A robust sustainable and governance framework

within a business is a really strong risk management framework for the long term.

"It really does come down to not just the immediate impact of your operations, but how are you designed as a business to cope with change? What we're seeing is many businesses start to put in emissions management frameworks, and as much as anything that is a good hedge against future regular regulatory change, because your business is already ready.”

Giving is not a substitute or trade-off

Ask yourself this question.

While a business committing to donate a portion of profits to achieving impact is noble, it is not a substitute or trade-off. How else can your business work for equality, and have a positive social and environmental impact through its core operations?

Use platforms to reach consumers

“We always try to authentically communicate what's worked and what hasn't. We wrote a 10 minute read about why we've switched our model on our blog, and have also taken questions on Q and A via social media. A lot of the questions were either resolved, or there was understanding on why we've done what we have.”

Demonstrating your commitment to purpose

creates an opening to engage with customers in a deeper way.

Providing customers with opportunities to interrogate your decision-making and understand your approach enables them to ‘identify with and feel ownership of’ the business’s purpose.

Bring customers on the journey

Be as transparent as possible.

If you are changing the fundamentals of your existing giving model, be as transparent with your customers as possible. While there may be misunderstandings and criticisms, allow space for these conversations and be prepared to explain why your business is taking a different approach.

Look to impact

over activities or outputs

This may require further training and learning about impact evaluations and theory of change methodologies. Get to grips with what meaningful change would look like in this context. Allow room in the budget for the nonprofit to undertake reporting, and be clear on what they are measuring.

"First...

start with a posture of listening and learning and doing research on the areas and challenges that you want to play a role in."

"For too long, we (the corporate sector) have gone in with our own agenda, like a brand leverage promotion. Saying can we maximize CSR or good governance with our brand and tying that to more sales? But if we're all serious about tackling injustices or inequity in our world, let's take the time to listen. To ask our partners what's really needed as well in terms of what types of solutions, what type of funding is really needed as well.”

Prioritise grantee centric funding

Challenge any potential assumptions that the particular social or environmental issue your business is intent on supporting is simple or already understood by you and your team. Put in the time to listen to grantees and understand their approach. Seek to explore their own preferences for funding.

Consumers

may look at a product like Thankyou, and it could be a three to five second read.

"Not everyone's going to read the entire blurb as well. That's the challenge of trying to communicate our impact model - a complex development model - about what our partners do plus the role that you the consumer is playing - all in a very quick and concise manner. So that's the challenge that we have in front of us.”

An unrestricted funding model

comes with its own set of challenges and risks

It requires a higher degree of dedicated input from donors to establish longer term, trust-based relationships with nonprofit organizations receiving funding. Measuring for impact, rather than activities, requires a deeper understanding of complex problems. It demands a high level of trust in grantees to deliver for impact, and to overcome unforeseen obstacles along the way. Businesses adopting an unrestricted funding model will need to be more comfortable with ambiguity, as activities may change throughout the life of a project. Deliverables may require longer time scales.

150,000 people in rural Uganda

benefited when a nonprofit partner pivoted from income training to food-relief.

“They were so successful in terms of pivoting that they reached 150,000 people. Now the national government in Uganda looked at their approach in the way that they pivoted. They've asked them to reach a million more Ugandans in the space of 12 months. And they were saying you couldn't have done that without unrestricted funding.”

Trust

Peter Yao reports:

“In shifting our entire giving strategy to support our grantees in what we call a grantee centric or a trust-based manner, it's having a really, really great impact. In our first twelve months that we've switched, the feedback from our partners have been really positive because they've had to pivot and they've had to meet new needs of the community [in response to COVID-19], which they couldn't have done if it was restricted funding.”

$10 million

of unrestricted grants

For Thankyou, their shift to a partnership-centric, unrestricted funding model saw them give $10 million of unrestricted grants to 18 nonprofit partners in 2020.

Sanitation in Cambodia

iDE Global's 10 year timeline to achieve success

A project of this kind - involving iterative pilots and testing, collaboration with the existing market to create an innovative solution, and a ten year timeline - would not be possible with short-term funding tied to a particular set of activities. Yet, this is how lasting and meaningful impact in this context was achieved.

10 years later, only 20%

of the people (in Cambodia) don't have a toilet

"So we really shifted the market. And so in 10 years we went from 80% open defecation to 20%, thanks to this sanitation marketing approach instead of just educating or capacity building.”

"Entrepreneurs don't go out to sell anything!"

