Sustainability: What it really means for your social start-up

At some point in recent days, we have all seen or heard something to do with sustainability. While some shudder at the mere utterance of this now ‘buzzword’ it is still a driving force in the business world today. According to indeed.com job postings with the keyword sustainability have quadrupled over the period 2009-2011; and an astounding 88% of executives and managers see it as being an integral part of their strategy for the future. For the new entrepreneur navigating this new and constantly evolving playing field can be daunting, but if you are serious about tackling many of the social problems facing the world today, here is what you need to consider.

1. The Network is Growing Daily: Every business person knows the importance of networking. For those with driven ventures, a growing network means access to individuals, funding, and most importantly partnerships that can help take your start-up to the next level. For instance, consider organizations such as the Social Venture Network which connects businesses with a growing community of innovative business leaders and social entrepreneurs to help improve and expand your impact.

2. There are Countless Opportunities: Starting a social venture opens the doors for entrepreneurs to not only tackle pressing social issues but it can also provide opportunities for one to visit new places, learn about new cultures, and most importantly, make money. Opportunities for social ventures abound not only in the financial industry (for those interested in impact investing and micro-financing) but in fields such as marketing and consulting. This is especially evident with the emergence of concepts such as ‘green marketing’ and ‘environmental consulting’.

3. There is no ‘Triple Bottom Line’: Experts in the field of sustainability hate this term, as it implies that there can be trade-offs between the social, environmental, and economic factors addressed by a business. True proponents of sustainability know that the real focus should be on the integration of these three factors. What does this mean for your venture? Simple, make each factor an integral part of your business model. By doing this you will not only have a social venture capable of addressing serious issues, but you will also communicate to investors and other stakeholders the seriousness of your intent.

4. No ‘Greenwashing’: Greenwashing is the intentional act of misleading consumers regarding your company/product’s environmental and social practices, achievements, or goals. Social entrepreneurs should always keep in mind that they are constantly under the watchful eyes of stakeholders bent on weeding out those businesses that are not true to their word. In moving your social venture forward, make sure that you do not commit any of the 7 sins of ‘greenwashing’. Firms found guilty of any one of these sins often find themselves quickly out of the market and on their way to oblivion.

The factors outlined above should provide you with an understanding of the dedication needed to see a social venture through from the start-up phase to success. Feel free to sound off below about your social idea or venture and what sustainability means to you.

To ‘B’ or Not to ‘B’: The Benefit Corporation Movement

 

As an entrepreneur about to launch a new venture, you will often hear mentors and advisors comment on the importance of choosing the right type of business entity. From limited liability companies, to C-Corps an entrepreneur can be faced with many choices. Add a social agenda and things can get tricky. Traditionally, entrepreneurs that had socially driven mindsets were often given two choices: head up or start a not-for-profit. The good news is that this is no longer the case. Today, the socially driven entrepreneur has the option of starting a Benefit Corporation (B-Corp for short). Benefit corporations are essentially businesses with social causes built into their for-profit business models. In other words entrepreneurs can commit their ventures to addressing specific public/social causes. B-Corp legislation has already been passed in a number of states including California, New York, New Jersey, Maryland, Virginia, and several others. For a quick guide to becoming a B-Corp in your state of choice check out the Legal Roadmap provided by the non-profit behind the B-Corp movement B Lab. If you’re still not sure whether a B-Corp is right for you, then consider the following reasons for using this new type of business entity:

Scale: Because benefit corporations have a for-profit business model they are much more capable of scaling up. Scaling up of a business is of huge importance not only to investors but to a venture looking to achieve sustainable growth.

Capital: Again the added perk of having a for-profit business model allows this type of business entity to easily attract investment capital from a wide range of sources including the new impact investing. Impact Investing according to this US News article refers to investments that fall in the middle of Philanthropy and Socially Responsible Investing. The for-profit model seemingly acts as a magnet for investors who are worried about their returns. Another added benefit is that in some cases the B-Corp can even raise money through donations – the only restriction being that the grantees must be 501c3 non-profits. Start-up ventures operating within capital intensive industries and featuring socially driven business models will feel right at home with this type of corporation.

A Network of Perks: We use the phrase a network of perks because members of the B-Corp network are good to each other – offering discounted products and services to other companies in their network. According to an Inc.com article mainstream companies are beginning to take notice. For instance, Intuit offers QuickBooks for free to B-Corps, and Salesforce.com offers them a non-profit discount. Do not expect major tax incentives, however, as most B-Corps pay the standard corporate income tax.

It has been found that this model works best when the business has more than one social impact. Also, pursuing a B-Corp status helps to quantify your social impact – something which is vital to obtaining impact investor support. However, despite the benefits offered by this type of entity, there are some concerns. Before jumping aboard the B-Corp bandwagon aspiring entrepreneurs should be sure to consider the following:

Answering the Tough Questions: In addition to the legal requirements there are over 220 questions that must be answered before a company can achieve a certified B-Corp status. Since 2007, over 900 companies have failed to make the cut. Those that do make it must also amend their company bylaws and pay annual fees ranging from $500 to $25,000 depending on the size of the business. For more info on this performance assessment and achieving certified B-Corp status check out B Labs’ ‘How to Become a B?’ found here.

Random Checkups and Re-Certification: With B-Corps being held to higher standards of purpose, accountability, and transparency it is expected that constant verification of those standards would be necessary. As such certified B-Corps are subjected to random third-party checks to verify performance results. Another cause for concern with B-Corp certification is that companies are only certified for two years and must constantly recertify themselves as standards evolve for this new type of entity.

Market Scrutiny: Undertaking a social agenda is no easy task and the increasing number of green and socially-conscious customers and competitors only makes things worse. As the market becomes flooded with new ventures promoting various social and environmental causes, consumers and stakeholders are becoming very good at identifying and punishing those firms that are not true to their word and cause.

Even with the support of a for-profit business model entrepreneurs must be ready to face difficult challenges and make difficult decisions when operating this new type of business entity. Like its big brother the S-Corp, legislation surrounding the operation of this type of entity is still evolving. The good thing is that the relatively new nature of B-Corps means that the new businesses undertaking this model can play a huge role in establishing best practices for others to follow in the future.

For additional B-Corp tips be sure to check out this article, and for examples of certified B Corporations check out the Inc. 5000 list found here. Also feel free to sound off below on whether or not you think a B-Corp is right for you.