For-Profit or Not-For-Profit?

So, there are two or three things in the Africa/philanthropy/activism field I’ve been meaning to rant about.  This is one, and at least another will follow sometime.   Since they are rants, I apologize for any rambling or over-impassioned writing. Now, onward to companies I refuse to support.

In the philanthropic world, there are a couple of things that are all the rage.  One, is Toms Shoes. A lesser one is Ethos Water, a sub-group from the giant Starbucks Foundation. I have grievances about these two companies.

Toms Shoes is a for-profit company that’s selling point is this: If you buy a pair of $40-90 shoes, we’ll donate a pair to a needy child in South America or Africa. One for one. It’s that simple, and it sells like hotcakes to hipsters wanting to help.

My beef with Toms Shoes has several dimensions to it. When I first  heard about Toms Shoes, it was because my friend Mike was explaining his grievances to an Invisible Children roadie. Since then, I’ve looked more and more into the company and have come to pretty much the same conclusions as Mike.

  • First of all, giving shoes to kids is just not sustainable. When that pair of shoes wears out, they’ll just be waiting for the next trip Blake Mycoskie makes with free shoes. It’s be much better if community development helped empower people with jobs and maybe they could buy their children shoes themselves.
  • But the company is giving away shoes! That’s so genuinely kind of them! NO.  Since it’s a for-profit company, they don’t release credible numbers. But we do know that they outsource production, meaning these $40-90 shoes probably cost a fistful of dollars. The positive press they get for giving cheap shoes away more than makes up for the loss.
  • Want to make this a better model? Make the shoes fair trade. Employ locally here so that American parents can buy their children shoes; or  even better, employ on-site, so that  the local residents get jobs and their children get shoes. Maybe give them some personal finance lessons so that now they’re kids can wear those donated shoes to school. There are so many roads to improvement, but they cost this altruistic for-profit too much money to consider.
  • Youngsters wanting to be a part of something truly good volunteer to work for Toms or to promote the company in places like college campuses. As my friend Mike put it, it’s like Nike having volunteers. A company uses its “good deed” which doesn’t really cost it anything and it gets free promotions and even some free labor out of it, so giving shoes away in Argentina actually saves them a lot of cash.
  • Also, the shoes look okay, but those boots are hella freaky.

Ethos Water is that bottle that you see in Starbucks stores that boasts, right on the bottle in blue letters, “helping children get clean water.” For every bottle sold, the company donates $0.05 to a water-related aid agency that is helping some of the billion people without clean water get clean water.

My gripe with Ethos Water is probably even greater than with Toms. It is also multi-faceted, and I was introduced to my problems when standing in a Starbucks one day waiting to meet a friend. I picked up the bottle, read the label, saw the price, and just about kicked somebody (maybe Peter Thum).

  • For starters, each bottle ranges from $2-4. For one bottle of purified water. I could buy a 24-pack of bottled water at Fry’s for about $3.50. The equivalent in Ethos would be about $100, of which $1.20 would go towards real change-makers. Or I could buy said carton of bottled water and donate $96 directly to programs.
  • With all this eco-friendly craziness going on, you’d think they would at least be good in that regard. Even though it’s made by Pepsi Co, who uses recycled plastic in all their bottles – Ethos Water doesn’t. They introduce new plastics into the world.
  • Starbucks bought Ethos Water for $8,000,000. To date, Ethos Water has donated $6,000,000. That’s just a fun fact.
  • Another fun fact: one could donate $100 to Charity Water and do some good. To get $100 to affiliated groups through Ethos Water, you’d have to buy 2000 bottles, or spend $4000-8000 dollars. And you would be creating all that  plastic waste in your wake.

Now, I don’t mind for-profits that send a little to a charity, like when Yoplait collects yogurt-tops for Breast Cancer awareness (my grievances with the Breast Cancer awareness cause [re: industry] aside) or others. These are companies choosing to send a portion  to a cause. I don’t support companies founded on pathos and espouse this cause and misuse the disadvantaged to get your cash. My favorite, of course, is the non-profit sector. These non-governmental organizations actually do work, and many are transparent about how their money is spent. Not all are ethical, many have too much overhead (but that’s a blogpost for another day) but they  at least have a mission statement and are  restricted by NGO requirements.  So, if you feel like giving shoes to kids or building a well in a rural village, do it in a better way please. Or just don’t tell me about it.

