Social Entrepreneurs: The Business of Giving Back
| 26 | Apr 2011 |
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Patrick and Arnold Schwarzenegger |
Public service is in Patrick Schwarzenegger’s blood. Yet, rather than go into politics or starting a nonprofit, the 17-year-old son of Arnold Schwarzenegger and Maria Shriver is forging a new path as a social entrepreneur. It’s a hybrid that combines a for-profit business model with nonprofit sensibilities, and many young entrepreneurs believe it is the answer to creating a sustainable economy that fosters growth and good will at the same time.
Schwarzenegger’s contribution to the social entrepreneur movement is a company called Project360. The company, which the high school junior created with fashion entrepreneur Kimberly Barth and friend Nick Sheinberg, sells apparel with inspirational messages designed to support its chosen causes. The company donates 10 percent of its profit to the organizations of its choosing.
“When we first started, we wanted to help a bunch of different charities,” Schwarzenegger told BusinessNewsDaily, “but we realized that with the size of company, we wouldn’t be able to make an impact.”
Instead, the company has narrowed its focus to support four key charities: the Girl Scouts, Best Buddies, Save the Children and Maria Shriver’s March on Alzheimer's.
It’s an approach that many social entrepreneurs think is essential to making a successful go at balancing capitalism and charitable giving. By focusing their efforts on fewer beneficiaries, companies are able to make a bigger impact.
Project360, for example, makes sizable donations to its chosen charity before it even starts selling its products.
Schwarzenegger has been boot-strapping it since the inception of his company, pitching to retailers through word of mouth and without a formal sales team. Now that the company has started to gain traction, it is hiring sales reps to formally present its line to retailers.
An feature in May's Details magazine, in which Schwarzenegger is pictured wearing his products, will, no doubt, drive interest in the business, too.
But Schwarzenegger doesn’t want the commercial success of his company to overshadow its message.
“Everybody should give to people who are less fortunate,” he said.
“Know you’re having impact. Every single thing someone does can help. I’ve seen firsthand with my parents and grandparents.”
Business first
Focusing on giving back is only part of the formula for creating a successful business model, said Eric Fleet, owner of Threads for Thought, a socially conscious fashion company he founded with his wife, Leigh, in 2006.
The company, which now has sales of $20 million a year, donates a portion of its proceeds to two causes: The International Rescue Committee and the National Resources Defense Council. It also focuses on creating sustainable business and manufacturing processes that are changing the way companies all over the world do business.
The idea for the company was conceived out of a desire to create a business that was both profitable and socially responsible. The key to doing that, Fleet said, is focusing on making sure your product stands on its own, regardless of your efforts to effect change.
“You have to put the fashion first,” he said. “Your message alone is going to sell your product.”
The Fleets’ company, which uses factories all over the world, focuses not only on using sustainable materials for its products, but on working with its manufacturers to create a âgreenerâ production process .
“We’re helping them be as sustainable as possible in an economic way,” Fleet said. “We try to implement different things that are cost effective to make the production process more sustainable. “
This includes recycling water from the dye process, using organic cotton, which cuts down on the pesticides used, and making lots of small changes, even in how the workers, themselves, are treated.
"One of our factories has an organic farm in the back of the factory where they feed workers," Fleet said.
He acknowledges that it wasn’t always easy to request change of its suppliers, especially when the company was first starting out.
"We have the scale to make change now," he said. "We produce a lot of goods and we can make those changes."
Building communities
Jonathan Golden agrees that for social entrepreneurs to succeed, they must focus first on making sure they have a great product.
Golden, founder of Land of a Thousand Hills Coffee, said you might lure customers in once with your do-good intentions, but if the product isn’t good enough, they won’t be back.
"The quality of the coffee comes first, helping people second," said Golden, whose company boasts annual sales of $2 million and sources it coffee from Rwanda and, more recently, Haiti.
"People might buy once, but not again, if it’s not good. Focus on being an entrepreneur first and get that right. Focus on the social aspect second. If you’re really just a nonprofit doing business, it will never work."
Golden, an Anglican priest and an industrial psychologist, has found the way to combine the two pursuits is to run the business and use it as a way to foster economic growth in the communities that grow it. In addition, he has a nonprofit arm of the business that accepts donations, and uses them to help build up the communities, constructing orphanages, soccer fields, farms or whatever the people need.
The formula seems to be working for Land of a Thousand Hills.
The company roasts its own beans and is currently building a plant that will increase its roasting capability tenfold, Golden said.
It sells its coffee in two of its own coffee shops, through another licensed shop, on its website and through 600 churches around the country.
It is beginning to pursue relationships with high-end grocery stores, coffee shops and restaurants.
Land of a Thousand Hills’ growth is also increasing its global impact.
“We just got in first 14,000 pounds of coffee from Haiti,” Golden said. “We’re working with three different villages there. Today they are planting 100,000 coffee seedlings.”