Competition spurs collaborative ideas to fix local problems

By Todd Cohen

[Note: This was written for Triangle Community Foundation.]

RALEIGH, N.C. –At stake was a $25,000 grant from Triangle Community Foundation.

Competing for the funds were five groups of partners, selected from more than 50 partnerships that had submitted proposals in response to a request for ideas for innovative, collaborative solutions to community problems.

Each group had 10 minutes to pitch its proposal to a panel of five judges, and another five minutes to answer questions from the panel.

The groups said they would use the grant dollars to develop:

* A storefront in downtown Siler City to serve as “Idea Centro” and engage residents, particularly Hispanics, develop them as leaders, and produce new thinking and economic growth.

* A pre-K class for four-year-olds at a year-round center for children and youth in an impoverished Raleigh neighborhood, combined with services for their parents, to help families break the cycle of poverty.

* A center to process and distribute food at a new food hub in Durham that aims to provide a market for local farmers and a source of food for agencies that serve people in need.

* A 200-square-foot home to serve as a model dwelling for people with mental-health challenges living at a Chatham County farm that aims to help them become self-sufficient.

* A food trailer to employ men and women in Durham who get out of prison, and help them develop the skills they need to survive in the workplace.

The competition marked the fourth year Triangle Community Foundation had hosted its Innovation Award, an effort to stimulate new ideas and collaborations to address community problems.

The award aims “to seed an innovative idea and gives nonprofits involved an opportunity to think outside the box, to move the needle on a community issue,” Lori O’Keefe, the Foundation’s president, told several dozen guests who attended the event.

The five finalists, she said, all were winners that “think innovatively and collaboratively.”

Claiming victory at the close of the event was the Bull City Cool Food Hub Collaboration. And thanks to donors to the Foundation, each of the other semifinalists received $7,000.

The competition

The Innovation Award event was held March 20 at HQ Raleigh, a shared workspace in the warehouse district of downtown Raleigh designed to boost entrepreneurialism.

With competitors waiting and watching from adjacent space, each finalist group had five minutes to set up any visual presentation it had prepared.

Then, standing in front of the five judges and the audience of guests, each group made its pitch.

To prepare for the competition, the finalists had participated in a “pitch workshop” in February led by BC/DC Ideas, a Raleigh consulting firm that works with nonprofits.

Judges at the final event included its chair, Easter Maynard, director of community investment for Investors Management Corporation and a member of the Foundation’s board of directors; Scott Crawford, chef and co-owner of Standard Foods; David Dodson, president of MDC, a Durham think-tank; Aaron Houghton, co-founder and CEO of BoostSuite, a website firm in Durham; Donovan Moxey, CEO of Interactive Multimedia Solutions and IBS International; and Steven Pearson, manager of corporate citizens and corporate affairs at IBM.

Boosting growth in Siler City

The Latino community in Siler City has grown to nearly half the rural county’s population of 8,100 residents from less than one percent in 1980.

Yet despite the loss of 1,700 jobs between 2007 and 2012 with the closing of furniture, textile and food-processing plants, Hispanics have stayed in Siler City.

Now, a collaboration known as Siler City Unidos is working to transform a storefront in downtown Siler City into “pop-up community center” known as “Idea Centro” that will engage partner agencies, foster civic participation and leadership among all residents, particularly, Hispanic, and generate ideas for developing the downtown area.

The collaboration includes Chatham Economic Development Corporation, Siler City Development Organization, Communities in Schools of Chatham County, the town of Siler City, and other groups.

The group told the judges at the competition that the challenges facing Siler City “have led to a willingness to try things that haven’t been tried before.”

Breaking poverty cycle in Raleigh

In Raleigh, where the number of residents living in poverty nearly doubled from 2000 to 2012, the poverty rate is 16 percent. In the 27610 zip-code area in southeast Raleigh, the poverty rate is 22.7 percent, nearly one in three households with children under age 18 lives in poverty, and the number of children living in poverty has grown 46 percent since 2008.

To find a way to help break the local cycle of poverty between generations, the executive directors of seven nonprofits have been meeting for the past year.

Known as the Wake Collaborative, the partners include Community Partnerships, Council for Entrepreneurial Development, The Daniel Center for Math and Science, SouthLight Healthcare, StepUp Ministries, Triangle Family Services, and Wake County SmartStart.

Their solution is to create a class for 18 four-year-olds at The Daniel Center, an after-school and summer program for children and teens, and to provide support services for their parents.

The pilot program, which would include an outdoor area for play and fitness, would remove a big barrier for parents to find jobs, while also creating jobs at the Center, the group told the panel of judges.

The pilot class would be expanded over time to eventually provide support for a broad “pipeline” of constituents, from pregnant mothers to children and teens, along with families.

The goal is provide support for the same children and their families as the children move into young adulthood.

