Building Healthy Communities

The Home Depot Foundation partnered with the Georgia Center for Nonprofits this week to hold a conversation about social enterprises in Georgia.  The basis for the discussion among about 70 nonprofit leaders was a survey GCN conducted of charitable organizations that yielded responses from over 750 groups.  GCN also produced a white paper summarizing the results and highlighting several considerations we should think about as we move forward into this somewhat blurry mix of business and philanthropy.

But before we get into any of that, I want to back up to point out that the terms “social venture,” “social entrepreneurship,” “social enterprise,” (or whatever we call it) aren’t really self-explanatory.  According to the Social Enterprise Alliance:

A social enterprise is an organization or venture that achieves its primary social or environmental mission using business methods. The social needs addressed by social enterprises and the business models they use are as diverse as human ingenuity.  Social enterprises build a more just, sustainable world by applying market-based strategies to today’s social problems.

That’s a lot of words, but to me it simply means that we are talking about nonprofit organizations that start a business to support their cause.  That may mean 1) that they are in business to raise money to support their work or 2) that they are creating a business to fill a gap they have identified that makes it hard from them to accomplish their goals.  It’s pretty easy to come up with examples of the first kind of social enterprise: look no further than the little girl next store selling Girl Scout cookies or the Salvation Army or local church’s thrift store.   The second kind often involves starting a business to provide jobs for people who are hard to employ, such as former felons, people with mental or physical disabilities or young people who don’t yet have skills or work experience.  In the survey of Georgia nonprofits, organizations are doing everything from running restaurants and landscaping companies to managing warehouses and recycling centers to radio production.  There’s even a nonprofit beverage bottler!

In a time when government and private support is shrinking, I applaud all of these nonprofits for thinking about creative ways to do more.  There is a hitch with that, though, in that 32% of the groups surveyed said they were losing money through their efforts, and perhaps even more disturbing, fully 30% said that they weren’t sure if they were making money or not (in their defense, most of these had been up and running for less than a year).  Although we want to encourage groups to take risks and try new ways of doing things, we also hope that they do it in a fiscally responsible way, that they know when to cut their losses (particularly when their goal is fundraising).

Interestingly, for almost 15% of the groups turning a profit isn’t even a goal for their venture.  This made more sense to me after talking to the director of the Georgia Justice Project, which says on its homepage that it is “an unlikely mix of lawyers, social workers and a landscape company. We defend people accused of crimes and, win or lose, we stand with our clients while they rebuild their lives.”   So you may question whether a bunch of lawyers should be in the business of running a landscaping company, they only do it because it’s difficult to find employers who will hire ex-offenders, and without jobs, their clients can’t move their lives forward.  Accordingly, GJP’s mission always trumps profits when they are making business decisions.  Their primary goal for the venture is to help their clients acquire a marketable skill and establish that they are dependable, trustworthy employees, and so that dictates how they make decisions.  For example, when Georgia experienced a severe drought, their business fell off, but they kept all of their employees by raising grant dollars to cover their losses.

You would hope that that would always be the case - that a charitable organization would always look to its overarching purpose to guide its decision-making, not the dollars and cents calculation of the bottom line.  If that’s true, maybe the line between philanthropy and business isn’t so blurry.  Maybe there aren’t really any “nonprofit” organizations.  Maybe we just need to think differently about what we a group needs to achieve to say they’ve turned a “profit.”