What does it mean to live sustainably, particularly in regards to stewardship of land? 2012 RSF Seed Fund Grantee stone circles has made this question central to its work. stone circles, located in the small town of Mebane, NC, has a mission to strengthen and sustain people committed to transformation and justice, and its mission comes alive through spiritual practice and principles, a sustainable relationship with the land, radical hospitality, and strategic collaboration.
Photo courtesy: stone circles
stone circles was founded in 1995 and has continually been at the forefront of the national movement to transform social change work by creating strong and explicit links between individual and social transformation. It does so by working at the local, statewide, and national level and provides trainings, workshops and retreats that offer transformative experiences that link commitment to sustainability and practice with frameworks for strategic action.
Since 2008, stone circles has been working to create a more equitable and just food system in central North Carolina. In 2011 the organization began researching ways to directly support local sustainable agriculture. One major discovery was the barriers that young adults of color face when trying to enter the farming profession. In addition to training and mentoring, farmers of color oftentimes lack the access to the resources and the decision-making groups that are fueling the growing movement around local food sustainability. The RSF Seed Fund grant is specifically intended to support a 10-day residential training program for young farmers of color at The Stone House, stone circles’ 70-acre rural retreat and training center. The program will include practical farm skills training in organic agriculture practices, food systems education, and personal practices for self-renewal that focus on the experience of deeply resting and replenishing the body and spirit.
Photo courtesy: stone circles
In preparation for the upcoming training, stone circles has put on a number of food justice workshops. According to evaluation summaries, beyond increasing their knowledge of food justice, participants also reported a deepened ability to relate across lines of difference. One of the highlights for many people was the opportunity to share personal stories of race, ethnicity, and class backgrounds, as it connected them to each other and to the larger framework being presented.
To learn more about the RSF Seed Fund and how you can help support new and inspirational projects like this one, click here.
Catherine Covington is Senior Program Associate, Philanthropic Services at RSF Social Finance.
This is the first post in a series by Morgan Simon on the trends, challenges and opportunities of impact investment, focusing on an exploration of the mechanisms which allow affected communities to lead and shape investments.
The concept of impact investment that has the explicit purpose of supporting economic and community development is receiving a growing amount of attention from an increasingly diverse set of financial players. This emerging trend is one of the most exciting, and potentially problematic, trends I’ve seen over the last decade. As with any new field, impact investing raises consequential questions and issues with the answers and intended results remaining up for grabs. Let’s consider the following questions to start:
1. How is impact being defined, and by whom?
2. How are strategic opportunities being identified and defined, and by whom? How will impact capital be deployed, with what objectives, and toward what ends?
3. Under what conditions shall profits be made from impact investment? Who should govern the agreements about use and distribution of the profits?
I am concerned that in a drive for global scale in impact investment, we will lose the voices that should matter the most—the billions of people who will be affected by social enterprises funded by our investments. I am advocating for the establishment of effective mechanisms to empower “beneficiaries” to be actively involved in the planning, execution, governance, and ownership of enterprises, and in the flows of capital connected with them. This is a topic we recently covered in a panel at SoCap called “Creative Financing for Community Wealth,” the main points of which I’d love to share for you in this post.
Current problematic trends in impact investment
There are several dynamics at play in the current impact investment market:
Investors and entrepreneurs profit at the expense of communities.
The goal of impact investment for many is to have a social impact while being able to make the same kind of investment returns that conventional markets have provided. If that remains the case, and if the ownership of social enterprises remains limited to the privileged, then it is difficult to imagine that impact investments will ultimately benefit communities, or facilitate any sort of resource transfer from the global north to the global south (or in the US context, from the rich to poor). If ownership structures are not addressed, then by definition, these investments must then be extracting value, thus repeating the cycle of exploitation that we have seen under so many different names over the decades. This is particularly apparent in the context of projects that see poor communities singularly as consumers rather than as participants in all aspects of the economy. There is an implicit, yet often unacknowledged, tension in impact investment between how producers are paid, how steeply consumers pay for products, and how much entrepreneurs and investors can make or expect to make over time.
Impact is being defined by investors and entrepreneurs instead of beneficiaries.
Some of the large financial institutions jumping on the impact bandwagon have made public statements defining impact as simply any investment made in a developing country. The many communities who have suffered from natural resource extraction, displacement and poor labor conditions know this is not the case, but they are not being consulted in the process of defining goals for impact investment projects. Similarly, well-meaning entrepreneurs tend to define community involvement as product research, such as holding marketing-based focus groups, rather than creating infrastructure for long-term engagement and community leadership development. This is largely due to the fact that impact investment has evolved as a “top down” industry—with investors setting the criteria for impact and returns with the consequences filtered down from social entrepreneurs to communities. In this approach there is no room for letting community needs guide the field.