Linking local farmers, hungry people

One in four children in North Carolina is at risk of hunger, yet small and mid-sized farmers in the state lack access to local markets.

In North Carolina, which lacks big food-processing facilities, bigger farms typically ship their produce to industrial food processors outside the state, but smaller farms in the state often must sell unprocessed produce directly to consumers.

The missing piece for small farms is to add a food-processing center to a food hub that houses businesses that buy food from small farmers and sell it to agencies that serve people in need.

Known as the Bull City Cool Food Hub Collaboration, partners include Farmer Foodshare, Reinvestment Partners, Carolina Farm Stewardship Association, and Durham County County Soil and Conservation.

The food hub, which buys produce from small and mid-sized farms, will process and store food, and distribute it to agencies that serve hungry people.

The Collaboration already has secured $50,000 from the U.S. Department of Agriculture and was seeking $25,000 from Triangle Community Foundation so it could develop the processing center at the hub.

The processing center would have a “multiplier” effect on the Foundation’s investment by generating more income for farmers, more food for people in need, and an economic boost for the area of downtown Durham that is home to the hub, the group told the judges.

Housing people with mental illness

In the U.S., 2.2 million people with mental illness get no treatment. And in North Carolina, 40 percent of homeless people have chronic mental illness.

Providing treatment and a place to live for people facing mental-health challenges is the focus of a partnership that includes The Farm at Penny Lane, a farm in Chatham County that grows and produces food for people living with mental illness; Habitat for Humanity of Chatham County; XDS, a nonprofit that works with people with mental illness and owns the property the farm operates on; and the Center for Excellence in Community Health in the Department of Psychiatry in the School of Medicine at the University of North Carolina at Chapel Hill.

Known as the Tiny Home Pilot, the partnership wants to build a 200-square-foot home on the farm that would serve as a kind of model home for mentally-ill individuals.

Based on stays of a week or two to get feedback from temporary occupants, the partnership then would work with Habitat Chatham to build an initial cluster of three tiny homes for individuals in Chatham County, including some who also could receive support from the Center for Excellence in Community Mental Health at UNC.

The occupants would apply for no-interest loans from Habitat and would own the homes.

The effort, which could grow to include additional clusters of three tiny homes each and eventually become a small community on the farm, aims to help people with mental illness avoid homelessness, become more self-sufficient, and improve the quality of their lives, the group told the judges.

Jobs for ex-prisoners

Eighty percent of men and women who return home to Durham from prison have no education credentials and no real work experience, and 60 percent still are unemployed after a year.

A partnership of three Durham groups aims to create a food trailer to provide people getting out of prison with jobs and support services to equip them to make the transition to civilian life.

Known as Second Helpings, the partnership includes the Religious Coalition for a Nonviolent Durham, Core Catering Company, and Durham County Criminal Justice Resource Center, a county agency.

The idea, modeled on nonprofit Homeboy Industries in Los Angeles, will employ ex-prisoners and provide them with case management and “wraparound” support services.

The skills that inmates must master in prison are not the skills they need to master to survive in the workplace after they leave prison, the group told the judges.

At Second Helpings, they said, a criminal conviction will not be a barrier to employment but a requirement.

When fully operating, the food trailer aims to employ eight people each working 20 hours a week.

Innovation matters

Key to the winning proposal was the “crucial nature of the collaboration between the organizations, and the innovative way they were going to have a multiple impact,” says Maynard, who chaired the panel of judges.

“They would not be able to achieve their goal if they were not working in collaboration,” she says. “We were looking for authentic collaboration.”

The winning proposal will provide a market for farmers, and food for agencies that serve hungry people while giving an economic boost to the neighborhood, she says.

Overall, the Innovation Award competition “was a real awakening to the Foundation about the quality of thought leadership in the nonprofit sector, and clear evidence of the innovative activity that’s happening out there all the time,” Maynard says.

“It also gives us an opportunity, through just one award, to celebrate several organizations and help build skills and not just write a check,” she says.

In addition to a grant to the winning proposal, all finalists received training in pitching their proposals, and then got an opportunity to make their pitches before judges and an audience, and to connect with one another, she says.

“The public nature of it,” she says, “fostered a lot more conversation and dialogue and interest.”

Pax Backpacks aims to make money to give back

By Todd Cohen

CHARLOTTE, N.C. — Three years ago, during his freshman year at Davidson College, Joe Morrison volunteered as a tutor for third graders in a local elementary school.

This year, as a senior, through Boston-based Citizen Schools, which has a local office, he is volunteering on a team at Martin Luther King Middle School in Charlotte that is teaching a class on how to start a business.

And he is about to contribute $1,000, part of it to buy materials for the class, the remainder to go to Citizen Schools, that he generated from Pax Backpacks, a social business he developed that was inspired by his freshman volunteer experience.

