Businesses give billions to not-for-profits every year. But what if the way you donate hurts instead of helps? Part 1.
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This is part one of our series on the billion dollar question of corporate giving. If you like what you hear, there's plenty more to come in future episodes.
Hey Gill, how you going? Hey good. How are you going? Good.
We're talking about giving today. And we're working out of a co-working space that is a B Corp and many B corporations actually donate. Many businesses do as well that aren't B Corps. All around us here at this end of town, from retail to corporate, they're all donating.
I'm wearing pants made by Patagonia. Patagonia are famous for their donations they give every year. And one that's quite spectacular is on Black Friday, one of the biggest sales days of the year for fashion, but other industries, they donate all their revenue. All revenue gets donated to community groups and grass root projects. Yeah.
And this topic of how businesses give is actually really what sparked The Business Pickle conversations for us in the beginning. Thinking about whether all those dollars that are being contributed are really creating impact at the end of the day and what the challenges and barriers are to that.
That's a really good point, you know, bit of a segue, but yeah, we started this whole idea over breaky, with our partners, and, we were chatting about a particular business who was known for giving and they had realized the way they gave was maybe not as effective as they'd like it to be. So they changed it. so we got really talking about it really into it and was like, wait a minute.
This is the same problem for other issues. There are many topics that have a superficial kind of good feeling about them, whether it's reducing plastic or, carbon neutrality and all these other things. But actually when you dig deeper, it's not as simple as good or bad. Yes. It's really complicated.
And this is a great example of that.
For sure.
So what are we covering today, Gill?
Yes. So we're looking at two ways that businesses are giving in particular.
One on in-kind donations and we'll be diving into TOMS shoes as a bit of a case study to unpack that more. And another is tied funding , which is super common way that businesses are donating, but it has a bunch of challenges that we're gonna look at as well.
Yeah, I think on the surface, this topic is quite boring. It's like we're giving stuff, shoes or money that's just good, easy. But through the research, it's very clear that it doesn't always help. It actually can be the thing that stops the impact from happening. Yeah. It's quite shocking. Yeah.
In 2006, 29 year old Blake Mycoskie was traveling on holidays in Argentina. In his words, my main mission was to lose myself in its culture. I spent my days learning the national dance, the tango playing the national sport polo, and of course drinking the national wine Malbec.
I also got used to wearing the national shoe, the alpargata: a soft canvas shoe. I saw this incredibly versatile shoe everywhere in the cities, on the farms and in the night. As he continued traveling. He also came across children, living in poverty and going without shoes. And from there, an idea was born. Once back in the States, Mycoskie founded a shoe company called TOMS and he introduced what's called a buy one, give one model or a one for one model. So it really does what it says on the tin, buy a pair of TOMS shoes and they'd give a pair of shoes to someone in need.
This is one of the first sort of impact social businesses that I really got excited about. I love TOMS shoes. I were super comfy and just being like great. Someone's getting a pair of shoes.
Let's hear from Andrew Davies. Andrew is the CEO of B Lab in Australia and New Zealand. That's the certifying body for B Corporations.
You can't really talk about baked-in corporate giving without talking about TOMS shoes.
To a certain extent, they have really pioneered and defined the modern construct of corporate giving through their buy one, give one model. They were best known for the idea that if you bought a pair of TOMS shoes, they would donate another pair of shoes into a developing nation to help a local community. It was a beautifully compelling and very simple model.
TOMS was built on an in kind donation model. Rather than donating funds to impact projects, they donated goods. And TOMS established a number of partnerships with nonprofit organizations to distribute those shoes to people in need.
Now in kind donations are a really common way that businesses provide support to nonprofits and something that we cover in our food waste topic is this idea of redistribution where businesses are donating food, which is an in kind donation to help non-profit food programs. It can be a really beneficial thing, but it's also got some challenges to examine.
I think in the food waste example, it was about that whether the food was healthy for people, whether it was gonna go off, is it safe. But then there's also people actually gonna eat it. So they want it to culturally fit. It's not just like you're giving food.
A number of businesses loved this idea of buy one, give one, and they followed suit introducing their own programs.
Just one example that comes to mind is Warby Parker, which is a eyewear company, and they've introduced a buy a pair give a pair program, which is a really similar idea.
