Shopping for a Better World

In response, many businesses have changed their practices to be — or at least appear to be — more connected to social causes.  Some companies give a percent of their profits to charity. Others host lavish philanthropic galas.  More recently, some companies have begun adopting a charity model known as “buy one give one” (B1G1).

Collection of The AuthorA worker at the Ras Dashen shoe factory in Addis Ababa, Ethiopia, sewed TOMS shoes for donation.

Toms is probably the largest and best known of the B1G1 companies.  For every pair of shoes someone buys, a second pair is donated to a child in need.  The eyewear company Warby Parker employs a similar model.  Every time it sells a pair of glasses, it sends money for another pair to a social enterprise that then sells them in poor countries. Established brands like Ikeahave tested the model, as have nonprofits like One Laptop Per Child and a growing number of start-up companies — including ones that sell vitamins, blanketsand children’s clothing.

The B1G1 model holds a lot of intuitive appeal, which has likely contributed to its proliferation. It allows people who may otherwise be disconnected from problems in the developing world to effortlessly engage with them by, say, purchasing a stylish pair of sunglasses.  It is also more tangible than most corporate philanthropy. “You actually feel that there’s someone out there who has a pair of shoes because of your transaction,” said Dean Karlan, a professor of economics at Yale University and a co-author of “More Than Good Intentions.”

B1G1 has the potential to raise funds perpetually, as it encourages philanthropy in everyday purchasing decisions. “To the extent [B1G1] unlocks money that would have otherwise not been available, that’s fantastic,” said Antony Bugg-Levine, chief executive of the Non-Profit Finance Fund.  If the goods are directed to effective organizations, B1G1 companies could give many social causes a boost.

The model could also fail.  Some companies may be interested in adopting B1G1 more to win customer loyalty than to support a social cause and may thus overstate the impact of their charitable activities. Some B1G1 companies may form a partnership with nongovernmental organizations with unreliable track records, impose ill-fitting donations on communities with no use for them or supplant local markets. “To the extent there are local shoemakers, they may not have much of a business if [a B1G1 company] comes and gives away shoes for free,” said Greg Dees, professor of social entrepreneurship at Duke University.

Dees and others also question whether B1G1 handouts can produce lasting change. “There is definitely a need for footwear in underserved markets,” said Valeria Budinich, vice president of Ashoka, a nonprofit that supports social entrepreneurs. “But those markets need new technology, production processes and distribution chains that [are specifically designed for] rural areas. Models like Toms have many great features but aren’t designed to come up with that level of transformation.”

In fact, most development experts refrain from painting B1G1 companies as social enterprises, as some outlets have, and instead consider them philanthropic ventures.  “To me, it’s only a social enterprise if the social impact comes from core operations,” Dees said.  “How you use the money afterward is your choice.”

No matter the obstacles, it should be recognized that the B1G1 model is attractive to consumers and consequently a potentially powerful method to bolster social change — and it’s worth examining whether it can be turned into a long-term solution for populations living without basics like shoes or prescription eyewear. How can products be distributed so they make a sustainable difference in the lives of those whom B1G1 companies are trying to help?

There are several reasons why the B1G1 model resonates with customers. The concept is easy to grasp: you buy an item, and in doing so, a similar item is shipped to someone halfway around the world. “There isn’t much more to it than that,” said Neil Blumenthal, a co-founder of Warby Parker.  “That’s the beauty of it.”

It is also a benefit to both the company and its program when it gives away a product similar to the one it sells. “It seems more brand resonant for the philanthropy to be linked to eyeglasses rather than donating the money to charter schools or health care,” said Bugg-Levine.  As consumers become increasingly interested in supporting mission-driven companies, many look for ones with, in Blumenthal’s words, a “coherent and authentic narrative.” If the narrative is absent, he said, “you’re not going to create an emotional connection with customers.”

There is also the undeniable power of the “one.”  B1G1 companies do not ask customers to support an abstract idea or cause. Rather, most say that their purchase will benefit “a child in need” — a claim often accompanied with an image of a child seemingly in need.  Psychology research has long shown that people connect more strongly with individual distress than with large-scale suffering.  The Times columnist Nick Kristof, for instance, has cited instanceswhere people have donated over twice as much to help save one child as to save eight.

Some B1G1 companies, like Warby Parker, have been able to capitalize on the strengths of the model to positively impact communities in the developing world.  For every pair of glasses a customer buys, Warby Parker covers the cost of sourcing and producing a second pair of glasses for partners like the social enterprise VisionSpring.  VisionSpring, in turn, employs a network of 9,000 sales agents in 13 countries to sell glasses in their communities.  (Disclosure: The Fixes columnist David Bornstein was on the board of VisionSpring for six years between 2002 and 2010.)

Collection of The AuthorWorkers at the Ras Dashen shoe factory in Addis Ababa, Ethiopia made TOMS shoes in March 2012.

One reason for Warby Parker’s success is the strength of its partnership with VisionSpring. Blumenthal worked for the social enterprise for five years before starting his own company.  As a result, both partners are confident of the other’s abilities and intentions.  “People you’re partnering with should have a similar long-term mission and vision, and also strong integrity,” said Jordan Kassalow, the chief executive of VisionSpring.