“What we missed in our first pilot is we assumed that those entrepreneurs could also sell the toilets. But in the Cambodian context, entrepreneurs don't go out to sell anything. They wait for the customers to come. But how will the customers from the rural village in Cambodia go to a town to buy those toilets? Impossible. After this first pilot, iDE iterated their approach. They began training students and community members how to sell the toilets, using a door-to-door marketing approach."

80%

of the population in Cambodia, 10 years ago,

...was still doing open defecation. People did not have access to toilets and they didn't want to use them. So nothing had changed. One, maybe because they did not have access to a toilet. Two, they didn't know where to buy it. Three, they didn't know what a toilet was. What iDE did differently is we created what we call ‘sanitation marketing’, using human centered design. Instead of providing toilets for free, (iDE) wanted to create a sustainable solution that would outlast their project work. They identified concrete producers and taught them how to produce the toilets and how to sell them."

The freedom

unrestricted funding gives NPO's

When nonprofits are no longer constrained by tied funding and these short term reporting and funding cycles, it opens up the scope of their activities, and enables these organisations to pilot new programs, test solutions in the field, and measure impacts over a longer time period.

Thankyou's move

from tied funding to unrestricted funding

“I feel corporates seem to feel pressure to fund something really simplistic because they believe consumers can only understand it to a particular degree. We were the test case. We could've gone both ways, but we chose to make the step because we knew at the end of the day, we needed to make funding decisions that matter for the community. We'll wear the risk as a brand. But thankfully, the sales haven't dropped, and I would even say that there’s been even more positive brand recognition.”

Thankyou pivots

away from their 'Track Your Impact' model

Instead, they have shifted their focus to a model of what they term ‘unrestricted funding’. In this system, partnerships with nonprofit organisations are established over the long term, funding cycles are extended, and funding is not tied to a defined set of activities. While the desired impacts are clear, alleviating people from extreme poverty, the activities and outputs may change as required.

Thankyou's Track Your Impact

model is compelling in theory but can perpetuate obstacles

Track Your Impact and models like it might be intuitive for people to understand and support, but they can underestimate the complexities of the issues needing to be addressed and how to create lasting impactful change.

A nonprofit leader says:

‘For some reason, [funders] expect nonprofits to be miracle workers, when in fact we’re all cutting corners, skimping on resources, doing everything with far less than we should, and then bending over backward trying to find a way to make it sound like we’re succeeding, while also making sure to keep the challenges front and center, but without sounding desperate or as though we can’t handle it.’

Nonprofit organisations

have long called for multi year unrestricted funding

This type of funding enables them to plan for the future, invest in their team, and focus on impactful work. In seeking an explanation for why it is not commonplace, (CEP) found that in many cases it simply had not been made a focus or priority by funders. For nonprofits, they saw it to mean funders did not trust the sector to deliver, and wanted to remain in control.

2 in 5

nonprofits received multi-year unrestricted funding

Those that did received only a little, with most reporting that unrestricted makes up less than a quarter of their funding.

Why the success

of a project may not transfer to other countries.

"A lot of organisations assume that something that worked very well in Africa is going to work very well in Asia, but the context is completely different. The culture is different, the needs are different.”

"Interventions are very traditional"

"Sometimes funds are not flexible enough to make people innovate."

"We need to go into the communities, talk to them, see if the solution fits or not. Not all the donors can or are willing to do that. Some donors fund the pilots. Some donors, no. They want you to go and to start as soon as possible, and start doing things [before we] know yet what solution is going to work best. We need to do some research and to pilot things."

Tied funding further limits nonprofits

to account for their spending before they have been able to commence a project.

Unforeseen challenges or unexpected opportunities discovered along the way are not easily retrofitted into the project scope.

Alternative models of corporate giving

Providing short-term cash...is one model, but providing long-term financing...is a really important space.

"Large organisations need to think about their capacity to support beyond those cash donations, because it does create tension for so many charities that they're reliant on short-term funding. How can you, as an organisation, invest for the long-term, when the funding you're getting is subject to annual expectations?”

Innovation

is limited when the time scale on which to measure the effectiveness of a project is limited.

Reporting requirements on outputs and shorter time frames mean that many charity partners are constrained to rolling out traditional initiatives and particular activities in order to secure ongoing funding.

Start small and build success

“In the beginning, maybe we start with very little numbers. But if you keep funding this initiative, then years later, you will have great success. Donors, they want, in the first year, 100,000 people impacted. But how deep has this impact been?”

