“Embedded philanthropy is transforming everyday commercial transactions for the public good.”
Catch me on the right day, and I agree wholeheartedly with this statement. Other days, it seems like we’ve got a tiger by the tail.
What is “Embedded Philanthropy”?
Lucy Bernholz of Philanthropy 2173 coined the term “embedded philanthropy” to describe the trend of integrating a charitable donation as “part of any other financial transaction, such as checking out of the grocery store and making a donation to diabetes care.”
You’ve probably participated in embedded philanthropy. A few examples of embedded philanthropy from elsewhere in this blog: A mutual fund that donates a portion of their proceeds to charity; TOMs shoes that give a pair to a child for every pair you buy; and of course the grandaddy of them all, Product (RED).
Sounds Harmless. So Why the Debate?
Here’s what’s potentially good about embedded philanthropy: it brings charity into our everyday lives and makes it easy. It allows us to express our identity and our values and align our consumer behavior with the causes we care about. I think we have to start using our purchasing power in this way to motivate corporate actors to behave in more socially responsible ways because corporations are some of the most important actors in this chess game of social change.
Here’s what’s potentially bad about embedded philanthropy: it could make us thoughtless about philanthropy and it could end up being a “corporate whitewashing” tactic where companies pay a relatively small percentage of profits to convey an image of corporate social responsibility that may not be backed up by the rest of their labor, environmental and social practices. When corporations cap their donations regardless of the number of units sold, it’s unclear that individual purchases actually increase the amount of money going to charity or if they just burnish the corporate reputation of the advertiser. I think this is a real danger and wrote about it here.
So, like most things–marketing, elected office…butter–embedded philanthropy is a neutral tool that can be used for good or evil. We have to figure out how to use it responsibly so that, as people who are invested in positive social change and real corporate citizenship, we don’t just wait and hope for the best.
Charities are Not Victims, They are Co-Conspirators
Charities themselves are on the front lines of this effort. They are the ones who allow their names and images to be used by the drug stores and clothing retailers and the credit card companies. And to be practical, the promise of a steady stream of corporate dollars and the backing of a corporate marketing budget is incredibly enticing.
But charities need to make sure that the corporations who approach them for an embedded philanthropy opportunities act in a way that is consistent with the nonprofit’s values. Not just talk in that way in a couple of feel-good meetings, but act in that way. Charities should ask for a report from KDL research or another source that can provide a snapshot of the larger picture of corporate responsibility. Charities are responsible to make sure their own good name is not used as part of a whitewashing effort.
I suspect that a few charities will be embarrassed by their association with a corporation that turns out to be semi-evil before charities start taking this responsibility seriously. But don’t let it be your organization that gets dinged: if the corporate report card is a “C” overall, take the principled stand and turn down the deal. It will do more to further your mission in the long run than a few extra dollars.
Another way to approach this is almost like shareholder activism, establishing partnerships and mutually beneficial relationships and then using the insider status to change the status quo. Can you imagine if Susan G. Komen for the Cure pressured every one of its 60 corporate partners to offer decent health insurance with preventive care to its employees? I bet they’d have a lot of leverage.
If Corporations are by Definition Sociopaths, How can they be Socially Responsible?
For the companies who wish to get some attention for their corporate citizenship through the use of embedded philanthropy, here are a few best practices:
- If your corporate social responsibility office falls anywhere under your sales or marketing function, you’ve got the wrong idea. It should be a cabinet-level position reporting to the president or CEO.
- You should get to know the charity before hitching your wagon to their star, and the best way to do that is to get involved. Start your relationship with something other than cash contributions. Maybe by donating professional skills of your workers, like expertise in logistics to help an international aid agency that needs to deliver supplies to remote areas. Your employees will be a fantastic source for due diligence.
- Don’t cap your maximum donation. Respond to the will of the people. This is one reason why embedded philanthropy, where the amount of the donation is explicitly added on to the purchase price, is a better model than cause marketing, where a percentage of the sale price is diverted to charity.
- Disclose the details of your arrangement with the charity on your web site, and if possible on the packaging or marketing materials. For example, don’t just say “a percentage of profits,” but say the exact percentage. And don’t use the word “proceeds” because consumers don’t know if that means gross sales, net profit or what. If you’re too embarrassed to list the exact amount then take the hint and up your contribution. When you consider what you’re getting out of the arrangement, make the the charity is getting a commensurate benefit.
- Align your business practices with your particular cause, so that you’re demonstrating more than a token commitment. For example, if you’re supporting a health-related cause, re-examine your health insurance or long-term disability policy. These things are financial commitments as well, and though not as flashy they are in many ways more important.
If you incorporate these best practices into your embedded philanthropy program, you would welcome and promote transparency. If you use corporate philanthropy as window-dressing, beware. The consumer public is going to figure it out and you’ll end up looking like a phony–a death sentence in today’s authenticity-adoring society.
This blog post is part of the Embedded Philanthropy Blog Series, sponsored by Telecom for Charity. The blog series was launched in May 2009 to highlight expert thinking and encourage discussions on the state of embedded philanthropy in today’s economy.
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