The social enterprise: making a buck and doing good

International, local projects blending nonprofit and profit models

April 03, 2011|By Gus G. Sentementes, The Baltimore Sun

World Hope International, a Christian relief and development nonprofit group, has been providing charitable aid and small loans to farmers and entrepreneurs in Sierra Leone for years.

Now the Northern Virginia group wants to go into business with those it aims to help. It has started a for-profit arm to build an industrial park and helped launch a juice plant that would process the West African country's bounty of mangoes and pineapples.

World Hope's effort is part of a recalibration of how some nonprofit organizations approach their work — applying the strategies of capitalism to achieve their goals. In Sierra Leone, which is still rebuilding after a civil war that ended more than a decade ago, World Hope wants to create good-paying jobs by attracting "ethical" investment. They say they can provide the moral compass, while foreign companies provide the startup capital.

"This is marking a huge transformation in the way nonprofits would do international economic development," said Richard Schroeder, a Baltimorean and World Hope economist who has led the nonprofit's effort in Sierra Leone. "We transform that humanitarian presence into a framework that will support ethical foreign direct investment."

Charities are increasingly turning to these "social enterprise" models after the recession, which drastically curtailed corporate and individual giving, forced many of them to rethink how they raise money and fund their work, experts said.

The social enterprise movement isn't limited to nonprofits.

Business schools including the University of Maryland's Robert H. Smith School of Business, which created the Center for Social Value Creation two years ago, are teaching how to develop business solutions to social and environmental ills. And a state law passed last year allows the formation of "benefit corporations" that take the "dual bottom-line" approach of making money and helping people and the environment.

Such corporations pay taxes and have shareholders but are shielded from shareholder lawsuits if they share profits or make donations to improve the welfare of employees or suppliers, or promote causes. About 50 benefit corporations have been formed in Maryland since the law took effect in October, according to the state Department of Assessments and Taxation.

"It's more than a trend," said Amy Kincaid, principal with Change Matters, a social enterprise consulting firm in Takoma Park. "It's beginning to be more of a way of doing business."

The Maryland chapter of the Social Enterprise Alliance, a group that brings together nonprofits, for-profits and foundations with a social mission, formed a few months ago and has attracted more than 50 members.

"More and more people are catching on," said Cindy Plavier Truitt, vice chair of the Maryland chapter and chief development officer at Baltimore-based Humanim, which has a nonprofit division that gives workers with drug histories and other problems a job.

Rockville-based Goodwill Industries, which for years has taken a page from the for-profit sector with secondhand retail stores that raise money for its job-training programs, announced last week a new partnership with the Social Enterprise Alliance to advance the field of social enterprise.

In social enterprise models, entrepreneurs and investors with a social conscience often work with nonprofits and foundations that want to create a cycle of investment and economic growth in poor or disadvantaged regions.

But the sentiment can take many forms. Socially responsible investors buy stock in companies with a track record of ethical or environmentally friendly behavior. And in microfinance, small grants or loans are extended to the poor to support economic activity and help them become financially self sufficient.

Colleges are increasingly taking up social enterprise lessons and methods in the classroom.

In Maryland, the new Global MBA program at the Johns Hopkins University Carey School of Business offers a three-week program overseas for students, who travel to developing countries and study businesses and nonprofits to understand the complexities of an emerging foreign market. And the University of Baltimore has a social enterprise program for nonprofit executives.

At the University of Maryland, the Center of Social Value Creation now sees many students coming from the nonprofit sector to get an MBA, and then return to the field. Melissa Carrier, the center's executive director, said the program has worked with 80 nonprofits — one-quarter of whom have sought to incorporate some type of for-profit model.

"This is a massive trend that's happening," Carrier said.

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