What Entrepreneurs Can Learn From The Philanthropic Struggles Of TOMS Shoes

Millennials are on track to spend $200 billion per year starting in 2017. One of the many things that sets this generation apart is its insistence that business be about more than just turning a profit. According to a survey by Deloitte, 73% of Millennials believe businesses can have a positive impact on the world, but they also think today’s companies aren’t doing a very good job.

In order to capture those Millennial dollars, entrepreneurs are making philanthropy as much a part of their businesses as marketing and new product development. But philanthropy can be tricky. It’s not enough to just tack a charitable donation onto each sale. The philanthropy has to be authentic to the company’s brand and its mission. Even then, things can backfire.

Just look at the cautionary tale of cheap Toms Shoes.

When Blake Mycoskie launched cheap Toms Shoes in 2006, he had what at the time seemed like an ingenious hook to set his company apart in the competitive shoe market. For every pair of canvas shoes the company sold, Toms would donate another pair to children living in poverty around the world. During its first year, Toms gave away 10,000 pairs of shoes. In its second year that number jumped to 200,000.

The buy-one-give-one model took hold and other companies, like Warby Parker and Smile Squared,embraced the philosophy, donating thousands of glasses and toothbrushes respectively.

But recently Toms has come under some very severe criticism. Many in the philanthropy world say that donating shoes might not be the best way to help poor communities; it might even harm them. From a recent Fast Company article on the Toms problem:

Rather, the charitable act of donating a free pair of shoes serves as little more than a short-term fix in a system in need of long-term, multi-faceted economic development, health, sanitation, and education solutions.

Giving away shoes can hurt local cobblers, which disrupts the local economy. And it risks creating an economy of dependence. While it’s much safer for kids to be running around with shoes than without, Toms’ charity didn’t address the reasons why they were going without shoes in the first place.

Toms (which has expanded beyond shoes) has since gone back to the drawing board and come up with more thoughtful forms of giving. The company now donates a birth kit (which includes a clean pad, gloves and sterile equipment to cut the baby’s umbilical cord) with the sale of every bag. With every bag of coffee the company sells, it gives money to help provide clean water. And while Toms still donates shoes, it now tries to source them from local producers to help strengthen struggling economies.

“I like the progression they’ve gone through and how they’ve challenged themselves to go beyond the original model,” says Valeria Budinich, leadership member at Ashoka, an organization that invests in social entrepreneurs.

I spoke to Budinich and other social entrepreneurial experts to find out what startups can do to incorporate philanthropy in ways that create a double bottom line — growing earnings while also doing good.

Don’t manipulate your customers.

Millennials, more than older customers, have very keen lie detectors. They know when a charitable offering is there just to make the company look compassionate. They want to buy from brands that incorporate meaning in an authentic way. Nike is a particularly popular brand with Millennials because, like Toms outlet uk, it’s had to fight back against criticism of its business practices. The company now works hard to ensure that its workers around the world are being treated fairly, and publicizes annual factory audits.

“Think about how you can involve your end customer in a way that you can develop products that have meaning,” says Budinich.

Be thoughtful about your supply chain.

Many businesses try to stand out with marketing campaigns that promise organic ingredients or locally sourced foods. This is a trend we’re seeing more and more, not just from stores like Whole Foods but also from retailers like Wal-Mart. The superstore chain came under fire last year when it expanded its organic program; farmers questioned whether the food labeled “organic” in Wal-Mart stores would truly be organic. Wal-Mart has had to bend over backwards to assure customers that it is living up to the organic ideals. Budinich says it’s crucial that, if you are going to tout your supply chain as part of your social-good pitch, you follow through and stay consistent.

“The worst thing is to trivialize it and turn it into very opportunistic behavior,” says Budinich.