Nonprofits are Good, but Social Enterprises are Better
It’s not uncommon for big-hearted westerners to learn about problems in developing nations and immediately start making plans to form a nonprofit. Some want to collect donated items and send them to people in need, and others want to offer free services subsidized by grants or donations in nations where resources and experts are scarce. From organizations ranging from Doctors without Borders to The Red Cross, nonprofits provide a quick, surface-level fix to some pressing issues, but they offer few if any economically sustainable solutions to deep systemic problems.
Over the past decade or so, a new class of business has arisen: The Social Enterprise. A hybrid between a for-profit business and a nonprofit charity, social enterprises are economically sustainable businesses that help solve a problem while turning a profit.
Sometimes the enterprise is designed to benefit its employees by hiring individuals with barriers to quality employment. Take, for example, The Greyston Bakery in Yonkers, New York. On one hand, they run a sound business baking and selling brownies to Ben & Jerry’s Ice Cream for their Brownie Batter flavors. On the other hand, though, The Greyston Bakery hires individuals with criminal records who experience difficulty finding work elsewhere. By providing quality jobs to underserved communities and running a responsible and profitable business, The Greyston Bakery functions as a social enterprise. Others employee-focused enterprises may hire refugees, sex trafficking victims, those with disabilities, or other underserved groups.
Other times, the enterprise focuses on its customers and offering them a product or service that will benefit the environment or otherwise solve a social problem. As an example, consider Norton Point, a high-end eyewear company. While the market for glasses may be competitive, Norton Point uses plastic waste the pollutes the oceans to create their uniquely-styled frames. That way, the company turns a profit in the sales of glasses, but they’re also helping to clean up the oceans and protect the environment as an integral part of their business plan. Nonprofits in the field of ocean cleanup are at the mercy of donors and volunteers, but companies that can fold such missions into the foundation of their enterprise can do good while benefitting all parties involved.
Of course, there is still an important place for nonprofits in certain arenas, but the development of social enterprises has filled an important and often missing role in development and social change. It’s common knowledge that many nonprofits are poorly managed and run on shoe-string budgets, and in part, this is because the viability of their business isn’t the metric against which they’re measured. By requiring business viability of organizations that want to do good, we can ensure that development occurs. Social Enterprises ensure that positive social impacts can be created in a sustainable, long-lasting way rather than relying on the intermittent generosity of others.
In the US, Canada, Europe, and Australia, the nonprofit organization B Lab offers the internationally recognized B-corp designation to social enterprises and business who pass a rigorous set of tests. B Lab evaluates the social good that a company is doing from its greenhouse emissions to its supply chain to its community impact. The “B Corp” certification is to businesses what “USDA Certified Organic” is to produce -- it provides the consumer some important information about the product they’re buying and how it came to be for sale.
Social Enterprises are popping up all over the US and the world so that workers can make a profit and social problems find economically sustainable solutions. For development that is good for everyone, we must continue to push social enterprises as an answer.