When I first heard Sam Mazzeo of In Better We Trust speak at a conference a few years ago, I was immediately impressed with his ability to make legalese sound interesting and approachable. I know, what a skill, right?
So, when he posted about cause marketing on social media a while back, I knew I needed to have him further explain it to you as both a lawyer and an advocate of social impact. If you’ve been looking for the one-two punch of a for-profit / nonprofit partnership, you’re gonna want to listen up, and maybe take some notes.
Commercial Co-Ventures may not be a term you’re familiar with (yet), but you’ve certainly seen it in action—and you’re probably dying to give it a try. However, before you jump into this type of committed partnership, read Sam’s take on how to navigate the legal world of cause marketing. Your cause will thank you.
WHAT IS CAUSE MARKETING?
You may not know it, but Cause Marketing, or Commercial Co-Ventures, is all the rage in the social impact space these days. So, what is it?
Cause Marketing is when a for-profit business promises to donate a portion of their sales proceeds from a product or service they sell to a nonprofit organization.
Simple, right? Not so fast . . .
Typically, the for-profit already sells products or services and, by virtue of making a promise to donate a portion of its revenue to a charity, the marketing campaign becomes a Cause Marketing campaign. Meaning, this can happen legally even if you didn’t intend it to!
A successful example of Cause Marketing (that didn’t happen by accident) is the NFL’s A Crucial Catch Campaign, also referred to as “NFL Pink.” This campaign is a joint effort between the NFL and the American Cancer Society to raise money for cancer research and awareness. The NFL auctions game apparel and equipment that bears a pink ribbon logo and sells NFL Pink merchandise. In turn, the NFL donates a portion of proceeds from these auctions to the American Cancer Society. Not only does the NFL gain some positive PR, but the American Cancer Society has also received approximately $7 million dollars from the campaign.
Not too shabby, right?
THE FINE PRINT: REGULATIONS ON A COMMERCIAL CO-VENTURE
Obviously, when a Cause Marketing campaign is successful, both the non-profit and the for-profit benefit financially and in a public relations sense. Cause Marketing, however, does require some compliance and oversight to keep it legal.
In many states, when a business engages in Cause Marketing, the business and non-profit legally become a commercial co-venture, which can trigger various regulations. Marketing language that puts you in the commercial co-venture category includes:
For each ______ sold, we will donate to ______.
Send in five ______, and we will donate $10 to ______.
AKA if you advertise to the public that proceeds will be donated from sales, you’re in the Commercial Co-Venture world, folks!
Many states have implemented regulations on commercial co-ventures in an effort to keep consumers well informed and to ensure businesses do not merely say that proceeds go to charity when they actually do not. Regulations and enforcement vary from state to state, which can present some difficulties and confusion for national campaigns.
Cause Marketing Regulations and Requirements
Generally, the regulations and requirements include:
Registration Requirements: A requirement for the business to register with the state by filling out a commercial co-venture registration form. Generally, annual reports must be filed with the Attorney General of each state.
Contract: In some states, the business and the charity must enter into a written contract with specifically required provisions and file the contract with the state.
Pro California Tip: In California, if you have an agreement in place with the nonprofit, you likely don’t have to register with the Attorney General!
Reporting by Charities: In some states, the charity must file a statement prior to the campaign and include the promotion in its annual reporting.
Accounting: A complete accounting and retention of those records is often required upon completion of the campaign.
Disclosures: The for-profit is likely required to include language regarding the specific amount or percentage of proceeds that will be donated in all of the campaign materials.
Unfortunately for all of you cause-marketers, states vary as to the extent of enforcing these regulations. Generally, the biggest consequence in failing to comply is bad publicity for the for-profit.
For a Goliath like the NFL, bad publicity is pretty easily absorbed. For a growing business or new nonprofit, on the other hand, bad publicity can be disastrous. For example, take the case of a for-profit that was required to contribute additional money to a nonprofit because the language in a campaign was ambiguous or misleading in regards to how much of the consumer’s purchase would be donated. In 1999, Yoplait was required to pay several million dollars in additional contributions to the Breast Cancer Association because of unclear promotion terms.
To sum it all up, find a sweet product that your nonprofit wants to endorse (or find a sweet nonprofit if you’re the for-profit), create a joint campaign that is compliant and discloses the donation percentage, and shout that campaign from the rooftops.
If all goes well, the nonprofit sees an increase in donations and the for-profit sees an increase in sales. It’s a win for everyone!
Still confused? Watch me explain it again in this video.
Sam Mazzeo is a Renaissance man, but like, an approachable one.
Here are some things he can help you better understand: trademark, business formation and securities, contracts, Halloween party planning, how to do a standing backflip, and the proper pronunciation of the word “GIF.”
But he can’t help you if your questions are related to birds. He isn't a big fan of birds.
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I’m Kristi Porter, and I help cause-focused organizations understand and execute effective marketing campaigns so they can move from stressed to strategic. Your resources may be limited, but your potential isn’t. Whether you’re a nonprofit, social enterprise, or small business who wants to give back, I’ll show you how to have a bigger impact.