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Yeah. Just seems like such a great concept. Mm-hmm
So what made this corporate giving model so compelling and attractive? Number one, TOMS were able to create a giving model that really made intuitive sense to customers buying these products. And it was an easy way of connecting their brand identity with their products and their sense of philanthropy.
It's harder to think of a corporate giving program that's clearer to understand than buy one, give one. Mm-hmm. You hear that phrase? You pretty much know what the program's doing. Yep. Yeah. I buy a pair of shoes. Someone gets a pair of shoes.
So not only is a business gaining the benefit of a giving model that's intuitive and tangible. They're also strengthening their brand by aligning their business with a positive purpose in a really clear way. From a business perspective, this purpose alignment piece is really powerful. So in a global study of brands in 2020, Zeno Group found that "...consumers are four to six times more likely to trust by champion and protect those companies with a stronger purpose over a weaker one."
So there's a compelling case for businesses to align their brand and their giving in a way that resonates with customers. Buy one, give one models are a straightforward way to achieve that.
Number two, it has easily measured outputs. TOMS had a really clear metric for determining the reach of their program. And that was the number of shoes distributed.
By 2019 TOMS were able to report that they'd donated more than 95 million pairs of shoes. For a business looking to ensure that their intended impact is measurable and tangible, one for one in kind donations are an attractive option.
Thinking about Warby Parker as well, they've donated over 10 million pairs of glasses across more than 50 countries. And that's something that's really easy to measure and communicate.
But the buy one give one model is not without its drawbacks. Are these product donations solving persistent problems facing communities in need? Do they tackle the root causes of poverty and inequality?
A 2016 study published by the World Bank Economic Review tested the impact of TOMS shoe donations in a randomized trial of over 1500 children in rural El Salvador. Their assessment found that the overall impact of the shoe donation program was close to zero. Most children in this context already owned a pair of shoes and the donations resulted in insignificant impacts on children's foot health self-esteem and overall health.
I've actually seen some amazing work done by some Australian researchers and academics who've studied impact and whether it's improved the wellbeing, health, of people. And it wasn't shoes. It was books I think, or school equipment. And that they thought would get kids to go to school more and to learn more and improve education outcomes.
Through this research, they did, they actually found the root cause was a lack of money. Because the families didn't have enough cash, the kids were going and working. Very simply. So they weren't gonna go to school where they have book or not. There's much more complexity to it than just giving a book.
Yes.
Like how does Warby Parker giving out glasses, how could that possibly be bad? It just feels weird that that can't be good. Charities that are helping people see again in countries where they can't have access to it.
Mm. It's not to say all in kind donations aren't helpful, but it's about understanding what the root causes are, as you were saying, what the impacts that needs to be created is, and whether what's being given is actually gonna help that.
TOMS have reported that close to two thirds of their nonprofit partners agree that donated shoes help to protect recipients from foot infection and disease. And 70% have reported protection from injury. Still of those close to 100 million pairs of shoes donated, we're not really able to determine what proportion of those donations led to meaningful, measurable change in the lives of those recipients.
Where does this leave buy one, give one as an option for businesses?
Well, in kind donations may be effective when they're highly targeted. And when the goods being donated are clearly helping to improve a locally identified problem within a community.
However, just like that 2016 study shows when it comes to in-kind donations, one size definitely does not fit all.
But, ah, I hear you say that's not a problem for our business. We don't deal in, in kind donations. We give our nonprofit partners cold hard cash.
Well, not exactly cash, more like a digital payment of funds. Still. If that's the case, you're in good company. Businesses play a big part in philanthropy. A survey by Candid across 40 countries showed that 44% of philanthropic funding in response to COVID came from the corporate sector.
Between 2018 and 2019 in the US alone, corporate giving ticked just over 21 billion dollars. That's about the gross domestic product of Cyprus. Wow. 44% of all donations and giving came from corporates. That seems like crazy.
Yeah. So this is of philanthropic donations. So that's excluding government contributions.
So, how did we get here? Let's rewind for a moment. Andrew Carnegie was a magnate and Titan of America's steel industry during the late 19th, early 20th centuries. And he was a fierce proponent of this idea that those who made vast amounts of money through industry should give it away to achieve social good.
