by Camden, Thivvya, Shams and Luis,
Most social enterprises or start-ups, regardless of their approach or stance on sustainability, will be faced with a very traditional business challenge, raising capital. At some point, the business will grow to such an extent where additional sources of financing will be required to further develop the product or services, access new markets, expand production, etc. New business models regardless of whether or not they challenge the traditional perceptions of business structure or value creation and capture, will actually have to go through the same process of seeking out investors as would any traditional business; these innovative businesses will have to prove that their different way of thinking or doing still have a value architecture that is cost effective and reliably to deliver a product or service to a customer at a reasonable price. On top of that, they will most certainly have to make good on their environmental and social commitments or else they risk losing their social license to operate.
Traditional investors, at any stage or series, will have to look under the hood into the operations, and marginal costs as they would for any business. This may present challenges for both the potential investor and the business. What if the investor doesn’t fully grasp the product of service even if there is a demonstrated need and willingness to pay? What if the investor believes that a company should only be beholden to the shareholders and not take into account social or environmental impacts? These types of concerns present unique challenges for innovative business models because the timing, type, and person behind financing matter in some sense more than the dollar value of the transaction.
Unsurprisingly, the same disruptors of business are the leading proponents of Impact investing, and in some cases have begun to merge impact investing and crowdfunding models, enabling the everyday investor to become active participants. This is something that the Global Impact Investing Network work with, where people can become members to get an access to a diverse global community of organizations interested in deepening their engagement with the impact investment industry. In this the investors that want to make a change can also contribute themselves to different organizations.
The Lift Economy is a collaborative of sustainability thought leaders with the “mission is to create, model, and share a locally self-reliant economy that works for the benefit of all life.” The Lift Economy team created the first of it’s kind “Force for Good Accelerator/ Fund” that allows for non-accredited investors to utilize a crowdfunding platform to invest in business. On top of that the opportunities available to the public will focused on businesses that are “women and people of color-owned, climate-change solving, and ‘Best for the World’ B Corporations (i.e., companies that score in the top 10% of B Corps worldwide)”.
Ever the leader in sustainable business practices and product design, Patagonia took its own mission to “use business to inspire and implement solutions to the environmental crisis” one step further to by investing in businesses that are directly creating those solutions to the environmental crisis.
Listen to the director of the fund explain why, what and how
Making skateboards from ocean plastic
This example could be one of the strongest examples of how social and environmental conscious finance can create true shared value. Just this week, Patagonia announced the results from one of their investments: a new grain to make beer.
The benefits of Kernza are clear, and demonstrate how a company can created shared value through their investments. Patagonia is simultaneously investing in R&D for Patagonia Provisions, supporting small businesses, driving action oriented solutions to climate change, and providing consumers who a more sustainable option to consume.
Questions:
Would you invest $1,000 of your own money through the ‘Force for Good Accelerator/Fund’?
Are new or hybrid models of financing necessary for businesses like B Corps that have built social and environmental missions into their purpose and who are not beholden exclusively to shareholders?
BUS446 
While the benefit of a new more specialized form of financing could of course be great if it’s attractive enough to work, but perhaps it can also have a small negative effect of, by separating itself from traditional methods, thus seem foreign, out of reach and not be considered at all by investors who are used to traditional methods.
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This is interesting! I am positive to Patagonia’s focus on sustainability, also with regard to beer. My question is if the beer is sustainable in its self? Throughout this semester we have tried to look at companies reducing the shadow side, and improving the sunny side. My impression of the beer, liquor and alcohol industry is that the product is unsustainable in its self, no matter how they are produced.
We know form studies that the cost of alcohol to society in 2004 was 18 billion kr. Not taking into account the social cost. For instance, 150 000 Norwegian children dread holidays due to the abuse of alcohol in their home. Even if the alcohol produced is sustainable in the making, the consumption of it is unsustainable. As most know this is a huge problem, and even more in countries with less regulation on alcohol.
My argument would be that alcohol, because of its shadow side, can’t become sustainable. In the same way tobacco can’t become sustainable, even if 100% of the tobacco leaves ware produced organic and employees received proper wages.
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