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Social entrepreneurism: the tricky balance of doing good while doing well

Volunteer Ann Walden serves meals during the Greater Wichita YMCA’s annual We Care Thanksgiving Dinner at the Robert D. Love Downtown YMCA. Providing meals for the poor is part of the YMCA’s mission.
Volunteer Ann Walden serves meals during the Greater Wichita YMCA’s annual We Care Thanksgiving Dinner at the Robert D. Love Downtown YMCA. Providing meals for the poor is part of the YMCA’s mission. File photo

One of the hottest new ideas for bettering mankind is using the cold, hard analysis of business to spread the warmth of human caring.

It’s called social entrepreneurism, and it means doing good while doing well or, maybe, doing well while doing good.

While the strict definition is a bit messy, the key idea is something called the “double bottom line”: entrepreneurs and organizations have a hybrid purpose in which they use the profit motive to benefit society directly rather than in the indirect, long-term manner of traditional capitalism.

“It’s mission plus profit,” Brian Black, corporate public affairs manager for Spirit AeroSystems, told an auditorium full of Wichita State University business students at a forum on social entrepreneurism last month.

He and the heads of two local nonprofits were there to tell the students that the principles they had learned aren’t only tools for making money but, if done right, could also be used to directly help their community.

Although it sounds as old-fashioned as the local machine shop owner keeping his workers through a recession, social entrepreneurism has gained public attention from the rise of lifestyle brands – through which people express their personalities and beliefs – and globalization, which has brought the cause of hundreds of millions of people closer to the attention of the developed world.

One big example is Grameen Bank, an organization that popularized micro-credit, which makes small loans to impoverished families in developing countries so they can invest in small businesses. Its founder was awarded a Nobel Prize.

It’s not a charity, exactly, but it does lend to people who wouldn’t ordinarily be able to access credit at a reasonable rate.

Another example is Ben & Jerry’s ice cream, with its explicit corporate emphasis on social causes, such as paying more for sustainably grown milk, sugar, eggs, vanilla and chocolate; curbing climate change; and mandatory labeling of genetically modified organisms. People are willing to pay more for a product with the right politics.

In recent years, some states have even created a form of corporation called a B Corp., for “benefit corporation.” These taxed, for-profit corporations include an explicit social mission in their corporate charters. Twenty-seven states have passed legislation to make such corporations possible, although Kansas has not, according to the website www.bcorporation.net.

Kansas examples

Kansas doesn’t have the burgeoning social entrepreneurial sector that some places do, but it does have a few taxpaying companies with an explicit social conscience.

Bryan Welch is the president of Ogden Publications in Topeka, publisher of Mother Earth News, the Utne Reader, Grit and other titles. It’s one of just three Kansas companies registered with BCorporation.net, a group that certifies B Corps.

For Welch, Ogden Publications is clearly a business, not a charity, but it is one that is responsible to a range of people and groups, not just its owners. His job is to balance those interests. It means buying recycled paper, staff time set aside for volunteering, female and minority management and staff members paid a “living” wage.

It’s a step beyond traditional corporate giving, in which companies maximize profits and then donate a small amount of the result to charity. These socially conscious companies spend their money on causes as part of their regular operations, above the financial bottom line rather than below it.

It goes against everything taught in business schools, because it means the company isn’t maximizing profits. That can make investors unhappy.

For Ogden, a strong social conscience shows itself in many ways, including the basic belief that cooperation and inclusion is good business – but that doesn’t mean sloppy practices.

“We’ve always used recycled magazine paper, and we negotiate extremely toughly for that paper,” he said. “We do this because it’s right, but we don’t let them put us over a barrel because we have a conscience.

“You want to be our friend so we can all be more productive at the end of the day.”

Welch said it has a business benefit: His employees embrace the structure and work harder because of it.

“The definition of a successful business is one that serves the interest of its stakeholders, whoever they are … the planet, the people who make our products overseas, the people who work there, shareholders who have priorities to be fair and good to the planet,” he said.

