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Can Capitalism Save The World?-June 2011

Can Capitalism Save The World?-June 2011

Fred Haberman and other social entrepreneurs think that it can help. In fact, it has to.

How do you change the world? To Fred Haberman’s way of thinking, you could start with something everyone in the world needs: food.

Haberman isn’t a professional farmer, nor does he oversee a food company. He and his wife, Sarah Bell Haberman, run a media and marketing agency in Minneapolis’s Warehouse District. But when they founded the agency 17 years ago after working for other marketing and public relations firms, they made a pact. In Sarah’s words, “we weren’t going to work for just anybody. We wanted to do something meaningful in the world.”

To the Habermans, food has a profound meaning. Where does it come from? How is it grown? And how much healthy food are you eating? 

This year, the Habermans’ agency—its full name is Haberman, Modern Storytellers for Media and Marketing—is helping roll out a program built around a food-related cause that Fred Haberman deeply believes in: preventing and controlling the incidence of Type 2 diabetes, a disease largely tied to obesity. The Diabetes Prevention and Control Alliance is the product of a distinctive partnership between UnitedHealth Group, Walgreens, and the YMCA. Haberman’s role is branding and promoting public engagement.

“More and more, the work we do is around moving a market or solving an issue,” Fred Haberman says. “The client and the agency are, more and more, vehicles towards doing good.”

That philosophy places Haberman and his agency in the ranks of a movement that goes by many names. The term Haberman uses is social entrepreneurialism, which he defines as “using entrepreneurial principles to solve social issues. And I equate entrepreneurial with using innovative business practices to (a) help society, and (b) leverage the various assets you have at your disposal in the company” to build market share.

Haberman has the double-barreled energetic enthusiasm of a marketer and someone who longs to bring about a better world. But his isn’t a Woodstock dream of getting ourselves back to the Garden of Eden. (The Habermans are too young to be members of the Woodstock generation, for one thing.) Social entrepreneurialism seeks to do good, but it also seeks to bring managerial rigor to the process, typically looking for ways to bring in revenue as well as “investments” from foundations, wealthy individuals, and other funders. A social enterprise employs innovative practices whose results can be measured, though the bottom line is measured primarily by the mission’s success rate relative to the financial investment. And in Haberman’s world, a social enterprise also must be profitable, or at least seek to become self sustaining. 

Such thinking would have been looked upon as blasphemy or at least irrelevancy in most business circles 20 years ago. Back then, those out to help right the world’s wrongs believed that corporations were often the cause of those wrongs. Meanwhile, leaders of the emerging “business for social responsibility” movement talked about how all social sectors, including business, needed to care more and do the right thing—and how seeking profits too often got in the way. Fred Haberman doesn’t buy such dichotomies.  

“I’m for making money, and I’m for doing good in the world,” he says. “And I’m proud of the fact that we’ve been able to do both since the beginning of our company.” 

Social entrepreneurialism may be generating more buzz than honey at this point. But there are signs that it reflects a deeper movement—a movement driven both by a sense of social mission and business rigor. And what might give the movement staying power, as Haberman believes, is that society can’t rely wholly on an overwhelmed public sector to handle the challenges that it’s facing. 

 

New and Not New

Social entrepreneurialism isn’t a completely new idea—many businesses and nonprofits have been involved in this kind of work for decades. Jim Delaney, founder of Minneapolis-based Engine for Social Innovation, notes that the forebears of Thrivent Financial for Lutherans were “founded 100 years ago as financial services companies with a social mission.” But Delaney also observes that the idea “has had jet fuel poured on it” in the last couple of years. Taylor Larson, who oversees Thrivent’s fellowship program for developing social entrepreneurs, believes that “the [social entrepreneurship] community in Minneapolis is . . . still in its infancy to some degree. But there’s a lot of passion and a lot of energy around it.”

