Small Business Labs

What are Social Enterprises?

A social enterprise, according to Wikipedia, is "an organization that applies capitalistic strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit."

Duke University's Center for the Advancement of Social Entrepreneurship says social enterprises create "social impact through the thoughtful adaptation of business expertise."

But my favorite social enterprise description comes from non-profit Inveneo, itself a social enterprise.  They say:

"we operate like a business with a social mission." 

By this they mean their business approach allows them to scale and become financially self-sustaining instead of relying on a non-stop stream of donations. 

Inveneo provides information communications technology (ICT), such as computers, telephony, and Internet access to people and organizations in rural and highly underserved communities of the developing world.  They go on to say:

"Our business model, based on both earned income and grant funding, is rooted in our belief that market-based strategies and relationships help to maximize social impact, sustainability and scale by aligning the interests and commitments of all stakeholders."

Over the last few months we've interviewed dozens of social enterprises. 

It's an exciting, growing sector and almost all social enterprise are small businesses.  And making it even more exciting is seeing these firms ignore traditional methods and instead embrace market-based approaches to solve social problems. 

We'll be blogging more about this in the coming weeks. 

Feedback Loops, Forecasting and Peak Oil

One of the most important things to consider when developing a forecast is feedback loops.  These are reactions to an event that either enhance or buffer the event's impact. 

Feedback loop impacts often cause unexpected results, unintended consequences and failed forecasts.   

The debate around Peak Oil is an interesting example.  According to Wikipedia, peak oil "is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline."

Depending on which source you reference, peak oil has: (1) already occurred; (2) will occur in the next few years; (3) will occur roughly in the 2020 time frame; or (4) will occur later than 2020. 

There are many forecasting that in the next few years post peak oil declines in oil supplies will lead to substantial economic dislocation.  For example, most of 2010's top 10 peak oil books forecast major problems in the next couple of years. 

Some of the forecasts are quite dire.  My favorite comes from Wikipedia.  One of their scenarios is:

"... a global depression is predicted, perhaps even initiating a chain reaction of the various feedback mechanisms in the global market that might stimulate a collapse of global industrial civilization, potentially leading to large population declines within a short period."

But a funny thing is happening on the way to the end of civilization as we know it. Technology is improving energy production. 

The AP's New drilling method opens vast oil fields in the U.S. covers the use of horizontal drilling techniques to substantially improve oil field recovery rates.  Key quote:

"This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half ..."

This is the same technology that recently more than doubled the world's natural gas reserves, turning an expected U.S. natural gas shortage into a natural gas glut. 

While peak oil will happen some day, it now seems unlikely the world will see a peak oil scenario come true for many decades. 

The doomsday peak oil forecasts failed to consider feedback loops.  In this case, rising oil prices encouraged the development of new and innovative drilling and energy production methods.  

Rising prices also resulted in increased energy conversation and greater investments in alternative energy sources.  These also push out when peak oil is going to happen and reduce its impact.    

Hopefully well before peak oil really does happen, feed back loops caused by environmental, sustainability and climate concerns will result in a shift to cleaner, renewable energy sources. 

So remember when doing a forecast - or evaluating a forecast - to think through the potential feedback loops and how they may impact the forecast. 

For those interested in learning more about peak oil and energy, my favorite sites are The Oil Drum and The Energy Collective. 

GobiSOFT Webinar on Reducing Carbon Emissions

GobiSOFT, from Gobi Carbon Management Solutions is a web-based tool that enables small-to medium-sized businesses to easily and affordably measure, report and reduce their carbon footprint.

They are holding a free webinar this Wednesday, December 8th at 10:00am PST.  The webinar will provide an introduction to measuring greenhouse gas emissions and what steps to take to begin saving money by tracking and reducing your organization's carbon footprint.

As we discuss in the Intuit 2020 report, sustainability is becoming a competitive business requirement as firms use sustainable business practices - like reducing their carbon footprint - to cut costs and respond to customer and employee demand. 

Click here to register for the GobiSOFT webinar.

Sustainability: A Competitive Requirement for Small Business

One of the key business trends for the next decade is the growing importance of sustainable business practices.  Put simply, sustainability is moving from a "nice to have" to a competitive requirement. 

The key reasons sustainability is becoming a business necessity are:

• Customer demand:  Over 40% of consumers say they prefer purchasing products from eco-friendly companies.  This is up from less than 20% 5 years ago and we expect the number of consumers basing purchasing decisions on environmental impact to grow rapidly.
• Employee demand:  Employees are increasingly looking to their employers to improve sustainable business practices. 
• Cost reduction:  Business of all sizes are realizing sustainable business practices save money.

The poster child for using sustainable business practices to save money is WalMart.  Anyone familiar with their culture knows WalMart cares a whole more about saving money than saving the environment.

This makes Walmart's massive sustainability efforts so telling.  They've realized sustainable business practices makes their customers and employees happy.  But more importantly, it saves them money and makes them more competitive. 

There are a growing number of tools available to small businesses to help them develop sustainable business practices. 

For example, Gobi Carbon Management Solutions Inc. recently announced the launch of GobiSOFT, a new web-based tool that enables small-to medium-sized businesses to easily and affordably measure, report and reduce their carbon footprint. 

The best news about reducing your carbon footprint?  The only way to do it is to use less energy, which saves money. 

In the coming years rising commodity and energy prices, resource constraints, consumer and employee demand will combine and require small businesses to be like WalMart and aggressively pursue sustainable business practices.  Not being sustainable will mean not being competitive. 

