Numerous studies have shown that consumers are actively shopping for brands that support good causes. In a recent survey by Cone Communications, 89 percent of consumers said they would switch brands to one that is associated with a good cause, given similar price and quality. At the same time, 82 percent of consumers said they donate to a charity supported by a company they trust.
As a result, many businesses are looking for creative ways to partner with nonprofits. Commercial-nonprofit partnerships can be a great way to expand your donor outreach and breathe new life into your fundraising efforts. But it’s important to do some due diligence on state requirements before you sign a contract.
Sometimes called “commercial co-ventures,” partnerships between businesses and nonprofits can range from something as quick and simple as a single event to a decades-long brand affiliation. Some examples:
These kinds of partnerships require a contract that lays out the terms of the agreement. What often catches people by surprise, on both the for-profit and nonprofit sides, is that they may also require special licenses.
“Nonprofits often aren’t aware that licensing for these types of engagements is required,” said Brock Klinger, account manager at Harbor Compliance. “They think it goes hand in hand with corporate sponsorship, but it’s an entirely different type of engagement, with its own set of rules and obligations.”
“The same is true for many for-profit companies that wish to do this as a part of their corporate social responsibility efforts,” Brock added. “Cause marketing is a hot topic for corporate marketing departments, and there is a lot of interest in these types of arrangements. However, many marketing departments aren’t familiar with charitable solicitation registration requirements or commercial co-venture licensing.”
Requirements for commercial co-ventures vary by state, so you’ll need to do a little homework into the requirements that apply to your fundraising plan.
Roughly half of states have special requirements for commercial co-ventures. Alabama, California, Hawaii, Massachusetts, Mississippi, and South Carolina require special filings to be submitted along with a copy of the contract. These states may also require the business to submit a filing detailing the financials of the charitable sales promotion within a specified amount of time after the contract ends. South Carolina requires a registered agent on the filing, while Massachusetts and Alabama require the business to obtain a surety bond. Illinois and New Jersey may also have filing requirements, depending on the situation.
There are also a number of states which require a contract filing or form of notice to be filed by the nonprofit. These usually occur whenever a charity renews its charitable solicitation license. However, some states, such as Connecticut, New Hampshire, and New Jersey, require the contract and a notice filing to be submitted prior to the charitable sales promotion.
In addition, any charity engaging in a commercial co-venture should also comply with that state’s charitable solicitation laws.
Generally, registrations are active for the length of the contract. Once a contract has run its course, a new one would need to be drawn up and reported to the appropriate states.
Once registered as a commercial co-venture, a business will usually just need to renew its license to remain active. However, a contract must be in place with every charity it engages with, and some paperwork needs to be submitted by the charity itself.
Several states have specific requirements regarding the language of the co-venture contract itself. These language provisions must be in place before the contract is executed. Other states require certain disclosure language to be used in all of the advertisements for your commercial co-venture. Since the language requirements are different in each state, many registrants list all disclosures on their materials for simplicity’s sake.
“Our clients who succeed with commercial co-ventures are generally those who take a thoughtful, managed approach to rolling out these programs,” Brock said. “Appropriate systems for tracking contributions are also important, as well as an understanding that states impose these sanctions to protect their citizens from illegitimate fundraisers. Companies that recognize this understand that they’ll see a better return on their investment by following the rules and avoiding penalties.”
Commercial co-ventures are a great way to expand your outreach and bring new energy into your fundraising program. Just be sure to review applicable state license and permit requirements early in your planning. If you have questions or need help, give us a call at 1-888-995-5895, or reach out here. We’re glad to help anytime.
Source: 2017 Cone Communications CSR Study, Cone Communications, May 17, 2017, http://www.conecomm.com/research-blog/2017-csr-study.