“A good deal of philanthropy arises in general from mere vanity and love of distinction gilded over to others and to themselves with some show of benevolent sentiment.” — Sir Walter Scott
Many people who donate to charity believe it’s important to help people in need. They feel that people should give to others because it’s the right thing to do. However, the psychological origins of wanting, or even needing “to feel what you’re doing is right” can be simplified as pride. This is not to bash on the vanity of philanthropy as much as it is to identify the motivations behind it. It’s completely natural (and thankfully so!) that people take pride when they know that they are helping someone else.
This sense of ‘altruism,’ referring to behavior that benefits another individual at a cost to oneself, is typically said to be the main motivation behind donations. While psychologists debate whether pure altruism is real, altruistic people emotionally enjoy giving and receive pleasure from the action (Source).
So why doesn’t traditional donating exploit the psychology of donating in a more impactful way? Shouldn’t it be the aim of NGOs and charities not to work on the good faith of their donors, but on maximizing their “donation value” based on the amount of impact being facilitated because of their donation?
Of course, NGOs and charities regularly report on such impact, but a certain “unit” of programmatic impact is rarely attributable to a single donor. Rather, nonprofits address their donors as a group per campaign, and the messaging is “Look at what we’ve accomplished!” It seems that the programmatic impact of nonprofits is commodified in the form of a report, rather than in a form more akin to offset accounting — where one unit of positive impact is assigned a value that can, theoretically, “offset” negative impact.
A few years ago I hypothesized the utility of service tokens in the social sector, where tokens were used to access a unit of service (e.g., food at a food market, a night at a homeless shelter, etc.), where impact could be more fairly and transparently distributed to those in need. In the following brief, I explore the other side of the market — donors and creating the impact that is supporting vulnerable communities.
Why are Environmental Commodities the Only Ones?
The only “impact” commodity markets that currently exist are those that measure environmental commodities like carbon offsets, renewable energy certificates, and energy savings certificates. Such markets have grown given increased regulation in the face of the worsening, existential threats of climate change. According to Ecosystem Marketplace, the market for voluntary carbon offsets came close to $300 million and traded almost 100 million metric tons of carbon dioxide equivalent in 2018, the latest year for which data is available. Estimates of the size of the global carbon compliance offset market range between $40 billion and $120 billion.
But, why are environmental commodities the only ones?
How can we commodify other types of impact, particularly as it relates to global policy related to that impact? How can we re-create impact accounting — Particularly in the context of holding multinational corporations accountable for how they affect society?
If there is one thing for certain in the impact commodity market, it is this:
Regulations make impact commodity markets. In a cap-and-trade convinced economy, policy that restricts negative impact also commodifies positive impact, primarily so that the worse offending parties can ‘offset’ their deleterious effects on society.
We already fiendishly keep track of campaign donations, and major NGOs are constantly tasked with providing detailed reporting to their donors, yet we do not keep score on the types of impact being generated in the same, commodified way we do offset emissions and renewable energy generated. Regulatory precedent has already been set for other types of impact commodities to exist. For example, commoditized racial equity-oriented impacts, such as # of formerly incarcerated persons with restored voting rights or # of black consumers turned homeowners, could be warranted by Civil Rights legislation from the 1960s to actually ensure institutions are actually following through on this legislation.
Yet, Wells Fargo, Bank of America, and J.P. Morgan do not offset the socioeconomic impact they have when caught giving brown and black customers higher loan interest rates. One may respond, stating, “This is why they are fined for such actions. It all balances out eventually,” but you’d be dead wrong.
Such actions have exponentially more harm than the value of the typical settlement or fine, because, in the context of discriminatory banking, billions of dollars of potential value are taken from marginalized communities in the form of home equity opportunities denied, new businesses that can’t be created, and college degrees that can’t be awarded due to unpaid tuition balances. Commodifying impact beyond combatting climate change is necessary to be truly sustainable.
Ideally, Donations Purchase Impact
Ideally, for every donation that someone makes, they purchase a specific social impact in return — tied to a specific outcome metric.