“One of the kids was a smart kid but was going through a lot outside of school,” says Morrison, a Chapel Hill native who is majoring in religion. “The process of working with him to pass third grade opened my eyes to the challenges students face, especially students from lower-income communities.”

His sophomore year, Morrison began looking into the concept of social enterprise and companies like Tom’s Shoes and Warby Parker, which match every every pair of shoes or glasses they sell, respectively, by giving a pair of shoes to a child in need or a pair of glasses to a person in need.

Morrison decided to make and market backpacks to college students online and contribute 22 percent of his gross profit to charity.

So he developed a business plan with the help of business mentors, including John Bradberry, a Davidson alumnus and president and founding partner of Ready Founder Services, a Charlotte consultant to entrepreneurs, and Allison Dulin, special assistant to the president at Davidson who directed the school’s Venture Lab.

He presented the plan at business plan competitions sponsored by Davidson, the University of North Carolina at Charlotte, N.C. State University and the Ashoka Foundation, generating $8,000 in prize money.

And late last summer, he ran a crowdfunding campaign using Indiegogo, a San Francisco-based digital “crowdfunding” platform — co-founded by a graduate of UNC-Chapel Hill — and selling 70 backpacks, plus some stickers and t-shirts, and raising $7,000. He recently finished filling orders taken during the campaign.

The backpacks are manufactured at Parrott Canvas Company in Greenville, a firm he found through a trade association for luggage manufacturers.

The backpacks sell for $85, come in four colors, use a basic design from Parrott with some tweaks by Morrison, and are made with Cordura nylon, lined inside with Oxford cloth, and finished with Japanese-made solid brass zippers.

“The bags are meant to last a long time,” Morrison says.

Operating as a limited liability partnership with no paid staff, Morrison markets the backpacks on a website he designed hosted on bigcartel.com that provides e-commerce options like inventory tracking, promotional code offers and promotional product images.

His next step is to build on online presence through search engine optimization and social media advertising, targeting advertising on Facebook to people ages 18 to 25 who “like” Tom’s Shoes and Warby Parker.

He also is assessing the price for the backpacks, looking at customer response and the long-term sustainability of his profit margin.

After graduating next spring, Morrison would like to work for a startup firm, aiming to learn as much as he can from a larger venture, and then “plow that into my own venture.”

“The charitable goal,” he says, “is to work with Citizen Schools to support their programming, specifically in North Carolina’s low-income schools.”

New index tracks top-performing nonprofits

A web-based index has been launched that is geared to helping donors and funders track nonprofits that are effective at addressing critical social issues.

Launched by the Social Impact Exchange, a national membership association that aims to build a “capital marketplace that scales high-impact social solutions,” the new Social Impact 100 is modeled on the S&P 500 and aggregates “top-performing, evidence-based nonprofits.

The S&I 100 tracks the number of people its portfolio of nonprofits serves, and lets donors give directly to those nonprofits.

Donors can choose from the 100 nonprofits the Index tracks, as well as nearly 16,000 local affiliates that are putting those nonprofits programs into effect to address problems in the areas of education, health, youth and poverty.

The Index screens the 100 nonprofits for “evidence of impact through third-party verified studies” that are available on its website, and are included in the Index “if they have the ability to serve more people in need,” the Social Impact Exchange says in a statement.

Donors can search the site for high-performing nonprofits serving specific problems and locations.

They also can use the site to give directly to those nonprofits.

The Index was designed and developed through a broad, sector-wide collaboration of evaluation firms, ratings firms and other leaders, the Social Impact Exchange says.

Supporters include the Robert Wood Johnson Foundation, Flora Hewlett Foundation and others.

The Social Impact Exchange also is working with donor advised funds, such as Schwab Charitable, to offer the S&I INdex to their philanthropic clients.

Todd Cohen

Competition attracts social entrepreneurs

By Todd Cohen

CHARLOTTE, N.C. — Julie Jones, a teacher at Cotswold Elementary School in Charlotte, had the idea of piloting a grub decomposing operation that would use a bioconversion process to divert food waste from landfills while producing protein-rich chicken and fish feed for local farms.

Her idea, Grub to Grub, won the grand prize last year — and a total of $21,000 — at the inaugural SEED20 competition for social entrepreneurs sponsored by Social Venture Partners.

SVP, an affiliate of a Seattle-based international network of 27 local affiliates, with two more in the works in Chicago and Bangalore, India, now is reviewing applications for its second annual SEED20 competition.

This year’s competition will culminate March 7 at an event at the Urban Garden at One Bank of America Center.

In early January, SVP will announce 20 semifinalists, which over seven weeks then will receive training, mentoring and coaching from community leaders on how to tell their story.

Ten finalists will be selected to deliver three-minute “fast-pitch” presentations at the final competition.

Finalists last year were selected from among 82 applicants.

