As “Occupy Wall Street” protests capitalism’s greed, social enterprise leaders are thankfully tapping the power of market forces to address capitalism’s thorniest social issues.
In 2000, Gerald Chertavian founded the social enterprise Year Up to address the “huge waste of human capital” he observed in poor neighborhoods as a Big Brothers-Big Sisters mentor. Year Up gives a “leg-up” to youth aged 18-24 who have been disadvantaged by low income, family dysfunctions, substance abuse, or a criminal record. The high-expectations program combines a six-month professional skills training program (covering topics like writing, networking, time management, conflict resolution, and personal finance) with project-based internships that teach a technical skill. Over 85% of its graduates go on to earn $15/hour or more.
A social enterprise, according to the Social Enterprise Alliance (SEA), is “an organization or venture that achieves its primary social or environmental mission using business methods.” Year Up, like other social enterprises, relies not on donations but on earned income. Student Pell grants and business-sponsored paid internships fund Year Up. 200 companies participate, including some notables like Google, J&J, and JP Morgan Chase.
Goodwill, another example, largely finances its work helping the disabled through its $2.7 billion retail store operations. NISH’s AbilityOne program, a $2.6B enterprise serving 45,000 disabled workers and creating 250,000 total jobs, facilitates Federal agencies and military bases buying products and services of social enterprises that employ the disabled.
I attended the annual SEA summit recently and learned more about the movement, whose “moment is now,” according to SEA President & CEO, Kevin Lynch. Here’s why:
- Increasingly competitive markets are creating more displaced workers.
- Government has less money at a time when need is growing.
- Philanthropists increasingly want to pay for outcomes that matter, e.g., less recidivism, rather than process outputs e.g., numbers of felons trained.
- Social value matters to more people. Consumers use tools like GoodGuide, a mobile application that enables shoppers to find safe, healthy, green & ethical products based on scientific ratings. Talent seeks companies with strong corporate social responsibility performance.
Social enterprises exist in for-profit and non-profit sectors, with some non-profits turning for-profit. Network for Good, an on-line community enabling non-profits to tell their stories to potential donors and collect contributions through a PayPal-like solution, grew from $25M to $500M under CEO Bill Strathmann’s leadership. He’s exploring for-profit status to access the talent and capital needed to fulfill his organization’s vision to provide $10B to non-profits over the next 10 years.
Social enterprises create a marketplace for consumers and businesses to monetize any social good they care about. They turn negative externalities like labor market failures into business model opportunities with terrific value promises. Intrinsic return replaces profits for the sake of profits.
New York City’s Greyston Bakery sells its award-winning gourmet brownies to consumers and to Ben & Jerry’s as an ingredient. This effort provides on-the-job training and jobs to 65 local residents regardless of their work histories, including many ex-prisoners. Profits fund housing for 224 low-income and homeless individuals plus childcare and healthcare services. Greyston Bakery and other social enterprise products are added to corporate incentive programs thanks to the channel Helping Hands Rewards, another social enterprise.
But some enterprises would succeed irrespective of intrinsic return. Catholic Charities of Fort Worth, Texas offers translation services to courts and hospitals by employing bi-lingual refugees. For-profit Working Farms Capital offers investors a terrific return for keeping organic land farmed versus developed.
Changes in the social enterprise sector will accelerate the sector’s growth.
- As outcomes are increasingly measured, the best business models for addressing specific issues will be identified and scaled.
- Ecosystems of support have developed. Catalyst Kitchens and California-based The Roberts Enterprise Development Fund (REDF) each provide support services to high potential social enterprises. The US government, through Obama’s Social Innovation Fund, as well as a growing number of “venture philanthropists” provide funds to help social enterprise business models scale.
- The Social Enterprise Alliance is expanding its support – measuring the sector’s economic impact and creating member networking and learning opportunities. It will also tackle federal policy issues that hinder social enterprises’ success.
- For-profit leaders like Chertavian and Strathmann are joining social enterprises, infusing the sector with skills and connections gained in the private sector.
The US spends $45-50,000 annually, I learned at the conference, per prison inmate. Released, a felon faces about 200 barriers to employment. Is it any wonder that only 35% of released prisoners in California (58% in other states) remain out of prison? Social enterprise ROCA, on the other hand, invests $10,000/year for two years in supporting and training young ex-offenders. 98% have no new arrests.
Indeed, the time for social enterprise business models is now.