Understanding Impact Business Models: Designed to Give

Modified on Mon, 3 Mar at 9:22 AM

What is the intent of the Impact Business Model

How do I assess my company’s eligibility for this Impact Business Model

What are some examples of companies that have this impact

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment

My company may be eligible for this IBM. What supporting information do we need to provide

My company has a mixture of revenue, profits, and time. How can I calculate the donation correctly

Implementation Plan Guidelines for Newly Established Donation Commitments
Concepts in the B Impact Assessment

What is the intent of the Impact Business Model?

Corporate philanthropy can be a powerful tool for positive social and environmental change. Businesses are increasingly gaining wider influence, and by giving thoughtfully and intentionally, they can support the causes their stakeholders and society most need.

The Designed to Give Impact Business Model (IBM) is found in the Community Impact Area.

This Impact Business Model recognizes business model structures that commit to providing significant portions of company profits, revenue, equity, or time to charitable causes.

To ensure that charitable giving is part of the core structure of the business instead of an isolated practice, companies have to consistently meet specific donation thresholds to capture their impact in this IBM. These donation thresholds need to be reflected in formal standing commitments and must be made annually. Companies with ad-hoc or irregular donations may capture their impact in the Civic Engagement and Giving section of the B Impact Assessment (BIA).

How do I assess my company’s eligibility for this Impact Business Model?

Companies may capture their commitment to charitable giving in the Designed to Give IBM if they have the following:

There needs to be a formal, written, accountable commitment to the giving (with immediate effect),
That commitment needs to exist in perpetuity and not be time-bound. These commitments are intended to be carried out year over year, regardless of the company’s financial performance for a particular year (recertifying companies need to show they met the commitment every year),
The commitment needs to be oriented around the relative scale of the whole business and not just a part of the business or in absolute terms. This means that commitments are evaluated as a material percentage of ownership, revenues, or profit.
The formal commitment must meet or exceed the explicit donation threshold established by B Lab standard and, therefore, must formally state the company's commitment to donate a specific percentage of revenue, profits, or time. The donation thresholds are outlined in the answer options to the question “Designed to Give Description.”

What does not qualify for this IBM:

Here are a few examples of positive practices that, while they may be captured in other areas of the B Impact Assessment, such as the Civic Engagement and Giving section, would not be considered a Designed to Give Impact Business Model:

Donations made by a company without a specific formal ongoing commitment (fluctuating from year to year).
Having a commitment to charitable giving that does not meet thresholds of materiality within the IBM (1% for the Planet).
Having a commitment to charitable giving at some point in the long-term future (like "we commit to donate 20% of profits when we become profitable" or "we commit to donate 20% of revenues from the year 2030").
Having a commitment to charitable giving that is not tied to the scale of the organization as represented by equity, revenue, or profit (“we will donate $20,000 every year”)
Granting less than 20% of ownership to a non-profit organization (that does not meet materiality thresholds within the IBM).
A company that historically created a foundation, but that foundation has operated independently without ongoing material funding from the company.
The company does not donate a percentage of its profits/revenue, but it donates a sum corresponding to a voluntary donation from the customer in addition to the price of the goods/services sold. For example, a wholesale company sells cups for $5 each. At the time of purchase, the customer can decide to add $1 as a donation, which the company will collect and donate on the customer’s behalf to a foundation. This does not correspond to donations of revenue/profit; instead, the company acts as an intermediary for a voluntary donation from the customer.
Donations that are not made by the company and are not in the company's books but are made by the owners/founders/employees (as individuals).
Donations that are made through a company’s fundraising efforts, but the donations are made by the customers or other stakeholders and not the company itself.

What are some examples of companies that have this impact?

Examples of companies that have “Designed to Give” Impact Business Models:

A conscious travel company, which is owned by a Foundation and donates 100% of profits to charitable causes.
A retailer that has created a one-for-one model linking donations to the amounts of all products sold.

Please note that these examples are non-exhaustive and illustrative.

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment?

If you are considering opting into this IBM, you will have to answer specific questions about the impact of your product/service that will determine which Impact Business Models you see in your BIA. These questions, called gating questions, ensure that you see the content that is most relevant to your company in your assessment.

There are three questions that require affirmation so that the Designed to Give Impact Business Model is visible in the assessment.

