Today’s philanthropists are harnessing market forces to make a difference in the world. How can your business contribute?
Andrew Carnegie made an immense fortune establishing the American steel industry during the late 19th century.
Then he gave almost 90 percent of his fortune to charities, universities and foundations.
This sort of philanthropy was emulated by many of his fellow Gilded Age industrialists whose ventures resulted in great wealth.
Contemporary counterparts (e.g., Bill Gates and Mark Zuckerberg) continue the tradition.
But while the first corporate philanthropists tended to donate to causes related to the arts, education and scientific research, today’s corporate giving strategies aim to make a difference in the local as well as global communities where they do business.
According to Andrew Dunnett, director of the Vodafone Foundation, "We’ve moved from the checkbook charity that has symbolized corporate giving in the past. We’re giving away the same amount of money, but there much more that we can do with our people, our technology and combining that with our charitable giving to make a difference in the communities in which we operate."
Paula Goldman is Vice President of Impact Investing at the Omidyar Network, the philanthropic investment firm started by Pierre Omidyar, founder of eBay.
In the Harvard Business Review, Goldman writes that, “Today, business leaders are not only trying to address community and global problems earlier in their lives; they are also questioning the traditional divide between commerce and philanthropy. As prominent hedge fund manager Bill Ackman told me, ‘When I graduated from business school I thought business was about making money and philanthropy was about doing good. Now I think both can be used as methods for changing the world.’”
Your business may not be as large or as profitable as this new generation of corporate gift-givers.
However, you can adopt the social change strategies used by the big corporate givers to your local situation.
Since the 1960s, a practice called "socially responsible investing" seeks to eliminate funding in "harmful" activities, such as investments in repressive regimes or companies with poor environmental protection records.
Impact investing is more proactive, it invests in companies, organizations and institutional funds with the stated purpose to generate social and environmental change, as well as financial return.
The most recent notable example is Mark Zuckerberg’s and Priscilla Chan’s commitment of $45 billion in Facebook stock to a limited liability corporation for impact investing.
An LLC, as opposed to a traditional foundation, allows for investment in for-profit companies with stated social goals in addition to non-profit charities.
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Impact investing is a strategy used primarily by large diversified financial institutions.
According to Michael Etzel in the Stanford Social Innovation Review, “The bulk of impact investment has been made by private investment fund managers and development finance institutions, which together have put up more than 80 percent of the money flowing into impact investing.”
You a small business owner, not Mark Zuckerberg or Pierre Omidyar (well, maybe not yet).
While you can certainly use impact investing strategies in developing your own personal investment portfolio, you’re not nearly going to have the same, well, impact.
What can your business do to have a more forceful social impact and help your bottom line at the same time?
As the name implies, a company with a one-to-one giving program donates one product to a charity for each product that it sells.
Warby Parker does it with eyeglasses and Toms does it with shoes.
While doing social good, you’re also building a brand identity that encourages customer loyalty and prompts people to buy your products, even if they cost more than the less socially committed competitors' products.
This may not be financially sustainable for many business models. But there are other forms of one-to-one giving.
Tracy Oppenheimer, content director for Buy1GIVE1, provides examples: “Accountants giving a day’s worth of education for every new client they gain. Health coaches can give a medical procedure for every session they host. It’s still a one-for-one message, but it’s not just a small group of nonprofits or enterprises affiliated with specific products that benefit. You begin to see that this message and associated giving knows no bounds, and that it can benefit the maximum number of valuable causes with maximum efficacy.”
Be Part of the B Team
“B Corporations” are companies using “business as a force for good.”
They are certified by the non-profit B Lab as meeting the highest standards of verified social and environmental performance, public transparency and legal accountability, aspiring to use market forces to solve social and environmental problems.
There are more than 1,600 certified B Corps in 42 countries, in more than 120 industries.
Again, B Corp certification attracts new customers with similar values. It also motivates employees who believe in working for the greater good, not to mention that doing good has its own rewards.
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The For-Benefit Enterprise
You might think your business is too small to have much of an impact. But if you collect together all the small businesses trying to do good, there’s a lot of good being done.
As Heerad Sabeti says in the Harvard Business Review, “We are in a new era. For-profit businesses are tackling social and environmental issues, nonprofits are developing sustainable business models, and governments are forging market-based approaches to service delivery. Out of this blurring of traditional boundaries, a different model of enterprise is emerging, driven by entrepreneurs who are motivated by social aims.”