Making a Profit and a Difference

As the economy reels, enterprising individuals who apply business practices to solving societal problems are gaining support from public and private sectors

By Stacy Perman

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Social entrepreneurs—enterprising individuals who apply business practices to solving societal problems, such as pollution, poor nutrition, and poverty—are now 30,000 strong and growing, according to B Lab, a nonprofit organization that certifies these purpose-driven companies. Together, they represent some $40 billion in revenue.

The idea of blending a social mission with business is not new. One of the founding forces behind the movement, the Ashoka Foundation, since its inception 1981 has granted multiyear living stipends to support more than 2,000 fellows dedicated to finding answers to a host of social ills through business ventures. Indeed, the concept of building a profitable business model in which doing good is an intrinsic part of the business and not just a philanthropic sideline has been gaining ground in recent years. Sally Osberg, president and chief executive of the Skoll Foundation in Palo Alto, Calif., another guiding force within the social venture community, says the number of institutes, universities, and organizations that are now tapping into social entrepreneurship has mushroomed since former eBay (EBAY) President Jeff Skoll established the foundation in 1999.

Now, as the economy reels, both the government and the private sector are looking for inventive ways to bring back prosperity, and many are counting on these entrepreneurs as a powerful tool for change. "Social entrepreneurship correlates to this growing realization that entrepreneurs are the key to a vibrant economy and to solutions that are badly needed," says Osberg. It's not all pie in the sky, says Bo Fishback, vice-president for entrepreneurship at the Kauffman Foundation in Kansas City, Mo. "Many social entrepreneurs have shown they can accomplish their mission," he says. "They can deliver on the social good and report a cash flow."

Not surprising, then, that they've caught the attention of such venture capitalists as those at Acumen Fund, a nonprofit that invests in companies that try to alleviate poverty, and Bay Area Equity Fund, which backs businesses aiming to make social or environmental improvements to San Francisco's needier neighborhoods. (See these additional resources for entrepreneurs seeking funding sources that back social ventures.) President Obama has even suggested starting a new government agency to help socially conscious startups gain more access to venture capital.

Who You Like Best

In January, we asked readers, staffers, and members of the social venture community to nominate candidates whose trailblazing companies, in operation for at least a year, aimed to turn a profit while tackling social ills. The 200-plus nominations we received included such entrepreneurs as Alex Mittal, whose Philadelphia-based Innova Materials makes antimicrobial products for private industry, then uses revenues from these efforts to develop water purification systems for the developing world. Kirsten Tobey and Kristin Richmond, founders of Revolution Foods, deliver nutritious lunches to more than 100 schools (that's 20,000 meals a day) in low-income areas in San Francisco and Los Angeles.