Short funding cycles

do not allow time for potentially impactful projects to prove their value.

Donors’ unrealistic expectations of costs needed by nonprofit organisations to roll out projects creates a ‘vicious cycle’ of underfunding, limiting the time for projects to prove their value.

Risk aversion

can limit innovation in the charitable sector

While in the business world, risk is accounted for, and accepted as a necessary element of investment in innovation, the charitable sector is often hamstrung by a low risk threshold from donors.

Restrictive funding

as a symptom of distrust in the sector

“There's this element of distrust in the philanthropic sector, and that's where you get really restrictive funders saying, ‘Hey, you can only use our funding if you do it in this way’. While they think it screams of accountability, what it actually means is it makes sense to me, the funder, which is really dangerous…”

Extreme poverty is multidimensional

"It's going to take a lot of different approaches to tackle extreme poverty.”

“Development is really complex. Extreme poverty is really complex. It is very multifaceted. Sometimes by simplifying a story, it loses all its nuances and worse still, it really doesn't do justice to some of the partners who are looking at systems and root causes as well."

Multidimensional Poverty Index (MPI)

The road out of extreme poverty is not one or two dimensional

Dimensions of health, education, and standard of living are interconnected. MPI considers factors such as nutrition and child mortality, attendance and length of schooling, through to access to drinking water, sanitation, electricity, housing, cooking fuel. In this way, it adopts a systems thinking approach to development.

Funder-determined time frames

May direct focus away from effective solutions

“It may put pressure on the NGO or the partner… They start to tailor their programs, not with the lens of reaching someone with the most effective solution, but actually reaching someone with a solution that's dictated by the funder or by the fund is a real strategy of trying to reach as many people as possible.”

Tied donations to a specific activity and timeframe

Can underestimate complexity of problem and solutions

A corporate giving model that ties a donation to activities to be carried out in a set time frame by the charity partner, rests on an assumption that solutions to address the experience of people living in extreme poverty are concrete, and that the solutions are already understood.

Evaluating the impact

of a particular project is a rigorous process

It involves accounting for what would have happened anyway without the initiative, determining the extent to which changes can be attributed to the initiative, and assessing the length of time that the measured change is beneficial. It requires greater overhead spending by nonprofit partners, with longer timelines, more resources, and a detailed framework and methodology for assessing the real impact of their projects.

The temptation of 'big numbers' in impact reporting

“I think there's always a danger with big numbers when you dig into it. We take big numbers with a grain of salt, because we don't want to be chasing numbers if they're not the most impactful things to chase. And so we've got to really know what's the most effective and impactful solutions, and that's the real number that we should be chasing versus an ethereal number to bolster up big claims.”

Funding that's tied to ouputs

can limit the overall success of a project

Take for example a charity partner that installs wells and water pumps. Your business might be able to say, 'we've helped our partner install X water wells', but in five years, it turns out most of them are broken down, the community hasn't got the means of repairing them locally, and there hasn't been work done on creating behaviour change within that community to use the well as intended. The impact of this project would be minimal.

"How do you actually tackle rates of water access decreasing in rural Malawi?"

"Sometimes it's not just installing a well...but it could actually be working with the local water municipality authorities and seeing, can we actually add value in tracking your expenses, (which) ensures that the water utility providers have a budget. And here's the enabling environment that we really need to surround them with, so that there's operation maintenance and there's support staff and crew when these water parts and pumps break.”

Quantity vs. quality

“A lot of donors look to the quantity and not to the quality. That's another problem in the sector. They want numbers...Instead of looking at the depth of the innovation."

Why create a Theory of Change

It is critical for businesses to consider what they want a nonprofit partner to report on, and to clarify what constitutes ‘impact’. A theory of change is a tool to help you describe the need you are trying to address, your outcomes, and your activities.

The burden of reporting

“If money comes with a need to report on the activity, and that reporting is about satisfying the expectations of donors, it can create more burden and cost. Anyone who's donating in a business capacity needs to be really thinking about what extra pressures they're putting on the recipients of that funding. The focus should always be on impact, with accountability."

Transparency

Not only did Track Your Impact create transparency from Thankyou to its customers, but it also relied on a high level of transparency from Thankyou's nonprofit impact partners. It sets a high expectation for charity partners to report on their activities and outputs.

Thankyou's Track Your Impact model

was built to connect the dots between consumers and impact projects they helped fund

“Our consumers are almost like our micro donors. And they are people that genuinely do care about what's happening with their dollar. And something that we thought through as a corporate philanthropic organisation is connecting the dots between their purchase on the supermarket shelf and the impact that our partners were having.”

