There’s a lot of lingo being thrown around the business community in this new era of sustainability and economic revitalization. The number one question I am receiving lately—as an entrepreneur, a teacher of entrepreneurship/life sciences, and a writer studying entrepreneurs—is, what is social business?
According to Muhammad Yunus, founder of Grameen Bank, social business is, “…a kind of business dedicated to solving social, economic, and environmental problems that have long plagued humankind—hunger, homelessness, disease, pollution, ignorance.” I often add health care to that list. Social business also may show up in many different forms, and a few are below:
1. The L3C - There is the new business form called the low profit limited liability company (L3C), where a business can put mission before profit in terms of priority to the organization. The L3C is currently available in several states, but not Indiana. Mission isn’t compromised for pure profit, as in a typical for-profit business enterprise. Americans For Community Development has started the first-ever and annual L3C Summit, which occurred earlier this summer in Chicago.
The other unique opportunity with a L3C is the ability to potentially receive program related investment (PRI) funding from a not-for-profit foundation, with stipulations. There are, however, some unanswered questions at the federal level regarding taxation of such funding, and there has been pending federal legislation to address this issue, but it has not yet been passed.
2. The benefit corporation - Another form is the benefit corporation, which is only available in two states, and being reviewed in several other states. In a benefit corporation, attention is paid not only to profit, but people (employees and the impact the organization has on their employees), and place (or the environment surrounding the corporation). As stated by bcorporation.net, “Benefit Corporations are a new class of corporation that are required to create a material positive impact on society and higher standards of accountability and transparency.” There is also something called B Corp certification that any type of business may earn, which also focuses on sustainability and impact a business has on the community and its employees.
3. The ESOP - the Employee Stock Ownership Plan (ESOP) is a form available in Indiana. AIT Labs was recently nominated ESOP of the year, and Dr. Evans, CEO of AIT Labs converted his company to an ESOP because he personally believed that the company would be even better with employees holding a stake in ownership. They recently expanded their headquarters.
4. The Co-Op - Another recent Indiana example is Pogue’s Run Grocer opening as part of the Indy Food Co-Op. Co-Ops are another social business type, because the members who use the Co-Op own the Co-Op, and keep currency and exchange local and more sustainable over time, rather than sending profits back to a corporate headquarters out of the state or out of the country.
5. “The One for One” strategy - Yet another form of social business can be found in for-profit companies, like TOMS shoes and Warby Parker Eyewear. Both companies utilize a “One for One” model. For every pair of shoes TOMS sells, they give one away to someone in need. Warby Parker created “eyewear with a purpose,” and gives one pair of glasses away to someone in need when a pair sells, because their rebellious founders believe that, “everyone has the right to see.” These businesses are exploding, particularly with my students in generation Y, who definitely want to not only want to buy a product, but who also want to better someone else’s life through their purchases. I personally think this could be done in health care with vaccines, as an example.
We are in a new economic era. We are competing for resources with people not only with the state next door, but also countries on the other side of the planet. We as a global community have finite resources and therefore must utilize our resources to the best and most sustainable ways—considering the environment, the people and the profit elements that go into an enterprise. I personally believe that the way we do business in Indiana must evolve and change with the times. We as a state must embrace social business.
Founder Blake Mycoskie of TOMS shoes said the following: “My advice to budding entrepreneurs is, don’t try to be an entrepreneur, try to identify the problems in the world that you want to solve.” He’s right. Now, in Indiana, we need to provide all the tools to our budding and current entrepreneurs to create and grow new and exciting solutions to our problems.
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