Saturday, February 26, 2011

in the "business" of saving the world?

thinking out loud, again.....

I have struggled with thinking through an issue raised on a web site I check in on from time to time. The issue is a matter of forming alliances for financial purposes with the intention of collaborating on successfully working to eliminate poverty. Article: Uncultured Project Appeal to Readers

In my paradigm the only time money can be moved in a charitable way is when there are clear organizational lines drawn in the frame of a framework that is transparent to those donating or granting the funds. Shawn, the guy behind the site and the actions, is an individual working towards supporting the elimination of poverty but he is not part of any organization. In his bid to form an alliance with another group to collaborate he has met disappointment and I think its because he is not part of an organization (charity, non-profit) that has a framework that is transparent and governed. However, Shawn makes the argument that a for-profit company could technically do the same thing and I wonder at that thought.

I suppose technically its possible for a business to choose to have multiple streams of cash flow and one of those could be put to some charitable initiative,  the other streams being traditional profit driven. Technically the business could accept donations to be part of their initiatives, sadly they cannot be tax deductible to the donors (tax laws state that the org must be non-profit). In theory the business could form an alliance with a charity who would accept donations and then partner in projects with the business in a way that contractually ensures the non-profits transparency framework is not compromised.

Let's talk sand water filters (which was an interest of mine and how uncultured became one of my links in the past) and the fact that a business here that perhaps does construction projects has the capacity to easily create the hardware for a household filter.  Let's say they agree to build them and find a non-profit that uses its financial resources to cover the shipping of the product and the setup in the country of need. Technically the owner of the business needs to ensure that there is enough money to keep the business operating as well as the time and materials for the work on the sand filter. The alliance with the non-profit could fund the materials or the business could donate them or the completed filter to the non-profit making for a charitable donation for the business which would offset some taxes. ( I am no tax expert) There is lies the challenge, that capacity for charitable work could be put to profits for the owner and so the only gain to his financial plan for his business is the potential maximum tax savings and potentially the reputation and marketing success in sales. My assumption is that the free capacity for this work could only be a small portion of the company outputs as there is no business so profitable in its products/services that it can both maintain market share and spend a large portion of their time on charitable work. I suppose an individual could be a high end consultant and split their time between consulting and charity work but much of the world's needs are more than people talking.

Is it even possible for a for-profit company to have a long term future that includes most of its effort being spend on giving its time and resources to eliminating poverty?  Maybe, if we had a poverty credits system whereby countries and companies had to show a portion of their profit going to eliminate poverty than you could have a company in the business of building frameworks for the elimination of poverty in parts of the world stuck in the vicious cycle of it.

Dude, the world is a matrix of rules,cultures and selfishness and I wonder at the most efficient ways to change that.

EDIT: I like my charitable deductions at tax time and here is the skinny on how that works for an org in my country:

"Purposes that are not charitable at law

Organizations established for the purpose of making a profit will not qualify for registration. To qualify for registration, an organization must be non-profit and have purposes (also called objects) that are charitable at law. "

1 comment:

  1. There are plenty of ways that a for-profit business can partner with a non-profit org to help eliminate poverty (and still make a profit).

    First the obvious: non-profits need stuff to operate - from pens to planes. I can sell them this stuff at a discount (but still make a proft).

    The more critical is this:
    Non-profits may be missing a critical skill-set, innovation or human resource that would allow the non-profit to generate its own cash flow. This comes to the fore with grants and other incentive moneys offered by governments and other bodies to carry out humanitarian efforts.
    For example: housing. A non-profit could receive $X from the government for providing Y number of residential units for low-income families. The non-profit, although aware of this, does not have the experience or skillset or even human resources to apply to such an endeavour. A for-profit development company may partner with the non-profit to provide the residential units at a rate suitable. The development company still makes a profit on the deal. The non-profit gets the residential units that (coupled with the grant moneys) provide housing for low income families.

    This could not have happened without the partnership.