When it comes to philanthropy, businesses take a traditional approach. They lean heavily on traditional corporate foundations: nonprofits through which they dole out grants to specific causes and marginalized communities, or provide free or reduced-price products and services. While this giving matters, it can’t drive the systemic change that’s needed to address long-standing issues like poverty or economic inequity. Such problems can be solved only by long-term innovation, not short-term programs.

That’s why businesses should adopt a new nonprofit model: a public charity spinout from a corporation. It’s significantly different from traditional corporate foundations and exponentially more effective at driving systemic change.

This new nonprofit model, which my organization has adopted, springs from the realization that public charities have more flexibility than corporate foundations. Public charities are required to receive most donations from non-corporate sources, which means potentially greater resources. They are free to invest in promising innovators and reinvest the returns to spur faster progress—something corporate foundations avoid. At the same time, a public charity can draw on the expertise and infrastructure of the founding company and its employees, giving it the benefits of the business itself.

Add it all up, and public charities can operate more like a corporate startup incubator or seed investor than a corporate foundation. They can easily invest in startups and promising solutions that require more resources or a longer time frame. They can also more easily support innovators who are not well-known in traditional investor circles. This outside-the-box strategy is key to driving comprehensive solutions to society-wide problems.

How can a business make this happen? First, establish a public charity, either instead of or in addition to a traditional corporate foundation. Give it a mission of finding and investing in promising innovators and social changemakers who can tackle the root causes of major social challenges.

Next, get your employees involved in its work. They can donate their time and professional expertise to the public charity, empowering it to support promising innovations far more effectively. That’s another difference from a foundation, which doles out corporate money but not the subject mastery of a corporate workforce. An independent board can ensure there’s no corporate self-dealing.

The next step is to solicit donations from outside the business—a requirement for a public charity. Fortunately, philanthropists have a good reason to support this nonprofit. Their donations are amplified by the founding company’s resources and employee expertise, exceeding the impact that donor dollars would otherwise make. They can also watch their support grow more powerful over time, as investments generate returns and get reinvested.

Add it all up, and what do you get? Groundbreaking solutions to pressing social problems.

Read the full article about changing the corporate philanthropy model by Lindsay Androski at Philanthropy News Digest.