By Josh Caplan
In a time where the global economy is still reeling from the effects of the greatest economic crisis since the Great Depression and tension between socio-economic classes are running high, capitalism is undergoing an examination. Is this economic system -- which, according to Whole Foods CEO John Mackey, has in the span of 200 years shrunken the number of people living on $1 per day from 85 percent to 17 percent -- too flawed or in large part obsolete?
This is not the correct question, even though it is asked daily by academics, politicians, businesspeople and thinkers alike. I am of the view, like John Mackey, that capitalism requires not a structural reformation, but a philosophical rewiring. Companies like Toms Shoes and Warby Parker are leading examples of how businesses can become successful while taking on specific issue areas where leadership gaps exist.
Lifting the “hood” on the issue of how companies fulfill their higher purpose is perhaps more substantive of a topic than why a specific issue area is of interest to the company and its founders. Culture is an invaluable trait of any successful company, but strategy is the bridge between dreams and reality. So, what are the two chief corporate social responsibility (CSR) strategies that companies execute?
The first model is what I call “Horizontal Corporate Social Responsibility” or HCSR. Drawing on traditional business-speak, horizontal integration is a strategy where a company produces corresponding production units. A form may diversify by growing horizontally in order to leverage the acquired company’s capabilities to their advantage. The “acquired” generally keeps its corporate identity, functioning as a conditionally-independent company. HCSR is commonplace, especially when it comes to Fortune 500 companies, where the majority of their “corporate citizenship” derives from donating money to nonprofits. In such a case, the company is “acquiring” the skills of the nonprofit by supporting it financially, using the recipient as a tool to fulfill its higher purpose.
Warby Parker is a fitting example of a HCSR strategy. The fashion- and technology-forward company has distributed more than 1 million pairs of eyeglasses to those in need. The New York-based company carefully uses the word 'distributed' because it supplies eyewear to VisionSpring, which, in turn, sells them to “vision entrepreneurs." These entrepreneurs sell stylish, ultra-low-cost frames to lower-income buyers. Akin to a company leveraging the resources of a company it has acquired, Warby Parker is leveraging VisionSpring’s infrastructure on the ground. This is a transaction like any other, where Warby Parker donates glasses in exchange for fulfillment of its social mission using VisionSpring distribution channel.
The second model is “Vertical Corporate Social Responsibility” or VCSR. The definition of vertical integration is the process in which numerous stages in the development and shipment of a product or service are managed by a single organization. Toms Shoes, a pioneer of the one-for-one model, has built infrastructure overseeing the supply chain from manufacturing to distribution. Notably, Blake Mycoskie and co. placed the first 10,000 pairs of shoes on the feet of Argentinian children, themselves. Through the company’s “Friends of Toms” non-profit organization, the social enterprise conducts “shoes drops” through the developing world. The organization gives people inside and out of the company an opportunity to fulfill the company’s higher purpose. It should be noted that TOMS also maintains a program, called the TOMS Giving Partner Program, where the shoe company hands off shoes to organizations to distribute the shoes. The mission of the “Friends of TOMS” organization is at the core of their social purpose. “We place the shoes on each child’s feet so that we can establish a connection, which is such an important part of our brand” says Blake Mycoskie. This model drives increased levels of internal collaboration, where a pooling of resources is undertaken, instead of leveraging the skill-set of multiple organizations.
As Founder & Chief Activist Officer of Tea of the People, an innovative tea company on a mission to drive the tea space in a healthier and more socially conscious direction, much thought was put into formulating our CSR strategy. We chose a HCSR strategy because, like most startups, we are operating under financial and human capital constraints. Tea of the People supports game-changing entrepreneurs and nonprofits leveraging scalable technologies because, simply put, these organizations are the best at what they do.
This December, we are giving a portion of our profits to Medic Mobile, a nonprofit using SMS technology to advance healthcare in the developing world. Blake Mycoskie built out a vertical CSR strategy because he knew of no other organization that existed doing what he set out to do. Neil Blumenthal was the second employee of VisionSpring and believed whole-heartedly in his former employer's abilities to execute. If such weren’t the case, perhaps Warby Parker would be using a VCSR strategy today.
In the end, when selecting the right type of strategy for your company, ask yourself this fundamental question: What is the most impactful way to put a smile on someone’s face? The question favors quality over quantity and focuses more on the “how” instead of the “why." Tea of the People has a broad spectrum of causes we care about, such as poverty alleviation and education, yet when it comes to criteria, we give solely to those with tech-driven solutions. Whichever one you employ should be gentle to your bottom line and maximize the level of impact of your company’s higher purpose.
Josh Caplan is Founder and Chief Activist Officer for Tea of the People.