For example, if I give $10,000 to Care International for their Sexual Reproductive Health program in Ecuador, then I would be purchasing the impact that the donation would be affording Care’s program. This could be a single outcome-based impact like the following:
$10,000 → 200 Sonograms for Ecuadorian Pregnant Women = 200 “Care Sonograms Provided” Tokens (or “CSP” Tokens)
Or, the donation could be tied to a more diversified set of impacts:
$10,000 → 100 Sonograms for Ecuadorian Pregnant Women & 125 Sexual Health Check-ups =100 “Care Sexual Health Program Tokens” (or “CSHP” Tokens), where each represents 1 Sonogram provided and 1.25 Sexual Health Check-ups provided
Thus, the impact commodity per program is different based on the targeted outcome of the program itself. To participate in an impact-based commodity market, organizations would need to specify what the program’s desired impact is and calculate the operational cost per unit of impact (e.g., for every $10, 2 homeless individuals receive free lunch, taking into account the operational costs to provide said lunch).
The interface for such a transaction — a donation for program-specific impact tokens, would be as simple as a pre-built, customizable check-out extension that NGOs could easily add to their own websites. Every-time a donor donates, they receive impact tokens for the impact their enabling, and those tokens can be used for a variety of purposes, including:
- Offsetting negative impact the donor may have caused, in which case the donor can ‘Retire’ their tokens and account for such retirement in their respective sustainability balance
- Keeping track of the impact they’ve enabled, in the case that a donor simply wants to see their impact quantified in a person-specific report
- Access to special events or promotional products that the facilitating nonprofit or social enterprise is offering for those that have helped them create the most impact
- Earning capital from selling tokenized impact to larger enterprises that need to balance their sustainability budgets
Simply put, 1 Impact Token = 1 Programmatic Unit of Impact = 1 Unit of Positive Impact that Can ‘Offset’ Negative Impact
Each token could even have an IPFS link to program reporting as a token attribute, so that any token holder could directly attribute the token’s impact to the specific program that facilitated such impact on the ground. In a way, an Impact Token acts as both commoditized impact and a donor receipt. Sustainable programs issuing impact tokens can use the blockchain to easily calculate total impact across their organization — down to the very outcome metrics.
Finally, commercial donors can view their ‘impact commodities,’ or the impact they help make possible, across multiple organizations in one place, as the donation-impact extension could provide a central dashboard of all donations made, the amount donated, the various Impact Tokens ‘purchased’ via said donations, and the impact metrics enabled via the donation. Never before has such a detailed donor report across nonprofit programs been possible to provide. Even better, all donations made through the donation checkout extension will be saved on the blockchain — making the donations of every nonprofit that uses the extension publicly auditable in the same place.The hypothesis being tested here is that “Donors will donate more capital, more often, if they know exactly where their money is going and what impact is being generated.”
Impact Token Markets & DeFi Swaps
Where things really get interesting are when we create Impact Token markets in which Impact Tokens can (1) be swapped for other cryptocurrencies, and/or (2) sold on a secondary market to entities looking to offset their negative impact balances. As NGOs get more comfortable with accepting cryptocurrencies (and resources like Emerging Impact-partner The Giving Block are an excellent on-ramp for doing so), they can sell program Impact Tokens for popularized cryptocurrencies that will most likely increase in value after the transaction. Such an increase provides the NGO with additional, operational funds that could bridge the gap during a time of need (e.g., during hurricane season) where more resources need to be deployed.
We could even create NGO Index tokens (otherwise known as “Program Fund Tokens”) where a single NGO token represents a donation across multiple programs (i.e. a Program Fund Token represents a share of multiple Program Impact Tokens in a Single Pool). For example, a donor may want to split their donation across all country offices of a single, major NGO, rather than just giving to one program. To do so, they could purchase Program Fund Tokens, which is a single token that represents multiple Program Impact Tokens. In this case, the donation would be split equally across the programs. Much like Impact Tokens of a single program, Program Fund Tokens could also increase and decrease in value depending on the demand for the impact the tokens have promised on behalf of the NGO.
The endeavor of making tokenized impact markets possible will be a personal project of mine, and I certainly invite collaborators to make this a reality! Until then, see you next time.
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About Robby → Robby is a southern-bred activist and impact entrepreneur. He’s currently CEO of Emerging Impact and served as the former Head of ConsenSys Social Impact. Greenfield is a Brother of ΑΦΑ, a Wolverine Alum, and Emory MBA Alum. Before full-time crypto-life, Robby worked at Goldman Sachs, Teach for America, and Cisco Systems. He commonly writes about crypto-economics and blockchain technology with a social impact focus. Find out more about my projects in the social sector @ http://robtg4.co/