Toms Shoes’ model of giving away a pair of shoes for each sold helped the company but was disastrous for recipient countries, critics say

No company has done more to put caring capitalism on the map than Toms Shoes. The for-profit Californian company is considered by many to be a shining example of ethical branding, with a business model that is aligned with meaningful causes. Every purchase from the company triggers a donation of a product or service in the developing world, so that shopping becomes a ritual engagement with social activism.

The giving model has also given back – in spades: Toms – short for “tomorrow’s shoes” – has enjoyed annual growth rates of up to 300% over the past decade, and given away 35m pairs of shoes, spending virtually nothing on traditional advertisers and relying instead on word of mouth and its 5 million social media followers.

Civil society groups, however, point to a darker side of the Toms story. They say Toms has made mistakes and potentially hurt the very people it has tried to help, after discovering that giving was not as easy as it had thought. And they say the lessons of Toms still haven’t been learnt by other companies trying to do good.

The problem with quick solutions

The Toms story starts 10 years ago, when entrepreneur Blake Mycoskie, while on vacation in Argentina playing polo, noticed that many local children were shoeless. Mycoskie went home to California, sold his laundry business, and began Toms, with the mission of giving shoes by selling shoes. At a time when few people were talking about business as a force for good, Mycoskie pioneered one-for-one, the concept of one product given for every one sold.

Thanks to a lucky break of a story in the Los Angeles Times, Toms experienced almost overnight success, instantly selling more than 10 times its available stock. The first part of the plan had thus become surprisingly easy, but the second part, giving the shoes away, proved harder – much harder.

The difficulty was not that there weren’t plenty of willing recipients, but that the company’s efforts were potentially yielding some unwanted side-effects, according to Swiss business executive, academic and philanthropist Andreas Widmer. “Mycoskie has a good heart. But I have matured to see that following the heart to fight poverty is a terrible idea,” Widmer said in an article for the University of Pennsylvania’s Wharton School last year. “The unintended consequence is that, of course, there is a local cobbler who actually makes shoes and sells them,” he said. “Can you imagine what happened to that guy the day the truck showed up with Toms shoes? Why would you go buy something if you could get it for free?”

When large amounts of free goods are introduced at no cost, markets are flooded and local economies can be damaged. The impact of these projects has been well documented. In a 2008 paper, Garth Frazer of the University of Toronto’s Rotman School of Management found that used clothing donations to Africa shrunk textiles and clothing sector employment by 50% across the continent.

Shoe donations can flood markets, putting local people out of business 

Michael Matheson Miller, director/producer of Poverty, Inc, cites Toms shoes in the award-winning 2015 documentary about how corporate giving campaigns perpetuate poverty in the developing world, He says in the Wharton School article: “When you give away something free, you’re giving away a band aid. You’re not addressing deeper causes [of poverty] and you may be inhibiting long-term solutions. Poor people aren’t poor because they lack stuff; they’re poor because they lack the infrastructure to create wealth.”

But macroeconomics was not Mycoskie’s biggest oversight. Providing shoes was not the most effective solution to attacking the root problem of the parasitic diseases that experts say cause health issues and school absenteeism in developing countries.

One commentator to a Huffington Post interview with the Toms founder stated the problem baldly: “This is multi-national expansionism disguised as charity. These people don't need shoes, they need clean water, food, sanitation, and education.”

Alternatives to pairs of shoes are much cheaper and have greater overall impact. For example, the NGO Deworm the World provides school-based parasitic treatment that cost around 50 cents (35p) per person, per year.

In his book about the making of Toms, Start Something that Matters, Mycoskie says: “Facts are important, but the story matters.” For founders like him, CSR is about brand storytelling. Even if with the most altruistic of intentions, the story is critical entwined with the brand’s identity.

Toms founder Blake Mycoskie 

Critics would say that this creates an overwhelming temptation to cut corners when the story the brand wants isn’t the one that’s available– either because the impact they want isn't there, or because other people are better-placed to be doing it. As BP’s former chairman, John Browne, and Robin Nuttall of McKinsey point out in their 2015 book Connect: How Companies Succeed by Engaging Radically with Society, corporate social responsibility teams can too often lose touch with reality, focus too closely on merely limiting the downside, and are detached from a company’s core commercial business.

A win-lose relationship

There is evidence that this issue is being repeated across many corporate social responsibility programmes on a large scale. The corporate thirst to capture a good story can result in short-sighted decision-making that causes communities to suffer and undermines the work of NGOs.

One consultant in the charity field, who has asked not to be named, says a global athletic brand he did not want to identify spent millions on building a corporate giving project. Half a year in, the team had become so indecisive about the design of the campaign’s website that the project was paralysed, and had yet to make any impact on beneficiaries (in this case young women).