EDIT: All links should be fixed. Sorry, I’m forgetful about HTML rules.

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18 thoughts on “For-Profit or Not-For-Profit?

  1. I think Tom’s shoes are ugly as sin, and it never made sense to me that wouldn’t just donate shoes (regardless of how many hipsters buy them) if they actually meant terribly well.

    But I LOVE charity:water. Their work makes me so happy, even when I can’t afford to donate to them.

  2. You’ve got the idea, Scott! Couldn’t agree more. A zillion more gripes against not just Ethos but the entire bottled water industry can be found here: http://asu.edu/yourtuition/documents/ASU_FY11_Tuition_NRUG_exec_summary.pdf

    Also, can you pretty pretty please go to http://lib.asu.edu and go to the library catalog/book search and type in “encountering development escobar” and read at least some of it and form a good argument about why we should push for international development, when the industry at its best (grassroots community development) is still, for lack of a better word, bad?

    No seriously — the postdevelopment school has sent me into a deep hole of existential despair and I need an anecdote! I trust in you + your perpetual optimism + your unstoppable intellect.

    In the meantime, I am trying to dig up the transcripts from a Berkeley anthropology course that my mom sent to me about the marketing of do-gooding and the consumption of poverty… you should really read this. Hang tight.

    You’re brilliant — keep writing!

    • I’ll read over some of that and get back to you – right now, I’m going to say that the development industry has problems but isn’t the problem. The problem is how it’s implemented and how non-profits fare against for-profits. Good work still needs to be done by people for other people, and there’s nothing that can make that untrue.

      Stay the course, Heidi, and the development world will begin to right itself. I truly, honestly believe that. Maybe it’s that perpetual optimism speaking through me, but I think people should help people and eventually they’ll do it right, even if there are others doing it wrong. Hopefully you run into the right kinds of development while you’re in the Corps :)

      • Thanks Scott. I used to think that until……
        …..Read Escobar (and a lot of other people’s books but that’s the only one online) and then get back to me!!

        Also, I just realized that in my comment I wrote “anecdote” when I meant “antidote.” WOW my brain is misfiring a lot these days :)

        Thank you for the good vibes! I hope the same thing for Peace Corps. And you keep on fighting the good fight — let me know if you need any help with Harry stuff… like I said, I can link you to people who can be helpful.

  3. Hey Scott

    We totally appreciate your time in looking more in to TOMS. We want to clear up a few points you made.

    “… giving shoes to kids is just not sustainable.”

    We’ve seen with our own eyes the dependency that some kinds of free aid can cause, but we don’t believe that all aid can be labeled as such. First of all, we’re giving shoes to children only – they are most likely by far to be barefoot, because their families simply cannot prioritize shoes for children in their very limited budgets. And we give them with the goal of helping children achieve some independence – being free from debilitating diseases, and having access to a good education. Other goods play similar roles: A few years ago, the World Health Organization backed the free distribution (rather than sale) of mosquito nets, stating that free mosquito nets are proven to save lives, and that protection from malaria should be a basic right. (http://www.washingtonpost.com/wp-dyn/content/article/2007/08/16/AR2007081602256.html) We take a long-term view: unless children are healthy and free of major diseases, they cannot get educated, cannot become productive adults, and cannot contribute to economic growth and help the entire community become more self-sufficient.

    Regarding local shoe-makers and shoe-sellers, our NGO partners around the world understand we do not want the shoes we give to have negative impacts on local economies. One important step is working with partners to identify children who would never otherwise be able to afford shoes. We recently had a conversation with an NGO who told us that 95% of the school-age children where they work have hookworm and/or schistosomiasis, and that NO children’s shoes are sold in or near those villages because there simply isn’t a market for it.

    And yes, children will grow and wear out their shoes- it is for this reason that TOMS partners with those organizations that can reach the same kids once their shoes wear out or they grow out of them. We work with our partners to send “replenishment” shoes on a regular schedule.

    “A company uses its ‘good deed’… and it gets free promotions and even some free labor out of it.”
    “…they outsource production, meaning these $40-90 shoes probably cost a fistful of dollars.”

