Planning, Startups, Stories

Charity Add-on: Does it Work? Is It Real?

(Note: I posted this first on Small Business Trends, and I'm reposting it here for convenience of readers of this blog. Tim)

I got an email over the weekend from an online retailer asking me to post about its new offer of donating "5-10% of the company's profits to charity." A press release explains that there's a drop-down menu at the end of the online purchase process, offering a choice of charities including MADD, Teach for America, Doctors Without Borders, and so on.

Frankly, that's not news. Local supermarkets and such have been doing that for years. Other websites do it.

But it interests me, so I ask you: does it work? Are you going to seek out the online retailer that does it? Is this real, or is it just a ruse, as in a cynical attempt to spin?

I'm quite cynical about giving a percent of profits. I think it's kind of a ruse. I don't doubt that they actually do it, but "profits" and "percent of profits" is a deceptive term. I think it's often used to quietly trick people into thinking "percent of sales price" when it's really just a percent of that tiny bit that's left over after all costs and expenses are paid.

The whole illusory nature of profits comes to mind again after that annoying flap in the presidential debates. I'm sure a lot of people misunderstood how big a company has to be before it produces $250,000 of profits before tax. Profits sound like money, when they're really just the leftovers.

In my mind, after 30 years of running my own business, profits are third priority, after cash flow as first, and growth as second. Even in good years, giving even 10 percent of profits in most businesses means less than a penny per dollar of sales price.

Furthermore, I really wonder, aside from the profits gambit, how much do people take greater good into their purchase decisions? Do you?

And, if you do, are you going to seek out retailers who offer up a percent of profits, as opposed to goods made in developing nations, or not made in sweat shops? How are you going to sort through that?

And, if you do, are you still going to be doing that these days, when you're worried about your house value, or the threat of widespread recession hitting the sales of your own business?

Race for Green Credibility

Check out GoodGuide for yet another effort to sort through green claims in products and evaluate what's green and what isn't.  It just won an award at last week's Web 2.0 conference, and it was a TechCrunch 50 finalist as well.

With greenwashing running rampant these days, we need some way to sort through it all.

Let's hope it doesn't become like the low-calorie disaster, everything from light beer to low-fat yogurt, which became a free-for-all and eventually lost -- I think -- all credibility. And then there's light vs. natural vs. organic vs. locally grown ... really, what's the good green buyer to do here?

Green is supposed to mean good for the planet. Or is it just not bad for the planet? Or perhaps, a trumped-up marketing claim to take advantage of the trend.

Let's hope it doesn't end up like "user-friendly" is to software: after a while it became a meaningless term because every software product published claimed to be user friendly. How long has it been since you've seen software making that claim?

And green also means more expensive; at least, that's what it means in our local shopping arena. Whether that's local or organic or natural, it's definitely more expensive.

My cellphone provider made a pitch about going green a couple of months ago when what they were really doing was saving printing and mailing costs by delivering my monthly bill via the Web. Come on, please, why not just pass those savings on to me? And if that's green, then what's saving the whales?  Greenwashing is coming all over the place.

It's not that GoodGuide is necessarily the answer, or, for that matter, that it isn't. It's just that there are so many claims made, and they show such a wide range of definition and validity. Where do we go for reliable validation?

The Future: Hot, Flat, Crowded

On Monday I posted some predictions from the World Future Society, what I consider to be an interesting list of believable possibilities for the next 25 years.

Today I want to add another view. I've heard several interviews with Thomas Friedman lately, and over the last week bought and read his latest book Hot, Flat, and Crowded.  This looks and feels to me like another very valuable view of the future, also very reasonable, well documented, and well written. In the end, although it delivers bad news, it's important bad news, and credible.

Hot, because climate change is real and it threatens humanity. Flat, because we're in a world economy now, with very few borders, and a very level playing field. And crowded because, well, do the math. Our numbers double every generation.

What this book and the thinking behind it should mean, if there is any common sense left in the world, is a big investment boom for clean technology and alternate energy technology.

In regards to new business, and especially emerging business, and growing small business, Friedman is calling for an all-encompassing new wave of political, social, and economic resolve, which he hopes will be led by the political, to change the way the human race consumes energy.

Drilling for oil, in Friedman's picture, may or may not be useful as a drop-in-the-bucket stopgap measure, but in the broader view it gets in the way. It obscures the real picture.

What we need, badly -- and that's not just we the United States, although we're the worst of it -- is to focus our efforts on new sources of energy, using new technologies, to end the economic dependence on something we don't have much of and we need a whole lot of: oil.

If Friedman had his way, the U.S. would jump on new alternate sources of energy in a way that would greatly surpass our efforts to get a man on the moon after the 1961 John F. Kennedy call to action, and also the technology revolution of the personal computer a generation ago and the Internet in our current world.

