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Social Sector
Capitalizing with the Poor
by
Jeff Keenan
and
John Terrill
and
Kenman Wong
Accounting fraud, burst financial bubbles, and the callous treatment of the natural environment only represent a few of the dismal business headlines of the past quarter century. It’s no wonder that employee morale and public trust in business have reportedly hit all time lows.
Refreshingly, however, many organizations are redirecting their businesses to serve higher purposes; they are creating economic opportunities for the poorest citizens of the globe. Because of its unique ability to create wealth and operate in an economically sustainable manner, business is an important institution in addressing serious global problems, such as poverty.
During a recent conference on the role of business in ending poverty (“Bottom Billions: The Role of Business in Ending Global Poverty” ) held at Seattle Pacific University, we came across many organizations that intentionally and creatively use commerce to serve the economically impoverished. These organizations operate far from the old model of “earn as much as you can on the business side and then give away money and goods as a separate, charitable endeavor.” Instead, many businesses pursue multiple bottom lines (i.e., economic, social, spiritual goals) all at once. Here are a few of the organizations that presented at the conference.
Krochet Kids
is an organization started by three college students who wanted to improve the plight of unemployed women in war-torn Northern Uganda. CEO Kohl Crecilius shared that although they were unsure how exactly to help, they decided to pass along the one skill they had in common: crocheting hats. The group set up a project to train a group of women in Northern Uganda to crochet hats. Today, about 100 women are employed producing high quality, stylish headwear geared toward outdoor winter sports enthusiasts. Their products are sold through high-end retailers like Nordstrom. Krochet Kids also partners with leading apparel manufacturers such as Volcom, and are about to begin a new project in Peru. In 2010, Krochet Kids sold 30,000 units and surpassed $500k in sales revenue. They project to sell 100,000 units with over $1m in sales revenue for 2011. Although technically a non-profit, Krochet Kids uses an “earned income model” allowing the organization to be far less dependent on donations than traditional NGO’s; only 26% of their total income for 2010 came from donations.
Another outstanding example is
The Paradigm Project
, a “hybrid” organization incorporated as a L3C (low-profit limited liability corporation), that sells highly efficient, low cost stoves in Kenya. The stoves provide economic, environmental, and health benefits (cleaner indoor air) to users. The revenue model is a combination of units sold at below cost to customers and the sales of certified carbon credits on the voluntary market for offsets. The carbon credits allow a small profit to be made, making it a sustainable model of achieving multiple bottom lines at once. The Paradigm Project is set to expand its work into neighboring countries.
Though its services are not nearly as “flashy” as the first two, the final example demonstrates how a small business based in the heartland of America can address global issues. General Manager Wade Gray was such an unassuming presence at the conference we could have easily overlooked him. Wade runs a small enterprise called
ECO7
, a janitorial business based out of Oklahoma City that not only uses organic cleaning products (he says he was once a skeptic until realizing the negative health impact of typically used chemicals on workers), but also purposefully seeks to employ refugees from the developing world.Eco7 endeavors to offer employees good wages and benefits while helping develop transitional skills such as English language improvement. Long term, Gray and his partners envision helping these employees become owners of their own businesses through franchising arrangements.
While these types of emerging enterprises are inspiring, we recognize that they are small in scale and represent only one way in which business can have an impact. MNCs (“big business”) also need to be active partners. It is very encouraging that executives from Adidas, Costco, Microsoft, and Phillips Healthcare were also present at the conference. Many large corporations like these are becoming increasingly active in the BOP (“Base of the Pyramid”) business space as they see profitable opportunities to serve by selling products to and creating employment opportunities for the world’s poorest 4 billion citizens, a previously overlooked “market.”
There certainly are tensions caused by profit seeking enterprises operating in poor areas of the world. Good intentions are not enough. Careful attention must be paid to sound ethics and definitions of “development” that transcend economic gains alone. No single sector can end poverty on its own, including business. Many governments and NGO’s are already playing critical roles. Given the influence of business and the need to reclaim its legitimacy, however, this is an opportune time for business to act as a key player in alleviating poverty. The world needs the wealth creation, knowledge transfer, and ability to scale that businesses excel at.
What are some ways that your business can pursue multiple bottom lines and serve a higher purpose?
How do you live in the tension between pursuing profit and social goods?
Editor's Note: The image above was found
here
.
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Comments
Tim
carbon credits? are you kidding. I love this web sight and have even taught a Sunday School class on Lyons. I cant believe such a fine organization falls for such non-sense as "carbon credit". Talk about stealing money from people,,,,you guilt money out of someone to help pay for a "good cause". I sense a saddening trend of naivet'e with this orgainization. Dont let the liberal ideology of the northwest take over common sense. God Bless.
Tim
After reading again i just had ro respond again. You write this on the premise that all companies make a ton of money and you assume that they should take the lead. Maybe as individuals me and you should give to these causes. Why do we expect Mr. Business to take the lead? What happened to the individual. It is obvious that none of you own, or have owned a for profit business. Non-profit is really profit for those on staff. You come from the premise that all non-profit all work for free. Most non-profits abuse this lable. Like goodwill, the management makes good money. As long as you spend every nickel you make on "employees" then you are a non-profit.