    Since TOMS was never intended to be a charity, turning a profit and proving that a business can be scaleable and sustainable- even with giving at is core- was absolutely Blake’s goal. And we do rely on word of mouth and sharing of the TOMS story to grow the business. We strive to be authentic, approachable, and transparent with our customers and fans, which has therefore inspired so many college students to get involved. Our interns, for the record, are paid. They are a crucial part of TOMS and we also feel the real-life experience they gain by having major responsibilities at a growing company is invaluable.

    In regards to the cost of the shoes, there is more to the story than simply the production. The give away shoes have to be shipped and distributed. We have a giving department that works tirelessly to ensure we are working with the best partners to get the shoes to the children who need them. And once all of those costs have been considered, we also have to cover the normal operating expenses of any other for-profit business.

    We welcome questions and concerns about TOMS because it gives us an opportunity to discuss anything we haven’t yet made clear. We hope this information gives you a little more insight on the One for One model and what we do every day.

    Thanks!

    • Caitlin,

      Thank you for taking the time to respond to this blog post. I appreciate an organization that is willing to address criticisms. However, I think we fall on opposite sides of the spectrum on aid models and involvement.

      I feel that giving to children is even more likely to foster dependency among locals, because they are not given the chance to be more independent. And the argument that shoes are a good that parents cannot provide due to strict budgets just doesn’t hold up, as many extremely impoverished families spend money in the same proportions as the poor, prioritizing community involvement and other expenditures over things such as buying shoes. They simply do not think it is a necessary item. (This is addressed in “The Economic Lives of the Poor” by Abhijit Banerjee and Esther Duflo).

      The health argument holds some ground, but not much in my eyes. Your comparison of diseases is just not balanced. The TOMS website says it fights soil transmitted diseases, but the only one of which that is transmitted by larvae entering the skin (as opposed to oral consumption) is hookworm (which you mentioned in your comment) which does affect many people (740 million currently according to WHO), but even WHO says this usually results in diarrhea, weakness, and anemia. Meanwhile, malaria led to over 860,000 deaths just in 2008. I just don’t think the two compare. The educational obstacle to children without shoes is unfortunate. However, why give shoes to potential students when you could work with local schools to address the issue.

      I was not saying that TOMS is putting local shoe-makers out of business. What I meant was that TOMS was missing out on a great opportunity to train and employ the myriad unskilled workers in some of the regions where your One for One movement is in effect. This wasn’t a criticism so much as pointing out a missed opportunity. I think that there is potential to teach the unemployed a new skill and give them economic empowerment; you could even have cyclic employment to ensure that you are reaching out to an even broader number within the community before allowing them to take their hard-earned money and financial training and becoming local entrepreneurs.

      Sending “replenishment” shoes just reinforces the lack of sustainability in the process. Even if the families incomes grow, why would they spend money on shoes if they knew a new pair were on their way? It just doesn’t empower the people to help themselves, it casts them as incapable, needy targets.

      You say that your business tries to be transparent, but I cannot find on your site just how much overhead there is in the shoe-selling process. Yes, shipping and distributing have their expenses and you’re right, I didn’t include this. I’m still curious as to how much that contributes to the cost and I don’t see that. But, going back to the type of model I would prefer, you could try to find materials locally (minimizing shipment costs) and employ local workers to build the shoes, stimulating the local economy and allowing you to leave the area sooner and move forward to benefit other areas.

      Again, thank you for taking the time to respond to my blog. I am simply not a supporter of the model of a for-profit founded on charity.Some follow your approach and some follow a partnership basis; some work for grassroots NGOs while others are completely laissez-faire with aid. We each do our part, I just don’t agree with TOMS’ model. We’re just on opposite sides on what we think are the aid sector’s models.

  4. I find it interesting that someone who is not poor can be an expert on what it is to not have shoes, and the solution to the problem. My family is from Haiti. TOMS supported NGOs in Haiti to get shoes to kids in 2009 and this year after the earthquake. Many of those children and my family members ran out of their homes without their shoes when the earthquake hit. In Haiti, Children are not a priority. Goods, clothing and food goes to the father first, then the mother and finally the children get left overs if there are any which most of the time there are none.

