How to Donate Responsibly

Title: The Challenges of Matching Private Sector Donations to Humanitarian Needs: The Role of Brokers
Authors:  Rolando Tomasini, Orla Stapleton, and Luk N. Van Wassenhove
Publisher:   INSEAD, Working Paper No. 2009/36/TOM/INSEAD Social Innovation Centre
Date Published: June 2009

When disasters hit, humanitarian aid agencies move quickly to secure funding for relief operations. But what’s the best way for corporations to donate effectively and responsibly? The authors of this paper examine the choices faced by companies in the aftermath of large-scale disasters: Corporations can develop a partnership with humanitarian agencies, send volunteers to the disaster site to help with relief operations, provide in-kind donations of goods, or send cash. Of these options, the authors assert that cash donations do the most good because they are efficient, transparent, and readily accountable. They also find that broker organizations, which manage the donation process for large organizations, can do an excellent job in matching corporate dollars to humanitarian needs.

Corporations have become more involved in disaster relief efforts in recent years for a number of reasons. Employees have come to expect that their companies will support such operations, especially when the disaster receives high media attention and the public is aware of the needs of those affected, or when a company’s clients or employees might be affected by the disaster. In addition, customers increasingly draw positive connections between a corporation’s brand and its level of community service, especially after a catastrophe; many people consider, for example, pharmaceutical companies that donate medicine or banks that solicit aid donations at ATM machines to be better to do business with.

Partnerships between corporations and aid organizations can be complex to establish, relief volunteers can be difficult to coordinate, and the logistics of in-kind donations can be cumbersome and unsuited to the people who most need the help. Cash, however, always comes in handy for both purchasing essential supplies and equipment up front and providing humanitarian groups with the flexibility to purchase clothing, food, and building materials as needed.

Yet donating companies are usually hesitant to send cash without a strict audit trail, to be certain that recipients use the funds efficiently. This is where the broker comes in. The authors conducted an in-depth study of Global Impact, one of the charity world’s largest brokers, representing more than 50 of the most respected U.S.-based nonprofits, including Doctors Without Borders and the U.S. Fund for UNICEF. Based on interviews with donors and observations of the issues that donors face when allocating funds, the authors found that Global Impact significantly improved the coordination and fulfillment of corporate donations. By managing details such as setting up corporate Intranet sites for collecting employee donations and preselecting charities with good practices, the organization helped ensure that both the corporate donor and the humanitarian agencies benefited from the effective and transparent distribution of donations.

Bottom Line: After disasters, corporations need to react quickly to offer help to those in need. The most effective type of aid is cash, and businesses that use broker organizations can smooth the path between humanitarian needs and corporate donations.