The world of business-giving is evolving and changing at a rapid pace.
In a bid to protect consumers there is now legislation in many countries you need to be aware of before you incorporate charitable giving into your sales or marketing campaigns.
As more and more companies introduce new ways to support social causes, there’s increasing pressure for ‘cause marketing’ to be regulated – to protect consumers and ensure businesses and non-profits apply best practices.
Even simply mentioning that you donate a percentage of sales to charity in your marketing could be a notifiable act in some parts of the world. That said, while cause marketing legislation is a factor to consider before deciding which charitable activities to do through your business, it is far less onerous than setting up a charity, non-profit, foundation or social enterprise. It’s also a small cost to pay relative to the challenges those you want to help are likely to experience every day.
The purpose of this blog is twofold: the first half aims to clarify what is meant by ‘cause marketing’ and to highlight potentially exempt activities so you can decide what would suit you and your business; while the second half gives you practical advice on how to approach fundraising campaigns and negotiate any legislative hurdles.
The information given here is intended to give you a few pointers so you can operate your charitable activities within the law. However, please be aware that I am not a lawyer, that legislation is different around the world, and is constantly changing. It is therefore important to check out relevant legislation that might apply to you.
Keep reading to find out more, or watch the video below.
Which fundraising activities are regulated?
This very much depends on what you do, where your business is located, the scope of your fundraising (e.g. local, national or international), the type of cause you support, and whether it’s you, or your business, that is supporting the cause.
Much of this blog may not apply if you plan to support a social cause in a way that doesn’t involve fundraising, for example volunteering your time, donating resources (such as computers, food or clothing), or making philanthropic financial donations (of money that’s not been generated by charitable sales promotions).
That said, since there are potential legal, regulatory and tax implications to consider, and because the definition of ‘cause marketing’ differs around the world, I’d still suggest reading what I discuss here, so you can make informed decisions, and get appropriate advice, to ensure you comply with any relevant laws. Even if what you decide to do isn’t governed by cause marketing legislation, you could still adopt some of the best practices I suggest.
The legal framework
Charities themselves are encouraged to monitor all fundraising activities conducted for their benefit, whether they are a passive or active participator. There are also potential legal, regulatory and tax implications for charities, e.g. if they promote you, they may need to pay tax on your ‘donations’.
I’ve found that having a basic understanding of the legal, regulatory and tax frameworks has helped me decide which charitable activities to get involved in and when to raise funds personally versus through my business.At the time of writing, cause marketing is a regulated activity in at least twenty US States. This means that if you operate your business in one of these, there are things you need to do before, during, and after any kind of charitable sales promotion.
In the UK, when you raise funds for a registered charity through your business, your actions are regulated by several laws including those which require businesses to have an agreement in place with charities they raise funds for, before undertaking any charitable sales promotions. At the time of writing, charitable sales campaigns in favour of social enterprises, B-Corps, and ‘unofficial’ causes in the UK are not governed by cause marketing legislation.
Legislation also governs fundraising activities in Europe, Canada, and Australia where cause marketing is becoming more popular.
Of course, the usual business advertising standards apply to all marketing and sales campaigns.
What is cause marketing?
Cause marketing relates to activities where a commercial business runs a charitable sales promotion or marketing campaign, for mutual financial benefit – for them and the cause. Other names for cause marketing include commercial co-ventures in the US, or commercial participators in the UK.
At a deeper level, cause marketing is all about appealing to the emotions of your audience, connecting with them, and giving them the opportunity to feel part of something good when they buy from you. Remember, Millennials are a generation that favours socially conscious businesses.
Examples of potential cause marketing activities include:
- A business donating a proportion of sales proceeds to a charity, and mentioning this in their marketing.
- A business organising a fundraising event for, or in aid of, a charity.
- A business inviting buyers to make a donation to a selected charity, when they pay for products or services.
- Action-triggered donations – where a company makes a donation when others take specific action, e.g. buy a product, or share/like a social media post.
- A charity promoting your products or services to their audience, e.g. b email or social media.
Please note that in some countries (or states) cause marketing applies:
- Whenever a business promises to support a cause – the cause doesn’t need to be named.
- Even if a sale doesn’t take place – the legislation is activated by simply naming a charity.
Phrases such as cause marketing, strategic philanthropy, corporate philanthropy, strategic giving, and commercial co-ventures are sometimes interpreted and used interchangeably, as though they all mean the same thing. But they don’t.
This matters because different laws apply to each. Only once you understand the subtle differences can you make informed decisions and comply with relevant laws. With this in mind I thought I’d share some useful distinctions, so you can determine whether your social giving activities are subject to ‘cause marketing’ legislation. Or not.
