Small Business

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

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. Rachel Sterne, another social entrepreneur, encourages those living under repressive regimes to post their own reportage at her profit-sharing Web site, Groundreport.com. You can take a look at each of the 25 ventures we profiled in our slide show, then vote for the business you feel holds the most promise.

Some attribute social models pioneered by small outfits to the social responsibility efforts espoused by large corporations. For instance, about three years ago, Wal-Mart Stores (WMT), the world's biggest retailer, launched a program to promote sustainability, urging its many vendors to produce ecofriendly products while encouraging its consumers to buy them. General Electric (GE) made its green mark manufacturing high-efficiency incandescent light bulbs, and such manufacturing giants as Clorox (CLX) have begun to roll out their own lines of "green" cleaning products. In March, Cadbury (CBY), manufacturer of England's top-selling chocolate bar, announced a deal to use 15,000 tons of Fair Trade certified cocoa from Ghana by the end of this summer for its popular Dairy Milk bar. The company said the move would improve the standard of living of thousands of Ghanaians by tripling the sales of cocoa farmers there.

One of this year's finalists, Daniel Lubetzky, founder of $25 million Peaceworks, which works as a catalyst for peace by encouraging joint snack-food ventures among people of different backgrounds in volatile regions around the world, says it is not enough to impose an artificial business model on a social issue. Lubetzky, who was awarded a $1 million grant from the Skoll Foundation in 2008, says that doing good alone will not ensure success. "I had an earlier company that totally tanked," he says. "I didn't understand the product line well, but I was passionate about the mission. The failure taught me that one can't advance a social mission if the business model doesn't sell. You can't just sell a social mission. You still have to come up with the best product with the best prices." Given the current economic climate, that rings particularly true.

For a look at all 25 businesses, flip through this slide show. More elements of this special report are available in the related-items box on the upper right side of this page.


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