One of the best-known and longest-established social enterprises in Minnesota is Finnegans, a Minneapolis-based for-profit company founded in 2000. Finnegans markets an Irish amber ale, which is brewed by Summit in St. Paul. Finnegans exists not only to sell beer but to generate profits, 100 percent of which are given to area charities.   

Former venture capitalist and current social entrepreneur Jeff Tollefson describes a social enterprise as “an organization that takes a business approach to solving a social problem.” Tollefson himself worked for many years in the for-profit business world, helping raise and run several venture funds for Crescendo Ventures, which has offices in Minnesota and Silicon Valley. A couple of years ago, when Crescendo’s funds were hit hard by the recession, Tollefson decided to step back and reposition his career. In 2008, he became executive director of the Minnesota branch of Houston-based social enterprise Genesys Works. 

Each year, Genesys Works selects a group of students from disadvantaged backgrounds to participate in an eight-week summer IT training program before placing them in year-long paid internships. Corporate clients pay to have these students work in their IT departments, where they perform tasks such as hardware and software upgrades and help desk support.

Tollefson emphasizes Genesys Works as “an IT staffing company. We serve our corporate clients, and we’re helping to develop the next generation of IT professionals.” But there’s also its mission: to help kids get into college and graduate. Genesys Works’ training and internship programs are designed to encourage students’ intellectual development, as well as provide them with an understanding of the work world and its requirements. 

Like many social entrepreneurs, Tollefson believes that a social enterprise should seek to be “economically self-sufficient.” The Minnesota chapter of Genesys Works expects to cover more than 95 percent of its expenses this year “from earned income,” which Genesys garners from the contract revenues received from its corporate clients. 

There are almost as many synonyms for social entrepreneurialism as there are models. Haberman’s agency fits into this universe several ways, though most projects fall into the cause marketing category. 

“Our agenda is to create brand differentiation for you by developing a social movement that creates both deeper customer loyalty and engagement and solve an issue for you,” Haberman says. Numerous companies, he adds “want to do good, but they don’t know how to navigate that. But they have the assets.” 

The marketing campaign that turned Haberman firmly in the direction of social entrepreneurship was the work his agency did for the Ann Bancroft–Liv Arnesen expedition across Antarctica in 2001. Haberman helped promote the expedition as an educational mission by connecting it electronically to schools nationwide, “bringing kids along in an interactive way.”  

Haberman also created a for-profit entity to manage the expedition in order to generate revenue through sponsorships and other sources. One of those sponsors was Volvo, which soon became an agency client. Haberman helped develop a program called the Volvo for Life awards, which were presented every year from 2002 to 2008. 

“The idea here [was] to tell everyone in the United States . . . to identify someone in their neighborhood, an ordinary person whom they know that does extraordinary things for their neighborhood or their community. The idea is, there are all these people doing amazing things, and they can be inspiring.” The stories around the awards “generated hundreds of millions of media impressions.” Good image building for Volvo, to be sure. “But more importantly, [the campaign] paid it forward for those individuals and promoted their causes,” Haberman adds. “The winners would get $50,000 to $100,000 to the charity of their choice.” 

This year, Haberman is helping to brand and market the UnitedHealth Group–founded Diabetes Prevention and Control Alliance (DPCA). UnitedHealth, Fred Haberman says, “is looking at the overall issue and in this case using their immense infrastructure, their relationships, their know-how, their expertise, and bringing together people in a coalition to attack and reverse this epidemic.”

 Koehler, UnitedHealth Group began work on the social enterprise in April 2010. DPCA’s goal, he says, is to “get upstream” on the problem of Type 2 diabetes—that is, teach people at risk of developing the condition how to change their health habits, and encourage them to maintain those changes. The DPCA program also guides those who already have the condition to work with physicians and pharmacist coaches. The program is available to all health plans and employers.

“We needed a common brand,” Koehler notes, in order to build awareness about both Type 2 diabetes and the DPCA programs. Haberman developed that brand (which will be rolled out later this year) and related marketing materials. According to Koehler, the Haberman agency realized that “we want to create a movement. They understood and cared about our mission, that it wasn’t just about making money.” 

