Making Trillions for Effective Charities Through Profit-For-Nonprofits

What is the main difference between Newman’s Own and Hidden Valley Ranch?

Or for those less familiar with salad dressings, the difference between Girl Scout Cookies and Nabisco?

Trade secrets and brand reputation aside, the business models of Newman’s Own and Girl Scouts are fundamentally different than Hidden Valley and Nabisco—which may come as a surprise to you as a consumer. Aren’t all food producers more or less the same?

As it turns out the latter operate as traditional companies, with shareholders that reap a percentage of profits and guide the decisions of C-suite executives. The former, however, donate 100% of their profits to charity. Despite the fact that these cookies and salad dressings are comparable in quality and price, the goodness they provide is not just of the tongue—it also sweetens up our world.

So what if this sort of business model became the norm—where consumers could continue to buy high-quality, cost-comparable products with the only difference being that the profits from their sales are donated to worthy, effective charities as opposed to (billionaire) investors. That way, we could generate billions of dollars to address social and environmental injustices while continuing to live our lives the way we do.

This is precisely the philosophy of profit-for-nonprofit companies—of which BOAS is considered one. Besides the obvious feel-good nature of this business model, there are also a lot of practical reasons why profit-for-nonprofit makes economic and strategic sense.

Why Profit-for-Nonprofits Work

First and foremost, the current alternative to the profit-for-nonprofit model is essentially the profit-for-profit model, where rich shareholders advance their accumulation of wealth while disregarding the impact it may have on socio-economically disadvantaged groups. Despite the common depiction of greedy investors which inclines people to subconsciously dislike these wealthy businessmen, most consumers are completely dissociated from the fact that they benefit these moguls through their daily purchasing habits.

What if instead, brands transparently promoted the beneficiary of their operations through nonprofit donation commitments, similar to Newman’s Own and Girl Scout Cookies? That way, the public could actively choose to buy from said companies in order to appease their altruistic appetite.

Think about it like this. You have a friend that is a barber and you really need a haircut. Will you choose to go to your friend’s salon so that you can support her business, or would you go to a salon with equal quality service at an equally affordable price that is not owned by your friend?

The obvious answer is—of course you want to support your friend! In profits-for-nonprofits, the nonprofits or charities are our friends, which enable us to support worthy causes in our world while living our day-to-day life with no sacrifices. In addition to that, profit-for-nonprofits attract better talent (people want to work for good companies), they retain that talent longer (people like working for companies that matter), and they acquire customers cheaper (would you rather buy from a store that also saves lives or the same store that makes a few people very rich?). The research and data suggests that these companies can't only compete, but that they might be more profitable (so able to save even more lives), live longer and have more impact. 

What is Needed for a Profit-for-Nonprofit Economy

In order to legitimately scale this logical business model, there are a few things that need to happen:

• Accountability schemes or third-party organizations monitoring the truthfulness of profit-for-nonprofit companies
• Marketing these new business models to the public, so they can make an informed decision to purchase from profit-for-nonprofits

When getting started, there are particular industries that are more suitable for profit-for-nonprofit. For example, if you are buying a car, there is an incredible amount of differentiation between models and makes that you will likely take into consideration before making a purchase, especially given the shiny price tag and daily use of your vehicle. On the other hand, if you are looking to buy something where brand and differentiation are a lot less important—let’s say paper towels, for example—then a profit-for-nonprofit makes a lot more sense. The Consumer Power Initiative, a non-profit organization encouraging consumers to support impactful charities through purchases of goods/services, calls these sorts of operations “no brainers.”

Products or services that inherently spark some sort of virtuous attitude, such as sustainable clothing or organic skincare, could also be suitable for this sort of business model.

How Do We Select Which Nonprofits to Donate To

As described in our previous blog, not all charities are created equally. Therefore, it is very important to select the beneficiaries of our profit-for-nonprofit companies very wisely. In fact, Effective Altruists promote that giving to such organizations can result in an impact 100-1000 times greater than the average charity. Of course, any organizations rating highly on effective charity scales such as Charity Navigator or GiveWell are strong candidates, but even more relevant would be those that pertain to the industry or company in question. For instance, paper companies might donate their profits to Amazonian restoration organizations and plant-based protein companies might donate to animal welfare groups.

What Could the Future of Profit-For-Nonprofit Look Like

The future of profit-for-nonprofit is incredibly optimistic, especially given that consumers are simply being asked to buy the same stuff they would otherwise buy, for the same price, but through a specific company that is committed to social good.

Currently, there is an organization called the Consumer Power Initiative, which BOAS works closely with, whose purpose is to promote this model, which they call “Guided Consumption” to the masses. If you are interested in learning more about their movement or getting in touch, feel free to visit their website or email them at brad@consumerpowerinitiative.org.