For-Profits vs. Non-Profits Who will Save the Environment?

The success of our social media campaign and the expansion of the TreeBanking and TreeBanker brand has led to to the inevitable discussion about why we chose to structure ourselves as a For-Profit business as opposed to a Non-Profit.

In the two years it took us to lay the foundation for our business we encountered an interesting pattern. When we attend environmental networking events we would tell people, “We’ve developed a profitable way to replant rainforests.” Of course this piques their interest, and they ask for more, “Starting with deforested land we hire local forestry engineers to plan the project, local workers plant fast growing pioneer trees to create a canopy. As we systematically harvest the pioneer trees we plant native trees under the canopy of the remaining trees, including fruit trees that attract the native birds and other animals thus spreading seeds and adding to the biodiversity. We also offer micro-loans to local entrepreneurs to process the lumber from the sustainably harvested pioneer trees and direct as much of our profits into the local communities as possible in order to improve the living conditions. Depending in their level of interest in the details I can go on and on about the good our business model creates in the world.

“We’re a socially conscious business dedicated to replanting millions of acres of Rainforests, removing carbon from the atmosphere, creating jobs in developing countries and restoring habitat for endangered species.”

This discussion usually leads to an excited expression of wonder, “Is anyone else doing this?” they ask, “Not that I know of.” I reply.

“it’s amazing… It’s beautiful… Thank you for doing so much good for so many” are typical replies.

Then the offhand question, that they think they know the answer to, slips out, “So you’re a 501(c)(3) right?

“No… We’re structured as a for-profit business.”

Depending on the audience I get one of two responses;

1)They shudder visibly, glaze over and walk away disgusted.

2)They ask, “With all that profit going to social programs is there anything left over for the investors”

Either the conversation stops cold or the story becomes more fascinating.

“Yes, There’s plenty of profit for investors and social programs.”

The contrast in reactions apparently comes from the the idea that in some people’s minds — For-Profit = Bad… Non-Profit = Good. No grey area, no further discussion necessary.

Many people aren’t familiar with the concept of Social Entrepreneurship or Social Enterprise. These are social mission driven organizations which trade in goods or services for a social purpose. Their aim to accomplish targets that are social and environmental as well as financial is often referred to as having a triple bottom line. Social enterprises are profit-making businesses set up to tackle a social or environmental need. They often use blended value business models that combine a revenue-generating business with a social-value-generating structure or component. Many commercial businesses would consider themselves to have social objectives, but social enterprises are distinctive because their social or environmental purpose is central to what they do.

Rather than maximizing shareholder value, their main aim is to generate profit to further their social and environmental goals. Therefore some commentators describe them as ‘not-for-profit’ as their profits are not (at least primarily) distributed to financial investors. Others dislike the term as it suggests they have an unbusinesslike attitude. An ingenious solution to this quandary is to call them for ‘more-than-profit’

The truth is that greed based capitalism is directly responsible for the majority of the financial and environmental problems our planet is currently facing. I’ll debate that openly.

Another truth however is that saving the rainforests of the planet and eliminating hunger in developing countries with $10 donations hasn’t worked either.

As our society starts to pick up the pieces of a failed financial experiment a new question is beginning to ring like music in the ears of people who love the earth,

“Is it Sustainable?”

I look at every line of my business plan and ask myself that. If it is I ask another question:

“Is it Scalable?”

If it works on one acre will it work on 1 million? If it works in one community will it work in one thousand communities?

At the recent G20 meeting in London Prince Charles announced his plan to protect rainforests by financing the protection of forests with funds raised through the issue of bonds. Bonds that investors buy and whose return on investment is generated by the carbon that the avoided deforestation pays for.

Now that scientists are gaining a better understanding of how forests store carbon, this new trillion $$$ market for carbon may be the forests best chance for survival. We have finally reached a point where the forests of the world are worth more standing than cut into lumber.

Is Prince Charles bad because he realizes that the best way to protect the rainforests of the planet is to attach a profitable business model to it to entice investors?

Is the average citizen bad because they have to decide between investing in their families financial well being or donating to a charity?

There are a lot of new companies opening their doors in the “New Green Economy.” Are they all good? Probably not. Are they all bad because they structure their business to make money? Definitely not !!!

In my opinion the old economy failed because we let it fail. We let greedy people build a house of cards while we were busy living the American dream. Most of trusted the decision makers blindly. Never questioning that they knew what they were doing. Now we know how wrong we were to give them so much freedom with our money.

In many respects we’re starting fresh. New ideas will replace old failed ideas. Trust will have to be earned.

The benefit we have this time is the internet and social media. We must insist on transparency in all business transactions. We will band together to monitor businesses and vote with our dollars. The crowd will decide who really has the good of the planet and his fellow man at heart.

Like the old saying goes, ‘Actions speak louder than words.’