 

New Profit Motives

If social enterprise is intended to bring a more businesslike rigor to building the common good, how does it measure success? For a marketer like Haberman, one key standard is media impressions. He also cites 2010 industry studies which assert that 80 percent of people say “they want to do business with socially responsible companies” and “85 percent have a more positive image of a product or company that supports a cause they care about.”

Most social entrepreneurs use measures suitable to their mission. At the Minnesota branch of Genesys Works, Tollefson claims that the number of students his organization places in business internships has grown from 16 in 2008 to 150 this year, and that 97 percent of them have gone on to college. 

“The business community has come together and supported our work,” Tollefson says. “Are they acting out of self-interest? Absolutely. They’re receiving cost-effective solutions to their IT needs.” At the same time, “businesses realize that we need to provide a hand up” to students who have been underachieving, Tollefson believes. The demographics of the state are changing, and the young people in those growing demographic groups “are the work force of the future.” 

This year, Genesys Works earned investment from Massachusetts-based New Profit, which describes itself as a “venture philanthropy fund.” New Profit, Tollefson says, has a “venture capital model. You [the investor] provide the money and New Profit performs the due diligence.” And like a venture fund, New Profit and other investment firms like it provide strategic help to social entrepreneurs. 

In the past year, global social innovation funding organizations Ashoka and the Social Enterprise Alliance have set up chapters in Minnesota. Like New Profit, these organizations provide “seed capital” to social entrepreneurial endeavors. So does the Minnesota chapter of Seattle-based Social Venture Partners, which opened for business in 2002. The firm organizes the annual Engaged Philanthropy conference (EPCON), which this year will be held June 16. The winner of the annual Social Entrepreneurs Cup, perhaps the premiere social enterprise award program in the state, will be announced during EPCON. 

Brad Brown, who worked in management consulting before becoming Social Venture Partners Minnesota’s executive director in 2007, notes that like traditional entrepreneurs, social entrepreneurs need access to capital in order to build their service model. This will require as much innovation on the capital markets side, he believes, as “we’ve already seen from entrepreneurs on the operational side.” 

Such innovations are on the horizon. Social enterprises typically are 501(c)3 charitable nonprofits, but other models are rising. These include L3C corporations, for-profit entities whose primary purpose isn’t to earn a profit, but to achieve a socially beneficial objective, with profit a secondary goal. L3Cs cannot as yet be set up in Minnesota, which is why Engine for Social Innovation founder Delaney established his L3C in Vermont, though he operates in downtown Minneapolis. Delaney says that an L3C allows him to more easily access a variety of capital markets, which could help him expand the Engine model in other cities. An L3C also has fewer reporting rules than nonprofits, which allows Engine to better protect its proprietary ideas.  

A similar legal entity called a “community enhancement corporation” has been proposed in the Minnesota Legislature. According to Stephen Young, executive director of the Caux Round Table, a St. Paul–headquartered global organization that promotes corporate social responsibility (CSR), such an enterprise could seek investment capital, but investors would understand that the organization would be focused less on short-term income and more on longer-term value appreciation, as well as providing social benefits, such as improvements in education, housing, and care for the elderly. 

Young describes social entrepreneurialism as “a new articulation of corporate responsibility.” He also believes that it’s too early to judge whether the idea will take any firmer hold in the corporate landscape than previous incarnations of CSR have done. CSR advocates, Young adds, see business as a fundamental force for social justice through the wealth that they create, but they also see that irresponsible business practices don’t serve society or the cause of market freedoms.

Delaney believes that given the tenuousness of financial stability in this post–Great Recession age, an increasing number of professionals are looking “for depth beyond a 9-to-5 job—even if they love their job,” he adds. There have also been other forms of cultural encouragement, notably the Obama administration’s Office of Social Innovation and Civic Participation.

“I think the contraction of wealth starting in 2008 made a lot of people step back and re-evaluate what was important in their lives,” former venture capitalist Tollefson says. “And they realized that it wasn’t stuff, but family, friends, and their communities . . . . It was a bit of a wake-up call.”