The runner-up last year, a network of gardens, known as Friendship Gardens, each of which donates a portion of its produce to Friendship Trays to deliver healthy food to over 1,300 recipients of meals, received a total of $11,000, and the remaining eight finalists each received $2,000.

“We hope to spawn an in-depth connection between the nonprofits and the community,” says Daniel.

The competition is grounded in SVP’s mission of fostering social entrepreneurship.

Founded in 2005, the Charlotte affiliate has invested nearly $700,000 in nine local nonprofits, while also providing them with business expertise, time and community connections.

Overall, the SVP network has contributed $46.25 million to 550 nonprofits, and eight affiliates have “fast-pitch” events for social entrepreneurs.

Becoming an SVP partner in Charlotte requires investing $5,000 a year for two years for two people age 35 or older, and $2,500 a year for two years for two people under age 35.

“We never just write a check,” Daniel says. “We nurture our investment by forming strong partnerships with nonprofits, working with them to help them increase their impact in the community.”

SVP does not have regular deadlines for submitting grants but tries to educate itself about community needs and partner with nonprofits that it believes are working to address gaps in services and are likely to make a big impact, Daniel says.

A new partner is Sow Much Good, a young nonprofit that wants to provide access to fresh, affordable food to neighborhoods that lack access.

Sow Much Good currently operates farmstands in the underserved neighborhoods of Ashley Park and near Friendship Missionary Baptist Church.

The group, headed by Robin Emmons, wants to connect with underserved neighborhoods, develop farms on available land there, enlist residents to work and volunteer on the farms, sell produce from the farms at local farmstands, and educate and engage residents in healthy eating.

SVP, which has partnered with Sow Much Good for over half a year, has invested $35,000 in the group, met multiple times with Emmons and the board, and is working to help it identify its biggest needs and how its partners can best provide it with their expertise, Daniel says.

Supporting and raising the profile of the groups it invests in, and the social entrepreneurs that participate in its SEED20 competition, Daniel says, “will increase the impact these nonprofits will have in addressing community problems, and strengthen the growth and social vitality of the community.”

‘Scale-up’ capital for social change

By Todd Cohen

Massachusetts became the first government entity in the United States in 2011 to issue a request for proposals for “social impact bonds,” a fledgling financing strategy that experts believe could help take effective social programs to scale by tapping into private capital, with government paying investors back only if the programs produce results.

Based on a social impact bond model launched in 2010 in the U.K. with the goal of reducing prisoner recidivism, Massachusetts is focusing on preventive interventions in the areas of juvenile justice and chronic homelessness.

With at least 10 other government entities in the United States considering or gearing up to issue social impact bonds, the Massachusetts initiative is being closely watched in government, philanthropy, social finance, academia and the nonprofit sector by those who believe the strategy might offer an effective, financially-feasible and politically-acceptable way to scale the impact of preventive social programs that have proven effective but are not widely applied.

“Philanthropy has been the source of risk capital for social innovation — funding research, prototyping, piloting and assessment of new approaches,” said Laura Callanan, a senior consultant in the Social Sector Office of McKinsey & Company in New York City and a member of the consulting firm’s social innovation practice.

“Philanthropy will never have the resources to fully scale the successful programs it helps incubate,” she said. “We need the budget power of government to bring the best of what we know — these evidence-based solutions — to scale.”

In August, Massachusetts and New York City became the first two government entities in the U.S. to announce and begin negotiations for contracts for social impact bonds.

The problem

In addition to its core function of supporting the safety-net of social services that nonprofits provide for people living on the margins of society, philanthropy traditionally has underwritten the nonprofit sector’s research-and-development role. But even when innovative social programs that philanthropy funds demonstrate successful results on a pilot basis, supported by evidence to show how and why they work, private philanthropy lacks sufficient capital to invest in expanding those programs.

And while it controls vastly greater resources, government is not known for making big changes when it might be years before that investment produces demonstrable results, particularly in an ailing economy.

Callanan and other experts in the nonprofit, for-profit and public sectors are bullish on social impact bonds, which they believe can provide the critical financing to bring proven social programs to scale. With the struggling economy fueling an increase in demand for social services, while also straining the resources of government, nonprofits and private philanthropy, experts believe, social impact bonds represent an innovative way to attract private investment capital to support social strategies.

“Social impact bonds help structure the hand-off from philanthropy — the risk capital of the social sector — to government — the scale-up capital of social sector,” explained Callanan, co-author of a recent McKinsey study on the potential for social impact bonds.

Tracy Palandjian, is CEO and co-founder of Social Finance US, the Boston-based sister organization of Social Finance Ltd., which launched the first social impact bond in the U.K. in September 2010. She believes the new financing vehicle has emerged in the face of unprecedented challenges for government and nonprofits, and unprecedented opportunities for private investors. With severe budget cuts in recent years, governments have less to spend yet face increasing demand for services fueled by the troubled economy, she said.

