Starting a Socially Responsible Business: How to Make It Work

With the holidays coming up, you might be planning a special charitable promotion for your small business, such as donating to a local nonprofit organization. While many for-profit startups make a point to give back to their communities during the season of giving, some incorporate philanthropy into their business model all year round. It may not be feasible for all small businesses, but for those who can afford it, the long-term benefits of social responsibility far outweigh the cost of giving away a portion of their profits.

What is a socially responsible business model?

For-profit companies that have a philanthropic business model make a commitment to support a social cause with every sale, 365 days a year. A well-known example of this is Toms‘ “One for One” model, in which the footwear company gives a pair of shoes to a child in need for each pair of shoes it sells. Other companies donate a percentage of each sale to a certain cause or variety of causes, with some allowing customers to choose where their donations go. If you think your business will lose money with a model like this, think again: Philanthropic incentives only help your bottom line.

“Research tells us that 80 percent of customers are willing to switch to another brand that’s associated with a charity of their choice,” said Marti Beller, co-founder and CEO of charitable fundraising and donation platform PlanG. “There is virtually no downside to driving your business while impacting the greater good. It’s a win-win-win — nonprofits receive increased donations, customers feel connected and empowered, and businesses win loyal customers.”

Tom Hsieh, CEO of SplinterRock, a technology consulting firm that provides free services to nonprofit organizations, agreed, noting that businesses should proactively demonstrate to consumers that they are positive contributors to society.

“People want to connect with the brands that they purchase,” Hsieh said. “They want to identify with companies that are giving back and making a difference in the world.”

What’s the best way to become a socially responsible business?

Consumers want simple, convenient ways to wield their purchasing power in the name of doing good. They want to make a difference in the world without having to single-handedly track down and donate directly to each cause that’s important to them. While committing to donate some of your business’s profits to a single cause is still a great way to practice social responsibility, giving your customers choices can provide a great advantage.

“Today’s shoppers don’t give in just one way or to just one cause,” Beller told BusinessNewsDaily. “They also want to find ways to give more without changing their daily lifestyle. That’s one reason retail-based philanthropic incentives are so popular.”

“People are generous at heart and really want to give, but many don’t think they have the time or money to do so,” added Stephanie David, founder and CEO of e-commerce website PopNod. “PopNod provides a simple way for people to integrate giving into their everyday lives by offering cash back for their purchases, which they can then donate to their favorite causes.”

There are a number of business-to-business, or B2B, services that allow companies to partner with them and set up a system of choice-based charitable donations for customers, such as Plan G and Charitable Checkout.

How do you market a socially responsible business?

Zack Rosenberg is the founder and CEO of Do Good Buy Us, anonline marketplace that purchases and sells products made by nonprofit organizations and donates more than 50 percent of its proceeds to a variety of global causes. He advised social entrepreneurs to emphasize exactly what is accomplished when consumers purchase from your company.

“Anytime you can tell the consumer, ‘Because of you, here’s what’s possible,’ it’s a win for your business,” Rosenberg told BusinessNewsDaily. “It’s all about selling a story.”

Read more: Starting a Socially Responsible Business: How to Make It Work

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This entry was posted on Tuesday, November 12th, 2013 at 7:52 pm and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.