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The Competitive Edge of Doing Good

Many companies believe that donating a tiny percentage of their profits to charities or promoting efforts to reduce greenhouse-gas emissions is good for the bottom line. In fact, giving away 100% of a company’s profits can be even better for business.

PRINCETON – It seems counterintuitive, but in a capitalist economy, doing the most good can provide a competitive edge. I am not referring to businesses that donate a tiny percentage of their profits to charities or tell you that they are reducing greenhouse-gas emissions. I am talking about businesses that donate 100% of their profits – or close to it – to effective charities that do a lot of good.

Newman’s Own, the American food company founded in 1982 by the actor Paul Newman and author A.E. Hotchner (both now deceased), is an early example of a business donating 100% of its profits to charity. The profits go to the Newman’s Own Foundation, which to date has distributed over $600 million to charitable organizations helping disadvantaged children and other good causes. Hugh Jackman cites Newman’s Own as an inspiration for his own charitable foundation, Laughing Man Coffee.

Perhaps the most prominent company operating along these lines today is Patagonia, the American outdoor-clothing company founded by Yvon Chouinard in 1973. Nearly 50 years later, when the company was valued at around $3 billion, Chouinard gave it to a non-profit organization, ensuring that all its profits will be used to protect the environment and fight climate change.