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By: Mark Dority, Director of Marketing

Last year, 2011 Acumen Fund fellow Shane Heywood published a blog post recounting his challenging experience working with a microfinance institution in the African nation of Malawi, during 2006.

While Heywood doesn’t dismiss or belittle the idea of companies that combine the pursuit of profit with a social-good agenda, he argues that many groups calling themselves “social enterprises” don’t truly fit that label – because they would be unsustainable without outside donations.

“Any organization dependent on external funding for sustainability is not a social enterprise – it is an NGO,” Heywood wrote. That’s also a good description of a nonprofit organization.

Either way, he certainly has a point. If a company wants to do well as a result of doing good it needs to make money…or it can’t do either.

Right now is a pivotal moment in history when the power of personal computing and Internet technology is having two convergent effects:

1. It’s powering an anywhere-and-everywhere 24-hour news cycle that makes it harder than ever to ignore the world’s social ills;
2. It’s also making it easier than ever for cause-conscious entrepreneurs to start ventures with the purpose of making money, while helping to alleviate the social ills they see.

The main challenge for these entrepreneurs is to find the right balance between their need to sustainably generate ROI and their desire to make a positive difference in the lives of those less fortunate.

So, as Heywood puts it, the problem with social enterprise isn’t only one of sustainability but also of scale – there are too many in too much need in too many places for these enterprises to make a real dent. But it definitely has its place.

Of course it does. It’s unlikely that a whole lot of cause-conscious entrepreneurs believe their ventures will somehow “fix” highly complex social problems. What matters is that they are making some people’s lives better or addressing a particular social problem.

Take Rubies in the Rubble, for example. According to the book Waste by Tristram Stuart, 7.2 million tons of food and beverages are thrown away yearly in the UK alone. And we know that about a third of the world’s food supply is wasted every year. Rubies in the Rubble serves up a line of chutneys and jams made primarily from produce that wholesalers were unable to sell. The company recently won Ben and Jerry’s Join our Core enterprise award. Kudos to them!

There’s also Frogtek, which develops and sells low-cost mobile software that allows micro-entrepreneurs running small shops in Mexico, Colombia and Spain process debit and credit card payments as well as manage their inventory. Where’s the ROI? Frogtek then makes a bigger profit by selling customer data to food companies and banks.

Closer to home, in San Francisco, New Resource Bank dedicates its commercial-banking services, such as credit lines, exclusively to companies that combine business with social impact. The bank is clearly doing something right, because it pulled in $8.5 million in revenue last year. And there is nothing wrong with that. 

And those are just three of the many companies who are using true for-profit models to support causes that matter to the entrepreneurs who founded them. None purports to swoop in and magically solve the world’s social ills, but each plays its own small part within the big picture.

That’s what we at KULA aim to do with our Cause-Related Loyalty Marketing platform, which calculates and drives the ROI of corporate philanthropy. CLM allows our partner companies’ loyalty customers to donate unused points and miles to causes they care about – fostering more meaningful engagement while increasing the visibility of nonprofits across the world.

Yes, our planet’s social problems are daunting. But not being able to fix them all at once is no excuse to do nothing at all.