It seems like every new business comes with its own well-publicized, tweet-friendly, hashtag #sociallyresponsible cause. It’s enough to make a do-gooder’s head spin and a traditional business owner’s eyes roll: how do these for-profit businesses prioritize their bottom line?
This week on In Process, we sit down with Cindy Cheatham, president of Good Advisors, LLC and former Vice President of Consulting Services for the Georgia Center for Non-Profits, to talk about the rise in social entrepreneurship and the way that affects non-profit and for-profit entities.
“That whole concept of advising your shareholders that the entire focus of your business isn’t going to necessarily be a return on investment is an interesting one,” says Evelyn Ashley. But even a cynic can find reasons why social consciousness can be good for a business—even if the concept of “social entrepreneurship” has an evolving definition.
“People throw out that term from a wide variety of perspectives,” says Cheatham. “Traditionally, the non-profit definition is that it’s about impact and using market-based methods and innovative approaches, just like entrepreneurship is about information technology innovation and not just small-business entrepreneurship. The business definition is evolving more around how you really embed and commit social good and social practices more than the traditional business responsibility—to be more accountable and more transparent.”
Cheatham was kind enough to explain some of the reasons that social entrepreneurship is booming right now, as well as some of the ways it intersects with traditional business sensibilities.
“Social entrepreneurship can straddle the middle.”
It doesn’t have to be all about social mission: companies can pursue social good and maximize profits.
“There’s a professionalization of the funders out there,” she says, noting that emerging capital is growing and getting smarter. “They want to see for-profit and non-profit entrepreneurs with that dedication around social impact, but also creating a more formal model for scaling [the organization] that will work. Coming out of the venture capital world and the foundation world is an emerging world of funding social ventures, both for-profit and non-profit.”
Social entrepreneurship has been around for ages. What’s different is the ability of social entrepreneurs to inexpensively have a platform for their cause.
“There’s a continued strategic focus on corporate social responsibility, which has been around since the beginning of time. Founders who created factories and knew that they needed to create a YMCA or another social structure,” notes Cheatham. “Some of them did it selfishly, and others did it with good intentions. They were the kings of the kingdom in communities, and so they were doing conscious capitalism back early in the industrial days, but now there’s a tighter, more strategic focus on corporate social responsibility.”
The Internet has given those with a cause a more resounding voice—it’s easier to share or contribute to a cause than ever before. Before the web, only the biggest non-profit organizations could afford mailings or mass communication. “The world is a much smaller place,” says Cheatham. “Because of the Internet, because of the millennials that are demanding social consciousness, I think the bar has been raised for traditional businesses.”
“Almost half of all populations—especially the under-40 millennials—are willing to pay more for a product they believe is socially conscious.”
This stat from Cheatham came as a surprise, but considering the increasing impact of peer approval in decision making, it shouldn’t be so shocking. “There’s always been the concept of ‘Doing Well by Doing Good…’ There’s some self interest there, but obviously it’s got to be authentic," she says."
“The businesses like the TOMS of the world or the Ben & Jerry’s are very sincere in wanting to commit [to their cause], but they tend to be more around truly knowing that there’s a world out there that cares about every aspect of how they source their product,” says Cheatham. “Environmental consciousness was one of the top things that millennials cared about, and secondarily was how you treat your employees and other aspects.”
Even legacy non-profits are being forced to change.
“Just like big technology companies, [non-profit organizations] can be disrupted,” says Cheatham. “There’s a greater expectation of involvement and influence that this generation has, and so those non-profits that aren’t listening and hearing, they’re going to be quickly running out of gas.” Ashley expands upon this point in discussing the criticism non-profits are often faced with regarding the way they compensate their staffs and how much of the money raised is put toward the actual cause.
“There’s a very unrealistic expectation that there should be very professionally run non-profits that don’t pay anything,” says Cheatham. “There is, thankfully, a movement around educating donors about overhead… the importance of leadership and investment.” Cheatham says that it’s a logical argument that is just not presented enough to the general public. “We go to these business leaders and we say, you have 30% [spent on] leadership and management. Why should a non-profit have to run leadership and management on 10%?”
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