Small Business, Big Change: A Microentrepreneur’s Guide to Social Responsibility
June 30, 2013 Editor 0
The following is an excerpt from the book.
As a socially responsible business, you’ll want to ensure that your business adds to, rather than detracts from, the economic and social well-being of your community. Whether you’re a storefront operation such as a retail business or local café, a service-based business operating from commercial property, or a solopreneur with a home-based enterprise, your company, for better or worse, will have a social and economic impact on those around you. Even if you conduct 99% of your business online from your home office, your company is still a part of the wider community and your choices as to where you buy your supplies or go for coffee may have a bigger impact than you might expect.
Your Money as a Vehicle for Change: Financial Ways to Support Your Community
We’re often told that one of the most powerful ways to bring about economic and social change is to vote with our wallets. There are a number of ways you can put your money to good use as a vehicle for social change, both locally and globally. One way of sending a clear message to the finance and investment sectors, for example, is to support and patronize ethical investment funds, sustainable banks, and local organizations.
Admittedly, it’s often easier just to keep going along with what works. For example, you may feel wary about devoting some portion of your retirement account to socially responsible funds that only have a few years of performance data, or you may like using your commercial bank for the interest rates they give you. But in the long run, if you’ve worked hard to build a socially responsible business, it would make more sense to keep that money circulating in a business network that shares your values.
Roughly one-third of the microentrepreneurs I spoke to have contributed cash or in-kind donations to organizations and causes they support. The Soap Dispensary’s Linh Truong has donated to several local environmental organizations since she started her business in October 2011. If she partners with an organization, such as the David Suzuki Foundation’s “Queen of Green,” to offer a workshop or event at her store, Linh will usually donate the workshop fees to the organization. Julie Beyer, owner of For the Love of Food, employs a similar strategy. She donates the proceeds from her open houses (admission by donation)—an event where people can sample the various goodies from her GLOW collection and learn about their nutritional benefits—to various local organizations.
Other microentrepreneurs decide to donate a percent of their revenues, or a percent of the cost of their products to values-aligned community organizations. Joanne Chang, the owner of Vancouver-based Nice Shoes, a vegan shoe store, plans “giveaway weekends” where she gives 10% of her sales revenue from that weekend to a local, values-aligned organization. Saul Brown of Saul Good Gift Co. has implemented a “Gifts that Give Back” program where a 1% donation is integrated into the gift: The recipient of the gift basket can choose to make the donation to either SOLEfood Farm (1sole.wordpress.com), an inner city urban farming organization; Canopy (canopyplanet.org), an environmental organization that saves old growth forests; or Engineers Without Borders (ewb.ca), the Canadian chapter of the international organization that designs and implements sustainable engineering projects.
Joe Staiano has pledged 1% of his year-end net profits to a Meaningful Trips Trust, which then goes to one or more of the several nonprofits that Joe’s company supports.i Lori Del Genis, owner of Conscious Elegance, has pledged to donate 5% of her gross annual income to charities with an environmental or humanitarian focus.
If you’re experiencing some lean financial times, it’s admittedly difficult to make contributions to any kind of fund that requires regular contributions. Likewise, unless your microbusiness is well established and consistently generating a healthy net revenue, it won’t be feasible to make a sizable donation or contribution to a community foundation or grant program that supports social programs or social enterprises. With a little bit of planning and budgeting, however, it’s probably feasible to set aside a small fund to donate to a local or international organization whose mandate and projects either align with your vision and mission or inspire you.
Supporting the Local Economy
While it’s true that it’s sometimes much more convenient, or less expensive, to purchase supplies online or through a large chain store, in the long run, the economic costs to your local community are significant. You may have clients that are scattered all over the globe, but that doesn’t mean you have to automatically follow suit when it comes to selecting suppliers, vendors, contract workers, or even your favorite coffee bar hang-out.
It matters where you shop. Recent studies analyzing the recirculation of revenue into local economies consistently show that when you buy local, anywhere from 30% to upward of 50% of those revenues are circulated back into the local economy. How? Money recirculates in the form of wages, purchases of local goods and services, and charitable donations to local nonprofit organizations. In contrast, only 15%-17% of revenue from purchases made at national (or multinational) chain stores is circulated back into the community—mostly through wages paid to local employees.ii
The Power of the Multiplier Effect
The multiplier effect works this way: If you support other independent, local businesses, this may encourage them to hire employees, which they usually do from the community. They also end up buying local goods and services, which in turn supports local businesses. The employees who work at these local businesses patronize other local businesses when they go out for coffee, eat lunch, do their banking, pick up their laundry, hire contractors for their homes, and so on. The effect can be exponential—and regenerative.