    I recently attended a meeting with the largest manufacturers of Haiti, the US ambassador and the Government of Haiti. Haiti does not have the capability to manufacture shoes. The only manufacturing is Tshirts (Hanes, Gilden, Old Navy Tshirts are all made in Haiti) because the resource cotton can be imported cheaply into Haiti. Your argument that 3rd world countries can somehow support shoe manufacturing is ridiculous. Haiti does not have the natural resources to manufacture footwear. If they imported everything needed to make a pair of shoes, those shoes would cost $200 -$300 which is the yearly income for a person in Haiti. Many African nations are in the same boat.

    Your argument means nothing to the kids of the world who now can read because they got shoes from TOMS. Let me ask you this. How many kids have you personally helped. Before you cast any stones at TOMS which has given 600,000 pairs of shoes ask yourself this…how many poor people do you know and have helped? Idealistic business models are great, new ideas is what makes the world progress. Attacking a business that is changing lives is ignorant. Your argument is like telling the government to not give out food stamps because it causes people to be dependent. So using your insightful argument, in this similar scenario you would then say that the better model is to let kids starve while the government should use the food stamp money to train their parents….. but the kids would still go hungry in the short term and possibly die of starvation. Which is why your theory is ridiculous. I could name anytype of giveaway and come to the same conclusion (Dont give free clothes to Goodwill, the people that shop there are too dependent on inexpensive hand me downs and will get used to not paying full price for clothes, Dont help habitat for humanity, those recipients should build their own houses and should stay homeless in the snow or rain orr sun while they learn the skillset of carpentry)

    TOMS is doing more than just giving away shoes, they are educating the poor on the importance of shoes and hygene. They are showing kids how to wash their feet. I bet you take a shower daily, because your educated mother told you to when you were a baby. Some kids don’t know they need to keep their feet clean or they can get Podo or other foot diseases.

    Check out the today show footage from April 8th on TOMS Shoes they mentioned on the today show one mother had only 1 pair of shoes between two kids. Her kids had to alternate days of going to school, both could not attend school on the same days since they had only 1 pair of shoes between them. With TOMS now both her children can go to school at the same time.

    • Kelly,

      I appreciate that you took the time to comment on my blog and defend your position on this issue. What I don’t appreciate is the number of assumptions you have made about my personal life. Before I respond to your evidence-based argument, I’d like to do something I normally don’t do – lend personal attacks a response:

      Despite not knowing anything about me except what I blog about, you are right: I am not poor. I live a fairly middle class life. I grew up in the public school system (albeit a montessori) and have been employed on-and-off since I was 15. Also, I never tried to portray myself as an expert on this or any other topic – this is a blog in which I list my thoughts and opinons. Also, since you brought up your Hatian heritage – my family emigrated from Southeast Asia – my grandfather left China when the Communists took over, and he and my grandmother were forced to flee druglords in northern Burma, my mother grew up in Thailand and Laos before finally making it to America. Does this give me more insight in the field of human rights and repatriation? Maybe, but it certainly doesn’t make me an expert.

      As for your blatant personal attack: “how many kids have I helped?” Even as a child, I have been involved in helping my community. I have been raising money for years to help rebuild wartorn schools in northern Uganda. I don’t know exactly how many students, mostly former night-commuters and IDPs, have benefited from that along with the scholarships and mentorships my donations and fundraising efforts have helped. Last year I helped raise money to build a sustainable school for women and girls in Malawi. I have made conscientious purchases that empower people financially through Invisible Children’s Bracelet Campaign. For the past ten months, I have been lobbying members of Congress to pass the LRA Disarmament and Northern Uganda Recovery Act, which will help the effort to bring Africa’s longest-running war to an end. This has the potential to bring home hundreds of abducted child-soldiers and allow hundreds of thousands of displaced people to return home. Beyond my activist efforts there, I am also studying to be a teacher. In the past six years, I have worked closely with students in seven different schools of varying socio-economic statuses. I’d like to think that I’ve impacted lives in one way or another. And just to make sure I do, this summer I will be in Uganda helping with AIDS education and women’s empowerment.

      On a less important and perhaps moot point, I actually don’t shower everyday, just some days (despite my educated mother’s teachings). I can’t justify showering everyday because I don’t always get filthy enough to warrant one living a mediocre, middle-class lifestyle.