“Government is waging an uphill battle to serve vulnerable populations at a time of diminishing resources and increasing needs,” she said.

And in tough economic times, she said, government tends to invest in essential “safety-net” services, making the investment in preventive social programs a “real luxury.”

What’s more, because politicians tend to operate on short-term deadlines, typically focusing on the next budget cycle and the next election, investing in preventive programs is tough because “it’s hard to justify spending a lot of money today when the rewards from that investment come a couple of years later, sometimes longer,” Palandjian said.

Investing taxpayer dollars in preventive programs also can be tough, she said, because effective programs run by one agency, such as one that provides supportive services for homeless people, can mean savings and avoided costs for another agency that serves that same population, such as Medicare coverage for emergency-room visits that serve as the default health-care solution for chronically homeless people. It dampens the incentive for the first agency to expand its preventive programs.

Among the more than 1 million charitable nonprofits, 80 percent operate with annual budgets less than $100,000, and they typically count on philanthropic and government funding. “The problems ahead of us are far greater than these two sources of capital,” Palandjian said.

And nonprofits that operate the more effective programs might lack the best fundraising pitch, while those with the best fundraising pitch might not operate the most effective programs.

A goal of social impact bonds, she said, is “to allow great nonprofits with a track record to access a new source of capital from the capital markets beyond philanthropy.”

The lynchpin of social impact bonds is private investment. During the past decade, in the wake of the global financial crisis, “a new class of investors has emerged,” Palandjian said. “They are really looking for a double bottom line — doing good while doing well.”

Those investors include foundations, high-net-worth donors and some institutional investors, although she expects that mainly foundations and high-net-worth investors initially will be willing to take the risk of investing in social impact bonds.

How the bonds work

Social impact bonds are not debt instruments but a partnership in which philanthropic funders and private investors shoulder the “financial risk of expanding preventive programs that help poor and vulnerable people,” according to From Potential to Action: Bringing Social Impact Bonds to the U.S., the report by McKinsey. “Nonprofits deliver the program to more people who need it; the government pays only if the program succeeds.”

The bonds structure a “government contract for social services as a type of pay-for-performance contract,” according to the report, with seven “stakeholder groups,” including the direct beneficiaries of the social services, government, nonprofit service providers, investors, intermediaries responsible for managing the bond project, evaluation advisers to help monitor and retire the program, and independent assessors to determine if the social targets are met.

Investors in the bonds provide capital that pays up front for the services of the nonprofit service provider, and pays over the life of the bond for the intermediary, the evaluation adviser and the independent assessor, according to the McKinsey report.

The intermediary raises capital from the investors, picks the service providers, contracts with government, works with the evaluation adviser and the independent assessor to set and measure performance targets, and teams with the evaluation adviser to track and assess interim results and suggest “midcourse corrections,” the report says.

“If the program meets performance targets, the government pays the intermediary an agreed amount,” it says. “The intermediary is responsible for repaying the investors their capital plus a return on investment.”

In addition to filling a “critical void” by providing a “structured and replicable model for scaling proven solutions,” according to the report, social impact bonds can help government “move toward paying for results rather than paying for activities,” and can reward nonprofit service providers that create effective programs.

Kristina Costa, a research assistant at the Center for American Progress who has studied social impact bonds, explained that the bonds still are “immature” financial instruments and that the federal tax code has no special provisions dealing with them.

“It’s not really a bond at all in the traditional sense of what a bond it,” she says. “It’s much more like an equity relationship. There’s no fixed rate of repayment or fixed time for repayment. If the agreement fails, investors potentially stand to lose all of their capital.”

The incentive for investing, she said, would depend on the investors. “It’s going to be a fairly modest rate of return. This is for investors who want to have a positive social outcome resulting from an investment.”

Focus on outcomes

Jeffrey Liebman, a professor of public policy at the Kennedy School of Government at Harvard in Cambridge, Mass., who has provided pro-bono assistance to Massachusetts and other states considering social impact bonds, said a key challenge for state governments is figuring out how to measure outcomes in a rigorous way, “how to divine evaluation methodology so that at the end of the day you know what you actually achieved” and whether an organization achieved the objectives.

“Mostly, we have no idea what we’re getting for our social spending,” he said, “and people would like to know which programs are working and which are not, and having a funding mechanism tied to results is very appealing.”

Another key impetus for the new strategy is that “we’re not making fast-enough progress solving social problems,” he said. “Social impact bonds give a mechanism by which government becomes a partner in scaling up something that is successful. It’s like having a money-back guarantee for taxpayers.”

Costa at the Center for American Progress said the financing strategy appeals to socially-minded private investors because they “want to know their money is doing some good in the market, not just making them some money.”

Social impact bonds, she said, represent “a really exciting, innovative opportunity for a lot of people to address social problems in a more flexible way, and particularly to address the kind of preventive issues that can save government and the public a lot of money down the line, but can be difficult to justify in the annual budget cycle.”