 

Common Goodness

One issue that’s at the top of Fred Haberman’s social capitalist agenda is “food deserts”—areas in the country where people don’t have ready access to fresh produce and meat. Residents in many inner-city neighborhoods, including a few in the poorer parts of the Twin Cities, typically can buy food only at convenience stores and fast-food restaurants, cornucopias of processed fructose and sodium. But as Haberman notes, food deserts are “also a rural issue,” notably in areas where the nearest food source for miles isn’t a supermarket but a Subway. 

Haberman hopes to partner with companies and nonprofits to address the issue. The social enterprise in this space that Haberman particularly admires is Growing Power, a Milwaukee-based organization that helps urban residents grow their own produce. Besides “feeding thousands of people in the inner city,” Haberman says, Growing Power founder Will Allen “has created franchises all over the country, including one or two that will be popping up in the Twin Cities.” 

Sarah Bell Haberman believes that businesses will become more actively involved in common-good endeavors, engaging themselves more deeply than simply writing checks. “These issues are huge and complex,” she says. “One entity can’t solve them. We all have to come together and play a part. And finding those partners is key to collaboration and building these coalitions.” She adds, “That’s the way we have to go.”

Fred Haberman puts it this way: “How many billions of dollars are we in debt today in the state of Minnesota? And what, a trillion bucks nationally? So who’s going to do this? We all have to do this. And who’s equipped to do it? The incredibly educated, brilliant, creative minds that we meet with every single day in boardrooms or at brand meetings or at various agencies.”—Gene Rebeck (Read on for additional sidebar information.)

 

Fred Haberman and Sarah Bell Haberman met as college students at the University of Wisconsin–Madison. Fred is a Milwaukee native; Sarah grew up in Minneapolis. After graduating, they landed their first “real” jobs in the Twin Cities, but it didn’t take too many years to figure out that working in corporate America and institutional public relations firms wasn’t their destiny. In 1992, they journeyed to Kazakhstan to open the first American office-products retail store. After more overseas travels, they returned home and took jobs in organizational development consulting, also starting a wilderness-adventures travel company. They founded their media and marketing agency in 1994. Brian Wachtler joined the agency in 1998 as its second hire; he’s now its president. The Habermans credit Wachtler for managing the agency’s growth and maintaining a balance between its social mission and its financial sustainability. 

The Haberman agency has developed media and marketing campaigns for clients including UnitedHealth Group and Volvo; it also has a large portfolio of clients in the organic food industry, including California-based Annie’s Naturals and several food co-ops. Other Haberman projects are intended as food for thought. Just before the Super Bowl, the agency launched “Add or Delete,” an advocacy Web site that calls upon advertisers to redirect 5 percent of their budgets to social causes. 

“The global ad spend is about half a trillion dollars,” Fred Haberman notes. “A portion of that money is just wasted—wasted in the sense that you don’t know whether it’s really working for you.” So why not direct some of the spend to something useful? Haberman sees Add or Delete as a “conversation starter” about how capital is spent, and how it can be spent more beneficially.   
 

Two Haberman outdoor projects in particular have established the agency’s tone and mission: 

• For the 2001 Ann Bancroft–Liv Arnesen Antarctic expedition, Haberman organized YourExpedition, a for-profit company that planned and raised funds for the two women’s ski trek across the frozen continent. Three million followers shared the adventure on line, earning the expedition 2.1 billion worldwide media impressions.

• In 2009, the agency planted the Haberman Dude Ranch, an employer-sponsored produce garden in Delano that has become one of the firm’s most popular benefits. Staffers who work in the garden get first dibs on the crop, which they can either take home or deliver to Open Arms of Minnesota, a charitable organization for people living with HIV. The Dude Ranch, which has gotten press in the Wall Street Journal, the New York Times, and other media, is at the forefront of a growing national movement: Companies including Google and Southwest Airlines also have planted employer-sponsored gardens.   




