Values Added

Doing business is about more than making money for Marci Zaroff, founder of Under the Canopy, an 11-year-old organic clothing company in Boca Raton, Florida. Her company's organically grown, pesticide-free line is made using eco-friendly dyes and manufacturing methods. The company audits its manufacturing facilities for fair working conditions and wages.

It's a business model that Zaroff, 39, believes benefits both the planet and people. "A conventional cotton T-shirt has a third of a pound of pesticides," she says. "[We're asking], 'How can we create a better product that is comparable to the conventional product, and also something that can protect life and future generations?'"

Fusing fashion with environmental sustainability and social responsibility has paid off: Zaroff projects sales of well over $10 million this year, and the 17-employee company's baby line will debut in Nordstrom this fall. "We're on the launch pad to go to another level," she says. "We believe we're on our way to being a $100 million company."

But can a small, sustainability-focused company grow and stay true to its earth-hugging, health-focused mission? Yes, if it approaches growth in a certain way, says Jill Bamburg, dean of the MBA program at Bainbridge Graduate Institute, a Seattle-area institute focused on sustainable business, and author of Getting to Scale: Growing Your Business Without Selling Out. "Even though you are surrounded by naysayers and alligators and difficulties of all sorts, it is possible [to grow]," she says, adding that the 30 socially responsible entrepreneurs she interviewed for her book were relatively unconflicted about the very idea of growth. "They were using their businesses to do good in the world," Bamburg says. "If their businesses grew, that simply meant they could do more good."

Rapid growth in the organics sector, however, has lead to debate over what it means to be organically produced, particularly as large companies from Unilever to Wal-Mart seek a piece of the market. The Cornucopia Institute, a Cornucopia, Wisconsin, organics watchdog group, issued a report last year that questioned the ethics of 11 major organic producers. It also filed a complaint last fall against Wal-Mart, alleging that the retailer has labeled some nonorganic food items as organic. "Consumers aren't necessarily getting what they think they're paying for in terms of all the social, economic and ecological justice aspects they think that label stands for," says Mark Kastel, director of Cornucopia's Organic Integrity Project.

Smaller players in the organics industry are having their founding principles tested by lucrative buyout offers, venture capital and distribution deals. Eric Schnell, co-founder of 4-year-old organic beverage company Steaz, has negotiated with Wall Street investment firms offering to help take his 11-employee company public, but he's managed to stay private with the help of angel investors. Still, he knows that growing inevitably means expanding into bigger, mainstream markets. "We can only grow so big in the natural community," says Schnell, 36, who runs Newtown, Pennsylvania-based Steaz with co-founder Steven Kessler, 46. Company sales are projected to reach $11 million this year.

Raising capital is another ethical land mine. Like Steaz, Under the Canopy has been approached by Wall Street, but instead has raised $4 million in angel investment over the past two years from its board members and advisors, which include the founders of successful sustainability-minded companies like Aveda, Crocs, Seventh Generation and Whole Foods. "Just because you're doing something organically doesn't mean you can't grow to a much greater scale," says Zaroff, who is working on strategic plans for 2008 that will build the company's farm capacity. But she's selective about the people she works with to avoid value conflicts that come with growth.

In fact, maintaining financial independence is key to upholding socially responsible values, Bamburg says. She sees successful organics companies growing more slowly and frugally by bootstrapping and building sales, then plowing money back into the business to grow some more. Well-vetted outside financing comes later, and at an affordable rate that supports further expansion. "They're growing the old-fashioned way," Bamburg says. "To the extent that you can build values into the fundamental business proposition, it's much easier to hang on to them as you grow."