Taking care of business by caring, not taking

By Todd Cohen

GREENSBORO, N.C. — The seeds of a quiet revolution are taking root throughout the global economy, sprouting change and new business models for anyone who wants to get involved in fixing social problems.

Helping to drive that change are hybrid “social businesses” that blend the mission of charity with the processes and efficiencies of business.

The theory and practice of that revolution were joined last week at N.C. A&T State University in Greensboro, where 500 people gathered for a social business conference that featured a competition among 31 student teams from throughout the 17-campus University of North Carolina system that had designed social businesses to address social problems they had identified.

The conference, which attracted a diverse crowd of students, educators, venture capitalists, foundation and corporate executives, and nonprofit and government leaders, was inspired by Muhammad Yunus, a Bangladeshi economist who pioneered the concept of “micro-credit” and social business and who, with the Grameen Bank he founded, won the Nobel Peace Prize in 2006.

“We can do business on the basis of our selflessness,” Yunus said during a keynote talk at the  conference. “That’s what social business is all about — finding solutions to make it happen.”

That approach to social change was reflected in the social business plans designed by the three student teams that won the competition.

A team from UNC-Chapel Hill, the first runner-up, has formed Sanitation Creations, a social enterprise that has a patent pending on Dungaroo, a portable toilet it says will be environmentally-friendly, waterless, odorless and cost-efficient, and will address the lack of access to adequate sanitation, a problem that affects an estimated 2.6 billion people.

A team from Fayetteville State University, the runner-up, has designed BioWaste Energy, a company that aims to help hog farmers secure funds to install systems to mitigate pollution from  lagoons that hold hog waste, a huge problem in North Carolina, the second-biggest hog producing state in the U.S., and to help those farmers sell methane gas captured by those systems to power companies.

And the winning team, from N.C. State University, has created Pennies for Progress, a company that will work with for-profit businesses like supermarket chains, asking them to add a one-cent donation from customers to the total of every transaction, and using those funds to make micro-loans to partners abroad, and then use the loan repayments to support local community projects.

As Muhammad Yunus “has proved time and time again, the biggest ideas start small,” Tom Ross, president of the UNC system, said before announcement of the winning teams, which will receive free mentoring plus awards of $1,000, $1,500 and $2,000, respectively.

A social business fund also is being formed to invest in social businesses proposed by teams in the competition that move forward with their business plans, said Leslie Boney, vice president for international, community and economic engagement for the UNC system and organizer of the conference.

Starting small

Grameen Bank — “grameen” means “village” — makes tiny loans to poor people, mainly women.

Formed in 1976, it grew out of an idea Yunus had several years earlier when, having returned to Bangladesh after receiving a doctorate in economics in the U.S., he found himself powerless to apply his formal learning to the famine that was ravaging his country.

So, with his students from a local university there, he went into the community to try to find a way to make a difference in the lives of even a few people.

He eventually focused on the centuries-old problem of “loan sharks” who preyed on poor women in the village.

Gathering a list of 42 names of women who had borrowed a total of $27, he loaned that amount to them so they could repay the predatory loans from the loan sharks.

But he went a step further, asking a local bank to make tiny or “micro” loans to poor people.

When the bank responded they were not “credit worthy,” he agreed to guarantee every micro-loan the bank made to poor people.

That effort grew into Grameen Bank, which is owned by its depositors, mainly poor women, has no lawyers, receives no government support, lends $1.5 billion a year, and has a repayment rate of nearly 100 percent.

“It’s all based on trust,” Yunus said.

His experience with the bank has led him to create 60 social businesses, none of them designed to make a profit, and all of them designed to solve specific social problems, including some businesses formed in partnership with big corporations.

One business sells seed packets for a penny or so each so families can grow produce to address a vitamin D deficiency that  causes night blindness in children.

That business, with loans from Grameen Bank it has repaid, now is the largest seed-seller in Bangladesh.

“We had no intention of making money out of the business,” Yunus said.

Another company sells solar-panel systems to help poor families overcome their lack of electricity and dependence on costly, toxic and dangerous kerosene lamps.

In partnership with big companies, he has formed a yogurt company to address the lack of nutrients children get, as well as a joint ventures to provide essentials such as water, mosquito nets and sanitary napkins.

Grameen also opened a branch in New York City that makes micro-loans to women to create income-generating activity such as hairdressing, baby-care centers, catering services and pet care.

That effort has had nearly 10,000 borrowers, with loans averaging about $1,500 and a repayment rate of nearly 100 percent.

Making a difference

The key to social change, Yunus said, is to “create our own fate.”

And that will mean changing the way we think about education, the economy, business and personal values.

“All we do in our lifetime is make money,” he said. “And in the process, making money has become an obsession, if not an addiction.”

