The role of enterprise foundations in addressing our greatest challenges

This may come as a surprise to some, but foundations that are philanthropic may also fulfil other roles than philanthropy that – sometimes – result in even more societal impact. As responsible long-term owners of large multinational companies like Bosch, Tata, Investor, Carlsberg or Rolex, they can have an impact that goes beyond the boundaries of what philanthropy can do. Think of Bosch, with its more than 400,000 employees and its impact in engineering the green transition to electric cars. Think about Tata, having around one million employees and its subsidiary Tata consulting services being the most admired company in India.

Enterprise foundations – foundations with philanthropic purposes but which also own companies – have contributed to the greater good for centuries. They contribute to improving the world through the responsible behaviour of their companies in providing great products, millions of well-paid jobs, taking responsibility for their supply chains and engaging in public-private partnerships. Moreover, because of their economic success, they pay substantial dividends to their owners, which through the foundations are channelled back into society for philanthropic purposes.

The fact is that philanthropy as we know it would not exist today without the successful businesses that generated most of the wealth financing it. Think of Rockefeller, Gates, Ford, Carnegie and many, many others.

Let’s face it. The challenges that we currently face – climate, biodiversity, food security, geopolitics, defence – are so enormous that they cannot possibly be addressed through conventional philanthropic channels alone. The climate challenge alone is estimated to require investments in the range of 4-6% of GDP annually up to 2050 – a period of almost 30 years. And climate is far from the only challenge we face. We need serious financial resources as well as innovation, management and organisational resources that can realistically only be found in close cooperation with the corporate sector.  In many ways, the concept of enterprise foundations fits the needs of our time.

We do not want to denigrate the important contributions of conventional philanthropists, as they have a crucial role to play in solving today’s pressing issues.  But we would like to draw attention to how enterprise foundations can contribute to change and development, both through their ownership of companies and their philanthropy.

The foundation model has passed the market test by enabling a number of successful world class companies to grow strong, something we need much more of in Europe. Creating companies like IKEA or Novo Nordisk does not happen overnight or even in a single generation. It requires a concentrated, long-term effort involving a steady accumulation of knowledge, experience and financial means that feed back to and reinforce corporate competitiveness.

This is why we have established the European Network of Enterprise Foundations hosted by Philea. We want to draw attention to the enterprise foundation model, which is needed more than ever in these challenging times. We also want to create a forum for enterprise foundations to compare notes about efficient governance of the relationship between enterprise foundations and the outstanding companies that they own. We need companies that are given the time to mature and develop instead of being snatched up by competitors before they have reached their potential.

For many successful business people, establishing a foundation is a way to give back to society. Through philanthropy, wealth is redistributed rather than consumed by the top 1% richest. It is clearly a way of reducing wealth inequality as well as addressing the many other challenges that we face. We are certain that more entrepreneurs would be willing to give most of their wealth – the shares in the companies they helped create – if they knew that they could combine giving back to society with securing the independence and longevity of their companies.

To conclude, enterprise foundations can help create a better future for us all, both through their responsible long-term ownership of world class companies and through world class philanthropy funded by sizable dividends.