Philanthropy, Profit and Transparency

A frequent issue faced by social ventures and enterprises is justifying profits earned while offering social goods to marginalized communities. Earning profit and creating social value are objectives that are often at odds with one another in the eyes of consumers and social activists. As a result, organizations have come up with different ways in which to measure “value” and its impact to demonstrate a philanthropic purpose beyond generating profit. As the trend continues for governments and community organizations to rely on private sector solutions to scale their social impact, it is especially important to highlight impact metrics to distinguish between using philanthropy as a marketing technique to drive profits vs. actually improving lives and communities.

To address these challenges organizations have formed to hold corporations accountable for their business models. One such example is B Corp Certification, a standard-setting process from B Lab that honors businesses that offer a positive environmental or community impact. Another attempt at building trust among consumers is demonstrated by Hugh Whalan, who runs a social enterprise based in West Africa. Demonstrating social impact is important but so is building trust among consumers that earning a profit from a social enterprise or venture is not exploitative. Whalen addresses the criticism he faces of running a for-profit business whose consumers live in stark poverty in his article, How Misinformed Ideas About Profit Are Holding Back the World's Poor. The author pushes back against the lack of trust in organizations who earn a profit from poor people, but argues that it makes more economic sense than simply giving away resources as charity.

With standard-setting organizations like B Lab and new models that attempt to build trust between consumers result in more transparency between the general public and companies. Is this enough, though? What other transparency tools exist to make sure that organizations use philanthropy as a way to earn profit?