Thursday, February 28, 2008

Social Entrepreneurship

If Xavier Helgesen's sole concern were boosting his company's profits, the decision would have been easy. Helgesen's $17 million business, Better World Books in Mishawaka, Ind., collects textbooks donated by students at 1,000 colleges and resells them online. At first, the company gave 15% of its revenues to charities that combat illiteracy. But after a year or so, Helgesen knew it wasn't working. "We were recording losses," says the 29-year-old. And the company wasn't able to contribute to its employee profit-sharing plan, which Helgesen considered a vital part of Better World Books' compensation package.

Clearly, the company needed to keep more of its profits. But this was a social enterprise, one founded as much for its mission to do good as to make money. Helgesen eventually made a tough decision, cutting to 7.5% the share of revenues earmarked for most of the company's nonprofit partners, and funding the profit-sharing plan before splitting the remainder 50-50 with those partners.

The goals of making money and doing good are often at odds. But that is not stopping a growing number of entrepreneurs from starting hybrid businesses. These so-called double- or triple-bottom-line companies, which seek social or environmental returns as well as profits, and often all three, began popping up in the '70s and gathered steam in the '90s as organic food caught on and a new generation of entrepreneurs recoiled from corporate excesses. About 20,000 such companies—roughly four times as many as five years ago—now exist, according to Jay Coen Gilbert, co-founder of B Lab, a Berwyn (Pa.) nonprofit that rates social enterprises.

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