      But that’s enough about me. Moving on to some of your perhaps more valid points.

      I don’t know too much about the breakdown of family choices in Haiti specifically, however the article I refered to in my comment to Caitlin from TOMS outlines that many poor families could spend more on essentials but choose not to. Yes, this study was probably carried out by upper-class economists. That’s up to you whether or not you lend their study a grain of salt. And I’ll try to reiterate my point regarding local shoemakers. Whether or not there is a shoe-making industry in the target countries, I was simply saying that TOMS has missed an opportunity to bring that industry into these countries. I surely don’t know how feasible or costly an endeavor like that might be.

      I agree that new ideas help the world progress. I am a strong supporter of progressive thinking to help end the world’s problems. I quite simply do not believe that for-profit companies founded on such ideals are as helpful as they portray themselves. While I disagree with TOMS’ unsustainable handouts of shoes, I disagree more with the fact that TOMS is a for-profit entity. Goodwill, however, is not. It is a non-profit group that tends to hire disadvantaged workers, lending consumers a chance at cheaper goods and providing some with economic empowerment. I am not too familiar with Habitat for Humanity, but my understanding was that neighbors help neighbors build houses until an entire community was built – teaching skills and providing shelter at low cost. According to their website, participants must pay down payments and monthly mortgages as well as contribute “hundreds of hours of labor.” And these houses are sold for no profit, and the monthly mortgages go towards building future houses. I support that because, as their website says, “Habitat is not a giveaway program.” (http://www.habitat.org/how/factsheet.aspx). In addition, I do not support the food stamp program as it stands. Yes, some people need relief. This relief should come with incentives to find work and get off the program rather than fostering dependency on it.

      Educating people about the importance of hygiene and clothing is very, very important. I don’t think this needs to be co-opted by a business gaining a profit from its mission. I hope that clears up my points on the issues of sustainability and the “for-profit charity” model.

      • My comments about specific charities were to make a point, I should have just used charity x or y because It does not matter what the organization is whether its for profit or non profit. The end result to any charity winds down the same road with the same goal which is to help someone in need for free. I think my last comments were a little high level so i will break it down in laymens terms. You were told at least once in your life about personal hygene. Whether or not you choose to follow your parents teachings is your perogative. 40% of the kids in the world were never told about hygene ever, Lucky you that you were one of the 60% lucky ones. Most kids in haiti live within 5 minute walk to the ocean or a river. The poor kids who have not been told about personal hygene have no idea that if you walk 5 minutes to the sea, you can wash your feet in the ocean. They don’t have the luxury of choosing to not take a bath and they have no idea about the repercussions of not doing so.

        From your response you have raised funds and assited organiazations in raising funds, so sure you have helped people through organizations with tons of overhead so the actual percent of the funds you raised depends on how well run the charities you worked with were. but it seems that you have not personally assisted a child in a 3rd world country by looking them in the eye and asking them what they need to get through the day. I have been to 3rd world countries and have done so. You should ask your family who relocated if they would refuse a gift that would ensure they got educated.

        When someone is poor their main concern is how to make it through the next few hours, then once they make it through those hours, thier next concern is how do they make it through the next day. I have raised hundreds of thousands of dollars for multiple charity causes. It is easier to understand the needs of the poor when you talk to them and move amoung them in solidarity, not from a comfy middle class home in the usa. From my experience of not only going to a 3rd world country and putting clothes on the backs of kids in rags to protect them from the elements to giving about 30% of my salary to causes in both the usa and oversees, like i mentioned in the beginning of this post, the goal of charity is to help those in need. I would rather buy a shoe that helps someone then buy a pair of converse that doesn’t do anything but put profits in a rich company….but thats just my opinion.

