One of the key differences between a social venture and a traditional charity is that by definition, a social venture takes a commercial approach to solving a social problem. It sells a product or service to customers, putting the profits back towards addressing whatever issue it has chosen to pursue. At the same time, it’s not always easy to make doing social good a commercially viable prospect. In fact, one of the difficulties of marketing for social ventures is that they are sometimes seen to be relying on social need to sell unrelated products.
The Toms model is that for every pair of shoes you buy, Toms will give a pair shoes to ‘a child in need.’ This model has certainly proved very effective on its own terms, as Herrera explains: “Since its founding in 2006, Toms has given more than 2 million pairs of shoes to children living in poverty in more than 51 countries.”
Herrara’s objection to the Toms model is that: “Rather than solve the root cause of why children don’t have shoes, Toms has created a business model that actually needs poor children without shoes in order to sell its shoes. Those children are an essential part of the company’s marketing.”
Clearly no one would disagree that – given a straight choice – it would be better to end global poverty than give poor children shoes. It’s less clear whether that’s a result that Toms, a company that makes shoes, are well placed to deliver.
Herrera argues that: “The root cause of poverty in many developing countries is a lack of access to fair-paying, sustainable employment. Imagine the positive impact Toms could have if it were to use every decision in its supply chain to address the causes of poverty.”
The key difficulty with that suggestion is that while: ‘With every pair of shoes you purchase, Toms will give a pair of new shoes to a child in need’ is a really good sales slogan, it seems unlikely that ‘With every pair of shoes you purchase, we will further increase the developmental impact of our supply chain’ would prove quite as effective.
Herrera is right that giving shoes to poor children is an essential part of Toms’ marketing approach but that interaction between marketing message and social mission is a good thing as long as the ultimate end result is socially useful. And a sustainable business that gives shoes to 2 million children is ultimately more use to those children than a business that seeks to solve poverty through its ethical supply chain, doesn’t sell many shoes and goes bust.
There aren’t very many social ventures where there’s a perfect interaction between the social mission and the commercial USP. In terms of its social business model, The Big Issue is a near-perfect exception that proves the rule: homeless people earn a living selling The Big Issue and The Big Issue sells more copies as a magazine sold by homeless people than it would if it was a newsstand current affairs magazine with a social conscience.
In most cases, there’s a trade-off. The challenge for many social entrepreneurs is to develop businesses that are commercially viable and deliver some social good, even if they don’t solve all the problems in the world.
This blog entry was part of the first Venture Network Newletter.