Spot the Difference: Social Enterprise vs. Philanthropy

Dr. Jordan Kassalow, founder and CEO of eye-glasses social enterprise VisionSpring, conducts an eye exam on a customer

Does an organization that gives a percentage of its proceeds to charity constitute a social enterprise? Or is it just philanthropy? Does it matter?

If you’ve read my previous posts, you know by now that I’m a huge fan of the “shopping for a social cause” model. But not all models are built alike, nor are all models built to last.

Don’t you occasionally wonder about those big companies that say “5% of all our proceeds go towards clothing a child in Africa!” and then you think, um, what does that even mean?  Will the 5% donation be used to give a child a t-shirt for free? Or will the 5% cut go to an NGO that is doing this work already? How do I know the child I clothe will stay clothed after that t-shirt gets old and unusable? How do I know this child will even want to wear the tacky logo-clad t-shirt I paid for in the first place?

The truth is, it would take some serious time and due diligence on your part if you hope to have all of these answers in place before making your philanthropic purchase. There are clues, however, that can help you figure out more quickly how effective your philanthropy will be, and these clues often lie in the business model of the organization you are purchasing from.

I’m dealing with two models of business here: the philanthropic kind, and the social enterprises.

The benefit of philanthropic organizations is that it takes the money that otherwise would have simply served to profit the shareholders, and now unlocks it for the public good. Social enterprises, however, have the potential to create lasting change, but sometimes this change comes more slowly, and the enterprises are not always as marketable as the big corporations that simply give money away.

The model I propose? Big for-profits give money to social enterprises. It’s basically Philanthropy+Social Entrepreneurship= Lasting Change

Guess who’s already doing this, though: Warby Parker. Warby Parker doesn’t simply pay for a random pair of glasses. Instead, they take the money that YOU paid for beautifully designed glasses and give it to the Social Enterprise VisionSpring, who in turn employ a sales network of local vendors (women, specifically) in select developing nations to sell the glasses at minimal cost. The model has potential for lasting change because it doesn’t just give out glasses for free, but gives women the opportunity to be businesswomen, earn an income, generate a new part of the economy, and in turn the customer making the purchase pays $4 for a return worth $380 in added income that comes from the benefits of prescriptions glasses.

 

I encourage you to go to the Warby Parker and VisionSpring websites to find out more about how they create lasting change through partnership and a combination of business models.

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1 comment
  1. I’m not sure if Warby Parker is a person or a a corporation, but it may not matter. The idea that an entity invests in organizations whose raison d’etre is to create change on the ground – change in the way business is done – is older than Maimonides (though his ladder elevated this idea to the peak of the charitable giving pile). Yes, it will take longer as you note, but it builds change from the inside as people without opportunities learn how to exploit them when available. This model is a gift to communities, organizations, individuals when societal conditions are otherwise harsh.

    VisionSpring sounds like it can really spread the understanding of how to effect permanent change…

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