        Another example of a charity I have worked with…VH1 is a for profit company. But they also have a non profit called the save the music foundation where they donate millions of dollars each year so poor kids can have access to music education. Should i stop watching my favorite shows on VH1 because they are a for profit company? Walmart is one of the biggest charity donors in my community of Los Angeles, but its a for profit company. Target, Home Depot, you name it almost every major company has huge charity divisions. They may not advertise their giving as widely as TOMS but they all do it. Does that mean that i should stop going to Target because they are for profit? Tons of companies that are for profit have huge charity divisions. If you look around your home on all the items you purchased are most likely from for profit companies, I bet the majority of what you own are from companies that have a charity side to them too. I know the CEOs of tons of organizations who are afraid to mention their gifting because of feedback from comments similar to your blog. Its easier for them to quietly give and coordinate charitable causes in secret which is a shame because awareness and publicity is a key factor is solving things. Ashton Kucher took it upon himself to educate people on what giving a simple mosquito net can do. Giving money direct to causes is not the only answer. It was interesting in the Today show footage I saw yesterday, Blake could have donated 40,000 pairs of shoes by giving cash to a number or organizations while he was on vacation. Instead he invested his money in creating TOMS and has given away 600,000. And just to end this interesting debate on a thoughful not, TOMS has a non profit called Friends of TOMS which coordinates giving the shoes, so on the flip side you could say TOMS is a non profit that also has a for profit division which is what many major organizations from Walmart, to Ralph Lauren.

        • It absolutely makes a difference whether the giving entity is for-profit or non-profit, just like it absolutely makes a difference how sustainable the program is. While many non-profits do try to slip funds under the category of overhead, many non-profits are more transparent than for-profit entities. Operating on the donations and grants of others, NGOs often have to be transparent to ensure a continuous flow of future contributions. Meanwhile, for-profits can (though some do not) hide their true financials. A project that is sustainable allows for the recipients to retain ownership over the project. It also allows the donor to move on to other programs or similar programs in other areas since the original program will become complete or continue under self-sufficient means. I make sure that the groups I support do not funnel funds through overhead and that they make their word as sustainable as possible.

          I made this clear both in my original post and in subsequent comments. There is a huge difference between established for-profit institutions that decide to give back to their community and companies founded on “giving” in order to apply pathos to their company mission. All of the examples you gave were long-time for-profits that decided it was high time to give back, and I support that. Were some of these decisions made to try to garner sales? Sure. Plenty of companies have bandwagoned their way into the Pink Ribbon consciousness and other growing movements, maybe with selfish intentions. I don’t support this, and it can definitely be difficult to determine where the line falls. On the flip side, I also do not support companies based in charitable work but are actually for-profits. Whereas some companies have a product that they sell, and then turn around and give profits to a cause, this new model masks its product as the cause. In my eyes these are different, in your eyes they are not.

          As far as your comment, whether high level or in laymen’s terms, I understood and agreed. I said specifically that education about these topics is very important. As a future teacher and a progressive thinker, I believe that these are things everyone needs to learn. I reiterate: I do not think this needs to be coupled with unsustainable handouts. One can teach and help, and thereby promote ownership, without giving gifts and fostering dependency.

          Buying TOMS is definitely far more impacting than any other shoe purchase. No other shoe company I know about has such a strong giving campaign. It’s simply not the type of impact I would endorse, which is why I originally wrote this blog post – to state my opinion. I was not calling for a national boycott or organizing resistance to the industry – I simply stated my opinion on two for-profits that were founded on the principle of giving.

          I do not know much about the difference between Friends of TOMS and TOMS, but I do know many companies have separate entities oversee their philanthropy. However, this goes back to my argument about differences between for-profits choosing to give back and for-profits founded on the concept. I imagine the two entities came about around the same time, with one selling shoes and one giving shoes. It immediately used pathos to grab the attention of potential do-gooders. Meanwhile, major corporations often open charities after already being established, and often doing work in different capacities. As you mentioned, this is often done behind closed doors – it is not used to raise awareness of philanthropy, which is regrettable, but it is also not used to promote business under the pretense of giving.

          I find it interesting that you acted as if I could not understand the lives of the poor because I was not poor (even though you did not know whether that was true or not), yet you clearly have the means to do some great work from meeting with high-level officials to raising huge amounts of funds for charities. Before you had these opportunities, would it have been fair to lob such accusations at you? No, I have not lived among the poor – that does not mean that I am not standing in solidarity with them. I don’t think I need a direct, face-to-face connection to people to be able to understand their plight and be able to help them. How would I get to the point where I could make such a connection without first caring and being touched? I hope to gain that connection as soon as possible, but I don’t see it a prerequisite to having opinions and being helpful.

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