Making money and doing good need not be mission impossible

Since launching her fashion brand in 2014, Molly Gunn has given more than half a million pounds to charity. “Sometimes you do your accounts for the month and think, ‘Woah, that’s a lot of money; there’s £30,000 that I’ve given to someone else.’

“But what would we do with that money otherwise? It would feel a bit soulless to me if there was a big pot of profit and there were still people needing help around the world and I wasn’t doing anything to help them.”

The presumably ironically named Selfish Mother donates £10 from every sale of its £30 T-shirts and £50 sweatshirts to a group of charities, from Women for Women International, a small non-governmental organisation that helps women in countries affected by war, to groups such as Save the Children.

Running a successful business while donating such large amounts of money has not been plain sailing. Selfish Mother has reduced its donations from an original amount of £15 per sweatshirt and recently raised the price of its sweatshirts by £5, responding to the rising costs that have followed Britain’s vote to leave the European Union.

Ms Gunn, 39, says: “I can’t blame everything on Brexit, but with costs going up, it’s been very, very hard to balance the books and to ensure we’re giving a good amount, while also producing a good garment.” She runs the business with her husband and they both take a salary of £42,000 a year. “We need to pay staff and pay the warehouse and production bills and have a fully functioning business, as well as donating to charity. It’s definitely always a bit of a juggling act to make sure that the model works, but there is enough. This wouldn’t be the business I would want to run were it not helping others.”

Ms Gunn is not alone. A recent government report identified more than 123,000 of what it called mission-led businesses in the UK, with a combined turnover of £165 billion, just over 4 per cent of the economy. Noting the difficulty in defining these companies, it settled on for-profit businesses “that have a genuine commitment to a wider social and environmental impact”.

The report put the growth in mission-led businesses down to “increasing expectations for business to adopt a responsible role in wider society” and to the internet, which has forced companies to be more open about what they do at a time when trust in business is weak.

Ms Gunn says: “It feels like a very Eighties concept that business is about greed and profit; it’s just some fat cats that are getting all the money. Actually, new entrepreneurs are thinking of ways that they can incorporate giving into their business model.”

On top of the helper’s high associations with altruism, there are business benefits to charitable giving. Stuart Lisle, 51, tax partner at BDO, the accountancy practice and business adviser, says: “There is a halo effect for the brand. It gives them opportunities for PR around the giving. It attracts a customer base that also sees that their money is going to do more than just fill the pockets of a corporate.”

Last year, Cat Gazzoli, 39, launched Piccolo, a baby food brand that donates 10 per cent of its profits to food education, via the National Childbirth Trust, and a separate charity she set up to deliver nutrition workshops for low-income parents. The company achieved sales of £2 million in its first year of trading and is on track to double that this year.

Ms Gazzoli says that Piccolo’s customers are attracted to the brand because of its charitable giving. “I believe that, especially in the baby and parenting space, people change as consumers and realise that the purchasing decisions they make can influence the world to positive social outcomes.”

The work done by Piccolo’s associated charity feeds back into the company. “Overall, it helps us to be a better company. Listening to what people are going through as new parents, not understanding the food landscape. My co-founder delivers a lot of these classes as our nutritionist. It’s good for us to stay glued to what’s happening in the world.”

Customers who feel that they are supporting something good tend to be more loyal, Ms Gunn says. “People who are into what we do seem very connected. It feels like we have a tribe of like-minded parents who believe in what we do.”

They are also keen to broadcast their purchasing choices, perhaps in an act of “virtue signalling”. Ms Gunn says that this means her customers do Selfish Mother’s marketing themselves. “A big part of our business is social media sharing. People are much more prone to share a photo of themselves in a garment they’ve just bought in the name of charity. It’s almost like guilt-free social sharing.”

‘It attracts customers who see that their money is going to do more than just fill the pockets of a corporate’

She and Ms Gazzoli say that the charitable sides of their businesses are what motivates them and their teams. Mr Lisle argues that this is one of the key business benefits of charitable giving. “It attracts a certain type of staff that have the same passions. It does build staff retention because people love doing what they are doing because of the output, which is to support the charities.”

However, there is another downside to these organisations, in the form of the administrative burdens involved in charitable giving. According to Ms Gunn: “At the moment I feel a bit guilty because so many people apply to us and I’m basically putting that on the back burner because this could be one person’s job, looking at charity applications and working out how to support them.”

Companies that broadcast their charitable giving open themselves up to criticism, too, Mr Lisle says. “People look for reasons to challenge and criticise, so [these businesses] have to get it all absolutely right. That costs a lot more and takes a lot more effort to make sure that there are no chinks in their armour with regards to their PR.”

Ms Gunn says that extends to her personal life and she and her husband thought carefully before buying a new car. “We both decided that even though my husband’s dream is to have a convertible Porsche, probably him driving around in a Porsche and then us giving to charity wasn’t a good mix.”

A capital idea? Not always
Giving large portions of a company’s profits away will limit the funding options open to entrepreneurs (Josephine Moulds writes). Rob Kniaz, 38, founding partner of Hoxton Ventures, says that it is something he sees regularly in companies seeking his investment, but he would not fund a business that pledged a portion of its profits to charity.

“It’s not really compatible with venture capital, at least not as it’s practised today,” he says. “Start-ups are generally run with a view that every dollar invested is going to growth and as VCs we have a duty to invest our own investors’ funds towards this growth.”

He views the practice as a largely ineffective marketing tool. “I take it in the same way as any other profit-and-loss cost. If you’re thinking from a financial standpoint, is that 1 per cent going to pay back in terms of extra users? I’ve never seen any evidence that that recoups its cost.”

He says that his experience is with technology companies and it would be different for other sectors. “If you have the cashflow, to dedicate a small portion of that and give that to charity, that makes total sense.”

Cat Gazzoli, founder of Piccolo, says that it is critical to have support from investors for the company’s charitable giving. “It’s not just at the team and consumer level, it’s the people who help fund the company to get it off the ground, so that it’s long-term.” Piccolo counts Prue Leith, the cookery writer and new judge on The Great British Bake Off, among its investors, as well as All Bright, a fund that invests in female-run businesses.

Other specialists in so-called impact investment include Bridges Ventures Social Entrepreneurs Fund and Big Issue Invest, part of the homelessness charity.