What if small firms gave like big ones?

More specifically, what if small firms gave the same proportion of net income that big firms did? A 2007 article in the Journal of Business Ethics by Amato & Amato provided pretty compelling evidence that charitable giving was connected to firm size and industry. Interestingly, it wasn’t just “bigger firms give more.” Small and big companies tend to give more than mid-sized ones. Presumably, this is because small firms are more embedded in individual communities, while big firms have more visibility and are responding to stakeholder pressure. Mid-sized firms, being less connected to individual communities and less visible, didn’t spend as much on charitable contributions.

Using data from the US Census bureau, we can figure out how much businesses are giving to charity by size. For example, an average firm with no assets has a net income of $150,000 and makes charitable contributions of about $200, while an average firm with $10 million in assets has a net income of $1 million and gives away about $2,250 a year. In contrast, the largest firms, with over $2.5 billion in assets give away nearly $5 million a year.

Do those numbers sound low to you? They should. Part of the reason is that the smaller the business, the more likely they are to make no charitable gifts at all. According to a 2008 survey by American Express, 66% of small businesses donate to charity. Contrast that to the large-firm segment, in which nearly 100% give to charity. 

Here’s where the math gets really fun. There are many more small businesses than there are large businesses. If we can figure out a way to break through whatever barrier is preventing them from making charitable donations, we can potentially do an awful lot of good. How much good?

If we can get the remaining 33% of small firms to donate just thirteen-tenths of a percent (0.13%) of their net income (the current average) to charity, that’s another $269 million to charity. 

And if we can get all small firms to donate at the same level as large firms (0.96% of net income), that’s an additional $2.7 billion to charity.

And now you know our secret mission here at Valor CSR. Let us know if you want to help!