Business changes the world—at every moment, in myriad ways, for good and ill. Decisions in boardrooms or on factory floors set in motion both staggering progress and far-reaching disasters:
But unlike the chaos-theory butterfly, business is not an uncalculating force of nature. It can behave with intention. Indeed, we have left the era in which business leaders were expected to treat their companies as mute, dumb giants, merely swinging pickaxes in a profit quarry. We are waking to the idea that if business inevitably shapes the future, it has a responsibility to choose what that future will be.
For guidance in this new realm, business is looking to social entrepreneurs. Not because they excel at that do-gooder thing, but because they have sophisticated, tested theories of change. They know their markets. They understand systems and levers of action as few others do. And, as many clever companies are learning, they can be great partners in endeavors that are good for the world and good for the bottom line.
Our fourth annual Social Capitalist Awards honor these leaders, who combine savvy business models with solutions to pressing social needs in ways that challenge our assumptions about making a profit and making a difference. The 43 honorees meet our partner Monitor Group's stringent standards for social impact, entrepreneurship, innovation, sustainability, and growth.
On these pages, you'll find evidence of a movement that's not just changing the world, but changing how we think about creating change. Increasingly, we're witnessing the blurring of commerce and charity: Companies now tend to their citizenship; nonprofits hitch income-earning solutions to markets. That phenomenon led us this year to assess the most innovative corporate partnerships among our winners—alliances that represent both business value and a choice about what kind of future to create.
Perry Odak, CEO of the
That host, Paul Rice, CEO of Social Capitalist winner TransFair USA, which certifies fair-trade products, figured Odak was speaking metaphorically. But soon, Wild Oats rolled out giant signs in all 113 stores to describe to customers the effect of the labor, price, and environmental requirements of fair trade. The strategy played well for Wild Oats and for farmers. Volume sales of the retailer's coffees went up 20% despite a $2-a-pound price increase—organic beans cost more to grow—leading Odak to introduce fair-trade loose tea, bulk sugar, and fruit. Meanwhile, the company's purchase of 2.1 million pounds of fair-trade coffee has yielded more than $1.5 million in additional revenue for 100,000 farmers and their families, Rice says.
This blended-approach partnership comes in many flavors, some reflected in the profiles that accompany our list of winners:
Scout new markets. The so-called "base of the pyramid" approach targets the poor as credible customers.
Unleash the consumer. TransFair's whole model is based on consumers' voting with their pocketbooks. Fair-trade consumption is growing at 75% per year, Rice says, sparking partnerships for TransFair with
Invent new products. TempTime Corp. and PATH, another winner, codeveloped a vaccine-vial monitor that changes color when exposed to heat, allowing health workers to know immediately whether the medicine inside has expired. This is a pressing issue in sub-Saharan Africa, where transport and storage conditions are often less than ideal. The monitor is profitable—and when the World Health Organization began requiring that all vaccination programs use time-temperature indicators, TempTime was sitting pretty as the sole producer of that technology.
To philanthropic purists who fear that the stain of profit making might corrupt the conscience of social endeavors, the message is clear: Quit thinking small. As ably as nonprofits have created elegant solutions to address complex social problems, business has proven distribution systems, scaling strategies, and technological know-how—all things that nonprofits need to truly succeed globally. (No one gets this better than 2006 Nobel Peace Prize winner Muhammed Yunus, whose Grameen Bank connects big lenders with borrowers in the poorest countries.)
Likewise, Milton Friedman fundamentalists who think profits come only from maximizing mercenary interest should take heed. These examples suggest that accomplishing social good is about profitability—for the long term, not for the quarter. The payoff can be hard to quantify at first. But pioneers like Odak feel it in their guts. They can imagine a future that's better for having made a choice. They've dared to paint a vision on the walls.
"Companies are beginning to realize that these questions of 'How can I accomplish more good in the world?' and 'Where is the market opportunity?' are essentially the same question," says Jeff Hamaoui, founder of Origo Inc., a consulting firm that helps both nonprofits and for-profits navigate this blended arena of social enterprise. "Simply put, good business design maximizes opportunity and resources, now and for the future."
So, what is your company willing to paint on the walls?
A version of this article appeared in the December 2006/January 2007 issue of Fast Company magazine.