Get All Access for $5/mo

Socially Responsible Small Businesses Often Grow Very Large Doing more than the minimum for workers and the environment has paid off handsomely for many well-known businesses.

By Fran Hawthorne Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Organic ingredients can cost nearly twice as much as processed ones. The price of solar and wind energy has dropped but still remains far above coal, oil, and natural gas in most of the U.S. Small business owners are among the most vocal opponents of raising the minimum wage.

Maybe a $16.45 billion behemoth like Starbucks has the spare cash to spend on good deeds like health insurance for its baristas or water-purification in developing countries, but how can a small, struggling startup possibly afford solar energy, organic ingredients, paid family leave, donations to local museums or any of the similar steps that typically define a socially responsible (CSR) business?

Actually, being socially responsible is often easier for small businesses, said Susan Salgado, a co-founder and co-chair of the New York City chapter of Conscious Capitalism, which is a nonprofit that promotes a broad agenda of sustainability, social entrepreneurialism, social responsibility and stakeholder values.

"Small companies are more nimble, so it's easy to stay more closely attached to your purpose and values," Salgado said.

Related: 7 Steps to Up Your Corporate Social Responsibility Game

Even from a strict dollars-and-cents viewpoint, she added, "there are a lot of small businesses that are actually doing it – even in the restaurant industry where I come from, where margins are incredibly small."

For starters, there's a lot of truth to the cliché about "doing well by doing good." Being socially responsible can also be profitable.

The best-known examples are in the environmental realm. Certainly it's easy to see how using less energy will reduce a company's utility bills (while also reducing the planet's carbon emissions). This can include installing good insulation, using motion sensors to turn off lights automatically and adjusting the thermostat to maintain slightly colder temperatures in winter and warmer in summer.

Other green steps may require a big initial outlay to produce a delayed reward. While the price of compact fluorescent light bulbs is typically about six times higher than traditional incandescent versions, CFLs use 75 percent less energy and last 10 times longer, thus paying for themselves in just a few months.

Some long-term advantages, particularly those involving work-force morale, are more subtle. In addition to health insurance, Starbucks also offers its employees stock options and a 401(k) plan with a matching corporate contribution, and in April [2015] it launched a program to cover full tuition for workers who enroll in Arizona State University's online undergraduate program. Investors put tremendous pressure on the coffee company to eliminate its health-care benefits after its earnings and stock price began slipping in 2006. To its credit, Starbucks held firm.

One result of this corporate good will: Employee turnover at Starbucks is only about one-third the disastrous triple-digit rate of the rest of the fast-food industry. That saves Starbucks huge amounts of money in hiring and training.

Yes, some ethical steps do cost more than following the standard, mass-market route. However, the good news is that there is a sturdy, and growing, core of consumers willing to pay extra for organic, artisanal, local and union-made goods and for brands that have a CSR reputation. For instance, in a 2005 survey by Ohio State University, 43.1 percent of respondents said they would fork over a 10 percent premium for humanely raised animal products, and 12.4 percent would actually pay 25 percent more.

This cohort shrank during the 2008 recession, of course, but it has since returned. Organic products are probably the category leader. According to the Organic Trade Association, sales of organic food more than tripled over the last decade and jumped 11 percent in 2014, to $35.9 billion.

"In this post-Enron era, with all the lack of trust we have in our politicians and financial institutions, people are looking for these kinds of stories," said Salgado. "More and more consumers want to do business with companies that are doing good for society."

Related: 6 Ways to Do Well by Doing Good

Perhaps most important for entrepreneurs, many successful companies have been started precisely to be socially responsible.

Consider Tom's of Maine. In 1968, an insurance salesman named Tom Chappell got fed up with the corporate world and decided to try selling a nonpolluting laundry detergent. Today, his company is famous for using only natural ingredients in its toothpaste, deodorant and other products, and for giving its workers paid time off to do community service.

Similarly, Burt's Bees began with a `reclusive beekeeper in Maine who sold homemade honey, and expanded into all-natural lip balm, shampoo, soap and body lotions. Another perennial CSR favorite is Ben & Jerry's Homemade, whose mission statement pledges to sell ice cream and other goods "incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment."

All three of these enterprises were so successful that giant multinationals paid hundreds of millions of dollars to acquire them, just to gain a toehold in their natural, worker-friendly, socially responsible – and profitable -- niches: Colgate-Palmolive ($100 million for Tom's), Clorox Company ($913 million for Burt's Bees), and Unilever ($326 million for Ben & Jerry's).

Can small businesses afford to be socially responsible?

Few businesses of any size can afford not to be.

Related: How Purpose and Social Responsibility Can Set a Startup Apart

Fran Hawthorne is the author of the award-winning Ethical Chic: The Inside Story of the Companies We Think We Love (Beacon Press) and seven other books about business, consumers and social issues. She writes regularly for The New York Times, Newsday, Institutional Investor, and other publications.

 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

Melinda French Gates Announces Open Call for $250 Million Fund. Here's Who Can Apply.

The fund is part of French Gates's $1 billion philanthropic plan.

Thought Leaders

How to Eradicate Toxic Behavior in the Workplace — and 3 Ways to Prevent It in the First Place

By taking these preventative actions, leaders can keep workplaces healthy.

Side Hustle

11 Side Hustles That Take Less Than An Hour Per Day

Here's a curated list of some of the most time-efficient side hustles we've seen lately.

Science & Technology

Cut Costs and Find Streaming Content Easier with BitMar

A lifetime of streaming for just $19.99.

Business News

Daniel Lubetzky Took Kind Snacks From Idea to $5 Billion. Here's His Best Advice For Anyone Who Wants to Start a Business.

In an interview with Entrepreneur, Kind Snacks founder Daniel Lubetzky tells aspiring business owners not to follow someone else's path to success — even his.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.