Four Twin Cities Social Enterprises
 

Admission Possible

Founded: 2000

This St. Paul nonprofit places college preparation coaches in high schools in the Twin Cities and Milwaukee areas to help get low-income students into college. Several organizations share a similar mission, “but we had a key insight,” Admission Possible founder Jim McCorkell says: “If you harness the desire of young people to serve their country, you could dramatically reduce the cost of delivering intensive services.” 

Admission Possible recruits recent college graduates through the AmeriCorps program to help guide those disadvantaged students through the college admission and financial aid process. In exchange for a year of service (about 1,700 hours), AmeriCorps volunteers get an $11,000 living allowance and a $5,350 education award to be applied toward loans or grad school.

A decade ago, Admission Possible served 35 students in two schools. Today, it works with about 7,000 students in 24 schools. It plans to expand into 10 cities within the next decade. “We’re able to do our work for about one-seventh the cost of the most similar federally funded program,” McCorkell says.  —Dan Haugen

 

Baby’s Space

Founded: 2000

Terrie Rose, a psychologist and a former associate director of the University of Minnesota’s Harris Center for Early Childhood Development, knew that children younger than kindergarten age need plenty of sensory stimulation and consistent contact with responsible adults in order to learn. But Rose also saw that more lower-income babies and toddlers were being placed in day-care facilities that weren’t helping them to mentally develop.

With the U of M functioning as a fiscal agent, Rose founded the first Baby’s Space center in Minneapolis’s Phillips neighborhood in 2000. Baby’s Space has since scaled up to four other facilities. Rose hopes that fees on Baby’s Space “intellectual property” will provide income to help it sustain itself as much as possible. Social enterprise funds Ashoka and Social Ventures are two Baby’s Space investors. 

Last year, 100 percent of the Phillips facility’s pre-K students were tested as ready for kindergarten. A 2008 “social return on investment” analysis performed by MBA students at the Carlson School of Management estimated an economic benefit of $3 for every dollar invested in Baby’s Space.  —G. R. 

 

Engine for Social Innovation

Founded: 2010

This social enterprise start-up, which is headquartered in the Handicraft Guild building in downtown Minneapolis, recruits and assembles teams of young professional volunteers to tackle various projects for Twin Cities nonprofits. The nonprofits pay a small fee for the service and get an opportunity to develop relationships with emerging leaders.

While serving as a board member for the YMCA, founder and former U.S. Bank vice president Jim Delaney noticed a mismatch between the types of volunteer opportunities available and the kinds of experiences young professionals were looking for. Young people want to use and share their professional skills, and they aren’t necessarily looking for long commitments. Engine puts together teams with complementary skills and assigns them to six-month projects.  

Engine for Social Innovation’s pilot projects last year included developing a best-practices handbook for the metro-area YMCA. In the first half of this year, the organization had projects under way
for Children’s Hospitals and Clinics, GiveMN.org, and the Minnesota Jaycees, with others in the pipeline.   —D. H. 

 

Springboard for the Arts

Founded: 1991

“Our work is all about the practicalities of being an artist,” Springboard Executive Director Laura Zabel says. Springboard’s mission is to connect artists with all of the skills, contacts, information, and services they need to make a living. It also works with communities to develop arts districts and other types of art infrastructure.

Just like for-profit companies, nonprofits can be tough ships to turn, but Springboard for the Arts manages to stay nimble and responsive by avoiding excessive layers or hierarchy. The staff has earned a high degree of trust from its board and funders, allowing it to take small risks without running every decision up a chain of command. (All staffers are artists, too.)

Springboard for the Arts won the 2010 Minnesota Social Entrepreneur’s Cup award for its Artists Access to Health Care program, which helps connect artists with low-cost medical care. Another initiative is its “Community Supported Art” program, based on the community-supported agriculture model. Members pay $300 for a “share” and receive a “box of art” three times a year. The self-sustaining program is entering its third season.   —D. H.