How Much Does That Company Actually Give to Charity?
The trouble with shopping your way to good works
One afternoon not long ago, I walked into Stag, an Austin, Texas, retailer for the “modern gentleman,” and spotted a pair of boxer briefs—brand name: Pact—that claimed to offer the “perfect fit.” At 22 bucks a pair they weren’t cheap, but I was intrigued. (I’ll spare you the details, but for years I have searched for the perfect pair of boxer briefs. Everyone has a grail.) What also caught my eye was a line on the packaging that promised: “For every pair of Pact you buy, we pay it forward by making a positive impact on our world.” I wasn’t sure what that meant, but it helped put me over the edge. Sold.
When I got home and checked the website, I learned that Pact, a hip San Francisco underwear company, has supported a long and diverse list of worthy causes: tsunami survivors, disabled artists, orphans in India. I learned that Pact is a “movement disguised as a clothing company.” And I learned that the company’s slogan is “You change your underwear, together we change the world.”
What I did not learn was how much of the money I’d spent went to disabled artists or Indian orphans. Nor did I learn what the company donates annually to these deserving charities.
And with that, my new pair of boxers sent me on another quest: to figure out how to think about companies like Pact, which sell stuff to people like me by appealing to our sense of civic-mindedness.
The idea of linking consumption to charity, known today as cause marketing, is usually traced to a 1983 promotion by American Express that donated a penny from every transaction and a dollar for every new account to help restore the Statue of Liberty. Since then, the practice has become so ubiquitous—by one estimate, it is now a $1.7-billion-a-year business—that it’s hard to make a run to the grocery store without fighting cancer. Laudable, altruistic motivations aside, the business case for this phenomenon is clear: a 2010 survey by Cone Communications found that most Americans would likely be willing to switch to a new or unfamiliar brand if it supported a cause, and nearly one in five would be willing to pay more for a do-gooder product.
It’s not surprising, then, that newer companies like Pact are embracing philanthropy from the get-go. Everything about the public identities of these companies is wrapped up in some professed higher purpose. They’re about making money, sure, but they’re also on a mission to (insert mission here). They’re for-profits dressed up like nonprofits.
One problem with cause-marketing campaigns is that they may make people less eager to donate to charities directly. In a 2011 study, published in the Journal of Consumer Psychology, researchers gave subjects a hundred hypothetical dollars and let them decide whether to spend it on clothing or donate it to a worthy cause. They could spend half on themselves; they could donate every last cent; it was up to them. Now the important part: the subjects were divided into groups. Some were told that a portion of certain clothing purchases would go to charity. Another group—the control—had to choose: buy clothes or help others.
The control group gave substantially more to charity. For everyone else, vaguely altruistic purchases largely took the place of old-fashioned charitable donations. They already gave, so why give again? It’s as if the impulse to be kind has already been gratified, suggests Mara Einstein, a professor of media studies at Queens College and author of Compassion, Inc.: How Corporate America Blurs the Line Between What We Buy, Who We Are, and Those We Help. “People check it off their to-do list of charity,” she says.
That might be dandy if companies were as generous as they seem. But multiple studies have shown that consumers consistently overestimate how much of the amount they spend on a product goes to charity. A 2003 study published in the Journal of Public Policy & Marketing found this was true even among consumers trained in accounting. When told that a certain percentage of profits goes to a cause, nearly everyone thinks they’re donating more than they are.
And the companies don’t exactly make it easy to figure out. In 2007, the founder of Ethos Water declared that the bottled-water brand, which is owned by Starbucks and sold in its cafes, would donate at least $10 million by 2010 to support safe-water projects in the developing world. Ethos’ slogan is “Helping Children Get Clean Water.” But is Ethos living up to its ethos? Hard to say. As of this writing, nearly two years after the 2010 goal came and went, the company’s website says Ethos has raised “more than $6 million”—which is the same amount it claimed to have raised in 2008. When I inquired, one spokesman confirmed the $6 million amount. Another said $7.2 million. Still another said the company has indeed raised $10 million, but has so far only donated $7.2 million of it. Unlike a nonprofit, the company isn’t required to be transparent. You have to trust them.
I’m not the only one bothered. This fall the New York state attorney general’s office issued guidelines encouraging companies to eschew vague pledges and instead to reveal exactly how much money has been donated and to keep those figures up to date. That would make companies more accountable while still allowing them, as the guidelines put it, to “showcase their generosity.”
As for Pact, it hasn’t exactly been forthcoming about how much it gives to the causes it trumpets. Jeff Denby, a Pact cofounder, writes in an e-mail that the company’s relationships with nonprofits are more like partnerships and go beyond merely “writing a check.” Perhaps, but its customers might be curious about the size of that check. Denby would only say it’s “significant.” Again, it’s down to a matter of trust. Is Pact really trying to change the world, or is it merely strumming consumers’ heartstrings to hawk its unmentionables? I still have no idea. But I do know this: the undies themselves are beyond reproach.
This article originally appeared in Pacific Standard with the title “This Underwear Should Be More Transparent.”
Tom Bartlett is a senior writer at The Chronicle of Higher Education.