercise scientist, says in a recent video announcing the new organization. “And there’s really virtually no compelling evidence that that, in fact, is the cause.”

Energy balance? Buy two Cokes and get a free candy bar.

Blair subsequently asked that the video be removed from the website and expressed regret.

But when a reporter asked Dr. Marianella Herrera, another scientist associated with the Coke-funded GEBN, whether sugary beverages have a place in a healthy diet, she waffled and ducked and danced around the question, as Dr. Freedhoff writes in a blogpost titled Ask a Coca Cola-funded GEBN Scientist an Easy Question, Get a 560 Word Answer.

This echoes the "junk science" funded and promoted by tobacco companies and the fossil fuel industry when they faced the threat of regulation.

Coca-Cola's philanthropy backfired, to say the least. it created a global media firestorm, and a lively debate about the relationships among the food industry, scientists and NGOs.

Coca-Cola defended itself at first, saying it was proud to support the work of GEBN. Later, Coca-Cola CEO Muhtar Kent backtracked a bit, conceding that "the way we have engaged the public health and scientific communities to tackle the global obesity epidemic that is plaguing our children, our families and our communities is not working." The company promised to be more transparent about its support for academic research.

The GEBN brouhaha overshadows other philanthropic work at Coca-Cola, notably its support for water and sanitation projects around the world. The company gave away about $34 million last year, and the Coca-Cola Foundation made another $90 million in grants.

None of that will get nearly the attention generated by Coke's funding of "energy balance." Which shows why corporate philanthropy is such a tricky business.