Corporate social responsibility trend is a win-win situation, allowing businesses to have profit growth while solving social issues.
Corporate Social Responsibility is a trend that has been gaining more attention in recent years.
Half of consumers are willing to pay more for a product if they know that the company is charitable. Business owners are experiencing a growth in revenue as well and the world is experiencing social improvements through incorporating philanthropy into their business plan.
As CSR is rising, the divide between non-profit and for profit companies are beginning to blur. These businesses below have found a way to combine determination, compassion and innovation and become agents of change.
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After working in the Peace Corps, co-founders Brett Beach and Tim McCollum sought to find a solution to help Madacascar, the world’s fourth poorest country. Their answer stemmed from the lush environment that surrounded them.
Seventy percent of the world’s cocoa supply is from West Africa, however, only one percent of chocolate is actually produced there. Beach and McCollum began a social enterprise producing chocolate in Madagascar then selling the chocolate internationally, so the local workforce could reap the economic rewards.
They experienced the same issues as startups are faced with in America, but with the added obstacle of working in a country plagued with economic and political hardships. After four years of bootstrapping, Madécasse received the funding they needed. Rather than giving up, McCollum used this time to learn about the chocolate industry and how to run a business in a generally poor country.
As a result, Madécasse has been able to train workers in every stage of the manufacturing process and provide over 200 people with above-market wages, empowering them to earn a meaningful income. Keeping the production of chocolate in Madagascar is the key to Madécasse’s success as a social enterprise, and local farmers benefit four times more than they would have from the fair trade system. The founders pride themselves in measuring the impact of their success by the social impact in Africa.
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Water is one of the three basic necessities of life, yet over 748 million people do not have access to clean water worldwide. Vestergaard Frandsen developed a product, along with a unique distribution method, that is taking major strides towards a solution. Their product, Lifestraw, is a microfiltration device that removes 99.999% of waterborne bacteria by trapping it within filtration fibers, allowing the water to safely pass through the straw’s pores.
Even more innovative is how Vestergaard Frandsen has been able to distribute millions of water filtration devices throughout Africa free of charge to the end user. Kenyans boil the water using wood fires to filter it. By using Lifestraw and Lifefstraw family, a larger scale model, they no longer have to utilize fire to clean water. This in turn allows the company to receive carbon credits and sell them at a profit to offset the cost of the free distribution.
Lifestraw has provide over 900,000 filtration devices, giving clean water to 450 million Kenyans.
These are just two examples of businesses that were able to find success through their inventive twists to a business opportunity. Although both companies do not have a permanent solution to poverty issues, they are creating a scalable business that in turn gives back to a hurting community.
However, just as 90 percent of startups fail, founding a socially responsible business does not automatically ensure success.
For example, despite 2.5 million laptops built, One Laptop Per Child (OLPC) was considered a failure. Although the startup was designed to boost educational performance, their laptop's release failed to impact math and language standardized test scores. In addition, the ambitious $100 price tag ended up costing $200, twice more than originally promised.
TOMS spearheaded the one-for-one model, an innovative business plan for their time. Unfortunately, this highly publicized solution is not solving a social problem. Just as there’s no such thing as a free lunch, there is no such thing as free shoes. Contrary to TOMS marketing, there are small, local businesses that sell affordable shoes in developing communities. Rather than supplying shoes to those that cannot afford them, “One Day Without Shoes” is interfering with local agencies and creating further dependency on foreign assistance which is not a sustainable economic condition.
As consumers increasingly show preference towards socially responsible businesses, it is a great time to adapt your business model to represent these ideals. Social enterprises and entrepreneurs are able to create a profit from their own business and capitalize on consumer interest in giving back. Through these models, business owners and consumers can join forces to solve our world’s greatest issues.