Doing good while doing well
Social entrepreneurs ask, ‘How can we help?’
By Jud Branam
The Ann Arbor area’s healthy appetite for social causes is nothing new, dating back to the storied 1960s and beyond. And from cameras to computers to polio vaccines, the area’s legacy as a hotbed of business creation and innovation is also solid.
Now, the two trend lines are merging in a mix known as social business, which weighs both business fundamentals and social concerns from the inside out.
Social businesses take many forms, from fair-trade shops offering the wares of village crafters half a world away, to the deli that makes Ann Arbor’s best-known sandwiches. Social enterprises can be for-profit or nonprofit, but they need to support themselves financially and build positive social change into their key results. While social business owners span the age spectrum, the phenomenon is in many ways suited to the social consciousness of the millennial generation, observers say.
“Social entrepreneurship is probably the area that’s growing the most in our offering,“ said Glenn Bugala, head of marketing at the University of Michigan’s Center for Social Impact. “I really admire this generation. They have a conscience and they have a heart. They want business to do more than pay for a McMansion. They want to make a difference in the world.”
Nationally, there is no shortage of examples of good social citizenship supporting better business results. TOMS Shoes, for example, provides a pair of shoes to a needy child for each pair they sell, and the company likewise contributes to vision care in a developing country every time it sells a pair of glasses in a developed country.
“There are a lot of challenges to having a business with different bottom lines,” said Paul Hickman, owner of Urban Ashes in Ann Arbor, which makes frames and other wood products from “upcycled” and reclaimed hardwoods. “You have a lot of upfront costs that Americans don’t generally like to pay for up front. It’s important to have a good story behind it — it needs to mean something.”
A pair of stores with great stories are Ten Thousand Villages of Huron Valley and Himalayan Bazaar, both fair-trade shops on South Main Street in downtown Ann Arbor. Villages is one of the top-performing locations in a chain of 200 stores providing fair-trade rates to vendors of gifts and crafts from around the world. Himalayan Bazaar was launched by Ann Arborite Heather O’Neal after she had established a specialty travel agency organizing trips to the Himalayas. The store merges fair-trade retailing with education and cultural outreach.
Along with those retailers, Small Gyfts is an app-based online service in Ypsilanti that uses charitable contributions to entice shoppers to patronize participating small businesses.
Businesses that display environmental, local-sourcing and employee quality-of-life considerations are legion in the Ann Arbor area, but it’s a fine line between offering incentives to compete in the labor market and building a business with social values from the inside out. Here are a few that fit the bill.
Classroom to world
Each year, U-M’s Ross School of Business offers the Michigan Business Challenge to its students. It’s a business plan competition offering “Shark Tank” style reviews from entrepreneurs and cash prizes. Part of that program is the Social Impact Challenge, focused on social entrepreneurship that addresses specific social issues via a self-sustaining business.
Last year’s winner, Ross undergraduate senior Eric Katz, created more than a plan — he created a viable social business, Kulisha, with global reach.
Aquaculture is growing rapidly in Kenya and worldwide, but the protein source for fish feed — forage fish such as sardines — is not sustainable and harvesting it causes environmental damage. In its place, Kulisha aims to create massive composting operations for food waste using a native fly efficient at creating high-protein larvae. Those larvae can then be used as a protein base for fish food and other animal feed.
Katz created a team with students from Brown University, UCLA and the University of Nairobi. He credits the challenge — and the $15,000 they received for winning it — with helping move the ambitious project closer to reality.
“It really launched us from a cool idea to something that could make a huge difference and be sustainable, if we took a more businesslike approach to it,” he said. “Business is a tool that can be leveraged to solve bigger issues.”
Katz said he was drawn to the larvae-as-feed idea because it would scale in financial success and social benefit without requiring compromises or trade-offs. “I never found anything else where the more money we make, at the same time the impact is spread farther. It’s a balance of sustainability and success.”
Rishi Moudgil, managing director of the Center for Social Impact, called Katz “one of our great examples of students coalescing around an idea that is clearly market-driven but also will have an impact for people out in the world. You don’t have a lot of people like Eric who can take an idea, assemble a team and start an international business while they’re students.”
