Charities Change Roles by Turning a Profit: USA Today

Charities change roles by turning a profit
USA Today Mar 26, 1996; Bill Shore

Abstract:
Working with business, and learning to think like one, is a necessary step in meeting increasing social-service demands; Bill Shore, founder of Share Our Strength, a Washington-based anti-hunger nonprofit, is author of Revolut ion of the Heart.

Even though Democrats and Republicans disagree about the role of the federal government in solving the nation's social ills, they do agree that nonprofits must take up more of the burden. Yet America's nonprofits do not have the resources to solve the huge social problems faced by our communities. Now, more than ever, nonprofits need to find new ways to raise revenue.

Over the past five years, Share Our Strength, a national anti-hunger group, has developed a groundbreaking partnership with American Express based upon its corporate values. The Charge Against Hunger campaign helps achieve several objectives for American Express: Employees become involved in local communities, American Express is identified as a good corporate citizen, and the company builds better relationships with the merchants who take its card by working together in a good cause.

Full Text:

Copyright USA Today Information Network Mar 26, 1996

Working with business, and learning to think like one, is a necessary step in meeting increasing social-service demands; Bill Shore, founder of Share Our Strength, a Washington-based anti-hunger nonprofit, is author of Revolut ion of the Heart.

Traditionally, America's nonprofits are rich in compassion and idealism, but they are entrepreneurially bankrupt.

They're stuck settling for leftover wealth -- the excess funds people and companies donate after their primary needs are met. Depending on leftovers to fight poverty or promote economic development is about as effective as trying to move a truck by asking passersby to push -- what you need is a powerful engine.

As nonprofit organizations in every American community are scrambling to bridge gaps in federal social spending, they're turning to the business sector, not for donations but to create their own sources of revenue -- their own engines.

The most innovative ideas are emerging from unlikely places. An order of Roman Catholic priests produced a feature film, Care of the Spitfire Grill, that just captured the Sundance Film Festival audience award. The $4 million profit from its sale to Castle Rock Entertainment will help to support the social-service programs of the church.

Likewise, five of the nation's largest black churches recently united to form the Revelation Corporation of America -- a business that will use its profits to make home mortgages and fund new-home construction in minority neighborhoods. Profits from 20 million church members' purchases of discounted groceries, clothing and insurance will go to create the loan and building funds.

The Roman Catholic priests and the African-American churches are only the most recent evidence of a burgeoning movement -- a profound but little-noticed trend bringing new vitality and desperately needed resources to the fight for better social services.

Not all nonprofits may be ready to leap into business, but increasingly many businesses are ready to get involved in ``socially responsible marketing.'' Ben and Jerry's Ice Cream, Anita Roddick's Body Shops and American Express all have raised money for charity by earmarking a percentage of profits for social causes.

Once nonprofit leaders begin to think like business executives, they'll be able to forge relationships that benefit both the public and private sectors.

Then they can take this approach a step further. In fact, a new breed of entrepreneurs is doing just that -- completely re-inventing the nonprofit sector by creating new wealth.

A nonprofit that creates wealth sounds like a contradiction in terms, but it doesn't have to be. In growing numbers, new entrepreneurial organizations, like the priests' and black churches', are emerging as hybrids -- profit-seeking firms with a social cause. They might better be called community wealth enterprises -- CWEs -- because their profits, rather than lining the pockets of individuals, are returned to the community.

The most well-known example of this phenomenon is Paul Newman's food company, Newman's Own. One hundred percent of after-tax profits from the sale of salad dressing, tomato sauce and popcorn is donated to a wide array of charitable causes.

By creating new wealth and returning it directly back to the community, CWEs are less vulnerable to what philanthropies call ``compassion fatigue.'' And because they create new wealth, community wealth enterprises also increase commerce, adding to the economy's growth, just as any for-profit business would.

Some businesspeople argue that nonprofits have an unfair competitive advantage because they are not paying taxes. At the same time, some nonprofit executives fear the loss of their nonprofit, tax-exempt status.

There is no doubt that, as the wall between nonprofit and for-profit continues to crumble, the nation's tax laws will need to be examined and revised. If a nonprofit is earning a profit, it is only fair -- under current law -- that it should pay taxes.

However, legislators may decide that preferential tax treatment for organizations that direct all of their profits back into the community is good public policy.

Of course, nonprofit organizations should raise every private and public dollar they can. But they should not limit themselves to philanthropic dollars. Nonprofits that rely solely on government funds, charitable solicitations and foundation grants are redividing the ever-shrinking philanthropic pie rather than taking steps to create a bigger one.

If nonprofits are going to fill even some of the holes left to them by federal spending cuts and escalating social problems, they must become nonprofits for profit.

Giving good business

Corporate sponsorship of charities is a growing part of many companies' marketing programs. One successful program, The Charge Against Hunger, one of the largest corporate-giving programs, primarily sponsored by American Express, has attracted numerous other companies to help. They've raised more than $5 million each of the last 3 years.

Return to the News Menu