In the economic boom that followed World War II, what's known as the Golden Age of Capitalism, we see Carnegie's ideas in action. Major companies began creating charitable foundations as an arm of their business. As corporate competition grew through the later decades of the 20th century, corporate giving became a part of business' strategies and brand positioning as a point of competitive advantage under the banner of CSR corporate social responsibility.
Today, there's a growing trend for businesses to commit funds to impact. Organizations such as Pledge 1% and Good2Give are amplifying the conversation around corporate giving and businesses are looking to align their philanthropic decisions with their business purpose and identity.
Maybe your business is already part of that conversation or is already giving funds to support a nonprofit partner. It's a nice idea to think that every one of those dollars contributed is creating some kind of good, but as it turns out with many things in this world, it's more complicated than that.
Open Road Alliance is an organization that provides bridge funding for social enterprises and nonprofits that are encountering obstacles in their impact projects. They did an important piece of research that found one in five impact projects encounters a roadblock with close to half 46% of those roadblocks caused by funders.
In many cases, corporate donors may hinder impact instead of helping.
Giving that million dollars could actually be the thing that causing harm. And I think that's what's counterintuitive with all of this stuff, all the topics we cover. You could be causing problem by trying to do a good thing. The guy who invented the plastic bag to make a sustainable option became one of the symbols of waste. Yes. What this kind of thing makes me think as a business person and other business people out there is to go deeper than the surface layer.
Don't just take that superficial, "I donated money, so I'm good." Mm. Go, "Is it having an impact?" Go through the end. It takes more time, takes more consideration, but if you genuinely care about making the impact, which most people do go a little bit deeper.
Imagine if an investor said to Elon Musk, "You can have a hundred million dollars, but you can only spend it on staff lunches, because we think morale is really, really important." And he's just thinking, "You have no idea what the most serious, root cause issues are."
It's the same approach of development. They're amazing locally led organizations who know the root causes, who know how to get systems moving and changing, but they just need funders to almost, like, get out of the way.
That's Peter Yao. He's the Chief Impact Officer at Thankyou. They make a whole range of consumer products and they donate their profits to help end extreme poverty.
What Peter is talking about here is something called tied funding. That's where a funder will allocate funds to a nonprofit for a specific project activity or output.
For example, imagine your business funds water projects to help people get access to clean water and sanitation. How do you know that the money is getting where it needs to go? Well, maybe you ask your nonprofit partner for numbers on how many Wells have been built or water pumps have been installed.
That's a tangible number that you can easily report and track on. But wells and water pumps are not the real impact. They're not the end game. True impact in this scenario might be people's health and quality of life improving as a result of having consistent, safe access to water. That's harder to measure and it will probably always involve more than simply building another well or another water pump, though those things may be important.
For example, for the clean cooking project that we are doing,
the electric, clean cooking.
Here's another example for you that Nadia Campos shared with us. Nadia is the Global Director of the Innovation Lab at IDE Global, which is an international nonprofit organization. She knows firsthand the challenges of funders, constraining funds to particular outputs or activities.
We submitted (graphic starts) a proposal and one of the indicators, it was just like, uh, 500 people will buy, the electric, clean cooking.
And the donor told me, "Only 500 people?" I say "Only? In one year? How many people you want to suddenly in the rural areas that they only have $2 per day to eat, to buy more than 500 clean cooking a devices? And yeah, it was like, it's a bit huge effort, so I had to add another indicator that more than 1000 people will, will at least see our flip chart because they wanted numbers, big, big numbers.
So they say, okay, for us, this is good enough. If you include the, how many people have interacted at least with your marketing material. I say, "But you know that this is not deep enough. Yeah. They have seen it, but it doesn't mean anything. They are not going to change their behavior.
However, if they buy a clean cooking device, they will not get the smoke in the kitchen! They, this is a much deeper change." But for them, is not the same quality and quantity.
As the saying goes, "What gets measured gets managed: even if it's pointless to measure and manage it and even if it harms the purpose of the organization to do so."
I've done some work in the development area from a marketing perspective, worked with social enterprises and charities in the field in Cambodia and Bangladesh and others.
And I've seen this happen, where we with the organization were trying to get people to change their behavior and do a really good thing, like wash their hands. Yes. But they were having to prioritize reach. So lots of eyeballs, get lots of people to see a poster when we all knew that wouldn't make any difference.