$2.5 trillion funding gap

estimated to meet the SDGs

"There's a $2.5 trillion funding gap as of today to meet the SDGs. Everyone's trying to figure out, gosh, how are we going to come up with that funding? So for us, it became this business model. We make household products and then distribute all the profits to our charity partners."

"We started our business saying, we've got consumer products like bottled water generating hundreds and hundreds and millions of dollars in the economy. So can we usurp that?"

1-for-1

The One-for-One giving model enables a business to align their brand identity and products with their philanthropy; strengthening their brand identity with existing and potential customers, by aligning their business with a positive purpose.

TOMS pioneered the concept of 'buy one give one'

"You can't really talk about baked-in corporate giving without talking about TOMS shoes. They have really pioneered and defined the modern construct of corporate giving through their buy one, give one model".

Theory of change

A common thread of impact methodologies is mapping a theory of change from inputs to activities, activities to outputs, to outcomes, to impact.

Expectation for nonprofit overheads

to be as low as possible limits their means of growing

Dan Pallotta argues that the expectation from donors that a nonprofit organisation’s percentage of spending on overheads should be as low as possible, and that this is a reliable indicator of their trustworthiness, limits their means of growing and accomplishing further impact.

Low budgets

affect NPO's ability to invest further

Nonprofit organisations continue to run with markedly low overhead budgets that stymie their ability to invest further in the administrative work of impact measurements.

Imagine if an investor said to Elon Musk, 'You can have a hundred million dollars, but you can only use it to spend it on staff lunches, because we think morale is really, really important'. And Musk’s thinking, 'You have no idea what the most serious issues are in our company.’ It's the same approach with development. There are amazing locally led organisations who know the root causes, who know how to get systems moving and changing, but they just need funders to get out of the way.

TOMS led the way in buy 1, give 1.

TOMS established a number of partnerships with nonprofit organisations to distribute the shoes to people in need across more than 80 countries

TOMS was built on an in-kind donation model. Rather than distributing funds directly to impact partners, they donated goods. TOMS established a number of partnerships with nonprofit organisations to distribute the shoes to people in need across more than 80 countries. A number of businesses followed suit, including the eyeglasses company, Warby Parker, with their ‘buy a pair, give a pair’ program.

Today, TOMS donates a third of net-profits

departing from its original buy one give one model

TOMS provides grants to locally-led nonprofit partners across three pillars: promoting mental health, ending gun violence, and increasing access to opportunity.

50%

Job losses attributed to clothing handouts

Half of all clothing industry job losses were attributed to clothing handouts, in Sub-Saharan Africa

65-70%

of nonprofit partners agree donated shoes “help to protect recipients against foot infection, disease and injury

Yet are still unable to determine what proportion of shoe donations led to meaningful, measurable change in the lives of the recipients.

Overall impact of the TOMS' shoe donation program close to zero

Most children in rural El Salvador already owned a pair of shoes. The donations resulted in insignificant impacts on the children’s foot health, self-esteem and overall health.

95 million

Pairs of shoes donated by TOMS

By 2019 TOMS were able to report that they had donated more than 95 million pairs of shoes. For a business looking to ensure their intended impact is measurable and tangible, one-for-one in-kind donations is an attractive option.

4-6x

More likely to support companies with purpose

Global consumers are four to six times more likely to trust, buy, champion and protect those companies with a strong purpose over those with a weaker one.

Growing trend to commit funds to impact

Organisations such as Pledge 1% and Good2Give are amplifying the conversation around corporate giving, and businesses are looking to align their philanthropic decisions with their business purpose and identity.

Charitable foundations formed through 20th century

Through the twentieth century, major companies began creating charitable foundations as an arm of their business, including the likes of Ford and General Electric.

Money from industry to achieve social good

Andrew Carnegie, magnate and titan of America’s steel industry during the late 19th and early 20th centuries, was a fierce proponent that those who made vast amounts of money through industry should give it away to achieve social good.

46%

of roadblocks caused by funders

1 in 5 impact projects encounter roadblocks, with a staggering 46% of these obstacles being caused by funders.

44%

Covid response funding from the corporate sector

A survey by Candid across 40 countries showed that 44% of philanthropic funding in response to Covid-19 came from the corporate sector.

13%

Increase in corporate giving in the US

Between 2018 and 2019 corporate giving in the United States went up by 13%, coming in at just over $21 billion.