Announcing the Energy Climate Era: Hot, Flat, Crowded

The buzz is growing very fast on what might have been the keynote speech at the Aspen Ideas Festival last week. I picked it up at Huffington Post, in a post titled Thomas Friedman Calls for Green Revolution. Here's the lead: 

At the Aspen Ideas Festival Thursday, New York Times columnist and The World Is Flat author Thomas Friedman gave a preview of his new book, Hot, Flat, and Crowded: Why We Need a Green Revolution — and How It Can Renew America, which comes out in September. The book's main argument is that the convergence of global warming, global flattening (the rise of middle classes all over the world), and global crowding (the population boom) is driving five key trends that will define the 21st century.

Friedman argues that those five trends — energy and resource supply and demand, petro-dictatorship, biodiversity loss, climate change, and energy poverty — have all been driven past a tipping point such that they have created a new era of history: the energy climate era.

I heard second hand, from someone who was there, that all the buzz was about that speech. The summary on Huffington today includes three short videos you'll want to see. Here's the link again: Tom Friedman Calls For Green Revolution.

Alltop's New Green Page

Even if it weren't an Earth Day tie-in, I'd still be adding Alltop Green to my regular visits. I like browsing the Alltop small business section, which is usually my first view in the morning. It reminds me of the early Yahoo!, streamlined, quick, and easy. Most days I get lost in there and I end up pulling out to jump to Windows Live Writer to post related to something I've seen there.  This new green version, a joint effort with Flock timed for Earth Day, gives me the same streamlined view of Flock's favorites from treehugger on down a pretty substantial list.

I think Green is going to be steadily more important from now on, so it's definitely part of my agenda. And I do mean green as in environmentally and socially sensitive, and, in my case, with special emphasis on implications for startups, business planning, and small business.

Online Buyers Pay Green for Green

Given a choice, four out of five online buyers say that when they have a choice, they prefer green. And they are willing to pay for it. Here's a quote:

"Consumers, when choosing between two similar products, prefer environmentally friendly products; 83 percent indicated they are extremely or very likely to choose the environmentally friendly option. "

That's from a study released last week by online advertising giant DoubleClick. It surveyed 1,087 adults.

‘Not only are consumers interested in green products and companies, our survey shows that nearly half of them will pay at least five percent more for them,’ said Stuart Larkins, senior vice president of search at DoubleClick Performics. ‘With so many consumers online researching and purchasing products, retailers should include relevant environmentally-conscious information throughout their paid and natural search campaigns, affiliate promotions, display ads, and e-mail.’

Additional data from the DoubleClick Performics’ ‘Green Marketing Study’ revealed factors reported by consumers to influence their attitudes toward online buying:

"Of all online advertising sources, search engine results pages had the highest influence, with 32 percent of consumers reporting their impact on the purchase decision. Most consumers (65 percent) provide feedback about an online purchase at least some of the time. Approximately three fourths of those who make online purchases say a recommendation from a friend, family member or co-worker is valuable when purchasing online."

I do however want to add one note of caution. This is what people say, not what people do. When the phone rings and you take the survey, are you going to tell the pollsters that you don't care to pay for environmentally sensitive options? Surveys record what people say, which is not necessarily what they actually do.

The Emperor's New Social Venture?

Very interesting post last week from Steve King, in Small Business Labs. He's looking at Ethos, Starbucks' branded water linked to investing in clean water where it's needed in so many places in the world. Here's the kicker, but don't settle for this little excerpt, read the post: 

As I sat in Starbucks, I realized my issue with Ethos is they may be doing too well financially relative to the good they are doing.  They also may be doing too well relative to their positioning.  Ethos positions itself as a mission-based social service organization, and their website makes them look like a non-profit.  I have a hard time reconciling this positioning with their pricing and my back of the napkin calculations of their profitability.

I give Steve a lot of credit for looking behind the curtain. So often there are questions we fail to ask.

Nonprofits with Legs and Teeth

Maybe it's about baby boomers not retiring, and maybe it's about ex-hippies in positions to do something they've always wanted, or maybe it is just about the world getting more crowded. Could there be a long tail of entrepreneurship, opportunities for people with motivation other than pure profit?  If all was ever fair in love and war, it was always just business for business. Until business became personal. And green. And socially motivated.

I just finished reading the Sunday New York Times piece called "A Capitalist Jolt for Charity".

Today, the once-struggling venture has morphed into a primarily for-profit enterprise. And the striking transformation of In2Books is emblematic of a larger trend: charities are changing their spots and making use of some of capitalism’s virtues. 

The process is being pushed forward by a new breed of social entrepreneurs who are administering increasing doses of bottom-line thinking to traditional philanthropy in order to make charity more effective.

