Supporting organizations that are doing good by sharing your time, talent, and treasure isn’t the only way to make your authentic impact. You can also make an impact through conscious choices about how you spend your money.
As an entrepreneur and philanthropist I’m giddy about social enterprises – businesses whose purpose is to change the world for the common good. Here’s why.
How you spend can change the world for the common good
Many of our social problems remain unsolved due to declining government funding, lack of impact from Corporate Social Responsibility (CSR) programs, and little social innovation from the non-profit sector.
Arguably, one of the greatest challenges facing non-profits is lack of funding. There’s just never enough money to do the things they need to do to make the difference they want to make.
To overcome this challenge many non-profits launch earned-income ventures. In other words, they create a business that earns profits which can then be used to fund the organization’s programming.
An example is “fee for service” in which a non-profit charges for the services it offers its beneficiaries. When possible to do so, this is a fabulous way to create an on-going revenue stream.
Social enterprises use the power of the marketplace to advance their mission
Even more exciting are the abundance of for-profit and not-for-profit social enterprises that use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas. According to the Social Enterprise Alliance, these enterprises are distinguished from other types of businesses, nonprofits and government agencies by three characteristics:
- The organization directly addresses an intractable social need and serves the common good, either through its products and services or through the number of disadvantaged people it employs
- Commercial activity is a strong revenue driver
- The common good is its primary purpose
Around the globe there are a multitude of ideas being implemented to address unmet needs in affordable healthcare, safe water, housing, alternative energy, climate change, education, job training, agriculture, finance, and more.
On the spectrum, social enterprises fall between a traditional non-profit which is reliant on philanthropy and a traditional for-profit whose purpose is exclusively revenue generation.
Profit and Purpose!
Who doesn’t love purchasing from a company with a double bottom line? Profit and Purpose!
For example, Method Cleaning Products whose founders “set out to change the world by creating beautiful cleaning products that are as kind to the planet as they are tough on dirt”.
Or Warby Parker which offers designer eyewear at a revolutionary price while leading the way for socially conscious businesses. Recognizing that almost one billion people worldwide lack access to glasses and therefore cannot effectively learn or work, the company partners with non-profits to ensure that for every pair of glasses sold, a pair is distributed to someone in need. I got me a pair!
And I purchase all of my skin care products from two socially conscious companies, Ann Marie Gianni Skincare and Beauty Counter. Both companies insist on using only safe, non-toxic ingredients in their products and educate their customers about making healthy choices for themselves and their families.
But shopping isn’t the only way to support these organizations. If the social enterprise is a non-profit you can donate directly.
Or, give to a fund which then invests in the company. One of my favorite examples is Acumen Fund founded by Jacqueline Novogratz. The organization raises charitable funds, but instead of giving them away, it makes investments in entrepreneurs who are willing to take on some of the world’s toughest challenges in areas where governments and charities are often failing. Additionally, they work alongside the entrepreneurs offering management advice, technical help, and connections to a wider network of talent.
It takes patient capital to address the world’s toughest challenges
Acumen Fund’s results are measured in social as well as financial terms using an investment style they term “patient capital”. Their investment is longer-term as many of these businesses take years to grow and face enormous challenges to sustainability.
One last thing. Have you had a conversation with your financial advisor about supporting social enterprises through impact investing? It might just be time. Join me next month to learn more.