75 Green Businesses You Can Start to Make Money and Make a Difference. Glenn Croston
the more important it is that a chief green be on board to make the changes happen. The most important qualities for a chief green are having the commitment, drive, and passion to keep moving forward. There are enough challenges and opportunities ahead to keep many chief greens busy for a long time to come.
OPPORTUNITY 13 Green Philanthropy Management
| The Market Need | Green philanthropists are well-intentioned but may not always accomplish their goals |
| The Mission | Improving how green philanthropic money is invested, ensuring that the money makes the greatest possible difference |
| Knowledge to Start | Business, finance, philanthropy |
| Capital Required | $$ to $$$ |
| Timing to Start | Months to years |
| Special Challenges | Research to measure nonprofit effectiveness and acceptance by donors of those measures to guide donations |
Philanthropy is a hot business. Bill and Melinda Gates have given more than $30 billion to their foundation and Warren Buffett is adding another $31 billion. This high-profile philanthropy may signal a new age, eclipsing even the era of Rockefeller, Carnegie, and Mellon. While the Gates Foundation funded grants worth $1.4 billion in 2005, it is not the only source for funding. Americans gave $260 billion to charitable causes (Giving USA estimates for 2005). One focus of giving today is environmental causes, and green philanthropists increasingly want to see that their money is well spent.
GREEN LEADER
One nonprofit organization committed to fighting climate change is StopGlobalWarming.org, founded by Laurie David, a Hollywood producer. There are countless others committed to a wide range of environmental issues.
Sir Richard Branson has committed $3 billion to fight climate change, and the Clinton Climate Initiative is committing additional billions to the fight. Google has created a foundation that is promoting a next generation of automobiles—such as plug-in hybrids using biofuels—and investing hundreds of millions of dollars to drive the price of renewables down to the cost of coal. In 2005, green philanthropy accounted for $8.9 billion (Giving USA), and this number is increasing steadily as concern grows about climate change and other issues. Some donations are large and from well-known names, but more come as small donations from millions of people.
How can people making donations ensure that their money makes a difference? Green philanthropists don’t want to just throw money at the problem and walk away, hoping for the best. They hope to leverage their wealth to make lasting changes in the lives of millions or even billions of people, but with large sums of money at stake and big goals in mind, philanthropists need to ensure that their money is well spent. While giving money to worthy causes is inherently rewarding, nobody wants to see money wasted or misused. The more money there is at stake, the greater the risk of wasting money, particularly in the absence of the economic pressure toward efficiency that is ever-present in the business world. “Billions are wasted on ineffective philanthropy,” says Michael Porter, of the Harvard Business School. “Philanthropy is decades behind business in applying rigorous thinking to the use of money” (The Economist, February 3, 2006).
The new philanthropists often are called “social entrepreneurs,” attacking social and environmental problems with the zeal and rigor of the business world. The salary may not be as large in the nonprofit world, but making a difference in the lives of millions may prove even more rewarding in other ways. Using the lessons of the business world allows green philanthropists to produce the greatest environmental impact per dollar invested.
INFORMATION RESOURCE
One group of philanthro-capitalists is New Philanthropy Capital in London, England, a non-profit that advises donors on how to make the most of their donations. The group’s report, titled “Green Philanthropy,” describes nonprofit efforts in the environment.
Foundations and social entrepreneurs need to measure success to keep track of how well they are doing. Making this work requires a nontraditional accounting system, in which the value created is not measured in profits but in the value to society. Nonprofit “portfolio managers,” “philanthro-capitalists,” or “venture philanthropists” track how investments in non-profits perform. Professionals from other industries also are getting into the nonprofit act, including management consultants, venture capitalists, and bankers.
One model establishes a firm to guide money toward the most effective environmental nonprofits. To start, the performance of nonprofit groups needs to be measured and compared to each other. How many tons of greenhouse-gas emissions were avoided per donated dollar spent by each group? How many lives were improved and by how much? Simply measuring the percent nonprofits spend on overhead is not enough to judge how effective investments in a nonprofit are; overhead says nothing about how efficient an organization is. In fact, the ongoing emphasis on lowering administration costs for nonprofits may be hurting their effectiveness in the long-run, creating well-intentioned but poorly funded management. By measuring how much organizations achieve with their expenditure money can be guided to the organizations and strategies that work best.
GREEN LEADER
The Center for Effective Philanthropy in Massachusetts (itself a non-profit) is working to help foundations measure success and be more effective (effectivephilan throphy.org).
Once data on nonprofit performance is available, the firm helps guide philanthropists, large and small, toward the best and most effective places to donate their money, helping them get the most bang for their buck. Once the money is invested, you can track the performance of donations and nonprofits year after year. By putting a value on a nonprofit’s work, the organization is pressured to do better and get as much done as possible with donated money.
Getting the venture started on the road to guiding and improving the results of green philanthrophy requires research to evaluate the performance of nonprofits. Nonprofits have not always been transparent about how money was spent or how well projects work. More effective nonprofits may be eager to cooperate and have the quality of their work validated by an independent “auditor.” Another challenge will be to decide whether to form a nonprofit or to pursue a for-profit structure to analyze non-profits and guide donations. The nonprofit does both the analysis and grant-making. A for-profit enterprise might provide the service and access to research for a fee. If your service is launched as a small independent firm, partnering with one or more financial-service providers would allow your service to integrate with investment, tax, and estate planning to reach existing customers.
GiveWell—a nonprofit founded in 2006 by two former hedge-fund managers, Holden Karnofsky and Elie Hassenfeld—works to fund charities based on how effective they are, not on the size of their overhead or the pictures in a brochure. Karnofsky and Hassenfeld got their start with a group of friends looking for charities to give to and were motivated by their frustration with the lack of good information about how effective charities really are. For each cause GiveWell takes on, it reviews grant applicants in depth, analyzing how effective the applicants are for the money they spend, and then funds organizations accordingly. Although not currently targeting environmental issues, Hassenfeld says, “The causes we cover are a function of what our donors ask us to analyze, and our interests and passions.” Environmental issues may be part of their future. Some critics are skeptical of GiveWell’s approach, but according to Hassenfeld, “Many in the nonprofit sector agree with our principles.” To move change forward, Karnofsky and Hassenfeld plan “to keep saying what we think, asking others to engage us in conversation if they think that we’re wrong.” Sounds