There is a major “capital gap” for community-run projects.
Although many investment projects are executed in the global south, they are generally run by the privileged—these entrepreneurs and their investors are the ones who will receive the $183-$667 billion in profit that J.P. Morgan projects. It is, at this point, exceptionally rare to impossible for communities, organizations or individuals from the global south to receive access to funds if they do not speak English and have advanced degrees. Communities are simply the resource base for projects; or, moreover, their involvement is generally limited to the consumption of specific products like solar lanterns.
Capacity-building is lacking.
Capacity building programs for social entrepreneurs to receive training and access to funding are plentiful, but similarly limited to a global elite. Further, there has been no effort to engage these programs in a broader conversation about the structuring of opportunities that would create access for people without a university education. Additionally, there is a need to explore methodologies that will respect and fit community leadership models already in place, rather than asking communities more accustomed to these collective structures to adopt Western business models. Finally, there is an urgent need for capacity-building programs working in developed countries to integrate a broader understanding of community organizing in their work in order to balance out the traditional business education social entrepreneurs tend to receive with a deep understanding of what community engagement looks like. The social entrepreneur indeed has a crucial role to play, but ideally would do more leading from behind than carrying the torch his or herself.
Signs of hope—innovative impact investment that ensures assets stay in communities.
At the same time that I see the potential greenwashing in the impact investment industry, I am deeply encouraged by the emerging group of entrepreneurs and investors that is finding ways of placing community needs first. Reflecting broader trends in the establishment of the solidarity economy globally, I see the emergence of what I call transformative finance, or what Marjorie Kelly refers to as stakeholder finance in her recent (and highly recommended) book, Owning our Future: The Emerging Ownership Revolution.
Transformative Finance provides resources to projects that:
are primarily designed, managed and owned by those affected by these projects
build local assets that support long-term sustainable development on the community’s own terms
are designed to add, rather than extract value from communities; and
balance risk and return between investors, entrepreneurs and communities.
Transformative finance projects are thoughtful about how to engage communities not just as producers or consumers, but as leaders and change agents. They create explicit ownership structures that reflect this appreciation and intention. In their structural makeup, they create mechanisms of direct accountability to the communities they serve. They also ensure that productive assets remain community-owned and that the use of those assets is determined by the community for continued community development. These enterprises are still often led by dynamic social entrepreneurs, but in these cases they see their role as community organizers rather than top-down leaders.
One such leader is Brendan Martin, who shared the stage with me at SoCap. He is the founder of The Working World, an organization based in Argentina, Nicaragua, and New York. The Working World provides innovative financing for worker-owned co-ops based on a co-determined business plan and revenue share that ensures value created stays primarily within the community. Over the past five years they have recycled $3M over 80 times into 600 investments, with a 98% repayment rate. Recently, The Working World raised capital from a number of investors (including a Toniic member) to finance a sustainable green windows cooperative in Chicago. More information can be found here: http://www.theworkingworld.org/us/
I look forward to sharing with you a number of models on community-centered financing models from within and beyond the Toniic network through the next few posts, and further exploring some of the questions and challenges articulated above.
What are your views on these topics? How do you achieve community accountability in your investment activity? Feel free to post any comments here, or to reach me at morgan.simon@toniic.com.
Morgan Simon is the co-founder and CEO of Toniic, a global network of early-stage social investors. Toniic members share deal flow, due diligence and monitoring on global investments in this action-oriented community looking to move $100 million into global social enterprise. She is also the co-founder of Innovacion Investments, the first community development venture capital fund in Texas, and was the Founding Executive Director of the Responsible Endowments Coalition, leveraging the $400B managed by US colleges and universities. In all her work, she emphasizes community empowerment, leadership and ownership.
RSF Social Finance is a proud sponsor and member of Toniic.
Note: The opinions expressed in this article are the authors alone and do not claim to represent the opinions of Toniic at large or any individual Toniic member.
Bikes Not Bombs uses the bicycle as a powerful vehicle and tool for social change. Each year, Bikes Not Bombs (BNB) takes in 5-6,000 donated bicycles and gives them new life through one of their many youth programs, international development projects, and retail shop/vocational training center.
A 27 year old community organization in Jamaica Plain, MA, BNB received a RSF Seed Fund grant in spring of this year to support Chain Reaction, its youth-created and run mobile bicycle shop and mechanics training center. BNB sought funding to cover the cost of parts needed to repair and refurbish donated bicycles in order to provide transportation to low-income communities as well as keep those bicycles out of the solid waste stream. Chain Reaction fixes and re-sells bikes priced between $50 and $75 and offers free bike mechanics lessons. Realizing that in low income neighborhoods people had less accessibility to bike supplies and repair shops, a key component of Chain Reaction is the capability to travel where people need them most.
