NZ Retail and The Register editor Sarah Dunn critically examines the recent explosion of retailers using the social enterprise model and considers, how much generosity is appropriate in this situation?
In a previous role at a rural newspaper, I often covered the local high school’s junior enterprise programme. It was great to see the kids learning about business, but there were definitely recurring themes to their start-ups: baking, soap, candles and firewood dominated the landscape each year.
And then in 2014, a group from Nelson College for Girls dreamed bigger than bake sales. They partnered with local jeweller Benjamin Black Goldsmiths to create ‘The daffodil ring’, a handcrafted piece of fine jewellery available in silver or gold. The rings weren’t cheap, but 50 percent from the proceeds of each sale went to the Cancer Society of New Zealand.
We covered this clever and community-minded initiative in the paper, and the Cancer Society threw its marketing weight behind it too. The project was a huge hit. Over $2,000 was raised for the Cancer Society during the daffodil ring’s launch night alone. Presuming the girls’ profits didn’t get eaten up by material investment costs, they would have pocketed a healthy return as well.
The daffodil ring’s success didn’t go unnoticed. The next year, I noticed dozens of new products based on the same social enterprise model rolling out – some young entrepreneurs stuck with the same ratio of 50 percent donation and 50 percent profit, but others passed on as little as 5 percent while foregrounding the charity component of their business in their marketing material. There was a lot of pocket money made that summer.
I’ve been spotting this kind of thing everywhere since first noticing it. A recently-launched SME retailer has done a great job of sharing information from its more transparent suppliers online, but currently fails to explain how a charity partnership that dominates the branding of a line of footwear actually works. No percentage-based donation is specified - only the enthusiastically-shared information that with each footwear sale, the consumer is supporting one of three charities.
The retailer also goes on to explain that while the product has no Fairtrade certification, we can take their word for it that the supplier trades fairly and pays an honest wage.
Having chatted with the owner-operator of this particular store, I don’t believe they intend to pull the wool over shoppers’ eyes. They came across as very genuine. My research into the supplier’s website indicates that the fudging of the charity donation likely originates there, and there may even be an operational reason for it.
However, consumers are beginning to ask hard questions of the businesses they shop with. Their thirst for conscious consumerism is strong enough that many businesses with a vague whiff of Fairtrade and organics currently pass muster, but shoppers are becoming more sophisticated as their understanding of issues connected with manufacturing and supply grows. Soon, retailers will need to demonstrate a robust framework of proof to back up their claims or risk a social-media storm.
As for the proliferation of minimally-generous social enterprise partnerships? Regardless of why a charity is given even 2 percent of a product’s total sales, the utilitarian point of view would be that as long as this is being done responsibly and appropriately, the charity is still receiving a net gain. If that net gain can also boost a retailer’s bottom line in the process, great.
While it’s easy to be cynical about such tactics, the fact that businesses are voluntarily diverting any of their profits to good works is to be applauded. After all, retailers are part of the community too, and a rising tide lifts all boats.
This story originally appeared in NZ Retail magazine issue 754 February/March 2018