Wichita YMCA

In Wichita, social entrepreneurism can be seen in very successful entrepreneurial nonprofits.

The Greater Wichita YMCA has been run so successfully over the past two decades that it built new gymnasiums every few years. Most YMCAs around the country don’t do this.

The way YMCA executive director Dennis Schoenebeck tells it, the YMCA built a new east-side Y in 1995 and discovered just how much unmet demand there really was. Membership quadrupled in the first two years.

“We’ve reached out more and have taken on more risk than most Y’s would on facilities, the number and scale,” Schoenebeck said. “We got it from the community. The demand was there, and that led to the next thing.

“Nobody had a great vision of what this was going to be. We just kept learning and growing and trying new things.”

It’s a matter of offering an attractive product to the correct market, promoting it and then operating it well, he said. And then, if there is a surplus from the money-making activities – such as exercise classes and personal trainers – it means using that along with donations of time and money to fund money-losing activities that are part of the mission: scholarships or 2,000 Thanksgiving meals for the poor.

In Wichita, the gyms can get by on membership and donor support as well as, of course, not having to pay taxes as a nonprofit. But in smaller cities, those numbers aren’t there, so the community has to come up with money, Schoenebeck said.

El Dorado did it and got a Y. Newton recently announced that it has raised $4 million of the $5 million required to break ground for a Y.

“There is a saying in the not-for-profit world: no money, no mission,” Schoenebeck said. “You have to understand the funding mechanism and how much you can do, or you’ll find yourself in trouble financially.”

Envision

Even more explicitly hybrid is Envision.

For decades, the organization was funded largely by a government contract that was filled by blind and visually impaired production workers in Envision’s factory at 2301 S. Water. It supplied plastic bags to the U.S. military and business cards to several government agencies. The surplus from that operation funded a clinic and other services for the blind and visually impaired.

Envision sustained a sizable hit to its finances in 2012 when the federal government cut back during the sequester. The board brought in businessman Michael Monteferrante in early 2013 to find new sources of revenue so it wouldn’t be so dependent on one contract.

Monteferrante has led the effort to create or buy new companies and create products. Envision now makes a variety of products for sale to various government agencies as well as on the open market.

It also now has divisions that offer more services and education, do vision research and raise money. It even owns a for-profit company and expects to get into more.

In addition to new products for the government, the company now sells biodegradable tablecloths, high-grade reflective dog collars and extra-heavy-duty trash bags, among other products, for the open market. They are marketed as high-end products made by the visually impaired and are set at a higher price.

Envision, even with impaired workers, can compete in the open market in some segments, Monteferrante said.

“Could we compete at Wal-Mart? No. Could we compete at the high end? Yes,” he said.

“Seventy percent of blind people are unemployed. Here they are working, contributing, instead of sitting at home.”

Earlier this month, it bought KFTI, a 100,000-watt radio station at 92.3 on the FM dial from Journal Broadcast Group. At least some of the staff members will be blind or visually impaired.

It’s all about the mission, Monteferrante said. Some entities, such as the services and the jobs for the blind and visually impaired, carry out that mission directly. Others, such as fundraising and operating for-profit businesses with nonvisually impaired workers, support the mission.

It’s a big operation, $150 million to $160 million, and keeping the units separate but aligned is key.

“We are in business; we are in the business of employing blind people,” Monteferrante said.

Sam Williams, the board’s director, helped push the board in a more for-profit direction after the sequester. He said that nonprofits too often don’t have a culture that encourages entrepreneurial thinking. They see only the need that must be met with every dollar available, he said.

Instead of spending every dollar they have every year trying to meet needs, nonprofits might look at holding some back to invest in starting businesses that will generate an income stream to support the mission.

The result, he said, will be more money available for the mission.

“The need is always greater than what they can supply,” Williams said. “This will help, but it requires a lot of discipline.”

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com. Follow him on Twitter: @danvoorhis.

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