Startup Life/How To/ How to give back Here's how companies can make giving back to social causes a core part of their company strategy By Anisah Osman Britton 23 December 2022 \Startup Life Which SaaS products are getting cut? By Tim Smith 22 February 2023 Startup Life/How To/ How to give back Here's how companies can make giving back to social causes a core part of their company strategy By Anisah Osman Britton 23 December 2022 Christian Kroll is the founder and CEO of Ecosia, a Berlin-based search engine that uses its profits to plant trees and give to initiatives solving the climate crisis. He believes that companies should be judged on what they could be doing, not on what they are doing currently (which is often the bare minimum). In our Startup Life newsletter, Christian gave us his top tips on doing good, better. Follow a “maximum approach” Most companies follow a minimum approach — they only give back a small amount in order to avoid criticism or to greenwash their marketing efforts. Instead, make a significant financial contribution to causes and organisations working on important social issues like the climate crisis. How much you give shouldn’t depend on the stage of the company; you should give the most you are able to give. Doing good should be written into your legal documents Social and environmental impact needs to be central to the company’s mission and decision making processes — not just a side topic for the marketing department. Legally structure the company to explicitly prioritise giving back. Ecosia’s company documents commit 100% of its profits to climate causes. Patagonia has recently taken a similar approach by legally changing its structure to prioritise giving back over profits. You could, for example, write into your company’s legal structure that you are going to have a one for one model — you will plant a tree for every purchase — or you will pay everyone a living wage instead of a minimum wage or you’ll donate 10% of your profit to a specific charity. You also want to make sure that enough is going back into the company to invest in innovation and growth. Create a stewardship model In 2018, we handed the stewardship of Ecosia over to the Purpose Foundation — an organisation that shifts company ownership and control away from a few shareholders, to the community, employees and the environment. You can create a legally binding commitment that states your company shares can’t be sold at a profit or owned by people outside of the company. There are many ways of doing this — depending on the jurisdiction your company is set up in — and can be done at any point in a company’s lifecycle. It can be an extremely expensive and complicated process to set up the legal and tax structure so work with lawyers who’ve done it before or an organisation like the Purpose Foundation to simplify the process and keep you out of trouble. Rethink what success and wealth looks like As a founder, you want to make sure that the company is working for you, personally. Brainstorm what it is you want and how much it is you need to have that life — it doesn’t need to involve yachts and fast cars but you still want to ensure you have freedom — and don’t take more than that. If you need investors, be careful who you have onboard Do they agree with your social responsibility model? What power are they asking for? Does this align with your core values? Are there alternative financing models that would support your goals better? If you want to use company money to give to social causes or move to a stewardship model, institutional investors that want to maximise their returns may use their voting power to block these decisions. Instead, look for angels who care about certain causes and are happy earning a smaller multiple on their initial investment and ESG-focused investors would also likely be more open to investing in a company with this kind of aim. When Ecosia became a steward-owned business, it was a lot easier to make the legal transition because we had the backing and support of our one and only investor who allowed us to buy him out— we returned his initial investment with interest. In your agreement with investors, you can add a clause that says how and when you can buy out shareholders. Getting around regulation Local regulation can determine how much you’re able to donate to causes. Although laws like this were created to avoid tax fraud, a maximum limit on giving is counterproductive. Lobby your political representatives to change this. In the meantime, get around it by having service contracts with social initiatives. On the subject of… giving back 💵 Exit to purpose. What can startups learn about Patagonia’s move to distribute all of its profits to those working to protect the environment? 😇 Impact before profit. Instead of focusing solely on maximising shareholder value, we need to champion new models for business. 📈 Put sustainability at the core of your strategy — and convince your key shareholders by putting forward a solid financial case. 😎 Giving back is your competitive advantage. More and more consumers want to make a positive contribution through conscious consumption and are willing to pay a slightly higher price for a product that doesn’t harm the environment and treats everyone fairly and with dignity, says soft drinks brand ChariTea. 👉Not sure where to start? Social media scheduling platform Buffer shares five examples of how small businesses are doing good in the world. Anisah Osman Britton is coauthor of Sifted’s Startup Life newsletter, which comes out weekly on Wednesdays. Sign up here. Related Articles Innovating for net zero? 4 roadblocks organisations face, and how to overcome them Sponsored by Pollen8 Click here to read more What does Kwasi Kwarteng’s mini-budget mean for UK startups? By Amy O'Brien Click here to read more 2020: The year in data By Bill Leaver Click here to read more 18 Ukrainian tech leaders to follow on Twitter By Kai Nicol-Schwarz Click here to read more Most Read 1 \Healthtech Is Daniel Ek’s new body scanner worth the hype? 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