Is your business clear on what real impact means? That's something we'll be exploring more in future episodes in our series. But as we'll find out, when a nonprofit is held to metrics on specific activities or outputs, rather than on meaningful impacts that address root causes, it can do more harm than good.
For businesses that do give, I think that's a great starting point that they've got a willingness to support nonprofits in some way. I think it just takes that extra layer of thought and insight into how impact can really be made on the ground.
It can actually be quite rewarding and confronting, but inspiring. On one side, it's like harder, go a bit deeper, check if it's working or not, maybe change what you're doing. On the flip side, you might really get to know how impactful your stuff is. You might wanna give more or just feel better about it.
And for businesses that want to be able to communicate the difference that they're making the temptation to those big numbers that Nadia's talking about, maybe your more impactful communication is drilling in on the real impact for one person.
Yeah. When you hear 10 different brands saying we donated X million or 10,000 this or 1 million that, you're like, is that big or small or good? But when you can connect with some real authentic stories in realities, it's much more engaging, much more differentiating. And I think beyond all of that, I would hope that people do this, not for the marketing outcome.
In my other business, we do donate 5% of our revenue and we do it for ourselves. We have let people know and we don't hide it, but we don't put it all over everything. The reason for that is we just personally feel good maybe making the world better. That's where I think it should end. If you then use it in your marketing and comms, that's great. That's fine.
But don't let that drive your strategy.
Let's circle back to the story of TOMS. TOMS has been on a learning journey as a business, perhaps partly in response to findings like those we talked about earlier. And they've actually departed from the very One for One giving model they helped to create.
Today, instead of in kind donations, TOMS has shifted their giving model to financial donations. They're committed to giving a third of their net profits in support of what they call 'grassroots good', providing grants to locally led organizations.
As a brand fan of TOMS and a customer for years, I didn't realize this. And I think that speaks to the fact that the model and exactly what they do can change. That's okay. I still like them. And actually maybe if it's more complicated now I'm gonna value them more cause they've taken the time to consider it.
And also credit to TOMS for having the bravery to shift their whole giving model and strategy from something that took the world by storm when they introduced this One for One idea. To shift away from that I think is bold, but it's the right decision.
How about your business? Would you be willing to shift away from the corporate giving model that you rely on? If your business is currently donating funds to a nonprofit, do you know whether you are part of that 46% of funder created roadblocks?
The need for financial support isn't going away. And with the impacts of COVID setting us back, it's now more pressing than ever that the funds businesses commit are doing as much good as they can.
We've uncovered that giving can be good, but it isn't good inherently. It sounds like there's a little bit of work required to go a layer deeper than that. Now, not as complicated as say packaging and trying to solve that complicated problem. Going a little bit deeper. There are some organizations who are leading the way in this and I think there's more and more businesses that are giving now, which is awesome.
And whether it's a business, that's thinking about giving for the first time to set their program up in a way that's going to be set for success, or if it's a business that's already been giving for a long time, taking the time to reexamine, why they're giving the way they are, were things based on assumptions or real evidence that impact is happening at the end of the day.
I think a lot more organizations are looking at their own issues and the harm they cause and then trying to figure out ways they can offset that or compensate for that through giving in a, in a more aligned way to their mission, vision or impact.
So what are we covering next?
We'll be looking at what the alternatives are to these two models we've looked at, buy one, give one and tied funding, looking at unrestricted giving. What does that mean, how does that work in practice with some more interesting case studies from Thankyou and others.
One of the things that has come out in this for me is trust. Trusting a charity partner that you're gonna give to give them money with a longer timeframe and empower them to achieve something good.
So yeah, look forward to hearing more about that.
Yeah. And if you're a business that has a giving model currently, or you're looking to start one and you've got resources to share or questions to ask, let us know. We wanna keep the conversation rolling.
Yeah. We'd love to hear about stories of impact, positive and negative, where donation has impaired or improved the outcome that's happened. Or organizations where they've really synced up their impact giving to their values, their mission, or the harm they create.
This has been part one of our series on the billion dollar question of corporate giving. If you want to dig further head to our website, thebusinesspickle.com. There, you'll see a deep dive into our research on this topic and some others. Thanks for listening to The Business Pickle.