Cause marketing versus sponsorship
A distinction I’ve found helpful is that cause marketing is where a charity allows its name or brand to be associated with business activities. For example, Innocent Drinks donates 10% of profits to charity, with the majority going to their charitable foundation. Since 2003they have also raised money for Age UK through the Innocent Big Knit I mentioned earlier.
Whereas sponsorship is the opposite in that the business pays to have its name associated with a charity’s activities. For example, Virgin Money sponsor the London Marathon, which is organised by a charitable foundation.
Cause marketing versus strategic philanthropy
Strategic or corporate philanthropy is where a commercial business makes donations to charitable causes, without any expectation of commercial gain, or goodwill. If consumers are not specifically asked to take action to trigger any giving, e.g. where your business makes financial donations to charitable causes, but you don’t mention this in your marketing literature or campaigns, this is usually considered corporate philanthropy rather than cause marketing.
Cause marketing versus corporate social responsibility
Corporate social responsibility (CSR) is ‘the voluntary action businesses take over and above legal requirements to manage and enhance economic, environmental and societal impacts’.³ CSR has a far wider scope than supporting charities or social causes as it includes the conscious impact businesses aim to have on communities (e.g. in terms of infrastructure, supporting community projects), the environment (e.g. disposal of waste, materials or energy used) and the lives of people (their employees, customers and those in the communities they operate). However, as part of a wider CSR strategy an organisation may decide to participate in charitable sales promotions or fundraising activities.
Large organisations often have committees which organise charitable activities, e.g. helping out with charitable projects, donating Easter Eggs or fundraising through cake sales or dress-down days. Most of these are unlikely to be considered ‘cause marketing’ unless their customers are asked to participate or what they are doing is used in their marketing.
Cause marketing is not the same as sponsorship or strategic philanthropy. However, some corporate social responsibility activities could be classified as cause marketing.
Cause marketing versus social investment
Social investment is where you lend to or invest money in a social cause. You can do this either as an individual or through your business. With social investment you are not donating or giving your money to the social cause. You are lending or investing your money, with the expectation you will get it back. Obviously there is a risk you won’t, but you can reduce risk by investing money through a micro-finance organisation or an investment company. The act of investing in or lending to social causes is not cause marketing. However, if you raised the funds through an activity that would be classified as cause marketing, then relevant laws and governance would apply to that campaign.
Cause marketing best practices
The following best practices are guiding principles designed to help you navigate your way through the cause marketing maze, whether or not your charitable activities are subject to any specific laws or regulations. Implementing these will give you, the cause and consumers more clarity about the scope of your charitable activities:
Comply with the law
Find out what laws apply to the type of activity that you want to do and apply these. Obviously this involves getting appropriate advice from qualified advisers. Useful links to help you find out more are on my website at www.givetoprofit.com.
Put a formal agreement in place
Before you start your cause marketing campaign, put a formal agreement in place to clarify key information, responsibilities, practicalities and time frames for both parties.
The basic information to state includes: all the parties involved (names and addresses); date the agreement was signed; how donations will be calculated; the information to be disclosed to consumers in marketing communications (see the following points); how you can use the charity’s logo; the practicalities of the campaign; when and how you will make payments; how you’ll account for or demonstrate relevant sales; duration of agreement; and terms relating to amendments or early termination.
You may also want to include information on how you’ll monitor and report your fundraising, before, during and after your charitable campaign.
Some charities will have legal contracts they use with their supporters so it’s worth asking them if they have one.
File and register your charitable sales campaign (where required)
It is important to remember what you need to comply with is governed by the type of cause you are supporting, where you operate as a business, and the geographic reach of your charitable sales campaign.
In some countries and states you need to do more than have an agreement in place before launching a charitable sales campaign.
If you are in the US you may also need to file and register your campaign in your state, and for national campaigns across all states concerned.
At the time of writing, there is not the same requirement to register cause-marketing campaigns in the UK.
When it comes to global and online campaigns, legislation has still to catch up around the world. For international or on-line charitable sales campaigns I suggest you adhere to the laws that apply in the country(s) or state(s) your business operates, and take advice on whether you need to do more.
Be transparent to consumers
Avoid any vague and misleading statements, and disclose the following in your marketing:
- The specific cause(s) that’s going to benefit from this campaign or event, including any specific purpose for the money, e.g. to build a house or fund the purchase of certain goods.
- If more than one charity is going to benefit, what proportion will go to each.
- The monetary amount (or item) that will be donated for each purchase rather than only stating a percentage of profits/sales.
In some countries you must state the actual amount you’ll be donating (e.g. £1.50 for every product sold, or, at least, to state the estimated amount (number of items) to be donated per sale.
- The minimum and maximum agreed contribution (e.g. up to £10,000, or up to twenty bikes).
- The duration of your fundraising campaign.
Have the above information easily visible to consumers on packaging or at the point of sale, so it’s easy for them to understand all key facts, before deciding whether to buy from you or not.
