Profits for a Better World
Once upon a time, people would start a business with two main goals: to be their own boss and to make some cold hard cash. But for some young businesspeople, that's just not enough anymore.
"I think many in my generation have lived their entire adult lives with a feeling of helplessness to change the world around them," says David R. Anderson, 25, founder of San Francisco-based Green Options Media, a network of sustainability blogs, and Renewzle, a lead-generation service for clean-energy installers. "The decreasing barriers to starting a business, especially online, have opened up a new world of social change, while at the same time providing an escape from the drudgery of a boring, corporate or otherwise ineffectual job."
There are many reasons for the rise of social entrepreneurship, which The Schwab Foundation for Social Entrepreneurship defines as "about applying practical, innovative and sustainable approaches to benefit society in general, with an emphasis on those who are marginalized and poor."
Lara Galinsky, vice president of strategy at Echoing Green, a seed funding organization for social entrepreneurs, points to the prevalence of social entrepreneurship programs at colleges (Each of the top 10 business schools in the U.S. has at least one faculty member teaching the subject.) media attention, and philanthropic business leaders like Bill Gates and Pierre Omidyar.
"Because of their tremendous wealth and exciting philanthropic strategies, they've helped social entrepreneurship take the fast road," Galinsky says.
"The concept has gotten traction because of the popularity and knowledge about entrepreneurship in general, coupled with a growing interest among young people and others to make a real difference in the world," says Elizabeth Gatewood, Ph.D., director of the Office of Entrepreneurship and Liberal Arts at Wake Forest University in Winston-Salem, N.C. "People are more globally focused, have a growing concern about the environment and sustainability, and realize that there is more to life and finding satisfaction than just making money."
For Selemani Kinyunyu, 21, starting Offset East Africa was a moral decision. His for-profit venture sells carbon offsets to travelers and then uses the money to plant much-needed indigenous trees and better manage natural forests in Tanzania.
"If you can make money and give back to the community, why not model the business in that way?" Kinyunyu says.
When Ben Lewis started Give Water right out of high school in 2007, the idea that his business would give back was a no-brainer.
"It was a desire to create a business that would do good and also make money," says Lewis, 19, who attends the University of Pennsylvania, while also managing his Pittsburgh business that has four employees.
Give Water donates 10 cents from each bottle sold to local charities. Buyers can choose from four different label designs--life, hope, love, strength--letting them decide which charity receives the donation.
"The idea was that one person, a consumer, can make a difference. [I wanted] to make it easy for people to give back, to do good," says Lewis, who has already donated $50,000 to charities throughout the Northwest, East Coast and Midwest where the water is sold at mom-and-pop shops, as well as Whole Foods. He says the company is set to donate $1 million--that's more than 10 million bottles sold--in 2009.
Structure for the Cause
Echoing Green has provided seed grants and technical support to more than 450 social entrepreneurs over the past 20 years. Most of the organizations have been nonprofits, but "this year, we've definitely seen a surge of just straight for-profit, socially focused companies," Galinsky says. "That's a really interesting trend." She says that four of the 20 grants provided in 2008 will go to for-profits.
Galinsky says for-profit social entrepreneurs choose that structure because it makes the most sense for the business--not because they're trying to get rich.
"It's because it's a better model to realize their social mission. I would be hard-pressed to think they were doing it with the motivation of having high infusions of cash for themselves," Galinsky says.
They look at the laws where they're doing business, or if they're better positioned to receive investment dollars rather than philanthropic donations.
Anderson sees the for-profit model of social entrepreneurship as a mainstreaming effort--making "doing good" an everyday reality.
"In some ways, I see the '1 percent for the planet' [an initiative where businesses donate 1 percent of their net profits] and other similar initiatives as selling the movement short," Anderson says, "pigeonholing the sustainability movement into 'charity' mode, when in fact, the only way to create the civilization-wide transition that needs to happen in my lifetime is through a massive transition to businesses that do good, and make money doing it."
Making money and doing good can be a difficult balance.
"If you think about [donating] 10 cents per bottle, that's $2.40 a case," Lewis says. "In a lot of cases, [bottled drink] brands aren't even making $2.40 a case."
Lewis credits his vendors and distributors with helping him with his narrow margins.
"I like to say it's a movement. It's not like this is a typical company or brand," Lewis says. "Everybody feels invested. We have retailers who feel like it's their product. Distributors feel like it's their product. Everyone takes ownership in it all the way down to the consumer, which is what I think makes it work."
Kinyunyu places faith in the social entrepreneurs themselves to manage the responsibility and bring in money. "Business is, after all, about managing risk," says Kinyunyu, who recently won the Believe Begin Become business plan competition developed by TechnoServe, a nonprofit that helps entrepreneurs in developing nations build businesses.
"An entrepreneur who is more aware and conscious about his surroundings is more likely to make informed choices," Kinyunyu says.
Making money, managing risk, dealing with vendors and a bottom line: This isn't the romantic side of social entrepreneurship, but it is the foundation by which entrepreneurs can make social change. You can't change the world if your business--for-profit or nonprofit--goes kaput.
"Making money is a necessity that often seems to get lost in companies with socially responsible missions, and I'd be lying if I said striking the balance between making money and creating a values-driven company culture was easy," Anderson says. "But it's not a zero-sum game. Just love what you do, don't be evil and focus on creating the conditions to carry out your company's mission in a sustainable manner. The rest will fall into place."