For Nonprofits and B-Corps, Building a Better World Takes a Lot More Than the Desire to Do Good
More than ever, consumers are looking for businesses that give back to the world through or charitable giving. A 2018 survey by sustainability consulting agency Futerra found 88 percent of respondents were interested in spending money with businesses that do good. And some of these businesses have become global sensations. Good-news stories tout the seemingly overnight success of organizations such as Toms shoes, which famously gives a pair of shoes to people in need for every pair of shoes sold.
But for every Toms, which achieved the success necessary to spread beyond its original mission to now facilitate change in other areas, such as gun control, mental health, and more, multiple mission-driven organizations struggle to find the foothold and capital necessary to succeed.
Many of these companies operate as benefits corporations (or B-corps). Like most traditional businesses, B-corps have shareholders to answer to and are expected to turn a profit. However, much like a nonprofit, they also need to meet their charitable goals. And a certified B-corp requires an additional oversight step of achieving a verified B Impact Assessment score, determining the value of the social good impact, along with recertification every three years.
Achieving both isn’t easy, and success isn’t born overnight, something Shannon Keith, founder and CEO of Sudara, knows well. Sudara is a certified B-corporation partnering with organizations in India to teach local women who previously worked or lived in brothels the art of sewing pajamas out of sari material. In turn, those women get paid for their work and the profits from those pajamas—known by Sudara as “Punjammies”—goes back into Sudara’s coffers to help expand the mission and outreach of the organization.
It’s an idea with potential for helpful change and one that comes with a product with mass appeal. But that doesn’t mean that the path to doing good has always been smooth.
Passion is the spark; grit is the flame
Most B-corps are born out of the desire to make the world a better place. For many B-corp founders, the idea for their business started with a spark of inspiration on how to help the world, not just how to make a profit. For Keith, that spark was witnessing firsthand the plight of women in brothels in India. According to the Global Slavery Index, in India on any given day in 2016, there were 8 million people living in slavery, with sexual exploitation, or sexual slavery, one of the leading forms of slavery in the nation.
Keith had always wanted to find ways to give a voice to the voiceless and her aid travels with her husband and church had led her to India in 2004 for the dedication of a well in a brothel community. While there, Keith was overwhelmed by the reality and dignity of the women before her. She decided to find a way to help change the trajectory of their lives—not by donating charitable goods or services but by helping women find a way to forge a life where they could make money outside of sexual slavery.
The idea for the product side of her new venture came from the gorgeous array of fabrics available in India. “I looked out into this sea of beautiful garments, bright and beautiful and lovely, juxtaposed in this dark environment,” Keith says. Keith realized that pajamas were a nearly perfect solution for a global consumer—unlike other parts of the fashion industry, pajamas aren’t particularly fashion sensitive, and everyone needs and wears them.
Helping women in India develop their own financial independence may have a reach beyond the community. The United Nations Sustainable Development Goals for World Improvement acknowledges that increasing gender equality is one of the keys to global sustainable change. Sudara started by employing six women in sewing centers in India in 2006.
By 2018, Sudara had employed more than 2,000 Indian women in sewing centers throughout the country. According to an internal impact report compiled by Sudara, after partnering with an organization in India, 70 percent of the women reported being better able to care for and support their families, and 97 percent reported feeling more hopeful about their future prospects. Keith intends to repeat the impact report every year to ensure that Sudara is still actively improving the lives of the women for whom it was founded.
The road to doing good is paved with challenges
Sudara may have started with a flash of inspiration but has also had to overcome some very pragmatic problems.
Like any burgeoning company, especially one that relies on purchasing materials from a third party, early losses are almost a given as the kinks are worked out. In Sudara’s case, there was the shipment of sari material that was destroyed due to a catastrophic weather event, cutting into potential profits and leaving the company scrambling to find replacement supplies.
Some of the organizations that Keith first partnered with in India turned out to not be as ethical as she thought. Sudara’s business model relies on contracts with local Indian distributors and contractors. One contractor held a shipment of fabric hostage. “We had 50, 60 thousand dollars’ worth of fabric held hostage—we were getting calls threatening harm to my body,” Keith says.
Then there were a few employee hires who attempted to rip off the core ideas of Sudara, down to the Punjammie patterns.
Through it all, Keith says staying true to the mission of the organization helped her weather the storms. “At some point, you just have to cut your losses and say, ‘You’re not going to take away our power. You’re not going to manipulate and blackmail us,’” she says.
Evolve your organization to help others thrive more effectively
Keith initially filed the business as a nonprofit in 2004. But it didn’t take long before she realized the nonprofit model wasn’t doing the optimal job of reaching her mission. “Our lens has always been, ‘What can we do to further the mission? What can we do to help the most women?’” Keith says.
Wanting to scale the business—and its ability to help—quickly was often at odds with traditional nonprofit thinking. For example, it was often difficult to get board members to sign off on using donor dollars to run digital ads promoting Punjammies. “Nonprofits aren’t designed around a business model for growth,” Keith explains.
The hesitation of a nonprofit board to spend money isn’t uncommon. Consistent funding is a huge hurdle for any nonprofit. According to a 2018 report by Oliver Wyman, SeaChange Capital Partners, and GuideStar, U.S. nonprofits reported facing cash flow issues, with around 50 percent reporting less than one month cash reserves.
Neither is it uncommon for organizations looking to do good to move from the nonprofit to the B-corp model after struggling with funding like Keith did. As of June 2019, more than 2,700 certified B-corps have been registered in more than 60 different countries worldwide.
But making that transition isn’t a guarantee of overnight success, either. It can take months or years for B-corps to show profitability along with true social change, and the lasting impact of that social change can be hard to measure. According to Paul Klein, founder and CEO of Impakt, a certified B-corp that partners with corporations and nonprofits to improve public relations, “Despite the evolution of business approaches such as corporate citizenship, community investment, shared value, corporate social responsibility, and sustainability, many would argue that real progress in terms of improved business and social outcomes remains elusive.”
While Sudara is now a certified B-corp, Keith also founded the Sudara Freedom Fund, allowing consumers to donate directly to support the women in India with whom Sudara works. That money goes to provide the wraparound services such as safe housing for the women in need, supplies and resources for children (Keith estimates Sudara has positively affected the lives of 500 children in India), microloans, back-to-school programs, and more.
Despite the challenges, B-corps are springing up globally and domestically: Since Maryland was the first state to pass legislation recognizing B-corps in 2010, 33 more states have followed suit. From Elvis & Kresse, which repurposes decommissioned fire hoses into purses and accessories to prevent increased landfill waste, to AeroFarms, an organization designing vertical farms to prevent water waste, B-corps provide an increasingly diverse landscape of organizations that believe that doing business well does not lead to sacrificing social responsibility.