An economic downturn is hampering spending among consumers, businesses and governments alike, and Canadian charities are suffering the consequences.

But a new study shows businesses are finding ways to support the non-profit sector beyond cash handouts, and at a time when corporate profits are being squeezed more than ever — particularly among financial services companies — the appeal of these alternative support vehicles is growing quickly.

Large companies especially are embracing such initiatives as payroll deduction programs for charity, employee volunteer programs, and raising money from clients and suppliers, according to Michael Hall, vice-president of research at Imagine Canada, the non-profit organization that conducted the study.

“Large corporations in particular have figured out how to mobilize a wide range of their resources, and understand that they can give more than just cash,” Hall said at a presentation of the study findings on Wednesday.

“There are other ways to support that don’t have as much cost but can have just as big an impact for a charity,” he said.

Among big players in the financial services sector that are embracing such community investment programs are Manulife Financial Corp. and credit union First Calgary Savings

Manulife offers an employee-volunteering program and sponsors several charitable events. It recently conducted a three-year study on the business benefits of employee volunteering, and found that retention among employees who had volunteered was three times higher than those who did not.

“What we see at Manulife is that these programs can reap huge rewards for the HR functions of a corporation – as one example,” said Sara Saso, director of community relations at Manulife, in a report on the study findings.

First Calgary Savings offers a number of community programs, and measures the impacts of these programs to ensure its contributions are effective.

“It is important to articulate both the business and the community benefits,” commented Dani DeBoice, manager of corporate citizenship at First Calgary Savings. “If a company invests in the community, it has to use the funds effectively; otherwise, it’s wasting shareholder dollars.”

Imagine Canada finds that many other large companies’ community investment efforts are lacking, especially financially. In its survey of 93 businesses in Canada that have revenues of at least $25 million, 97% made financial donations to charities and non-profit organizations. The median contribution amount was $340,000, or 1% of pre-tax profits, falling short of the 1.25% of profits donated by the broader corporate community.

“Smaller businesses do more,” said Hall. Even more concerning is that a quarter of large companies donated less than 0.6% of profits, which is “not very much at all,” according to Hall.

This is especially worrisome for the non-profit sector given the current economic environment, and the fact that a decreasing number of individual Canadians are making charitable donations, Hall said.

He pointed to Statistics Canada figures showing that the number of individual donors in 2006 dropped by 1%. In addition, annual growth in individual contributions fell from 7% between 1995 and 2005, to 1.4% in 2006.

“This was last year, before the economic troubles came our way,” Hall noted. He added that a major incentive for contributions last year was the capital gains tax incentive for charitable donations. Given the performance of the markets this year, “I don’t think that incentive is going to work very well this year,” Hall said.

Still, he said the fact that most corporations and individuals are making some form of contribution is encouraging.

One reason that many businesses contribute, according to the study, is the corporate and financial benefits of community investments. The study found that 79% of large corporations believe business and non-profit organizations can mutually benefit from collaborative relationships.

“The relatively high level of community support provided by large corporations appears to be driven, in large part, by an interest in the business benefits that can be obtained,” said Imagine Canada’s report.

More than half of large companies contribute to boost their reputations, the survey found. Other motivating factors include building strong communities, which is good for business, and improving their relationships with the community.

Despite acknowledging the financial benefits of giving back, however, 51% said philanthropic motivations were important despite the returns.

“Philanthropy is not dead, there is a philanthropic spirit,” Hall said.