While human beings are “not financial,” he said, “we love money, we love to enrich ourselves.”

In addition to being “selfish,” however, “we are also selfless,” he said.

Still, our education systems do not stimulate students to explore their selfless side, and business is all about making money, not making change, he said.

What’s more, college and university faculty, in particular, can be disgracefully disconnected from and clueless about actual social and global problems.

Far too many professors, enabled by a weak tenure system that provides little accountability, are rooted in theory, not practice, and in the often insulated and self-referential “literature” of their academic discipline, not in the marketplace, and are sure they know far more than non-academics how the real world works and should work.

Universities are “not the real world,” said Yunus, himself a professor, at a pre-conference dinner for sponsors, speakers, judges and others from the social business competition. [This reporter served as a judge.]

Perpetuating business as usual is an overpowering “propaganda machine” dedicated to crushing the audacious idea that “we built a system that doesn’t work,” he said.

Despite all those obstacles, Yunus said, young people like the ones submitting social business plans at the conference hold the hope for a future that will eradicate poverty and other social ills.

And schools and universities, if they embrace the real world, can prepare students who are engaged in their communities and can make change happen.

“We need students who come out of our institutions who can think and do, who are ready to change and act, and perhaps most importantly, who are ready to dream and then execute,” said Ross, the UNC system president.

Students also need to use a “reality check” to test what they learn in the classroom, he said, by getting out into the community, talking to people, assessing models for fixing problems, and finding gaps.

“Think big and dream big,” he said.

And based on that reality check, he said, “don’t propose anything that can’t be sustained, and think in advance about where revenue would come from to sustain their business.”

Yunus said that, equipped with digital technologies that are rapidly changing and were barely conceived of 20 years ago, young people have instant access to the information they need to help them serve as those change agents.

By identifying social problems and creating “inclusive” social businesses to address them, he said, young people can make a difference.

To help make that happen, schools and universities should help students understand who they are and what they value, and give them the thinking and learning skills to identify real problems, figure out what they want to fix, and create solutions to make that difference.

“Something is wrong with the system, he said. “Fix the system.”

Social economy

Social businesses are part of an emerging social economy that is fueled by the desire to fix social and global problems, and is sector-agnostic.

What matters to these change agents is investing their time, know-how and resources in strategies that are effective and for which results can be measured, not whether the sector in which they invest those assets is nonprofit, for-profit or government.

Accelerated and shaped by rapidly changing digital technologies and social media, the social economy is a diverse and seemingly ramshackle mix of strategies that reflect and share a growing hunger to fix problems and move beyond the paralyzing mindset that is mired in business as usual.

So traditional nonprofits are looking for ways to be smarter about developing new revenue streams that free them from dependence on charity and a sense of entitlement to it.

“B” corporations are emerging that are rooted in a mandated double bottom line that requires both that they make a profit and benefit a social cause.

A growing number of for-profit companies are aiming to create “sustainable value” by using their business processes to identify social or global problems that pose obstacles to their financial bottom line and to develop philanthropic strategies to address those problems, in the process benefiting their communities and their business.

A growing number of foundations are not just making grants that help meet the requirement that they “pay out” 5 percent of their assets each year in grants and overhead, but also are becoming more informed and active shareholders, investing their endowment assets in companies with products, services, values and social and environmental impact that are in sync with the foundations’ philanthropic missions.

And a growing number of political donors, given a green light by the landmark Citizens United decision by the U.S. Supreme Court that makes it easier to support political campaigns, are investing in politicians they believe can make a difference in fixing social problems.

Social investing

Traditional nonprofits are struggling to survive, hammered by escalating demand for services in a damaged economy, by rising costs, and by increasingly demanding and critical philanthropic funders and donors.

Often panicked and paralyzed in trying to figure out how to sustain themselves financially, nonprofits become consumed with asking for grants and donations, often acting as if the importance of their cause entitles them to philanthropic support, regardless of whether or not their programs and operations are effective and efficient.

Social businesses, in comparison, count on social investment they can pass on to their clients in the form of the training and investment they need to create businesses and jobs.

Traditional nonprofits can learn from social businesses about the need to use the philanthropic investment they get to create new social-enterprise opportunities for their clients, instead of simply creating new or bigger programs to serve those clients, Yunus told me in a brief conversation.

In addition to sheltering victims of domestic violence and equipping them with the skills to become financially independent, for example, agencies that focus on domestic violence also could make loans their clients could use to create savings accounts and find jobs that would actually make them financially independent, while also repaying the loans and generating revenue the nonprofit agency could use to serve even more clients.

Maimonides, the 12th-century Jewish philosopher, said the highest form of charity was to make a loan to a poor person, creating an incentive for that person to figure out how to establish financial stability and repay the loan.

That’s the way social businesses think and work, and it is the way nonprofits will need to think and work if they expect to survive in the social economy.