A writer for the Guardian’s Secret Aid Worker column describes corporate-NGO partnerships as “win-lose” relationships, where companies inevitably have the upper hand. “[Corporations] are happy to fund a project through their charitable foundation as long as [NGOs] don’t look at their core operations in too much detail.” The columnist adds that companies gain kudos from their association with the NGO’s brand and receive free consultancy services, diverting NGOs from their priorities. Even in partnerships where there is social value added, the columnist says, “there is always a power dynamic that means the NGO’s aims get diluted”.

Navigating the world of NGOs

And sometimes corporate involvement in developing countries can be downright dangerous. One such example is how the pharma industry began distributing free drugs to developing nations. Nearly overnight, Africa was flooded with expired western drugs. Apart from the moral question about whether poor people in Africa deserved real and fully potent pharmaceuticals, many pharmacists were put out of business, removing access to critical expertise.

Abdirahman Osman Raghe, former permanent secretary in the Somali interior ministry, told the Wall Street Journal in 2001: “We once had so many pharmacies here. Pharmacists knew their jobs. Now there are people handing out drugs who are not trained because of the donated drugs from the international community that are so cheap.”

Western companies flooded Africa with expired drug donations

It Cuts Both Ways

Corporations, on the other hand, have legitimate concerns when it comes to NGOs. They may be unprofessionally run, corrupt, have poor governance, or get poor results. As the Guardian’s Secret Aid Worker points out, regulation of UK charities is sparse, and NGO boards “display a worrying lack of transparency”.

Joel Levesque, who runs UK-based development consultancy Huguenot Consulting, says: “NGOs can also become entrenched in their own ways and resist new solutions; it should be no surprise that years of battling the same issues and seeing little progress can make people jaded.”

He adds: “Some NGOs rely heavily upon relationships and reputation for local impact. If a new solution alters those relationships, the fear of losing influence could cause some people to respond irrationally, or emotionally. All of this can be off-putting to a corporate that wants to give in a way that is impactful without getting tangled in politics."

Toms changes tack

For a company that relies on social media to get its message out, Toms is remarkably media-shy. The company did not respond to requests for comment from Ethical Corporation. Mycoskie also declined to be interviewed for the Wharton School article.
But as the Wharton School academics point out, Mycoskie did respond to criticism that Toms wasn’t doing enough to alleviate poverty by changing the brand’s business model. In 2013 he pledged that a third of all donated shoes would be produced in local factories, rather than China. Toms has factories in six countries, including Kenya and Ethiopia and the only shoe factory in Haiti. “If we really want to be serious about poverty alleviation, using our model to create jobs is the next level,” Mycoskie told the Huffington Post.

Blake Mycoskie in Toms’ Haiti shoe factory

Toms also diversified from shoes to new product lines, including sunglasses and coffee, engaging local NGOs, called Giving Partners, to provide eyeglasses or sight-saving surgery for each pair or sunglasses sold, and a week’s worth of clean water for every pound of coffee. “We now also sell bags, to fund safe births for mothers and babies in need, and backpacks, to support anti-bullying programmes,” Mycoskie said.

“As Toms approaches its 10th anniversary, I feel more energised and committed than ever. As far as we’ve come, I still see tremendous opportunities to grow our movement,” Mycoskie wrote this year in Harvard Business Review. The ‘why’ of Toms – using business to improve lives – is bigger than myself, the shoes we sell, or any future products we might launch.”

Toms depends on social media to spread its message

How to up your giving game

Seven steps to successful partnerships with NGOs

1. Think bigger
Look for the overlap between what your business does well, and what the needs really are, advises Joel Levesque of Huguenot Consulting. Engage with NGOs, support them. Think of this as a business engagement. Add value.

2. Know who your stakeholders are.
John Browne and Robin Nuttall put it well in Connect: How Companies Succeed by Engaging Radically with: “Knowing your stakeholders means more than writing down a list of risks they could pose, having a cup of tea with some NGO heads, and holding a few focus groups. It means understanding your stakeholders as rigorously as you understand your consumers”. Know who you’re working with, who they do and do not talk to, make connections, really understand.

3. Identify the real need
Look at the environment you’re going in to. What do they actually need? Identify the key guides you can work through. Remember the need might not be money. It might be expertise. Make sure that everyone understands and agrees on the core problem before deciding on the solution.

4. Create synergy
Look for win-win opportunities to get everyone working together. You will have to be the internal advocate for these projects, so ensure that what you are asking your colleagues to get behind will appeal to their own intrinsic needs. Why not use this as an opportunity to ask your suppliers and customers to collaborate?

5. Fixate on impact
Set your sights on impact, and focus on measuring the maximum “bang for your buck”. Put your time and energy towards creative solutions, and multipliers. It’s like an investment: don’t start till you’ve got a strong return.

6. Manage relationships
Founders are often very passionate, and sometimes stubborn. Ego plays as big a part in NGOs as it does in business, and that may create politics to manage. Listen, educate, but if nothing else works, isolate them from the pack and work with them separately.

7. If everything seems too much, get help
It’s hard to get real impact, so find people who already know what to look for and how to navigate the pitfalls.

social activism  engagement  social media  economies  CSR  brand  NGO  Social Responsibility  stakeholders 

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