Consider these phrases: “social entrepreneur,” “social intrapreneur,” “social business,” “social enterprise,” “social innovation,” “social innovators,” “social return,” “impact investing,” and “venture philanthropy.” Consider the recent creation of the L3C, a low-profit LLC meant to generate profit through socially responsible investments. Consider the new B-Corporation, or public benefit corporation, which according to www.bcorporation.net, “uses the power of business to create public benefit.” And the most notable example, the neologism, “philanthro-capitalism.”
Take away the fancy phraseology, the nuanced definitions, and the word smithing, and two common denominators remain: Every example combines the moral appeal of social benefit programs (we’re helping people and society) with the institution of private wealth (but this isn’t charity).
Since time immemorial corporations have couched their products in social benefit rhetoric. The idea being that if you see two identical products on the shelf, you’ll buy the one that is a product of fair trade or comes from local markets. It’s not just to make you buy their stuff, but to make you feel good about buying it.
Every CSR (corporate social responsibility) and marketing department knows this; in fact, every one who sells stuff knows it. Which is why, according to a study by Terrachoice, an environmental marketing consulting agency, “More than ninety-five percent of consumer products claiming to be green are committing at least one of the sins of greenwashing.” Greenwashing defined as, “The act of misleading consumers about the environmental practices of a company or the environmental benefits of a product or service.” Old news, right?
Now the really interesting trend nowadays is that social benefit organizations like nonprofits are couching their goods and services in capitalist terms. As businesses sell consumers socially conscious or beneficial “green” products, nonprofits now sell their services and products as “capitalist.” Nonprofits advertise, promote, and are actually functioning less like traditional nonprofits, and more like businesses because they know Americans are more likely to support “social innovation,” “social business,” and “social return,” over charity.
The most illustrative examples come from the private consulting firm Monitor Group, a respected and prestigious global consulting agency. (In 2008 they committed twenty-five million dollars in free services to the Cambridge, MA based nonprofit New Profit, a “venture philanthropy” fund devoted to “social innovation” and entrepreneurship.)
In Monitor’s report An Orientation for the Twenty-First Century Philanthropists philanthropy is explicitly discussed in language of private business.
In this new parlance a charitable gift is not described as a donation but an investment, and the charitable gift yields a return. Something like, for every five dollars you donate one well in Africa is built. The well is the social return. In similar publications social issues are described as a market. Instead of a market for children’s toys it’s a market for obesity or homelessness. Monitor Group summarizes this entire transformation in two sentences, no doubt unconsciously, considering the sentences are heeded no special attention.
The old way: “Philanthropy corrects for the market, because the market is part of the problem.” Nonprofit A cleans up the river business B pollutes.
And the new way: “Philanthropy connects to the market, because the market is part of the solution.” Philanthropy seizes the power of business to solve the world’s most entrenched social problems. But this isn’t just rhetorical gymnastics or clever marketing.
The consulting firm for nonprofits, La Piana, in their 2009 publication Convergence, reported five major trends in the nonprofit world. The fifth was the “blurring of sector boundaries,” as “nonprofit and for-profit benefit efforts are becoming less distinct.” Here are two examples.
Boston Community Capital (BCC) is a community development financial institution, a type of nonprofit that provides credit to low-income areas for socially beneficial projects like affordable housing, child-care facilities, youth services, and schools. They make equity investments in businesses to create local jobs and one way they do this is though their Venture Fund—private money lent by individuals who expect to make a profit—but managed by the nonprofit BCC. Private money invested in nonprofit causes.
Muhammad Yanus is a joint 2006 Nobel Peace Prize recipient, along with the bank he founded, (Grameen Bank), “for [his] efforts to create economic and social development from below." He is the author of the New York Times best-seller Banker to the Poor, and has written another book, Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs, published early 2010.
The core principle of Yanus’ and BCC’s philosophy is simple: the institution of private wealth can solve social issues like malnourishment, obesity, poverty, etc…. Yanus writes that a social business intends “to solve a social problem by using business methods, including the creation and sale of products and services.” BCC is “founded on the conviction that financial return and social return need not be mutually exclusive.”
Yanus takes a chapter to define exactly what a social business is, making clear distinctions. A social business is a non-loss (all investments are recouped), non-dividend (investments are recouped but not one penny of profit is gained), and does not operate like a nonprofit because a social business rejects the practice of charity. It is also, despite its name, not a conventional business. A social business is cause-driven, not profit driven.
BCC and the social business, though very different, share one similarity: they reject the practice of charity. Both can be lumped together in a somewhat crass yet apt phrase—capitalism with a social conscience.
Now consider the philosopher Slavoj Zizek. Speaking in 2009 at the Royal Society for the Encouragement of Arts, Manufacturers, and Commerce, Zizek quoted in his lecture, “First as Tragedy, Then as Farce,” the always-quotable Oscar Wilde: ‘It is immoral to use private property to alleviate the evils that result from the institution of private property.’ Of course Zizek is not advocating for the end of all social programs. “My God,” he says, “I’m not against charity.” The point is, that while the institution of private wealth is just one cause of a depressing amount of social problems, there is “something hypocritical” about using private wealth to solve the problems it helped cause in the first place. Like if business B donated money to help nonprofit A clean up the river business B polluted.
On a personal and fundamental level of humanity, donating time and/or money to your favorite charity is eternally moral (Please don’t let this essay deter you from giving generously to people in need); but on a social, world-wide macro-level, charity from nonprofits, individuals, governments, and businesses are no viable or systemic solution to abject poverty, malnutrition, illiteracy, child-trafficking, etc….
Nonprofits have come to a similar epiphanic realization concerning the inability of the charitable status quo. Which is why they have combined social sector and capitalist language and nonprofit and for-profit practices. Hence Yanus’ social business and BCC’s Venture Fund, both admirable programs that simultaneously make money and help people.
Yanus and BCC provide ample evidence to support their projects and philosophies. Since 1985 BCC has through socially responsible investments helped, according to their website, “Build or preserve affordable homes for over 10,000 families and individuals, support child care facilities serving over 7,000 children, finance schools and youth programs serving over 2,000 low-income students, renovate over 750,000 square feet of commercial real estate in distressed inner-city communities.” And they make money. Yanus’ socially responsible businesses like Grameen Danone, a yogurt company, and Grameen Veolia, a water treatment company, have proven the efficacy of the social business while helping thousands of impoverished people. He didn’t win the Nobel for nothing.
Can this new vision save the world? Can nonprofits be more like private business and private business more like nonprofits? Some intelligent, capable, and altruistic people think so. But it’s easy to pick a few examples from our big world to prove a point. The real questions, asked everyday by nonprofits and private businesses are these: Which social issues can sustain a genuinely altruistic business model? How do we grow the idea and the practice? How do we get it to scale?
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| Whether nonprofits are operating more like businesses or businesses more like nonprofits, it seems that the heart of the story is that a blend of strategies and resources may be necessary to create "innovative and effective activities" that are needed to "resolve social market failures" (see Dr. Alex Nichols' book, "Social Entrepreneurship: New Models of Sustainable Social Change") . While we need to name this activity, I think we also need to recognize and become comfortable exploring social solutions regardless of type of organization.