Part Two in a Two-part series by Hub LA Co-Founder and CEO Elizabeth Stewart.
Read Part One here.
Corporations have realized that the next generation of talent (and consumer) is looking for brands that straddle the chasm of making profit and doing good. Corporations that blend their legal responsibility to maximize profits for shareholders wherever possible (a legal requirement of the corporate structure) while giving back or at the very least accounting for their negative impact on people and the planet, have coined Corporate Social Responsibility (CSR), a term that emerged in the nineties in the corporate sector. Starting on the “purely profit” side, companies practicing CSR are a nudge to the left on the spectrum.
Right next to CSR, further down the spectrum towards a pure not-for-profit, is a for-profit entity described as triple-bottom line. This refers to accountability for people, planet, and profit. For example, a company that makes tea decides to make its tea in a way that benefits or gives back to the environment (as oppose to not harming); has gone to great lengths to be transparently governed; and has human resource and procurement policies that place value on diversity, inclusion, and locally-sourced labor force. These standards and business practices can now be highlighted to the public through a new certification called a Benefit Corporation, or “B Corp” for short. The B Corp stamp demonstrates that a business is operating using triple bottom-line indicators.
Next on the spectrum we arrive at the social enterprise. Although the definition of a social enterprise still varies depending on who you ask, when used in the context of our ProfitPlus Spectrum it is defined as an entity operating as a business with the purpose to earn a profit via market-based, revenue generating activities, AND to achieve social, cultural, or environmental outcomes. An example of a Social Enterprise that meets this definition is Isidore Recycling based in Downtown Los Angeles. Isidore has created a business out of recycling electronic waste, the fastest growing waste stream in California, while creating jobs for formerly incarcerated individuals to help them develop job skills and build a resume. They are demonstrating how a market-based approach can help make a measurable impact on a social issue.
Businesses in the Cleantech sector are also a great example of social enterprises. New businesses within the Cleantech category mainly focused on technologies and services to reduce energy consumption, and create new energy solutions, exploded to address climate change – a social and environmental issue. So baked into their reason for existing was a social/environmental purpose along side a viable market opportunity given that a growing number of consumers (enterprises and consumers) are either forced through legislation, or are willingly pursuing these solutions. If they these companies do well, the issue of climate change is being addressed.
Finally, closest on the spectrum to the pure charitable non-profit is the non-profit that creates a related for-profit to generate revenues. Despite being a charitable 501(c)(3), a non-profit can own and operate a for-profit to sell goods or services related to it’s mission. In other words, the entity is operating a new business arm and helping sustain itself through market-based means, which diminishes or eliminates the need for grants and donations.
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