Blending profit with purpose

Do More Than Give is an important read for many reasons. Here are two: 1) This book takes a rare and intelligent look at what the donor can do beyond selecting a good cause and 2) Each of the donor recommendations fuels your imagination to explore how you can cultivate the catalytic behavior in your followers, friends and philanthropists.

Also worthwhile in this book are the case studies of individuals, corporations and foundations—large, small, private and community—who have played a unique role in advancing a larger issue with nonprofits at the table. For those who haven’t read its predecessor, Forces for Good, you can read a summary of best practices in the book’s appendix, which essentially means two books in one. Overall, the book contains a great deal of innovative thought and approaches to working collectively with donors.

This week, I’m highlighting Crutchfield, Kania and Kramer’s best practice #2: blending profit with purpose, thanks to a recent blog post I read today at SelfishGiving.com.

The post is called “Cause Marketing versus Sponsorship – What’s the difference?” and is coincidentally written by one of our featured authors, Jocelyne Daw, who wrote Cause Marketing for Nonprofits.

According to the authors, businesses have a lot to offer as vehicles for social progress, and donors can engage business tools in three ways:

1)   They can tap corporate know-how to create direct social impact: They can utilize the knowledge, skills and abilities of employees, as well as company systems and processes; intellectual property such as patents and trade secrets; and other assets. For example, GE used their industry know-how to upgrade thirty-seven clinics and hospitals and retrained local staffs in poor communities in Africa, Asia and Latin America, all without charge. GE continues to open a new clinic every month as part of its $90 million annual budget for philanthropy.

2)   They can create shared values through profit-making initiatives that serve social objectives: In the GE example, senior executives saw a tremendous range of opportunities for their business. The company with a goal of reaching 100 million new patients every year. GE partners with Grameen Bank, the microfinance institution, to build a sustainable rural health model, reducing maternal and infancy mortality rates by 20 percent.

3)   They can use their investment capital to further their social impact: The authors report that catalytic donors are using their vote and their cash to further social issues through “impact investments.” The authors explain a strategy called “shareholder advocacy,” where a foundation can purchase shares of stock in a company in which they wish to have policy influence. For example, the Nathan Cummings Foundation, whose interest in the environment prompted them to purchase stock in Smithfield Foods so they could file a shareholder resolution requesting complete disclosures of environmental impacts. They filed annually, eventually gaining 29 percent of the shareholders’ votes, and the company began to negotiate with the foundation. The foundation brought in their grantees for expertise, which led to the company’s commitment to track and report environmental indicators relating to its farms.

4)   Even more immediate social impact can be accomplished by foundations offering low- or no-interest loans to grantees, which has been done for decades. These loans qualify as program related investments, which means foundations can count these loans as part of their payout requirements. This strategy allows foundations to “recycle” their funds because they can be used multiple times to achieve social impact. Another example of impact investing is when foundations or donors are willing to be the lead investors in a socially responsible business solution to attract other venture capitalists. Kiva is a great example—in 2010 users lent more than $100 million in microloans. The Packard Foundation similarly was the first investor to the table in their case, taking the risk and lower return in order to fund a sustainability project, which eventually attracted substantial venture capital from traditional sources.

Watch for more Do More Than Give highlights during the month of April. You can also visit DoMoreThanGiveBook.com. For more information on this book and other features, visit our Page to Practice library or follow us at Twitter and Facebook.

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