If you’re looking for creative ways to broaden the reach and appeal of your fundraising campaigns, cause marketing presents exciting possibilities. From charity events to buy-one-get-one campaigns, cause marketing can invigorate your fundraising efforts and bring in new donors and dollars for mission.
A successful partnership leverages the best of for-profit marketing savvy and nonprofit passion to create social value. To ensure that social value stays front and center in these arrangements, it’s important to build your partnership on a compliant, transparent foundation.
Requirements for Businesses
To engage in cause marketing partnerships, also known as commercial co-ventures, businesses must register or complete other requirements in 24 states. Generally, these include filing a copy of the fundraising contract with state charity officials before launching a campaign and reporting financial results at its conclusion. Often, financial reports must be filed within a certain number of days of the close of the campaign, although in some states, reports are due annually for all engagements conducted that year. A few states have more substantial requirements. Massachusetts, for example, requires commercial co-venturers to secure a bond.
For businesses, this can translate into a lot of complexity, since every engagement requires filing a separate contract. We work with a lot of large corporations that are engaging with multiple nonprofits, often within a single campaign. For example, a business might have multiple participants on a promotion for one product, and yet another set of participants surrounding another. Or many businesses will choose a charity of the month to support, which requires a separate contract with each individual charity. Charity events are another example of co-ventures that are frequently tied to several different nonprofits.
Another type of cause marketing partnership that is becoming very popular is social media influencer campaigns. In these arrangements, a social media influencer will agree to support a charity by diverting a portion of proceeds from products sold through their page. The influencer usually has a legal entity to protect their interests and may need to enter a co-venture contract to do this properly.
All of these agreements require separate contracts and individual financial reporting, and all of that paperwork needs to be filed according to the applicable state requirements. Yet that proper foundation is well worth the effort given the success of these campaigns and the enthusiastic response they generally inspire.
Requirements for Nonprofits
Nonprofits also have regulatory due diligence to perform before engaging in cause marketing. First, they must ensure that they meet charitable solicitation registration requirements for fundraising wherever they will be soliciting. Since solicitation occurs where the request is received, not where it originates, nonprofits will need to assess where their fundraising appeals are reaching potential donors to outline their fundraising “footprint” for registration purposes.
Charity officials often collect nonprofit registration information as part of their co-venture review process, underscoring the importance of meeting these requirements when planning a campaign.
In addition to registration, some states require specific disclosure language to be included in cause marketing campaign materials. You may also need to include specific provisions in the co-venture contract.
Keep in mind that many for-profit partners will be encountering registration and reporting obligations for the first time. Don’t be surprised if they’re unaware of the requirements, but don’t let them be discouraged, either. These campaigns can be hugely valuable for the parties involved. Set the expectation of licensing requirements early to avoid surprises close to launch.
Benefits of Transparency
While it can be time-consuming, the point of filing all this paperwork is to protect nonprofits and the public from unfavorable agreements and subpar results. Donors and nonprofits alike want to see dollars go to mission, and co-venture requirements are designed to ensure that happens. Be sure to take advantage of the transparency this provides by checking registrations, prior contracts, and financial reports on file for any potential for-profit fundraising partner. These filings show not only how much prior campaigns generated, but what share of the proceeds went to the charitable cause.
In addition to vetting past agreements and financial performance, nonprofits can ensure a successful co-venture by choosing a partner whose business aligns well with their programs and mission. Look for companies whose customer base, culture, products, or services are a good fit. Once you’ve attracted new donors with your campaign, be sure to work proactively to retain them!
Reap the Rewards of Compliance
Whenever for-profit goals intertwine with charitable missions, there’s potential for abuse. By taking time to ensure that your cause partnership is built on a transparent, compliant foundation, you are laying the groundwork for a successful partnership that drives measurable social value.
If you would like to take a deeper dive into fundraising requirements, check out this charitable solicitation white paper produced by Harbor Compliance and the National Council of Nonprofits.
Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.