Purpose & Profit: Beyond the Bottom Line

For a select group of consumers, the product itself is not the only thing that matters in their purchase decision. What a brand stands for and what sort of support it can offer to charitable causes is an important factor. For many consumers, knowing that their purchase helped some sort of cause in a specific way provides a “warm glow” effect, providing an emotional and/or moral comfort to the customer beyond the purchase of the good or service itself.

This article will delve into how business involvement into charitable causes plays a role in business growth and customer choices.

Purpose and profit. How the two can work together.

“Good Corporate Citizen”

When a business dedicates attention and resources to helping solve some sort of societal issue, it signals to the public that the wellbeing of a community is more important than just earning business dollars for products sold. The intent is that a business deserves the trust of the public, because the business operates with integrity and responsibility. This is the core of the “Good Corporate Citizen” effect. The intent is to build customer loyalty, because people want to support businesses they believe in.

Studies have indicated that Millennials (ages 29-44) and Generation Z (ages 13-28) are willing to buy from and be loyal to companies that value and advocate for social and environmental concerns. One study indicated that 94% of Millennials and 95% of Gen Z believe companies should address social and environmental issues.

An additional study determined that 73% of Millennials and Gen Z are willing to pay more for products from companies that are committed to social and environmental impact.

“Reputation Insurance”

In the inevitable event of a corporate misstep or crisis, a history of community support and ethical action can significantly mitigate the resulting public backlash. This is a  lesser known but critical benefit of business philanthropy; its function as “reputation insurance.”

Imagine a bank that has consistently invested in charitable causes in the communities that they serve. If they suffer from a data breach, the public and media are more likely to view the incident as an isolated mistake rather than evidence of systemic failure. Their positive charitable track record provides a protective goodwill buffer that may save them millions in lost business or long-term brand damage or consumer distrust.

Choosing Causes That Matter

A business must align its values with its audience in a manner that is authentic and integrated.

One case study of this is Patagonia, the apparel company that thrives as an outdoor, nature focused brand. The clothing and textile industry is one of the largest global sources of greenhouse gases, wastewater, and landfill accumulation. Every purchase of Patagonia apparel contributes to this problem. How does Patagonia minimize its negative impact as being a part of this polluting industry?

Patagonia has embraced a mission-driven corporate responsibility and philanthropy into every facet of its business model. This includes:

·      “Earth Tax”: Patagonia donates 1% of all sales to environmental organizations. This has driven hundreds of millions of dollars toward environmental causes, positioning the earnings of Patagonia as a continuous source of nonprofit funding.

·      Activism as Marketing: Patagonia developed a program called Worn Wear that urges customers to repair, reuse, or recycle Patagonia apparel. The company offers free repairs on its products to extend their lifespan.

·      Nonprofit Ownership: In 2022, the founder of Patagonia gave away ownership of the company into a nonprofit, with all non-reinvested profits flowing to environmental charities. 

No Greenwashing

Greenwashing is the deceitful business practice of a company providing false impressions or offering misleading information to showcase products or services as environmentally friendly.

The intent is to deceptively gain customer goodwill by exploiting the demand for sustainable products, all while failing to make a genuine commitment to creating them.

Greenwashing is harmful because it:

• Misleads Consumers: It causes consumers to make purchasing decisions based on false information, wasting their money and eroding their trust.

• Undermines Genuine Efforts: It makes it harder for truly sustainable businesses to compete, as it lowers the incentive for all companies to invest the necessary time and money in real, systemic environmental change.

• Delays Climate Action: It creates a false sense of progress, distracting the public and regulators from the need for urgent and concrete action to address climate change.

Conclusion

When purpose is pursued with integrity, it ceases to be a marketing tactic and becomes a powerful engine for building business growth based on consumer trust. At Generosity Nexus, we bring a deep experience in helping businesses engage in charitable strategy & planning that can drive sustainable financial growth and be a channel of charitable good.

We encourage you to schedule an appointment to discover how we can assist you.