Other ways to be transparent include:
- Evaluating your efforts, and reporting these to your chosen cause, and publically to consumers, e.g. on your website or in your business premises.
- Applying the same levels of transparency with both online and offline campaigns.
- Keep your campaign or fundraising simple – so consumers can easily understand exactly what they’ll be supporting by making a purchase.
Distribute charitable proceeds promptly
Some countries state required payment time-frames. Otherwise, agree with the cause you’re supporting when you’ll forward funds, e.g. within 30 days of the end of the campaign.
Maintain accurate records
Keep accurate records of sales, donations and campaigns.
Help charitable causes comply with the law
There are potential legal, regulatory and tax implications for those you are raising funds for, depending on the extent to which they get involved in your campaign. Many larger organisations will know what to do and will have procedures and processes in place that will help. However, you may need to guide smaller organisations into getting the relevant advice.
If you live in the US, I suggest you check out The Ten Commandments of Cause Marketing Law written by Karen I Wu – you can find out more about these at www.givetoprofit.com.
How to avoid cause-marketing legislation
Obviously if what you do is considered cause marketing in the jurisdictions of your charitable sales campaign, you need to take account of the relevant laws.
However, there are plenty ways to support social causes and donate money to them that are not classified as cause-marketing activities:
- Support causes not regulated by cause-marketing legislation (while still applying best practices).
- Support social causes in ways other than raising funds for them – I shared ideas for this in Chapter 3.
- Donate funds without mentioning this in your marketing – this is philanthropy.
- Sponsor a charity’s events or operations – with a supporting sponsorship agreement.
- Support an unrecognised social cause – e.g. a First Giving Campaign set up by an individual or someone you know who needs help due to personal illness or tragedy.
- Support social causes personally.
Just like any other individual, business owners can raise funds for charity personally – we don’t have to do our charitable fundraising through our business.
If you are a solo-preneur, you and your business are often perceived as one. In other words, your personal and business brands are not distinct but interlinked. What people think about your business is greatly influenced by what you do personally – both the good and bad. This is similar to the way that the personal actions of high-profile politicians, celebrities, or business leaders have an impact on how others perceive them in their professional roles.
When you’re the owner or figurehead of a small business, supporting charities personally is likely to have a positive impact on your business.
- Does the fact that someone supports social causes influence your opinion of them?
- Are you more likely to buy from people with similar values?
There will be times when it’s in everyone’s best interests to put your charitable activities through your business. However, there are likely to also be times you want to support charities personally too.
When I go to Rwanda, I do this because I want to personally. The trips themselves are not part of my business and neither is much of the fundraising I do that’s associated with that humanitarian work.
I just started making bracelets and earrings to raise funds for my trips and all sorts of people started buying them – they were not designed specifically to appeal to my business audience. Nor were they sold through my business.
- Check out what cause marketing legislation applies where you operate your business before doing any fundraising for charities or social causes through your business!
- Irrespective of whether your charitable sales campaigns are considered cause-marketing, it’s still prudent to apply best practices. With the rise in social-impact-driven businesses and consumer trends increasingly favoring companies who put social impact at the heart of their businesses, it’s likely that cause -marketing regulations will increase.
- Cause marketing legislation may be an extra hurdle to navigate, but please don’t let this put you off. Setting up a business with a social mission is much easier than setting up a registered charity, foundation, or social enterprise.
- If you don’t want to have to get your head around cause marketing legislation, there are plenty other ways you can support social causes as I describe in Chapter 3 of my Give-to-Profit Book.
I hope this has given you a good overview of cause marketing. I explain more about cause marketing and tips for growing a business by supporting causes in my Give-to-Profit Blog and my Give-to-Profit Book.
I’d love to hear your ideas and thoughts – please do share your comments and questions below.
Often described as one of the most authentic and inspiring souls you can meet, Alisoun is on a mission to empower business owners and entrepreneurs to grow fulfilling profitable businesses that make a difference in the world.
Alisoun’s keynote talks, training, mentoring, and best-selling books Give-to-Profit: How to Grow Your Business by Supporting Charities and Social Causes and Heartatude: The 9 Principles of Heart-Centered Success have favorably changed the good fortune of thousands of people worldwide. She loves doing humanitarian work, fundraising and living by the beach in Scotland.
Alisoun is also the founder of The Heartabiz Hub a business training academy and has written the following free ebooks:
- 52 Ways to Raise Funds for Charities and Social Causes Through Your Business (click here)
- 101 Ways To Attract Great Clients, With Heart, Integrity & Social Impact (click here)
- The 9 Secrets to Signing Up Clients Without Selling (click here)
You can connect with Alisoun here:
- Alisoun’s website – www.alisoun.com
- Alisoun Mackenzie Facebook Fanpage – click HERE
- Give To Profit Facebook Fanpage – click HERE
- Twitter – @AlisounMac