Other business ideas are playing out closer to Ann Arbor, such as former U-M basketball player David Merritt’s Merit Goodness, a clothing design company that donates 20 percent of its proceeds to a foundation dedicated to keeping underserved Detroit-area youths in school and headed for college.
“We have always had a really big passion for young people,” Merritt told a Big Ten Network interviewer. He said his interest in helping came from “growing up in Detroit and just seeing how blessed and fortunate I was, with parents that taught me values.”
Between 25 and 35 percent of incoming Ross students list social impact as a top priority in their career plans, Moudgil said. Likewise, firms looking to hire Ross grads are more focused on social impact and community involvement than in years past, simply because they know the issues are important to the job candidates, Moudgil says.
“There’s no question (social entrepreneurship’s) taking off,” said Moudgil, himself a Ross graduate. “Especially in the past five years, we are seeing increasing numbers of students interested in these concepts.”
Community, craft and cause are the three pillars of Cultivate, a comfortable space that offers high-end coffee, 36 craft beers on tap and a user-guided community event space in Ypsilanti. Raised gardening beds and outdoor seating are in the back. The former auto repair shop has been renovated with a focus on sturdy, rough-hewn wood furniture offering maximum seating in an open layout.
“There was a full year of building a community before we opened our doors,” says Bekah Wallace, director of community and connection for Cultivate.
Wallace said she and her husband, Ryan, began to think about coffee and community in 2011, before they bought the old auto shop on New Year’s Day 2015 and opened for business that September.
A key tenet to their sustainability is “do everything with excellence.” While a nonprofit, Cultivate aims to generate enough revenue to pay its expenses and support key causes. And Cultivate resembles for-profit social business in that proceeds are earmarked to support key causes, and the business has pledged to pay taxes on beer and coffee sales to contribute to the coffers of Ypsilanti.
In social business as in so many other fields, there are gradations between a pure approach and any number of hybrids.
“There are a lot of different ways to attack a problem as big as we all know the social need is, in our community and throughout the world,” says Barry McDonald, creator of the Small Gyfts app. “What’s really important is helping underserved communities through the business.”
Cultivate practices open-book accounting to be as transparent as possible. That’s important, Wallace said, since much of the work at Cultivate is carried out by volunteers, and a trusting environment is critical for the business to succeed.
“Our operation does want to tie into the work the community is doing — there’s really a lot happening in Ypsi,” she said.
Likewise, the Cultivate team took a different path with their products. While some craft-beer bars tend to exclude novices and cater to devotees, Cultivate focuses on educating patrons about the beers, how they’re made and what defines them. The team also works to include women in the sometimes guy-centric brew talk.
“We intentionally wanted to go about craft differently — be open and accessible,” Wallace said.
Cause, the third leg of the stool, is that all proceeds and tips go back to hunger-relief programs such as Food Gatherers, Growing Hope, Meals on Wheels and Food 4 Farmers, an international program helping coffee farmers.
“I’m doing the work I’m passionate about and making a living,” Wallace says, “and being excellent allows us to make more change.”
She hopes Cultivate will inspire more social approaches from other employers: “Maybe not everyone will start a 501(c)(3), but people can think about how to give their employees more opportunity to volunteer, or what nonprofit can I adopt in my neighborhood?”
The lesson so far? “It’s really compelling to be part of something that’s about more than your own good,” she says. “In working to change the community, it also changes you.”
What began as a move away from toxic work materials evolved into a multi-layered story of renewal and growth for Paul Hickman and his 11-employee team at Urban Ashes.
The company uses reclaimed lumber from demolished houses, streetside trees and other sources to create artistic frames, decorative stands and other items. And its workforce is made up of ex-felons and marginalized youths, many of whom have never had a job before.
After selling the family outdoor advertising business he’d grown up in, Hickman sought a new business in 2008 — one that didn’t include constant exposure to vinyl sheeting and other noxious materials. So, along with natural hardwoods, his company uses petroleum-free finishes to be “as socially and environmentally responsible as possible.”