The first question, “Community Oriented Impact Business Model” requires a “Yes” response (not pictured). The second question, featured in a screenshot below, requires the fourth selection: “A formal standing commitment to donate a significant portion of sales, profits, or ownership to charitable causes (>2% sales, >20% profits/ownership).” The third and last gating question, “Formal Charitable Giving Model Commitment,” requires a “Yes” response (not pictured).

To ensure that the Designed to Give Impact Business Model shows up, answer the gating questions as shown in the image above. Any deviation from this will prevent the Designed to Give IBM from becoming visible in your BIA.

My company may be eligible for this IBM. What supporting information do we need to provide?

These are some examples of evidence that your company can provide during the verification stage to confirm the applicability of the Designed to Give IBM. These examples are not exhaustive – depending on your company’s specific business model or context, your analyst may require additional or different documentation.

Your company must provide evidence of a formal, written commitment that meets the criteria outlined in “How do I assess my company’s eligibility for this Impact Business Model?”. The commitment can either be publicly available (e.g., on the company’s website) or described on a formal corporate governing document (e.g., articles of incorporation, company’s bylaws).

As outlined above under “How do I assess my company’s eligibility for this Impact Business Model?”; these commitments are intended to be carried out year over year, regardless of the company’s financial performance for a particular year. Next to the formal commitment, your company needs to provide supporting evidence to show that the commitment has been met by carrying it out year after year.

Recertifying companies who earned the Designed to Give IBM at the previous certification need to provide evidence to support they met the commitment every year.
A company with a newly created commitment can either provide evidence to support that the commitment has been met during the reporting period OR provide a formal implementation plan that outlines how the company plans to carry out the commitment year over year. Please find additional information about the implementation plan under “Implementation Plan Guidelines for Newly Established Donation Commitments” below.

Please review the table for specific guidance on which evidence needs to be provided for each answer option:

20% or more of my company is owned by a nonprofit organization	Companies can present evidence that at least 20% of their shares are owned by a non-profit organization. This can be demonstrated by sharing the articles of incorporation of the company. A company that has the characteristic of being more than 20% owned by a non-profit organization can be captured in the “Designed to Give Description” question only for the percentage of revenue donated to the owning non-profit. If the company made tax-deductible donations in the fiscal year of reference to other non-profits/ charities, these can be captured in this answer option of the “Designed to Give Description” question only if the company can present a donations commitment that meets one of the thresholds in the first two answer options of the “Designed to Give Description” question.
We are formally committed to donate more than 20% of profits to charity each year	Companies can provide evidence of a formal written commitment to donate 20% of profits to charitable organizations each year. The value donated is calculated as a percentage of the company’s profits in the fiscal year of reference.
We are formally committed to donate the equivalent of 2% (or 5%) of revenues or more to charitable partners each year (including in-kind product donations)	Companies need to provide evidence of a formal written commitment to donate 2% (or 5% for companies in the Service with Minor Environmental Footprint sector) of revenue to charitable organizations each year. The formal written commitment should meet the criteria outlined previously.
We are formally committed to donate the equivalent of 5% of our time or more through pro-bono services	Provide evidence of a formal written commitment to donate 5% of pro-bono time each year. Only pro-bono time donated to charities, non-profits, and NGO organizations whose primary objectives are philanthropy and/or societal well-being can be considered for this answer. The commitment should specifically look at the amount of time donated and not the value of time donated, as there is no standardized method to calculate this value. Pro-bono time commitments are evaluated based on total hours donated/ worked for all staff in the context of the BIA. Companies that provide a pro-bono service can exclusively be evaluated for their pro-bono commitment and, therefore, can receive recognition of impact in the question “Designed to Give Description” based on the percentage of time donated. Only cash donations are related to the impact of the last two answer options of the “Designed to Give Description” question.
We have created and provide the majority of funding for a nonprofit foundation, of which at least 10% of company profits (or 2% of sales) are donated each year	For this answer option, the company is required to demonstrate through documentation that: The company created a foundation/non-profit (not sufficient to “partner with a non-profit”), to which the company donates each year >50% of the funding this non-profit receives yearly these donations correspond to at least 10% of the company's profit or at least 2% of the company's sales (revenue). Note that sales and revenue can be used interchangeably here. However, it is important to verify that the commitment is based on total sales and not sales of a specific product/service and that the threshold is achieved based on total sales. The creation of a non-profit may be separate from ownership, and the creation aspect is the focus of this answer option.

