It seems counterintuitive, but in a capitalist economy, doing the most good can provide a competitive edge. I am not referring to businesses that donate a tiny percentage of their profits to charities or tell you that they are reducing greenhouse gas emissions. I am talking about businesses that donate 100% of their profits -- or close to it -- to effective charities that do a lot of good.
Newman's Own, the US food company founded in 1982 by the actor Paul Newman and author AE Hotchner (both now deceased), is an early example of a business donating 100% of its profits to charity. The profits go to the Newman's Own Foundation, which to date has distributed over US$600 million to charities working for disadvantaged children. Hugh Jackman cites Newman's Own as an inspiration for his own charitable foundation, Laughing Man Coffee.
Perhaps the most prominent company operating along these lines today is Patagonia, the American outdoor clothing company founded by Yvon Chouinard in 1973. Nearly 50 years later, when the company was valued at about $3 billion, he gave it to a non-profit organisation, ensuring that all its profits will be used to protect the environment.
The arrangement commenced in September 2022. So far, profits amounting to $71 million have been allocated for environmental initiatives that include stopping a proposed mine in Alaska and conserving land in South America, as well as for helping to elect pro-environment Democrats in the US.
Mr Chouinard's decision, supported by his wife and children, to give away his company, is especially laudable because, to enable the NGO to have the option of supporting political candidates, the family had to forego substantial tax benefits from their huge donation.
Wonderful as it is, the company's success does not prove that doing the most good provides a business with a competitive advantage. After all, although Patagonia is notable for many beneficial policies, including donating 1% of its total sales to environmental organisations and promoting the repair, exchange and recycling of its clothing, these innovations largely came after the company was successful. Its initial success reflected, to a significant degree, the desirability of the goods it was selling.
Now that it is clear that all of Patagonia's profits will go towards protecting the environment, will the company do even better?
Vincent van der Holst, an online marketer, believes that it will. He argues that companies that donate their profits to good causes "grow faster, live longer and are more profitable". Accordingly, he has created BOAS, a platform for selling vintage jeans that has pledged to donate 90% of its profits to effective charities saving the lives of children dying from preventable diseases in low-income countries.
BOAS is not yet earning enough to be cited as an example of a successful company that was founded for no other reason than to earn money for good causes. Humanitix, a ticketing agency founded by two Australians, Adam McCurdie and Joshua Ross, in 2016, is a better example of a business gaining a competitive edge by donating 100% of its profits to highly effective charities.
Mr McCurdie and Mr Ross went on a hiking trip through Sri Lanka shortly after the end of that country's tragic civil war in 2009. The poverty and hardship they witnessed made them resolve to work together to help children who had been less fortunate than they had been.
Mr McCurdie was an engineer, and Mr Ross a financial analyst. How might they work together to do the most good? The unexpected answer was to start a ticketing agency. Like most people who buy tickets online, they disliked seeing the price of their tickets go up when the ticketing agency added its fee.
But what if there were a ticketing agency that did not make profits for its owners but was wholly owned by a charitable foundation so that, by law, all its profits would go to a cause that almost everyone would endorse, like helping children in extreme poverty? Ticket purchasers would feel more positive about that agency than they do about other agencies, and some of their positive feelings would flow toward the event itself and its organisers, who would have a reason to prefer that ticket agency over others.
That was Mr McCurdie and Mr Ross' theory, anyway. With support from the Atlassian Foundation and the government of New South Wales, they were able to test it. Humanitix has become the fastest-growing ticketing platform in Australia and New Zealand and is now establishing itself in the US. Despite the need to reinvest much of its profits to ensure future growth, Humanitix has already donated $4 million to effective charities assisting children and is on track to donate an additional $5 million in 2024.
The theory works for ticketing agencies. Doing the most good does provide a competitive edge. Further applications are waiting to be discovered. ©2024 Project Syndicate
Peter Singer, professor of bioethics at Princeton University, is founder of The Life You Can Save.