In just three years, social enterprises have increased five-fold in central Ohio.
The next time you buy a cup of coffee, have your office cleaned or shoot down a giant water slide, you probably won't be thinking about infant mortality, human trafficking or wildlife conservation.
But people who patronize or invest in more than 100 central Ohio businesses are part of a growing social enterprise movement where commerce intersects with the greater good.
Social enterprises are loosely defined as businesses that integrate a social impact as a firm component of their business models. That social impact can take many forms, from employing ex-offenders to donating a percentage of profits to a cause.
Some social enterprises are highly recognizable. Goodwill stores, among the largest and oldest, exist solely to channel profits into job training. Zoombezi Bay, a for-profit subsidiary of the Columbus Zoo and Aquarium, supports conservation efforts at The Wilds in Muskingum County.
Others may be less well-known.
The Bottoms Up Coffee Co-op in Franklinton is a combination coffee shop and co-working space that directs 10 percent of its sales to reducing infant mortality. She Has A Name Cleaning Services offers job training, employment and empowerment to women in recovery from human trafficking.
Central Ohio social enterprises are growing rapidly, from fewer than 20 registered in 2014 to more than 100 today. A confluence of altruism, demographics and entrepreneurship explains much of the trend.
“Columbus increasingly is becoming a young city, and there is an affinity among young people for doing something greater than themselves,” says Melissa Fisher, a local growth strategist and principal at Fisher4Marketing LLC.
That is borne out in a couple of ways, says Allen Proctor, president and CEO of the Center for Social Enterprise Development.
Younger employees might push for active volunteerism in their workplaces, Proctor says. “Or they pursue alternative channels of entrepreneurship where they say, ‘I'm going to start a business that's about more than making money.'”
Philanthropy Meets Enterprise
Research suggests that generations think about altruism differently, and this has played a part in the growth of social enterprise, Proctor says.
“Baby boomers are trained to think in terms of philanthropy. Millennials have been trained to think in terms of getting involved.”
Put another way, “Baby boomers have the money, and millennials have the enthusiasm.”
At the same time, philanthropy in the form of charitable giving has been flat for more than 30 years and is by itself unable to make the necessary impact, Proctor says. “The grant-dependent, not-for-profit model is insufficient and unsustainable. Social enterprises have formed in response to an unmet need.”
But social enterprises face several hurdles, from lack of startup capital to challenges in being able to accurately gauge consumer demand and willingness to participate.
“These are tough little businesses to run,” Proctor says. Some bear additional expenses of helping their employees with life-skill training, transportation or recovery issues.
Social enterprises also must be businesses that are viable enough to support the social impact they envision. “The biggest challenge is giving the customer what they want,” Proctor says.
Fisher agrees. “It's a big gray area, and market validation is never perfect. Having ex-felons build bicycles is a great idea on paper, but there is no definite way to know whether people are willing to pay a little extra for that bike.”
Proctor says social enterprises “can never be as profitable as their competitors, but the hope is that your product will be just as good and that consumers will pay a little extra for it. ... In Columbus, we are still at the stage of getting consumers to think that way.”
Fisher says market research has shown a kind of disconnect between what consumers say they'll do to support a cause—such as buying products made only in the USA—and what they'll actually do. “In many cases, they vote with their dollars.”
The success rate of small startups is spotty, and social enterprises are especially vulnerable. The Center for Social Enterprise Development says eight of 10 entrepreneurs who start businesses fail within 18 months. In 2016, five central Ohio social enterprises either went of out business or dropped their social impact, Proctor says.
New Name, New Mission
Changes in the local social enterprise sector prompted Proctor's Center for Social Enterprise Development, founded in 2014, to re-brand, redefine and broaden its mission.
The newly named SocialVentures is expanding its focus from simply helping in the creation of social enterprises to providing existing companies the support needed to survive and thrive.
The organization is launching Social Ventures Fund LLC, a private investment fund for accredited corporate and individual investors. Other programs will help entrepreneurs identify customers, market their products and services, and master the challenge of balancing social impact and success.
“Our community has reached a juncture,” Proctor says. “There are a lot more players than there used to be. We are mobilizing the consumer community, the entrepreneurial community and the investor community around social enterprise.”
Having a strong social enterprise sector is important to Columbus' identity, Proctor believes. “It says that having everyday businesses be part of making this a better community is what Columbus is about. It's a whole new business sector that's willing to step up … to meet community needs.”
Social entrepreneur John Rush launched Clean Turn Enterprises in 2012 with support from a group of philanthropic investors. “My question then was how to leverage a traditional business model so that folks with challenging backgrounds could not just get jobs but move forward in a career.”
Today, Clean Turn Enterprises encompasses three different brands: Clean Turn Demolition Services, She Has A Name Cleaning Services and Passion Purpose Profit. All are involved in employing and empowering people with histories of generational poverty, homelessness, addiction, incarceration or human trafficking.
Rush says he is encouraged by the growth in social enterprise in central Ohio. He sees several issues, though, that will need to be addressed in the future, including how to hold companies accountable for their claims of making a social impact.
“Social return on investment is hard to measure,” he says. “You're dealing with the human factor.”
To date, SocialVentures has allowed businesses to self-identify as social enterprises. It hasn't set a threshold for percentage of profits a business must channel into its chosen causes, but Proctor says that might change.For now, businesses must explain their impact. “You can't just tell us you're a nice guy or that you recycle.”
When it comes to the difference between social enterprise and charities, Fisher says, “a lot of these businesses are able to do more good than a straight charity, which depends solely on donations. ... You're bringing in some income that you can redeploy.”
Laurie Loscocco is a freelance writer.