Cupcakes & Community: Why the World Needs Social Enterprises

If you’ve ever taken a sociology paper or know anything at all about consumerism, you will know that its effects are pretty awful. The consumerist mentality has us producing more, buying more, and throwing away more. Essentially, it encourages a non-stop downwards spiral towards exploitation of both people and the environment. Resources are running out, and there is no easy solution to this complex mess. Nothing worth doing is easy though, and it’s time to take a look at how we can fix the problem of unethical businesses.

On any corporations way to becoming large and successful, it seems that some people will inevitably get screwed over. Take the chain-store clothing companies who let their employees work in the illegally built Rana Plaza building in Bangladesh. When the Rana Plaza collapsed, 1,134 people were killed, with many more injured. That is a HUGE number – and the whole thing was completely preventable. On the day of the actual collapse, many workers had refused to enter the evidently unsafe Rana Plaza. In response to this rebellion, management hired local gangs to force them inside where many lives were lost. Only with significant public pressure, did Benetton, one of the companies being manufactured for, give $1.1 million in reparations one year after the tragedy. Benetton had knowingly outsourced their manufacturing to places rife with worker exploitation, yet were unwilling to face the consequences of this shortcut.

This is on the extreme end of the spectrum, but in the vast majority of traditional businesses, someone loses. Whether it’s restructuring to increase efficiency, or failing to neutralise a negative environmental impact, somebody’s body gets climbed over, in order for someone else to reach the top. The truth is that businesses simply wouldn’t survive if they didn’t keep their costs low and their retail prices competitive. For big corporations that outsource work to developing countries, it’s not just enough to say that workers should be paid a fair wage. Despite the best intentions of Fair Trade initiatives, the money often doesn’t make it to those who need it most. Even in the unlikely event of a cultural shift of thinking towards responsible purchasing, the drop in demand for consumer products would lead to economic recessions, depression, and unemployment. Arguably, the end of consumerism would spell out an even worse situation for those who are most vulnerable.

Welcome Anomalies

So, if neither Fair Trade nor a scaling back of consumerism will work, what can be our saving grace? This is where Social Enterprises come in. Within the ‘grow or die,’ mentality that is business today Social Enterprises are an anomaly, and a welcome one at that. Their primary aim is to improve the common good; whether environmental, economic, or cultural. Occupying the no man’s land between traditional businesses and charities, they utilise products, services, or employment policies to further their core values, whatever they may be. Although definitions of Social Enterprises (SE) vary, basic criteria include: a perception of themselves as an SE, not paying more than half of their profits to shareholders, and generating more than 15% of income from traded goods or services. Our reliance on capitalism and trade is unlikely to change any time soon, and it doesn’t need to. We can have our cake, and eat it too.

Values + Business = Success

There are more of these ethics focused Enterprises around than you may think. Some are not registered as SE’s, but the people behind the businesses have the good of others at heart, making them a refreshing change from profit-centric traditional models. One such example is Tart Bakery, a small, family-owned food business. Alongside baking and selling food, Tart assists a lot with charitable events and organisations where they can, with the donations ranged from leftovers, to full on catering spreads. Food is an invaluable incentive for low budget events like these, and cupcakes grow attendance more than a good cause can ever hope to.

Another recent development is the addition of vegan food to Tart Bakery’s menu. Small businesses are often closely linked to their communities and have a strong interest in serving them. As well as Philippa, the baker going vegan, the Grey Lynn community happens to have a lot of vegans. This then led to the bakery being able to take advantage of this both fiscally viable, ethical and environmentally friendly trend. Just giving away food didn’t do great things for making ends meet – combining business and values is far more practical in the long term. Whether this marriage of consumerism and compassion is done organically, or necessitated by legislation change, an ideal future would see all businesses becoming SE’s, and ethical consumption as the norm. It may seem that generosity and profit are unlikely bedfellows, and it is true that the start up years for Tart Bakery have been tough (like most small food businesses). But, now, three years since the outset, and in the midst of many failed cafes and businesses along the neighbouring strip of shops, Tart Bakery has not only remained, but is successfully growing its customer base in an ethical way.

What Makes a Social Enterprise?

It’s my firm belief that when given the opportunity, people are inherently generous. The rising number of Social Enterprises in the US and UK shows that this inherent generosity is finally making its way into the structures of big business. In Britain alone, there are around 62,000 SE’s, which collectively contribute over £24bn to the economy and employ about one million people. In the United States, 60% of Social Enterprises were created in 2006 or later, with 29% created since 2011. These businesses operate in a wide range of sectors including economic development, workforce development, energy and the environment, education and the international arena. A bit closer to home, Social Enterprises in New Zealand include the SkyPath project which successfully lobbied the Auckland Council to build a walking and cycling pathway across the Auckland Harbour bridge, tree planting initiatives, and Live the Dream which is a programme aimed at growing NZ’s next generation of social entrepreneurs.

