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 American food company founded in 1982 by the actor Paul Newman and author Aaron Hotchner (both now deceased), is an early example of a business donating all of its profits to charity — specifically, to the Newman’s Own Foundation, which to date has distributed over $600 million to organizations working for disadvantaged children. Actor Hugh Jackman cites Newman’s Own as an inspiration for his own foundation, Laughing Man Coffee.
Perhaps the most prominent company operating along these lines today is Patagonia, the American outdoor clothing brand founded by Yvon Chouinard in 1973. Nearly 50 years later, when the company was valued at around $3 billion, Chouinard gave it to a nonprofit organization, ensuring that all its profits are used to protect the environment and fight climate change.
The arrangement started in September 2022. So far, profits amounting to $71 million have been allocated to environmental initiatives that include stopping a proposed mine in Alaska and conserving land in South America, as well as helping to elect pro-environment Democrats in the United States.
Chouinard’s decision, supported by his wife and two adult children, to give away his company, is especially laudable because the family had to forego substantial tax benefits from their huge donation to enable the organization to have the option of supporting political candidates.
Wonderful as it is that Patagonia’s profits will always support protecting the environment, 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 organizations, and promoting the repair, exchange and recycling of its clothing, these innovations largely came after the company was already successful. To a significant degree, Its initial growth reflected the desirability of the goods it was selling.
Now that it is clear that all of Patagonia’s profits will go to protecting the environment, will the company do even better? Vincent van der Holst, an online marketer, believes 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. (Disclosure: I have invested €500, or $537, in BOAS, with the expectation that the most significant return on my investment will be the knowledge that it has helped to save lives.)
BOAS is not yet earning enough to be cited as an example of a successful company created for no other reason than to raise 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.
McCurdie and Ross went on a hiking trip through Sri Lanka shortly after the end of the 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 them.
McCurdie was an engineer and 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 for events online, they disliked seeing the price of their tickets go up when the ticketing agency added its fee, aware that their purchases were increasing profits for a faceless group of owners.
Yet the convenience of booking tickets online means that for most event organizers there is no feasible alternative to using an agency and no basis for choosing one agency over another.
What if there was a ticketing agency that did not make money for its (presumably rich) owners, but was wholly owned by a charitable foundation, so that, by law, 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 did about others and some of their positive feelings would flow toward the event itself, as well as its organizers, who would have a reason to prefer that ticket agency over others.
That was McCurdie and Ross’s theory, anyway. With support from the Atlassian Foundation and the government of the Australian state 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 U.S. Despite the need to reinvest much of its profits to ensure future growth, Humanitix has already donated $4 million to 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.
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