Guide to Impact Marketing

Overview

Impact marketing, or cause marketing, is a strategy to connect a commercial product or service to a charitable cause, social/environmental initiative or other nonprofit in order to position a brand as being sociopolitically conscious. Doing so can boost a company’s sales by targeting consumers who choose the companies they support based on the values espoused.

Impact marketing is a critical way for nonprofits to acquire funding for their own initiatives and simultaneously support brands doing purpose-driven work in these unprecedented times. Slow Factory has developed a cheat sheet distilling industry best practices based on the legal landscape, the Better Business Bureau’s recommendations, independent research as well as legal frameworks around impact marketing and cause marketing. We hope to provide the fashion industry and other nonprofits engaging with brands with an ethical framework to work from.

What is Impact Marketing?

The most common impact marketing is when a brand offers to donate a percentage of sales or set donation to a nonprofit organization. Agreements between corporations and nonprofits can involve the right to use the nonprofit’s name or logo in the brand’s marketing efforts; for this right, large nonprofits often require minimum donations in the hundreds of thousands or even millions of dollars.

The origins of impact marketing date back to 1973, when 7-Eleven pledged to make a donation of 1 cent to the National Wildlife Federation for each “Endangered Species Cup” it sold. The campaign raised over $250,000 and allowed the NWF to donate over 1000 acres of bald eagle habitat in South Dakota to the U.S. Fish and Wildlife Service in 1974. Since then, this idea has inspired thousands of companies to donate a percentage of their sales to causes the public was interested in (you can geek out and read the history at length on Wikipedia).

Ethical Considerations

The irony is that oftentimes products sold in honor of special causes may in fact be contributing to the very reason that the cause exists in the first place. For example, in the case of disposable cups funding endangered species relief funds, production of disposable cups are one of the many symptoms of overconsumption that harm our environment and species. Similarly, t-shirts sold with environmental or social justice messages written on them are often made with toxic fabrics including polyester and toxic dyes and bleaches, produced in the same conditions that require social justice work. While a percentage of the proceeds go to nonprofits working to preserve specific habitats or human rights related to making that t-shirt in the first place. This is why a new framework is necessary to support companies who want to scale their positive efforts in a profound and ethical way.

Below you will find a cheat sheet to help you understand how to set up and communicate campaigns to support the important work nonprofit organizations are doing.

For companies that want to donate to a nonprofit

Great idea! You can either donate a set amount (flat donation), or commit to donating incrementally as you sell products (e.g. an percentage of checkout or an amount per item). In all cases, you want to be completely transparent about who you are donating to, how much and when.

Flat donations

In this case, you should be clear about how much you are donating, when and how in any customer-facing communications. The key here is to make sure that the company is a proud sponsor of the charity and to disclose the gross amount of the donation — do not state that purchase is related to donation, even anything that implies that customers’ purchases will help your donation.

Per-purchase donations based on product sales

There is a bit more leg-work to do here, but it can still be relatively simple to be ethical and legally compliant. Once you are going to donate a portion of the sales, your campaign becomes governed by “Commercial Co-Venture”, or CCV laws. Don’t be scared!

Here’s what you have to do in this case:

  • Be specific in all communications and advertisements! You must name the exact nonprofit you are supporting, not a general cause.
  • You must say exactly how much per item will be donated. Ideally, this is a dollar amount. Percent donations should be listed in terms of “proceeds” or retail price, rather than “profit” or any net amount that subtracts expenses or margins which are not transparent.
  • Disclose any minimum or maximum amount; once maximum amount is reached, remove “your purchase supports” language immediately.
  • Important: You must be in direct contact with and sign an agreement with the charitable organization with the details of the donation.
  • Some states require specific notice or filing [eg. Maine, Massachusetts, Alabama, Illinois, South Carolina and Hawaii].
  • For example, New York state does not have filing requirements for CCV activity, but does require that a sponsoring entity “provide the charitable organization with an accounting stating the number of items sold, the dollar amount of each sale and the amount paid or to be paid to the charitable organization”.

Note: The nonprofit cannot normally promote the products in question, because it may be seen as an “unrelated business activity”. Nonprofits are allowed to conduct for-profit business, but that income cannot be tax-deductible. The nonprofit CAN thank and acknowledge the support of the company, but it must stay away from anything that can be seen as “an endorsement to purchase”.

Further Ethical Considerations

While the above covers basic legal and ethical best practices, Slow Factory proposes the need for further diligence and reflection. As noted above, there must be a harmony between a company’s activities, their values and any cause they want to support. This is from a brand cohesion perspective and certainly an ethical perspective.

Thanks

Beyond the practical experience, legal council and general research of Slow Factory, this document draws on the research in the article “For Goodness Sake” by Ed Chansky.

This article is for the purpose of information and should not be considered in place of legal council specific to your situation.