For Profit. For a Reason.
What do TOMS shoes, Warby Parker shades, and The Honest Co. soap have in common? They are all for-profit companies that operate as "triple bottom line" organizations.
A triple bottom line (or "3BL") company is one that focuses on generating positive change in the areas of people, profits, and the planet. Their bottom line is rooted in these 3 areas - hence the name.
Traditionally, organizations that wanted to serve other people tended to be non-profit (501c3) organizations. ("Non-profit" belies a 501c3's actual permissible activities though, as non-profits can generate profits - but they have to follow certain rules to keep their 501c3 status.) Churches are non-profit, as are most charities.
Lately though, we have seen a trend in socially conscious for-profit companies entering the scene that claim to care deeply about helping other people. They tend to feel like most non-profits; yet they are designed to make money.
Understanding that non-profit organizations can actually make money for themselves in qualified ways (germane to their mission, shareholders/directors can't receive profits as dividends, etc.) is crucial. If you think "non-profit" means that the organization must stand there with an old Burger King cup asking for change, you are mistaken. 501c3 organizations can and should engage in activities that generate funds and sustain the enterprise so it can grow and flourish.
But what about companies like TOMS, Warby Parker, and The Honest Co.? What is the real difference here between a 3BL and a 501c3?
Several things, actually:
1. 3BL is not an actual IRS definition. Socially conscious companies are called triple bottom line but this is only descriptive. We made this term up, in other words. They are taxed like normal businesses.
2. 3BLs have greater flexibility. A 3BL can explore new products and services to make money and can more creatively seek ways to make money, while non-profits need to stay inside their box of their permitted activities.
3. 3BLs can pay their directors and executives more. Non-profits have rules and regs on what an officer or director can be paid, but 3BLs have much more rein on this.
4. A 501c3 is beholden to its board. Non-profits (at least the ones I have been associated with) rely pretty heavily on board decisions whereas 3BLs can make decisions and act more quickly. Whether this is by design or this just happens, the organization rises and falls with the quality and responsiveness of its board.
Both non-profit and for-profit are viable for organizations that seek to make a difference, and the idea of a for-profit business focusing intensely on caring for people, profits, and the planet is Biblical...and beautiful when executed well.
3BL or 501c3, get out there and do work that matters.
Disclaimer: I almost failed accounting in college and I am still surprised I passed. I am not a CPA nor should you mistake me as one. I don't give tax advice and if you choose to rely on my opinions contained herein, do so at your own (great) peril. Much love.
Photo credit: elycefeliz via Flickr