Saul Brown likens communities to complex ecosystems, with economic decisions having wide-ranging impacts on everyone in that community. Supporting local businesses or spending at big box stores affects the delicate balance of that community. Local economic support is like providing an abundant supply of water and nourishing resources to a rainforest where the nutrients and water stay in the soil (the community) and benefit the plants and animals within the ecosystem. Conversely, business that takes place mostly with larger companies that aren’t locally owned dissipates that nutrient supply in much the same way that moisture dissipates out of an arid landscape where there is little plant life to trap and circulate the water. The difference in outcomes is stark. It’s like comparing a rainforest to a desert: One ends up vibrant and diverse, while the other is parched and dry.iii
It’s difficult to appreciate how the multiplier effect works in the abstract, so here’s how it played out in Portland, Maine. The Maine Center for Economic Policy (MECEP) recently conducted a survey of twenty-eight local businesses that generated approximately US$57 million in revenues.iv MECEP researchers found that for every US$100 spent at a locally owned business, an additional US$58 went back into the local economy; furthermore, 65% of the expenses for those businesses were paid out to other local businesses for goods and services.
A 10% Projected Impact
If you’re wondering how the 10% plays into this discussion, here’s the answer: When organizations such as MECEP and Urban Conservancy and Civic Economics conduct studies on the economic impact of local businesses, they don’t stop at reporting the descriptive data (real impacts in the present); they also calculate projections of how much more in the way of revenues and jobs could be generated if consumers shifted just 10% more of their spending to local businesses instead of spending their money at national chains. When MECEP ran the calculations for Cumberland County, they found that a 10% shift in retail spending would generate 874 jobs and US$35.5 million in wages, not to mention an additional US$127 million of economic activity.v
Are there other benefits besides the economic? Definitely. By working with local suppliers or vendors, you can be a doubly good, socially responsible business citizen. Not only do you strengthen the local economy by choosing local suppliers, you also shrink the size of your company’s carbon footprint by reducing the energy waste that comes with transporting supplies across state or provincial lines and international borders.
Buying and Sourcing Locally
Getting involved in a “buy local” initiative is one of the best things you can do to support both the local economy and other local, independent businesses. The results of a 2011 annual survey of independent businesses showed that in areas with an active “buy local” or “local first” campaign, independent businesses saw a 5.6% increase in revenue compared to just 2.1% for businesses in areas that didn’t actively promote buying from local businesses.vi
Economic benefits are only one of the benefits of “buy local” initiatives. Businesses and residents also reaped “intangible” social benefits (for lack of a better term), such as stronger connections among businesses, customers, and municipal governments, and bolstered community links and civic pride. From the same 2011 survey, 55% of respondents reported improved loyalty among existing customers, 51% observed that city officials became more aware and supportive of independent businesses, and 49% noticed increased levels of collaboration, purchasing, and mutual support among local businesses.vii These are far-reaching impacts with even greater multiplier effects, and it’s not hard to imagine how it can happen. For example, the stronger sense of community fostered through “buy local” initiatives may lead to other investment and revitalization projects in a city. The outpouring of collaborative energy and support across different stakeholder groups can have a profound impact on the community as a whole.
As one of the founding members of LOCO BC (locobc.com), a Vancouver-based alliance of small businesses committed to supporting the local economy, Saul Brown of Saul Good Gift Co. is well aware of the benefits of buying from local businesses. When it comes to his suppliers, he has a marked preference for suppliers that are social enterprises and/or located within British Columbia. Ten percent of the products he procures for his gift baskets come from companies, mostly social enterprises, located in impoverished neighborhoods such as Vancouver’s Downtown East Side.
Vancouver-based Melissa Cartwright of Mellifera Bees tries to support local businesses and other vendors as much as possible. “When I need something, I always think of people I know whose values are aligned with mine and how we can help each other out,” she says. For example, she purchases the spices she uses for her infused honey from a supplier she knows on Cortes Island. She knows she can trust that the spices from this supplier are organic, fair trade, and sustainable.
For Joseph Hodgkinson, the owner of Foda Catering, shopping locally for his supplies and equipment is a core driver of his S-R philosophy. In addition to the regenerative benefits of buying goods from local businesses and farms, Joseph has found that “the quality of the products he purchases is almost always far superior” to those that have been shipped across great distances. Not only is the produce from local farms fresher, tastier, and more nutritious, but the money spent on the food also supports local economic growth.
Categories: Social Innovation
Subscribe to our stories
- Can Africa’s tech start-up scene rise to the next level? November 20, 2017
- Chocolate innovation: Sweet tooth hackers solve cocoa farmers’ challenges November 20, 2017
- A new generation of CEOs: Running a business in West Africa as a woman November 20, 2017
- Is crowdfunding the silver bullet to expanding innovation in the developing world? November 20, 2017
- Towards building an Entrepreneurship Ecosystem- Global Entrepreneurship Week and Freetown Pitch Night-The Role and Significance of the Freetown Pitch Night November 20, 2017