Don't get me wrong.  I think improving the environment is a good thing. 

But even better is saving money and gaining competitive advantage by improving the environment. 

Crop Mobs for the Agricurious

The New York Times continues its love affair with small farms and the slow food movement.  Field Report: Plow Shares covers crop mobs, which are:

"a monthly word-of-mouth (and -Web) event in which landless farmers and the agricurious descend on a farm for an afternoon..."

The article covers a crop mob of 50 that recently descended on the Okfuskee Farm in North Carolina to help with a wide variety of chores.  The lure is both farming and the opportunity to meet and commune with others who are agricurious.  Key quote from the article:

"The more tedious the work we have, the better,” Jones said, smiling. “Because part of Crop Mob is about community and camaraderie, you find there’s nothing like picking rocks out of fields to bring people together."

Alert readers will remember I grew up in a small farm town in Kansas.  Oddly enough, we never considered picking rocks out of fields entertaining. 

It's a fun article that highlights a number of trends we are following -small farms, slow food, new localism and the growing interest in sustainable products. 

Green is the New Black for Baby Products

The Washington Post has a great article talking about the greening of high end baby products.  It points out that the luxury baby products market has contracted substantially since the start of the recession. 

But one area that continues to grow is the high end green baby products segment. 

My favorite example is the Uppababy product line.  The picture on the right is the Uppababy Vista stroller, which retails for $699 and is so cool it almost makes me wish my kids were still babies.  From the article:

""We use organic products whenever possible," said (Uppababy) spokeswoman Sarah Hines, who adds that the fabric used in the firm's bassinet is lined with "organic soybean fiber and cotton" and that the Vista's sun shade provides baby with SPF-50 protection from solar rays."

The movement towards green and sustainable products continues to grow.  And while the recession has dented growth for many green products, the baby products market shows demand for green is still in place. 

Here Comes Carbon Taxes

The U.S.government's budget deficit problem will require tax increases to fix.  We think carbon taxes are becoming the most politically acceptable alternative and expect them to be in place in 2010.

The political viability of carbon taxes stems from the broad and growing spectrum of groups concerned about global warming.  This diverse group includes environmentalists (obviously), religious groups that view sustainability as a faith-based earth stewardship issue, and security advocates concerned about America's reliance on foreign oil.

Americans in general are also becoming much more sensitive to these issues, as shown by our recent post on increased interest in energy efficiency.

The New York Times article Climate Change Seen as Threat to US Security provides another example.  The article describes work done by the Department of Defense showing that global warming security concerns have moved beyond foreign oil reliance to the broader topic of geopolitical impacts of climate change.

And according to DOD's analysis, climate change is going to cause a lot of geopolitical impacts:

"... over the next 20 to 30 years, vulnerable regions, particularly sub-Sahara Africa, the Middle East and South and Southeast Asia, will face the prospect of food shortages, water crises and catastrophic flooding driven by climate change that could demand an American humanitarian relief or military response."

As concensus on cleaner energy sources builds, there is also a growing realization that while the costs are high, they will have to paid.  Key quote from retired Marine general Anthony Zinni:

“We will pay for this one way or another ... We will pay to reduce greenhouse gas emissions today, and we’ll have to take an economic hit of some kind. ...  Or we will pay the price later in military terms,” he warned. “And that will involve human lives.”

The carbon tax debates are just starting.  The House passed climate and energy legislation last June and it will be actively debated by the Senate in the fall. 

While the final form and amounts are not clear, expect to see a carbon tax - probably in the form of a carbon cap and trade system - passed by Congress later this year. 

Consumer Interest in Energy Efficiency Growing

Excellent post over on the Compete blog on consumers becoming more interested in green energy and energy efficiency. 

As the chart below from Compete shows, the number of unique visitors to the top energy conservation sites grew by 68% over the last year.  These sites combined are now getting about 3.5 million unique visitors per month.

   

The trends towards increased consumer interest in sustainability and energy efficiency continue to build.   According to the Compete blog post, the increased interest coupled with substantial green energy spending programs by the government is creating a wave of new business opportunities. 

The Small Wonders Report on Green Entrepreneurs

Anne Field writes the excellent Not Only For Profit column at True Slant. 

She pointed me to a report from the Center for Small Business and the Environment on green entrepreneurs.

The report and supporting website is called Small Wonders and the report provides an assessment "of the widespread and proliferating phenomenon of small green businesses."

The website also provides resources and advice for small business owners interested in greening their businesses.  There is also online networking for green-preneurs on the site. 

In addition to the report and other content, there is also a very cool Flash online press kit that is fun to play with. 

Trash Opportunities

Talking Trash is a great article from Foreign Policy magazine covering trash statistics.  According to the article the world throws away roughly 2 billion tons of garbage every year and the average high income country resident generates 3.1 pounds of garbage per day.  That's a lot of trash.

The good news is recycling rates are at historic highs.  Interestingly enough low income countries tend to do a pretty good job of recycling because they have so many low income people collecting and recycling trash to eke out a living - 500,000 in Brazil alone.  But as the chart below from the article shows (FP has great charts), there is still lots of room for improvement in the US.

The other good news is trash can be turned into ethanol.  Bizarre Biofuels, another FP article, discusses that state of garbage to ethanol conversion and points out that during the last year several trash-to-ethanol plants have been approved in the US and Canada.

There are many examples of successful small recycling businesses in the US.  Over the coming months we will be profiling some of the participants in this growing sector of the economy.