By Nina L. Kaufman, Esq.
Do you wish you could do well by doing good? Would you like “green” to mean both earth-friendly and solid profits for your company? Do you want your business to prosper without having to feel that you’re a greedy capitalist? If so, you may want to consider “cause-related marketing” and its cousin, socially conscious companies, for your business model.
What Is A Socially Conscious Company?
The terms get bandied about (and their definitions are in flux) – cause-related marketing (a/k/a cause marketing), social entrepreneurship, and socially conscious companies – but the basic underlying principle is the same: creating a company that operates ethically, provide social benefits, and/or are sensitive to the environment. The goals are, in short, making money and solving social problems.
For some companies, being socially conscious is the basis of the business itself, such as companies that make environmentally sound products. For others, it’s the way they conduct business and relate to their community. Socially conscious behavior can bring tangible rewards to companies: higher productivity (employees want to stick around); new streams of business (because your efforts have helped build a more economically vital community); new customers (who switched from your rivals simply because they admire your efforts).
Another approach for companies is to engage in cause-related marketing, which is a form of linking a company or brand to a relevant social cause or issue, for mutual benefit. A current example is the Product Red campaign which includes companies such as Apple Computers, Motorola, and The Gap as participants. Under the program, each partner company creates a product with the Product Red logo. In return for the opportunity to increase their own revenue through the Product Red products they sell, the partner companies give a percentage of the profit to The Global Fund to Fight AIDS, Tuberculosis & Malaria.
Social entrepreneurship is probably the other end of the spectrum. Closest to a non-profit organization, it involves the use of entrepreneurial principles to organize, create, and manage a venture to make social change. They will assess their success in terms of the impact they have on society, rather than the traditional of profit and return. An example is the for-profit SKS Microfinance (www.sksindia.com), which provides microlending opportunities in order to encourage economic self-reliance.
Why Would Business Owners Create a Socially Conscious Company?
1. Building a Bridge Between Haves and Have Nots
For Hattie Elliot, Managing Director of Socially Conscious Companion (www.gosococo.com), the reasons were clear. “It is possible to do good in everyday life,” she urged. “Especially if you’re starting a business, you have the opportunity to set a precedent and have that reflected through your company.” Socially Conscious Companion has created a line of pet jewelry and accessories made by South African artisans. As an animal lover and exchange student in South Africa, Hattie witnessed the devastation wreaked on families as a result of the AIDS pandemic. “It broke my heart,” she said. “There are children who have nothing – no family, no support system, no health care, no education.” Astounded at the vast sums of money that animal lovers were willing to spend on their pets in the United States, Hattie determined to be the bridge between the two, “transmuting money into energy,” as she put it. Socially Conscious Companion supports the Baphumelele Orphanage and Education Center in Cape Town (www.baphumelele.org.za), which provides a home and a school for aged newborn to 19 years old. Most of the children are themselves HIV positive.
When asked why she didn’t simply create a not-for-profit organization to raise money for the orphanage, Hattie had a definite answer: “As a business owner, it was important to me to have the flexibility to sell the business, which I could not do as a non-profit,” she responded. In addition, the creative and management freedom she currently enjoys in Socially Conscious Companion would not be available to her (to the same extent) in a non-profit structure. As a for-profit business, she also has the ability to tweak her profit-sharing formula on an ongoing basis so that it can be responsive to the needs of the orphanage, while mindful of the earnings of the company.
2. Transforming How We Think About Business
Jody Weiss had a slightly different take on the for-profit/non-profit question. For her, creating her PeaceKeepers Cause-Metics (www.iamapeacekeeper.com) cosmetics company was a matter of shattering myths. “So many people think of corporations as vehicles just for making shareholders rich. Why can’t a corporation be good for its employees, good for its consumers, good for its investors, and good for the planet?” she queried. “Imagine the powerful message it sends to consumers when they learn that the founders are giving away all their profits!” Jody exclaimed. “Wouldn’t that speak to you more loudly than any ol’ regular business or non-profit (which is supposed to give its money away)? she added.
PeaceKeepers’ model provides that it gives away all of its after-tax profits to women’s health advocacy and human rights issues. Like Hattie, Jody sees money as energy, with the power to profoundly transform. “It’s a totally different conversation with investors,” she said. “You’re not speaking to people about the classic financial criteria of return on investment of X percent within Y years. Yes, you’ll get a return on your investment. Perhaps not the same multiple within the same time frame as in traditional businesses, but part of the investment you make is in saving lives and alleviating dire situations. You can’t put a price tag on that in the same way.” Jody admits that it hasn’t always been an easy sell to the investment community. Still, she sees that the change in mindset has only just begun. She pointed to the for-profits projects being created around the world to conquer illiteracy, provide microlending financing, and teach people sustainable trades. In addition to its stated mission, PeaceKeeper cosmetics have “no nasty anything!” – no artificial fragrances, artificial colors, synthetic preservatives, or parabens, among a long list of other “nots”.
3. Real Business, My Way
Emily Dalton didn’t set out to become an overtly socially conscious company. In fact, she downplays that aspect of the Jack Black men’s grooming line (www.getjackblack.com) that she co-founded with business partner (also a woman) Curran Dandurand. When they started Jack Black in 2000 (“before we even heard of the actor,” she interjected), their focus was on providing a clean, simple line of products specially formulated for a man’s needs.
Jack Black’s social consciousness is stealthy, and not “shouted from the mountaintops.” Emily and her partner shared the attitude that they did not want Jack Black’s products to harm the environment or animals – no mean feat in an industry that has relied for many years on animal testing and chemicals. Jack Black is a People for the Ethical Treatment of Animals-approved company: it does no testing on animals, uses no animal-derived ingredients, nor will it work with companies that do. In fact, Emily has vendors sign agreements to that effect. Jack Back’s packaging is recyclable, and is increasing the number of certified organic ingredients it uses in its products.
However, because of the challenges of operating in a male-dominated field, Emily has centered her attention more on building a strong, prestige brand than on promoting the company’s underlying approach to developing cruelty-free products. “We’re not really cause-based,” she protested. “Being eco- and earth-friendly was not a major driving tenet of the company. But Jack Black is about alternatives, about choices.” She gave the example of the imminent launch of Jack Black’s cruelty-free shaving brush. “Most shaving brushes are made of badger bristle, which requires that a badger be killed in order to harvest the hair. We’re developing a brush that both performs better and is cruelty-free. For us, that’s a better sell to the men’s market. We educate them on how ours is a better brush. And the cruelty-free part of it is an added bonus. So the sale becomes a no-brainer.”
What Steps Can You Take?
An aspect common to all of these companies is that they didn’t just fall into their causes and philosophies by accident. The owners were very clear that they wanted their companies to reflect their own social perspectives. This takes business, financial, and legal planning – especially in PeaceKeeper’s case, where the documents sent to potential outside investors had to disclose the company’s intention with respect to profits and the effect on return on investment. If you’re at all interested in forming a socially conscious or cause-related company (or changing your company into one), make sure you get your advisory team in place. That way, whether your cause is global or just good works, you’ll be able to see “green” . . . all the way to the bank!
Nina L. Kaufman, Esq., is an attorney to small businesses and an e-commerce entrepreneur who can be reached at nkauf@palkauf.com. She has just published a new book, 100 Vital Questions to Ask Before Going Into Business with Someone Else, which is available on Amazon.com. For more information on her small business-focused law firm, Paltrowitz & Kaufman LLP, visit www.palkauf.com. For her legal information business, visit www.WiseCounselPress.com.