What comes to mind when you picture a philanthropic business?
Do you imagine a company donating a percentage of profits to a charity in exchange for a nice tax write-off? If so, it may be time to think twice.
When Mark Zuckerberg and his wife, Priscilla Chan, announced the birth of their new baby, they also announced that they were going to allocate 99% of their Facebook shares to their new organization: The Chan Zuckerberg Initiative. As they listed the causes this initiative hoped to help (health, education, scientific research and energy), it sounded like they were announcing that they were giving their money to charity. But as critics quickly noted, the couple was actually starting an LLC, rather than a non-profit. Why didn’t they donate that money to charities instead, people asked, since charities already have expertise and credibility when it comes to dealing with these issues?
The Chan-Zuckerberg couple’s choice may be part of a rising tide that goes far beyond just Facebook. It could just be that their initiative isn’t tied to charity because the old model of a business donating to charity is going through an overhaul. Instead of donating a small percentage of profits, game-changing businesses are now designing their core services to address the same problems in a different way. When we look at the numbers, this may be a good thing. Only a measly amount of the world’s wealth currently goes to cause or charity.
As Tech Crunch pointed out in defense of the Chan Zuckerberg Initiative, “The budgets of all the charitable foundations in the world combined equals only .0001% of all assets invested in business through the capital markets.” What if we could unlock the other 99.99% of this wealth and direct only a bit more of it toward cause? Or, possibly a better question, what if we shaped more businesses around addressing the same problems charities usually deal with?
It may seem like creating businesses that serve those in need of charitable help wouldn’t lead to a profitable model. But as the Smithsonian’s Design for the Other 90% series points out, the wealthiest 10% of the population may have the money to spend, but the other 90% have the numbers. Giving them more buying power may lead to dramatic profitability. Designing businesses around the needs of the poorest 90% of the world’s populations looks fundamentally different, but it’s not just a do-gooder challenge — there is money to be made there, too.
Part of the reason this merging of business and cause is just surfacing now is the mindset we’ve historically had around solving problems. We have regarded funding charity/cause as a one-way exchange, a “giving” that expects nothing in return. And that idea is limiting in two ways. One, it automatically puts the resources dedicated to causes in the “extra” or “overflow” category, dramatically limiting them. Two, it assumes that the people or communities receiving the efforts of charity don’t have value to offer in exchange. What happens when we start to look at cause the way we look at business, as a two-way exchange? First, we see the value of these communities we support, and second, we shift the power balance of cause. Those benefiting from charity are no longer just passive recipients, but empowered parties in a mutually beneficial exchange.
Modern companies are starting to rebuild the way they do business around this model. As The Guardian points out, “Corporations are giving a smaller percentage of profits than ever to charity.” But this isn’t as dour as it sounds. “Companies aren’t necessarily giving less,” the essay argues, “instead they are changing how they think about their charitable efforts – moving from gifts and grants to strategic community investments that they hope will maximize social and business return.”
What are these efforts? Some of these companies are empowering employees to spend a significant amount of time on cause-related, pro bono work. Others are losing short-term profits in favor of ethical decisions, like refusing to test on animals. But the most common example is companies that are dedicating their entire mission to addressing the world’s problems, not in place of making a profit, but in addition to it. These efforts make a huge difference when it comes to employee morale and retention. As The Guardian points out, “Studies … show that employees consider a firm’s values more important than their salary.”
Look at some of the biggest brands right now, and you’ll see that a lot of them are built from the ground up to address solving social and environmental problems. Tesla is dedicated to making solar power a viable option. Warby Parker not only democratizes stylish frames by selling them at low prices, but is committed to empowering people in developing countries to sell glasses at affordable prices (they actually detail why they chose this model instead of making donations on their website). Patagonia’s mission is to “use business to inspire and implement solutions to the environmental crisis.”
When it comes to the Chan Zuckerberg Initiative, the plan is to look at cause-based investments similar to Facebook’s own acquisitions. Zuckerberg has been praised for managing the acquisition of Instagram, WhatsApp and Oculus in a way that allowed them to thrive without micromanagement, rather than absorbing them into the walls of Facebook. In a similar manner, the initiative plans to look for promising talent and initiatives and help them benefit from Chan and Zuckerberg’s resources, including Zuckerberg’s funds and Chan’s firsthand expertise in education and healthcare. In many ways, their model looks more like an incubator than a charity. Picture a Y Combinator but instead of growing the next dating service or grocery app, it aims to grow the next approach to curing disease, which may just be a profitable endeavor that could fund even more initiatives.
This model of philanthropy-minded businesses isn’t just a flash in the pan — it’s a key movement led by the demands of young consumers. Millennials, and the generation following them, Generation Z, don’t just like philanthropic brands — they expect them. According to Tech Crunch, “69% of millennials want their investments to be aligned with their values, and 90% want their jobs to be.” Gen Z goes a step further. According to Marketing Magazine, “A total of 93% [of Gen Z] are willing to pay more for brands based on environmental, social and community considerations and 90% encourage their peers to do the same.”
What this tells us is that it’s not just businesses that are starting to take over a territory that charity once occupied — it’s regular people, too. The idea of a philanthropist being someone who donates money to charity or time to volunteering is starting to change. A cause-driven life isn’t just about what you do with your spare money or spare time. Instead, it’s about the career you build, and the products you choose to bring into your home. Giving back isn’t just a side gig for millennials and Gen Z; it’s integral to everything they do.
Biz Stone, the co-founder of Twitter put it best, “The future of marketing is philanthropy, because young people buy meaning.” This will involve dramatic changes for big corporations that have gotten comfortable with the old “two-pocket” model of running business as usual and donating to charity on the side. If their brands don’t start placing cause at the center of everything they do, they can expect to cut young people out of their target.
It’s a big change, but it’s kind of awesome, isn’t it?
Graphics and research assistance by Rachel Hardacre