The New Type of Business Proving That For-Profits Can Be Charitable
When you talk about corporations, many people imagine smoke-filled back rooms, whiskey glasses, and businessmen in the vein of Gordon Gekko saying “greed is good.” This may once have been true, but a promising trend in modern business is flipping this stereotype on its head — the growth of social enterprises.
A social enterprise is an organization with the heart of a non-profit entity backed up by the financial prowess of a for-profit company. But they are distinct from for-profits in that their bottom line is always about doing good. Conversely, a for-profit’s end goal is to maximize earnings. While nearly all companies these days donate to charity, social enterprises make a specific cause to their mission — and they put their money where their mouth is, typically giving 50% or more of their profits to a charitable cause.
In my own backyard in Illinois, a social enterprise called Chicago Lighthouse Industries produces commercial products such as clocks and calendars. What makes Chicago Lighthouse Industries unique is that it provides employment opportunities for the visually impaired. Any profits it generates help support the Chicago Lighthouse, a charitable organization providing care services to the "blind, visually impaired, disabled and Veteran communities."
On the other side of the Great Lakes in Canada, there’s a social enterprise organization that has a similar business model, only with a more global reach — ME to WE. ME to WE sells a variety of sustainable products crafted by people in the developing world, such as Fairtrade chocolate and Rafiki bracelets. The social enterprise exists to raise funds for its charitable arm, WE Charity, which directly supports communities in need around the world, and inspires youth in Western countries to become engaged on social issues.
Like many social enterprises, ME to WE doesn’t just donate a small sum to charity — in fact, over the last five years it’s delivered over 90 percent of its profits to WE Charity, with the rest of the money being reinvested in the social enterprise to increase future global impact. As a result, ME to WE has donated a remarkable $20 million in cash and cost offsetting in-kind donations to WE Charity since 2009. And the sale of its unique, hand-crafted products generates employment for over 2,000 people uplifting them from poverty in WE Village communities around the world.
Organizations like these may seem like a radical new shift in business, but social enterprises have actually been around for years. In fact, Goodwill, an early pioneer of the social enterprise model, is over a century old.
It seems like there’s been something of a paradigm shift in recent years. Social enterprises are growing at an exponential rate, and even traditional for-profit businesses are shifting their focus toward doing good in the world. This is attributable to societal changes — simply put, people want to help others. Social enterprises are making it easier than ever.
Government policy has been somewhat slow in recognizing the need to support social enterprises, but fortunately, the tides are turning.
In the UK, which can reasonably be described as one of the world’s best places for social enterprises, the government recently launched an initiative to increase social enterprise investment globally and attract new social enterprises to the country. This in a country which already has over 1.4 million people working in the social enterprise industry.
In Canada, the Finance Minister announced the creation of the Social Finance Fund, which would invest $755 million (CAD) to jump-start the social finance industry. According to the Globe and Mail, “The list of opportunities for the fund is long and varied: It could be used to stem the rise in diet-related chronic disease, finance affordable-housing projects or support Indigenous entrepreneurs.”
And in the U.S., governments are starting to do their part in helping these businesses thrive. According to Forbes, here in Cook County, Illinois, it’s now much easier to operate a social enterprise thanks to changes in local government procurement law last year.
Social enterprises are proving that individual charities can successfully leverage the for-profit business model to create social impacts. As social enterprises continue to pop up all around the world, consumers will increasingly demand that their purchases be linked to a positive social outcome. In turn, governments will need to adapt their policies and laws to facilitate the rise of the social enterprise and harness their economic and job creation power.
Pat Brady is former chairman of the Republican Party of Illinois and a former state and federal prosecutor.