Warby Parker made a conscious decision to support the sale and not donation of glasses.

Donations, Blumenthal said, can “create perverse incentives that create a culture of dependence and at times can negatively impact the economy.”  There are also practical considerations to this.  “People are constantly breaking or losing their glasses, or their prescriptions are changing, or new people are finding that they need new glasses,” he said.  “You need a permanent presence [in a community], and that can’t be sustained by giving away stuff for free.”

Unlike Warby Parker, Toms donates its goods. Since its inception in 2006, Toms has given away over two million pairs of shoes to children in 40 developing countries. The company markets itself as one that “does good”; the company’s founder, Blake Mycoskie, even calls himself “chief shoe giver” instead of “chief executive officer.”

The giving aspect of Toms occurs entirely through NGO partners.  When a customer makes a purchase, a second pair of shoes is manufactured and shipped to the recipient country, where an NGO partner picks them up, transports them to their community and distributes them.

“We want our shoes to somehow be an enabler, whether it’s to get kids in school, prevent [disease] or boost self-esteem,” said Katherine James Schuitemaker, a consultant who works with Toms.  Its shoe-giving work in Debre Markos, Ethiopia, for instance, has been done in collaboration with medical groups and has helped raise awareness of podoconiosis, a disfiguring foot disease prevented by wearing shoes.

However, it is not clear that all of Toms’s handouts are “enablers.” On a recent trip to Ethiopia I met with Toms’s employees, who said that shoes promote education because children are often barred from entering schools barefoot. However, when I met one of their core Ethiopian giving partners, the International Orthodox Christian Charities, I learned that they distribute the shoes in schools — to children who, presumably, already own shoes. This situation is not unique. Some children in Toms’s promotional material are also wearing shoes, though they may be inappropriate for school or playground use (see the fourth image onthis blog post and several images in this video).

“I think the act of giving is fine when there are temporary needs to be met,” Dees said, “but we need to get around to finding out what the underlying problems are.”  There will always be people who “shouldn’t have to pay anything for shoes or glasses,” he continued, but for those who can afford such items, long-term handouts make less sense.

As with many mass donation programs, Toms’s donated goods are not customized for the recipient region. And while closed-toe canvas shoes may be suitable in some areas, they may not fit with the weather or fashion demands of many markets. Areas with high rainfall, for instance, would likely be better served with a rubber boot.

The presence of handouts may also prevent local markets from thriving. “If you drive down the price so much that you create disincentives for longer term investments from factory owners, then that causes long-term harm,” said Karlan. Toms disagrees. Sebastian Fries, the company’s “chief giving officer,” believes the giveaways will create “shoe-wearing behavior” among the poor that will eventually result in demand for local markets.  “If we begin to create an environment where shoes are available,” he said, “we hope the local shoe industry will take this up and start selling shoes.”  Once this happens, he said, Toms would consider exiting the community.

Toms rarely provides work to local shoe markets.  With the exceptions of Argentina and Ethiopia, where Toms has local manufacturing hubs, all shoes are shipped from China — a practice critics argue makes the end product more expensive and less environmentally friendly.

Some of these issues can be resolved.  For instance, Toms is actively looking to expand its local manufacturing. “In a year, I’ll be in a different position to tell you where we’ll be locally manufacturing,” Fries said. “That’s a clear goal of mine.”  They are also experimenting with donating additional varieties of shoes.

There are many ways Toms and other B1G1 companies can do better.  The core idea of B1G1 remains a powerful one, as it engages customers in the developed world in a way many philanthropic programs do not.  To be effective, however, the B1G1 program must be designed to be sustainable and consistent with the needs of the developing world recipients.

Many development experts support the idea of selling, and not donating, goods in the developing world. “If you told me the shoes were being produced and sold locally, helping with unemployment in the area, and they were paying good wages and had good working conditions, then that starts to be more appealing as well,” Dees said. “Those kinds of things tackle the underlying problem more.”

If a company does pursue a handout model, Bugg-Levine suggested that B1G1 companies give people vouchers instead of a product.  “If you give people vouchers to purchase shoes from local shoe manufacturers, you won’t distort local markets,” he said. Karlan took this suggestion a step further. “Take the money you were going to spend on shoes, and just give it out,” he said. “The goods cost too much compared to the benefit people accrue, so it’s better to take the money you were going to spend on shipping and turn it into a cash transfer program.”

If a B1G1 company wants to more deeply embed itself in a community, it could also, Budinich of Ashoka suggested, go the distance and develop a low-cost product to sell in those markets.  She compared Toms with Czech shoemaker Bata, which she said revolutionized the shoe industry by mass-producing and selling shoes at affordable prices in over 70 countries.  “Could Toms work with the next Bata of the world?” she proposed.  This kind of collaboration, she said, could have a deeper and longer lasting impact on the world of shoes than handouts ever could.

At the heart of these suggestions is a desire to turn an increasingly popular philanthropic model into a mechanism to positively and sustainably impact the recipients. The ideal situation, said Dees, is when a program can “give a warm feeling” while still “engaging in effective problem-solving.”  With a few changes to the model, some B1G1 companies might approach that.

David Bornstein will return next week.