In the old days there were nonprofits. They were foundations and the like, the alleged "do-gooders" that were conceived on missions like fighting poverty and racism, broadening the meaning of art, spreading education. You know them. You've lived with them forever. United Way. Toys for Tots. Meals on Wheels.

It occurs to me that the magic of the social enterprise has to do with control and power. If I build a nonprofit foundation to solve a social problem, I depend on being able to raise money through donations. But if I build a social enterprise instead, and figure out how to make my own money, at least enough to power the enterprise, then I'm in charge. I focus on the business model and the social benefit and the underlying purpose, instead of the fundraising.

So social enterprises are doing things like creating channels for developing country handicrafts, or PlayPumps distributing low-power-consumption technologies for poor countries. Bill Drayton, founder of Ashoka, talks about a new generation of people thinking they could "do better."

I'm wondering now whether the tradeoffs between social enterprise vs. straight nonprofit isn't a lot like the tradeoffs of bootstrapping instead of raising money through venture capital. With one course, you own what you build, you get to grow it and steer it and make it work as well as you can. You're in charge. That's bootstrapping and, I think, the social enterprise. With the other course, you get more resources but because of that you're also not in charge, you might be the captain of the ship but you can't change destinations without permission, and if you change course in mid-journey you'd better be able to defend your decision very well when the board asks about it later.

Of course I can't make the straight parallel between these two ideas, because where they come apart is the matter of choice. Some bootstrapped business chose that option, but many other never really had the choice of investment. Does the social venture have the option of going straight nonprofit?  That's hard to generalize. At the very least, these are interesting questions

Better Green Late Than Never

(Note: I'm crossposting this here from the Huffington Post, which is where I posted it originally. Tim)

It doesn't just rain, it pours. Or perhaps melts is a better metaphor. By the time I'm watching the NBC logo turned green, and football analysts sitting in the dark at halftime, no wonder Al Gore won both the Oscar and the Nobel. It's about time things turned green. Because it couldn't happen to a more deserving world.

Last week the Wall Street Journal called it a "green stampede."

Business loves a bandwagon. Media love a story. And the greening of business is both. And suddenly it seems that in the world of business, at least, we have a veritable green explosion of convenient truth:

• The most obvious is the global recognition that saving the environment matters. The canonization of Al Gore is as much a symptom of changing times as a cause. Look around businesses, and business press, and business blogs, and business schools and it's now as plain as day that real people value the common sense of saving what's left of the environment. Okay, I admit, the glass is at least half empty when we consider how little we're actually doing about it, but it's half full when we consider how frequently it's taken into consideration. Real companies with real stockholders are now taking factors like carbon balance seriously. Inc Magazine has a special section on it in its latest issue. In today's world, it makes good business sense to spend money on green factors.
• I write this on the plane back to Oregon after two days at the University of Notre Dame helping with the preliminary round judging for two venture competitions: one for sustainable social enterprises and the other for business in general. A group of us went over roughly 60 ventures proposed by undergrads, grad students, and alumni. The fact that we reviewed 19 entrants in the social sustainable category is remarkable. More remarkable, though, was how hard it was to draw lines between the two divisions. Most of the social sustainable enterprises also looked like plain good businesses. Many of the ventures In the standard channel had social and sustainable elements. The trend was glaringly obvious.
• Andrea Learned at Marketing Profs Daily Fix was one of a half dozen bloggers last week who noted a Slate Magazine article showing how buyers paid more, and happily, when offered fair trade goods at higher prices. 
• Investors, always a good lead indicator, get it. In VC gatherings, Web 2.0 conferences, and VC-related blogs the green businesses are clearly hotter than the norm. And green isn't just environmentally sensitive any more either, it's also about social equality, governance, and distribution.  To confirm this, browse through what's available at www.ted.com or the latest demo conferences.
• Stock markets get it too.  Earlier this year Motley Fool said "the market for the green arena specifically has never been brighter." The underlying assumption is that green companies are less likely to be responsible for the oil tankers destroying Alaska or Enron screwing its people. Or they are more likely to win new business, like when Swedish company Hoover's sensitivity to power consumption in appliances led to a huge contract with China that led to a big boost in valuation.

There's no denying that "Greening" has been a long time coming. A show of hands please ...  how many  remember the stir caused by "The Greening of America?" Published in 1970, (Ok, a show of hands, how many were alive in 1970?) it was essentially a tribute to so-called "counter-culture" ideas of the late 1960s. We're talking about Mario Savio and the free speech movement in Berkeley in 1964, then the anti-war movement of the late 1960s, the world wide student movement in 1968, civil rights, hippies, and, among all of that, environmentalism. It wasn't global warming back then as much as Rachel Carson's Silent Spring; but it was a start.

Better late than never, I suppose, but wow, did it have to take 40 years?