Peter Singer's recent article in Project Syndicate sheds light on an intriguing aspect of modern capitalism – the potential competitive edge gained by businesses that contribute their profits to effective charities. Singer highlights Newman’s Own, BOAS, and Humanitix as examples, noting the remarkable success of Humanitix in particular. Despite reinvesting profits for growth, Humanitix has managed to donate significantly to charities, indicating the potential of Profit for Good (PFG) businesses.
An elephant in the room in the discussion of Profit for Good is the almost total lack of access of such firms to capital for seed costs and expansion, whereas normal, for-profit competitors can raise significant early funds in exchange for equity stakes. We are encouraged by the success of Humanitix, and the evidence that it provides. This lack of money is quite understanding; the vast majority of investors expect returns returned to them rather than charities and philanthropists do not typically use funds meant to benefit charities to finance businesses.
Singer expresses interest in exploring other contexts where the Profit for Good factor could be enable a strong competitive advantage and thus more money for effective charities. We are interested in answering this call to action. Finding contexts in which the Profit for Good factor offers a particularly powerful competitive edge is important not just for the direct funding of charities that it could do, but also for providing critical evidence that could motivate philanthropists to further use Profit for Good firms to multiply their impact.
Strategic Profit for Good Firms and a Framework for Finding Them
A framework that could be used to assess the suitability of these strategic Profit for Good firms would be some mix of the following factors:
- Low or no differentiation between product or the ability to legibly provide superior products or services along a dimension valued by consumers.
- High degree of profitability with a successful firm (either from high scalability or high degree of profit from individual transactions- profit limited by transaction volume).
- Relatively low cost to be able to participate competitively in the market on price.
BOAS, a fast vintage fashion platform, meets these criteria well because it operates in a high margin (80% gross margin at scale, currently at 60%) industry and they focus on just the jeans category, where they can buy and get vintage jeans donated in bulk to expand with relatively low cost before expanding in other categories. They focus on differentiation by focusing on speed rather than accessibility (the focus of their peer to peer competition).
The Profit for Good Initiative is interested in launching a program that enables people in a major United States city to generate hundreds or thousands of dollars to the Against Malaria Foundation, The Humane League, or the Clean Air Task Force (their choice) by buying identical life insurance products at the same prices. See our Commissions for a Cause Pitch Deck and Project Plan documents, noting that these are in their early stages and we are still revising them.
Other Resources, and How You Can Help
To learn more about Profit for Good, we recommend that you watch my TEDx Talk and check out this reading list.
The Profit for Good Initiative is looking for a co-founder with excellent organizational and networking skills that would have 20+ hours per week to dedicate to the task (ideally more). Donations are most welcome and the Profit for Good Initiative is a 501(c)(3) org so your donations would be deductible from your gross income for a tax advantage. Donations would be used to advance the Commissions for a Cause project. If you know of grantmakers that might be good fit for our projects, please also let us know. Brad, its founder and CEO, can be contacted at brad@profit4good.org
People interested in investing in BOAS can do so here from €100, on the same platform that Peter Singer used to invest in BOAS. You will find the pitch and all financial information there too. For any questions about that, you can email CEO Vin at vin @ boas.co.