An important point to be made is that simply donating money or goods doesn’t make a Social Enterprise. McDonalds is an example of a dirty corporate attempting to position themselves as do-gooders. Yes, they do support various sports initiatives in schools. BUT, they also exploit the environment (see deforestation), animals (caged hens and pigs), and people (see current petition to give McDonalds workers a living wage, and rising rates of obesity). So no, neither your plastic packaged, chemically treated sliced apples, nor your little pedometer distribution program will not convince me that you have my best interests at heart, micky dees.

“People before Profit,” is what the Social Enterprise movement comes down to, and this is the slogan of one such Enterprise Hum Cafe and Falling Apple Trust. Run by a young couple, this social enterprise is situated in the heart of Auckland city, beside Grafton Bridge. It’s a beautiful old 1800’s villa, which you may be more likely to know as ‘the Grafton hippie cafe’ due to its arty vibe, and the colourful characters it tends to attract. Slowly but steadily, local volunteers and business sourced donations have been helping to restore the house and save it from demolition. Over the three years it’s been operating as a Social Enterprise, it’s been host to many koha-funded community events, including Photography Festival exhibits, folk music festivals and fortnightly swing dance classes. The small coffee hut out front draws in students, professionals and locals who can use the whole downstairs area to relax and do their thing. Coffee buying is non-essential. The other day, someone left behind a note that sums up what this place is for a lot of people. “Thank you for providing a haven in this hectic, crazy city, where I can zen out and just relax.”

Vapid, or Viable?

Right about now, some of you may be thinking that like BA’s, this all sounds rather superfluous to the needs of society. It’s often difficult to prove any tangible effect on individuals, or a country’s economy, when the goals are things like ‘community’ or ‘corporate responsibility’. Concepts of hauora are all well and good in high school health classes, but rarely make it past the chopping block in the real world. It’s hard enough to keep a company afloat in today’s ruthless corporate environment, let alone focus on intangible ideas of spirituality. However, despite some scepticism that they will ever reach a large enough scale to make an impact, Social Enterprises are showing serious promise in many areas.

Research from Social Enterprise UK shows that over half of these organisations are increasing their revenue, developing new products, and expanding into other countries. These studies suggest the success of SEs is only going to grow, as most have proven themselves to be sustainable models, lasting over six years. A recent Forbes article also pointed out that Social enterprises may be helpful for promoting diversity within management. In stark contrast to the 18% rate of women leadership within small and medium-sized enterprises generally, Social Enterprises can boast that 40% of their sector’s leaders are women. SEs also tend to have higher ethnic diversity, which has been shown time and again to correlate with stronger performance. In addition, corporate responsibility improves business reputation and product quality, giving a strong incentive for more businesses to head this way.

What our Government has to say…

The Department of Internal Affairs is also supportive of the growing Social Enterprise sector in New Zealand. It’s not without benefits for the government, as SEs support many government goals including “the development of a productive, competitive economy, better public service goals, and strong communities.” They are even making their way into government itself, with an example being the Social Bonds initiative that encourages businesses to invest in socially beneficial programmes such as mental health treatment. Say what you want about asset sales, but the $4.7 billion raised from some of them is being used by the Government to establish the ‘Future Investment Fund’, which will help to encourage entrepreneurship in the SE sector as well as funding institutions like schools and hospitals. Also, the recently released budget boasts a whopping $80 million dedicated towards Research and Development over the next four years. So, it is safe to say that SEs are being taken seriously.

The Future

This new breed of enterprise faces many challenges, including a lack of business advice and funding tailored to their hybrid social/commercial nature. Basically, they’re such a new concept that they have to learn things as they go, rather than being supported by experts in the sector, as there aren’t really any. In the coming months and years, it will be up to consumers to support Social Enterprises. Studies have shown that although people generally have the intent to buy from socially responsible enterprises, they are often unaware of where to find them and what their options are. Hopefully, government incentivising, and heightened awareness of ethical consumerism will ensure the Social Enterprise sector continues to grow.

Complex issues have no simple answers, and the issue of exploitation within business has been long discussed by governmental and NGO leaders. However, SEs are proving themselves to be a light at the end of the consumerist tunnel. Many business leaders have said that the Rana Plaza disaster did change attitudes towards supply chain issues, and that this will have flow on effects in the business world. Growing trends of veganism, fair trade, socially and environmentally responsible brands show that we are finally starting to look at the consequences of what we’re doing. As students and future graduates, Social Enterprises provide us with potential career paths to make the world a better place in a tangible way.

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