My company has a mixture of revenue, profits, and time. How can I calculate the donation correctly?

The answer options in the question “Designed to Give Description” state five types of giving:

revenue (or in-kind product donation), profits, ownership by a nonprofit, time, or foundation creation with a donation of 10% profits (or 2% of revenue).

When a company presents a “combination” giving model, the total amount of giving must equal the thresholds stated in the answer options. One must convert each type of giving into revenue to see if the company's combination of donations amounts to the threshold required by this IBM.

This is how different types of giving can be converted into revenue:

For companies on the Service with Minor Environmental Footprint track:

1% of revenue = 1% of time, 4% of ownership/equity, 4% of profit

For companies on all other tracks:

1% of revenue = 2.5% of time, 10% of ownership/equity, 10% of profit

Example:

Can a company on the Wholesale/Retail track with a 1-1-1 pledge (1% equity, 1% product, 1% time) qualify for the Designed to Give Impact Business Model?

Conversion:

1% Equity = 0.1% Revenue

1% Product = 1% Revenue (if tax-deductible)

1% Time = 0.4% Revenue

Since the combination of donations of equity, product, and time amounts to 1.5% of revenue, the company would not be given the Designed to Give IBM, which requires a 2% revenue donation for companies on the Wholesale/Retail track.

Implementation Plan Guidelines for Newly Established Donation Commitments

In all scenarios where a newly certifying or a recertifying company (that did not earn the Designed to Give IBM at the previous certification) has a formalized donation commitment but did not meet the donations threshold in the reporting period, a formal implementation plan is required to earn credit in the “top half of the model” (question "Designed to Give Description"). Please note, recertifying companies who previously earned this IBM and did not meet the donations threshold in the three years since their last certification are not eligible to follow the guidelines in this section; they are not eligible to earn the IBM.

This implementation plan must:

Be signed by executive leadership. B Lab emphasizes the importance of executive leadership's endorsement and signature on the implementation plan.
Clearly outline how the practices defined in the commitment will be realized in practice and seamlessly integrated into the company's existing business model.
Include a short-term timeline specifying the actions and milestones necessary to meet the commitment. This short-term timeline is essential because the commitment should yield an immediate effect rather than representing a future initiative.
Clearly outline team responsibilities to ensure the commitment is met.

Concepts in the B Impact Assessment

Charitable Donation - Charitable donations include financial contributions and in-kind donations of goods and services to nonprofits or non-governmental organizations. Pricing discounts to nonprofits do not count as charitable donations; only free services are considered in-kind donations.

Charitable donation is donating money to charitable organizations. This section is not intended to reward contributions made by the founder of a company; this section is specifically referring to contributions that the company has made. Please only include in-kind donations if they are tax-deductible. If you are uncertain, please refer to the IRS's guide on Determining the Value of Donated Property: http://www.irs.gov/pub/irs-pdf/p561.pdf. If your business received a material service or value for your contribution (i.e., Membership dues, Licensing fee to use a non-profit organization's logo), please consult the non-profit or your accountant as to whether these are considered tax-deductible. Please do not include contributions your employees or customers made, even though the company may have encouraged those parties to contribute. Charitable giving also does not include discounts for your company's products or services.

Near-term outcomes - This refers to the immediate or near-future results or consequences of a particular event, decision, or action. These outcomes typically occur within a relatively short period, ranging from a few days to a few months. Near-term outcomes are often tangible and measurable, and they can influence subsequent actions or decisions. Unlike outputs, which focus on what is produced/delivered, near-term outcomes focus on the impact or changes that occur as a result of the outputs. They are the effects or consequences of utilizing or implementing the outputs.

Long-term outcomes - The results or consequences that occur over an extended period, usually spanning months, years, or even decades. Long-term outcomes often have a broader impact and may be less immediately visible or measurable than near-term outcomes. For instance, long-term outcomes in the context of environmental conservation could include the restoration of an ecosystem, the reduction of carbon emissions over several decades, or the preservation of endangered species.