Thursday, July 16, 2015

When a Purchase is also a Donation

Charities Review Council's Accountability Standards® are based on the value of establishing trusting and meaningful partnerships between nonprofit organizations, donors, and the general public. At Charities Review Council, we believe strengthening these relationships can help us better understand how to effectively engage the communities we serve.

Cause-related marketing offers a meaningful opportunity for community engagement.
Cause-related marketing allows a for-profit organization to partner with a nonprofit organization by selling a good or service with a designated percentage of profits donated to a charitable cause. The partnership between a for-profit and nonprofit organization aligns with Charities Review Council’s value of establishing relationships based on mutual benefit and public good.

At a glance, cause-related marketing presents a scenario in which everyone wins.

  • Corporations increase profit revenues, strengthen their reputations, and expand brand recognition.
  • Charities generate funds and raise awareness for a particular social cause.
  • Consumers feel reassured that a portion of their purchases will be utilized in a meaningful way.  

However, some would argue that the benefits of cause-related marketing are 
short-lived. For example, imagine a shopper who chooses to buy coffee that promotes world peace, cereal that supports early childhood education, yogurt that funds breast cancer research, and, as a last minute impulse, a chocolate bar that promises to protect animal wildlife. By filling a shopping cart with products promising to make the world a better place, consumers such as this one may feel that they have already fulfilled their philanthropic responsibilities. For donors, cause-related marketing is attractive because it provides an easy and convenient way to support a charitable cause.

The danger of cause-related marketing is that it may lead individuals to overestimate the value of their charitable consumption patterns and underestimate the reality of social problems in our society.

Buying a chocolate bar at a grocery store that donates a portion of its proceeds to environmental sustainability won't save the world. After all, the reality of environmental degradation cannot be condensed into a simple label designed to boost sales. 

However, buying products that support charitable causes can make a small difference and represent an increased trend towards ethical consumerism.

If choosing to make a purchase of this kind, be sure to ask:

  • What percentage of my purchase today is going towards the nonprofit organization? Charities Review Council's Soliciting Practices Accountability Standard® requires that the percent going towards the cause be made available upon request. As a donor, you should look for a disclosure that looks something like this, "10% of your purchase today is going to support X nonprofit." 
  • Is it clear what nonprofit organization I am supporting with my purchase? Sometimes it's not clear what nonprofit is being supported. As a donor, you are entitled to know who your gift will be benefiting. So before you give, ASK who will this gift benefit?

Although cause-related marketing is not a catchall approach to solving the world’s problems, it provides the unique opportunity for nonprofit and for-profit organizations to work together for the advancement of a meaningful cause. As a donor, you can make each dollar an informed investment by continuing to ask questions about the causes you care about. 

Click here for Charities Review Council's list of strong, trustworthy, and accountable nonprofits. 

Holding Nonprofits to a Higher Standard

James Reynold Sr.
President of  the Cancer Fund of America
In a case of unprecedented collaboration between state charity regulators, the Breast Cancer Society, Cancer Fund of America, Cancer Support Services, and Children’s Cancer Fund of America have been charged with bilking over $187 million of donor’s money. These four cancer charities— all regulated under the oversight and control of James Reynold Sr. and his family members— have been accused of using dishonest means to solicit funds from donors and filing misleading financial statements that inaccurately portray the amount of funds spent towards fundraising and administrative costs. 

As Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection, declared, 
Millions of dollars intended for cancer patients never reached the patients, depriving legitimate cancer charities and cancer patients of much-needed funds and support.” 
Rather than support the intended organizations and individuals in need, professional fundraisers of these cancer charities often received over 85% of donations and some individuals spent donations on luxury vacations, new cars, and more.
Jessica Rich
Director of the FTC's Bureau of Consumer Protection

The failure of these four cancer charities to adequately represent themselves and appropriately spend donor dollars, as well as the failure of governmental agencies and non-governmental organizations to have detected these cases of fraud earlier, raise the questions: 
  • How can donors build trust with nonprofit organizations?
  • What questions should donors ask to ensure their dollars are being spent in meaningful, equitable, and transparent ways?
  • In what ways can nonprofit organizations be held more accountable to the public and to the people they are designed to support?
We believe these questions are the building blocks towards creating more meaningful partnerships between donors, nonprofits, and the public. 

In response to the cancer charities case of fraud, David Callahan presents a pessimistic view of today’s nonprofit sector. In his article, "Who Will Watch the Charities?" he argues that philanthropy “is a world with too much secrecy and too little oversight”. He even equates the charitable sector with the “Wild West, connoting a society overwrought with unregulated and corrupt charitable organizations.

It’s hard to argue with Callahan’s underlying claim that nonprofit organizations would benefit through greater transparency and oversight. Indeed, these values align with Charities Review Council's Accountability Standards®communicating the mission and work of the organization with the public and actively reviewing the organization’s impact on the community. However, Callahan gives little recognition to reform that has taken place in the past and he provides guidelines for reforming the nonprofit sector that may ultimately result in more harm than good.

For example, Callahan envisions a hierarchy of philanthropic nonprofits with corresponding levels of tax-exemption based on their relative assessment of “actual public benefit”. He criticizes the way in which “Donors can get the same tax break for bankrolling a libertarian push to abolish food stamps as they do for giving to a food pantry.” While this example might seem to provide a clear-cut indication of one organization that is more worthy of tax exemption than another, the reality may be much more nuanced and complex. For example, who would be granted the power to determine the value of various nonprofit organizations? And which organization would be more deserving of public funds— an organization advocating environmental rights or animal rights? LGBT rights or civil rights? Or organizations that are directly in conflict with one another, such as pro-life or pro-choice organizations? Creating a sliding scale of tax exemption based on “actual public benefit” becomes an increasingly political debate that many people fear would lead to the exclusion and discrimination of meaningful organizations. 

Because Callahan believes that the nonprofit sector operates with little-to-no-oversight, he concludes his argument with the declaration, It’s time to create a new federal bureau to police the sector, much as Britain has a national Charity Commission. Although Callahan continues to advocate greater accountability and enforcement of legal standards, he disregards the work of similar organizations that are currently striving to enforce regulatory standards and establish organizations that are more transparent, accountable, and just, like Charities Review Council. We work alongside nonprofits as they strive to better meet the needs of their communities. We meet nonprofit organizations where they are, using the Accountability Standards® as a guide to strengthen their internal practices, policies, and procedures. While Charities Review Council offers more comprehensive and non-judgmental support to nonprofit organizations, other organizations such as GuideStar and the Better Business Bureau will also provide donors with the information they need to make smart giving choices. 

Charities Review Council
Meets Standards Seal
The Breast Cancer Society, Cancer Fund of America, Cancer Support Services, and Children’s Cancer Fund of America are by no means representative of all charitable organizations within the nonprofit sector. The case of fraud was preventable and serves as a reminder of why the Accountability Standards® are so important.
Through adherence to various nonprofit sector practices, legal and regulatory requirements, and donor and public expectations, we at Charities Review Council help strengthen nonprofits capacities to pursue their mission and better serve the community.