The business model and source of wood has also evolved. Named initially for reclaiming timber lost to the emerald ash borer — a beetle that destroyed millions of ash trees in 27 states, after being first discovered in the U.S. in southeast Michigan in 2002 — the company has moved out of bulk wood and strictly into finished wood products. And it has moved into producing for larger distributors and chains rather than catering exclusively to small independent shops.
Urban Ashes products are sold in 250 stores across 43 states, Hickman said, and is growing steadily. To handle new opportunities, Urban Ashes recently moved into larger space in a vacant Johnson Controls factory outside Saline. Major clients include the Frank Lloyd Wright Foundation and Holstee, a company that sells inspirational posters and artwork.
“We’ve evolved out of being a picture frame company to a company with a story people like,” Hickman said. “Everything we do is as socially and environmentally responsible as possible.”
Men who were caught up in the drug trade and worse in their youth now work on routers and sanders, constructing display-quality woodwork. Hickman says they’ve proven to be reliable employees, with tenured staffers mentoring newer arrivals.
“Our clients love the product and the back story,” said Lexington, Ky., gallery owner Letha Drury. “We never tire of telling about the wonderful job that Urban Ashes does in repurposing wood and reclaiming lives.”
“I didn’t even know what a social enterprise was when I started this,” Hickman said. “I started the company for the same reasons anybody would start a social enterprise, but I didn’t know what the name was.”
When in doubt, give it out
For Ari Weinzweig, the philosophy of the Zingerman’s Community of Businesses has always been there, but spelling it out makes it clear and replicable.
“Those who give more do better, that’s what we believe,” said Weinzweig, co-founder of Zingerman’s and author of a series of philosophical business books that touch on the company’s beliefs and practices. That means that even though he’s at the helm of a $60 million business and some of that revenue comes from management consulting and leadership, Weinzweig remains free with his time and expertise.
“When in doubt, I usually give it out,” he said.
For Weinzweig, social elements of the business empire grown from the city’s most famous deli go far beyond making a contribution or supporting a cause. Or even creating the area’s leading food nonprofit, Food Gatherers.
In his new book, Volume 4 of “Zingerman’s Guide to Good Leading,” Weinzweig devotes a chapter to the importance of a spirit of generosity in growing a successful business, workforce and life.
The chapter begins by offering an alternative reading of Charles Darwin’s evolutionary lessons, compliments of anarchist Peter Kropotkin’s 1902 book “Mutual Aid.” In it, he argued that survival of species wasn’t based on the most effective competitors, but the best collaborators.
Like the Siberian wildlife studied by Kropotkin in developing his theories, Weinzweig compares a workplace to an ecosystem.
“The big picture is, we are part of an ecosystem, and you can’t be healthy in an unhealthy ecosystem for any length of time,” he said. “It’s reasonable and healthy to help those who have less.”
Zingerman’s growth into a web of mutually supporting businesses all based in Ann Arbor did not happen by accident. Founders Weinzweig and Paul Saginaw wanted to grow the business, but keep it unique, so franchising was out. They wanted to create more leaders and more opportunity, so key players in each business expansion became equity partners. And they wanted to fuel the local economy by adding jobs; they now employ about 700 local people.
“I talk about a self-fulfilling belief cycle,” Weinzweig said. “Your beliefs and expectations drive your actions, which then reinforce your beliefs. If you flip the belief (that business is just competition) and believe the more generous we are, the better we do, that reinforces itself. If you hold positive beliefs about humankind and the world, it makes the world a more positive place.”
Customers of Zingerman’s know the company isn’t shy about charging full prices for top quality, but they may not know the lengths the company’s leadership take to ensure that workers have a voice in the company or that 10 percent of the company’s profits go to charities.
“The money is one piece of it, but there’s a lot more to it than just money,” Weinzweig said, citing resource sharing, searching for win-win solutions and giving second chances liberally as other keys.
Weinzweig said the tenets of Zingerman’s leadership seem to be growing and becoming more common.
“I think that in the world we circulate in (in Ann Arbor), there’s a lot of that happening. If you read the news, some people aren’t going in that direction, but I choose to pay attention to the people who are.”