Donovan
Tim, leaving the debate about carbon credits aside, this article, to me, provides examples of companies that focus on goals outside of the typical "profit maximization" principles taught at most business schools.
At no point do the authors claim that business is the only way to alleviate poverty. In fact, I am positive that they would urge individuals to be generous to charitable causes.
Business, however, is an extremely influential institution in the world. Business exists to supply goods and services that allow humans to flourish and to provide meaningful work. Whether the company is a multinational corporation or a smaller one illustrated in this article, there is space for it to do more than make money; it can change the world for the better.
martha
Tim, the idea that most nonprofits abuse the label is like saying that most for profit businesses are greedy and socially irresponsible. Businesses of whatever model are viable when they are created and implemented via clearly understood moral principles.
Why should Mr. Business take the lead? Business is a sector that affords tremendous creativity within a free society. Businesses (for profit and nonprofit) can and should take leadership in launching products and services that meet social and infrastructure needs. We can't, as a society, keep on trying to pay for social needs through tax dollars only. I think we should launch businesses that address social needs and let competition improve the efficiency of service delivery.
J. Greg Spencer
Tim,
the business of developing projects that reduce air pollution (including household cookstoves that reduce indoor air pollution and "greeenhouse gases") is hardly "guilting money out of people" or "northwest liberal ideology". Regardless of your view on climate science, the highly technical business of investing capital in physical assets that cost-effectively reduces air pollution is part of a $140 Billion/year marketplace involving thousands sophisticated multi-national companies, NGOs and engineering firms. Carbon offset projects, especially those using the "Gold Standard" selected by Paradigm, require thousands of man-hours to develop, must be certified as meeting rigorous international standards, and any claimed pollution reductions must be independently verified by certified engineering firms in Europe before they can be sold. These projects not only reduce air pollution, but typically also create many other environmental benefits as well. Paradigm's use of carbon offset projects to generate income to subsidize the stove costs and give a return to investors is as real in effect and risk as any other business, it just creates a lot more benefits.
Sue Cockburn
Martha's comments are right on.
Having worked in both the for-profit (20+ yrs) and the not-for-profit world (10 yrs) - and neither is perfect - in the not-for-profit world I rarely came across anyone who wasn't giving it 200%. In all roles from entry level to management level. They were passionate, committed and were there, in almost all cases, because they strongly believed in what we were doing. Funding, as for many not-for-profits, was an ongoing challenge.
I'm now back in the for-profit world with a couple of new businesses - we're small potatoes - and I want to make some serious money - and give big chunks of it away.
I love what I do and want to help as many people as possible through my businesses. Through doing the work we do and through giving to people/organizations in the not-for-profit world who are making a difference in our world.
The for-profit world offers the opportunity to make money and to invest it in some worthy causes that can make a difference in the lives of people.
I think big business has a role to play in helping to alleviate suffering at home and in the third world. And, as the public leans towards doing business with those who offer good products and services AND who have a social conscience, the world and the people in it will be better off. In many ways the direction that business travels towards this goal is in the hands of the consumer. If how businesses operate is an important part of why we (the consumer) deal with a particular business or brand, this will impact how businesses do business. And with social media, it will be tough for businesses who are only in it for themselves and what they can get out of it to keep this hidden from the public for long.
Tim
Wonderful comments everyone. Thats why I love this sight. Although I dont agree with everyone, I do appreciate the opinions expressed. I happen to be in an environment where non-profit is abused to the max. And I would almost say that unfortunatley most for profit companies if strectched thin would do anything for a buck. Thats the world we live in. I forget who said it but it is true,,,,the only thing wrong with capitalism is greedy capitalist. My point was that we dont need to call companies non-profti when they make a payroll. I could start a non-profit and pay everyone in my family $200,000 a year. As long as I have no money left then I can still be called a non-profit. We should no gloify non-profits over for profits companies. They both have the very same abuses. I only give to 100% volunteer orgs.
Kenman
Thanks to all who have taken the time to post such insightful comments.
Tim, thanks for clarifying your perspective. I wasn't sure how to take your initial reaction as the examples we gave are all profit generating activities and are voluntarily undertaken by the founders of the organizations mentioned. Nor, did we suggest that all businesses be somehow forced to go along.
One thing we have found very encouraging is that people involved in these efforts represent broad political ideologies. They seem to be drawn together by a common desire to find economically sustainable solutions to poverty, which is a goal that is shared by those on the right, left and everywhere in-between (at least one would hope).
I certainly understand your point about not glorfying non-profits over for-profits, that's why we chose mostly business examples (including some large MNC's) and its partially why we directed a conference ("Bottom Billions: Bottom Lines: The Role of Business in Ending Poverty") focused on business. If you are concerned about Krochet Kids (the one non-profit we mentioned in the post) abusing their status, financials are posted at the organization's website and you can even find the amounts (which happen to be very low) their top managers are being paid at sites like Guidestar.org (look for IRS form 990).
Thanks again for contributing your thoughts.
Kenman
Kenman
Comments are now closed
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