What You Need To Know About Commercial Co-Ventures


Jun 26, 2018

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You’d like your marketing dollars to make a social impact—what’s next? Get to know the commercial co-venture regulations that may apply to your cause marketing campaign.


 

Your company’s marketing team wants to use its marketing dollars for good—now what? Commercial co-venture agreements are required for many cause marketing campaigns that promise to give a percentage of sales to a charitable cause.

A commercial co-venture, also known as cause marketing campaign, is an increasingly popular way to align products with social impact initiatives. Commercial co-ventures are also increasingly regulated, with at least 22 states in the United States having special registration requirements.

According to the definition used by most states: “A commercial co-venturer is any person or firm who for profit regularly conducts a charitable sales promotion or underwrites, arranges or sponsors a sale, performance or event of any kind which is advertised to benefit a charitable organization.”

Here are some tips you’ll want to keep in mind as you enter into a commercial co-venture with a nonprofit partner:

1. Be as clear and honest as possible with your nonprofit partners and your customers.

The purpose of a commercial co-venture agreement is to put all your cards on the table.

A good commercial co-venture agreement should have clear messaging on the specifics of the cause marketing campaign such as its active date range, percentage of sales to be donated, the name of the nonprofit beneficiary, and a plan to disclose the total money raised at end of campaign. Share this information with the nonprofits you are supporting and with any state governments that require it. To test your knowledge of best practices, check out this cause marketing quiz.

2. Consider partnering with an intermediary to reduce your administrative burden.

For every nonprofit you are directly supporting, you may need to register separate paperwork. This can quickly grow to a hefty stack of paperwork because you will need to register in every state that you work in that also regulates commercial co-ventures. Many state regulators also will require your nonprofit partners to register to fundraise in any states where a promotion is taking place.

If you indirectly support multiple nonprofit organizations through a grantmaking intermediary like GlobalGiving, you need only that grantmaking intermediary to complete a commercial co-venture agreement. By choosing to support fewer charities or by choosing to partner with a single grantmaking intermediary like GlobalGiving, you can reduce the administrative burden for your company and for the nonprofits with whom you partner.

3. Test your commercial co-venture over a short period.

If your cause marketing campaign is a one-time event, state laws are less likely to require registration than if the promotion is ongoing. You could consider testing your cause marketing campaign over a short period, and then plan to launch a more long-term initiative based on your findings. At GlobalGiving, we call this Listen. Act. Learn. Repeat.

4. Don’t ask your nonprofit partners to advertise for you.

While they can list your company as a supporter or partner, a nonprofit should not take an active role in advertising your product or services. This is unrelated to the nonprofit’s charitable purpose and could trigger an Unrelated Business Income Tax. You also don’t want to undermine the social impact of your initiative by directing resources away from your nonprofit partner’s mission.

5. Consult a lawyer experienced in cause marketing law.

Your lawyer can help you draft a clear and accurate description of your cause marketing campaign similar to the following:

    [COMPANY] will donate [AMOUNT in CURRENCY] for every [PRODUCT] sold in [DATES OF CAMPAIGN] to [NONPROFIT NAME(S)]. This information will be advertised [LIST WHERE ADVERTISED]. Funds will be remitted on a [WEEKLY/MONTHLY/QUARTERLY] basis.

Partner with GlobalGiving to simplify your next commercial co-venture.

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Featured Photo: Provide Women and Girls Education in Cambodia by Women’s Resource Center.

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