In addition to believing in their clients and investing in ways that enable those clients to find ways to sustain themselves, nonprofits need to develop business strategies that will free them from their addiction to philanthropic support, and generate new streams of revenue they can use to better serve their clients while repaying their social investors and sustaining their own organizations.

While they are 800 years apart, the philosophies of Maimonides and Yunus share a belief in the need for social investment rooted in trust and self-help.

Will, faith and seeds

The emerging social economy and the range of social enterprise it has spawned reflect a rich mix of variations and mutations, each incorporating the particular needs, interests, resources and creativity of activists, advocates, investors, donors and other social entrepreneurs.

They all can learn and are learning from one another, sharing what they have know about what works and what does not.

And they are limited only by a failure or limitation of imagination, aspiration, will and faith in their dreams, their ideas, and their ability to turn them into lasting change.

“People say, ‘Why create a company not to make money,?” Yunus told people attending the Greensboro conference. “Our mind is so much made up by existing concepts of business, cannot entertain any other concept.”

So taking on huge, seemingly intractable problems like poverty can seem overwhelming to many people, but not to Yunus.

“Poverty is not created by poor people,” he said. “Poverty is created by systems. We’ve designed the system wrong.”

Humans are creatures who are both selfish and selfless, he said.

“Social business is based on our selflessness,” he said. “We want to make other people happy, and in the process make ourselves happy.”

Ultimately, he said, people can improve our communities and world through social enterprises they create to take on social problems they identify, often starting with modest ambitions to make life better for just a handful of people — like the 42 impoverished women in his village who were virtual slaves to predatory lenders because they could not repay their combined $27 in loans.

“If it works, it will grow into a giant tree,” he said. “Social business is a kind of seed.”

Social entrepreneurs focus of Forward Ventures

By Todd Cohen

CHARLOTTE, N.C. — Second Helping is a new for-profit company that operates a food and coffee cart and employs women trying to get their feet on the ground after getting out of prison.

The company was the idea of Melissa Mummert, a program coordinator at Changed Choices, a Charlotte nonprofit that works with women who have been incarcerated.

In developing her idea, which had the support of her nonprofit’s board, Mummert turned to Queen City Forward, a community-development organization that supports nonprofit and for-profit social entrepreneurs dedicated to achieving a social good.

Queen City Forward reviewed her plans and referred her to Social Venture Partners Charlotte.

Second Helping now is a semi-finalist in a funding competition sponsored by Social Venture Partners Charlotte.

Opening shop last October, Queen City Forward grew out of Bull City Forward, a similar effort formed in Durham in 2010.

Akin to a chamber of commerce for social entrepreneurs, Bull City Forward was created in response to efforts by Durham leaders to help foster nonprofit and for-profit social enterprise, and help it grow, says Christopher Gergen, the Durham group’s executive director and co-founder.

“We believe the social-enterprise sector is where our global economy is going,” he says. “Increasing numbers of organizations want to be doing well financially and doing good in terms of positive social impact in the world. And that’s where talent wants to work, where customers want to buy, and where ultimately investors want to invest.”

Bull City Forward now has roughly 160 members representing just over 80 nonprofits and businesses.

After San Francisco-based PlayWorks received a grant from the Robert Wood Johnson Foundation to expand to nine new communities its program that places a full-time coach in elementary schools to work with kids on issues like team-building and problem-solving, for example, Bull City Forward worked in partnership with the Durham Public Schools to court it.

PlayWorks now operates in nine Durham elementary schools and occupies an office in Bull City Forward’s incubator space for social entrepreneurs in the Kress Building downtown.

Like the Durham group, Queen City Forward provides resources and connections designed to help its members grow, Gergen says.

Queen City Forward has raised a total of $90,000 in start-up capital from Foundation for the Carolinas, Duke Energy, Fifth Third Bank, and from individual donors.

It has assembled an interim board of civic and community leaders chaired by Mayor Anthony Foxx, and signed up its first three member organizations, including one that will occupy an office in incubator space the organization has leased in Packard Place, a 90,000-square-foot hub for entrepreneurs.

“We hope to build a community of social entrepreneurs who are focused on solving some of our most challenging community issues in a way that is self-sustaining for individual entrepreneurs and their businesses, whether for-profit or nonprofit,” says Charles Thomas, executive director of Queen City Forward former director of education for The Light Factory Contemporary Museum of Photography and Film.

Gergen says Forward Ventures, the umbrella organization that operates the Durham and Charlotte groups, hopes to expand to other cities like Greensboro and Raleigh over the next two to three years.

Forward Ventures also is part of the Fourth Sector Cluster Initiative, a statewide network that has worked to spur other efforts such as an interagency task force created by Gov. Beverly Purdue.

“North Carolina has the opportunity to be a national leader,” Gergen says, “as a state that fully understands and embraces and supports what is being called the Fourth Sector.”