Stephane Alexandre, one of BNB’s Youth Employees explained her participation in the program: “giving back feels good because I am actively making a difference in one person’s life. If I can just help one person see, I mean really understand, the possibilities that a simple bicycle can bring, then I would have done my job that day.”
Through Chain Reaction, BNB seeks to reinforce academic learning, build critical thinking skills, provide unemployment training, and cultivate leadership while solidifying a lifelong commitment to environmental and social justice.
You’ve probably heard of the “new economy,” which often refers to social media, sharing-based businesses, and sometimes socially responsible businesses. RSF Social Finance is working to build the next economy: one that’s rooted in community, considers everyone’s needs, and restores trust in financial relationships through transactions that are direct, transparent and personal.
Through our innovative investing, lending, and giving programs, RSF provides critical access to capital for path-breaking social enterprises working in Food & Agriculture, Education & the Arts, and Ecological Stewardship. We collaborate with like-minded organizations to create a financial infrastructure that will support the next economy. And we’ve democratized impact investing with our Social Investment Fund (SIF), which allows anyone with a $1,000 minimum investment to participate in building the next economy.
This is incredibly ambitious. We’re asking you to help spread the word as we promote our “building the next economy” stories on our website, Facebook, Twitter (#nexteconomy) and elsewhere. We’re focusing on these points:
RSF provides critical access to capital for path-breaking social enterprises.
RSF collaborates with like-minded organizations to create a financial infrastructure for the next economy.
RSF has democratized impact investing with the Social Investment Fund, which allows anyone with a $1,000 minimum investment to participate in building the next economy. More information on opening an account: here
Read our latest borrower stories on the Reimagine Money Blog:
Fire is a defining element for Pine Hill Waldorf School—as both metaphor and history. In a sense that’s true for RSF as well.
The old New Hampshire farmhouse the school had occupied since shortly after its founding in 1972 burned to the ground in 1983. Determined to rebuild, the school formed a fundraising team. Among those they approached was Siegfried Finser, who at that moment was reviving the Rudolf Steiner Foundation (now RSF Social Finance) as a social investment vehicle.
“Our situation ignited the rebirth of RSF,” says Arthur Auer, then a Pine Hill teacher and now director of the Antioch Waldorf Teacher Training program, located during the summer on Pine Hill grounds. “Forces and people coalesced and created a comprehensive school master plan and one of the most striking examples of Waldorf school architecture in the U.S.”
INSPIRATION
“I saw an education for children where their whole beings were tended to and cared for—bodies, minds, spirits—and people coming together who all wanted that,” recalls Sherry Jennings, who has been a Pine Hill teacher from the beginning. “I was very inspired to tend that flame.”
She notes that Pine Hill was at the forefront of a surge of interest in Waldorf schools, which numbered only about a dozen at the time, most of them started in the 1940s. “Parents were looking for a new kind of school community, where they could be part of it and have connections with other adults who shared similar values.”
A similar “hunger” arising again today gives the school fresh inspiration, she says. “We’re coming full circle, in a way. I see that parents are really longing for deep connections.”
INNOVATION
That intense parent connection to the school was an important aspect of an innovative $1.1 million rebuilding package that included $500,000 in pledge loans and loan guarantees through the newly minted RSF and an innovative parent bond program. To spread costs, parents of new students were required to purchase a $1,000 bond that could be redeemed upon graduation; at that point many opted to donate their bond to the school, producing an ongoing asset-building stream.
With Pine Hill as a model, RSF has continued to support Waldorf schools, not only by providing capital but also by helping them to build communities willing to commit financial and other resources to a project’s success.
At Pine Hill, the school community also was integral to designing the new building. The architect interviewed teachers, friends, parents and children, and the children drew pictures of what they thought the building should look like. The result was a building that appears to emerge from the land itself.
“We wanted the building to arise out of a sense of place in the forest, on that granite hilltop,” Auer says, “and we wanted it to be not just environmentally friendly but also to fit into the environment. Its main gesture is a big heart of an auditorium in the center and two classroom wings embracing the children as they stream into the building.”
The auditorium was completed several years later in a second building phase, and unbelievably, a second fire struck as the last coat of finish on the stage was drying. It destroyed the auditorium and damaged both classroom wings. Insurance covered the cost of rebuilding, but “that fire was extremely painful,” says Auer. “That building was built with love by a whole team of parents.”
Now Pine Hill is building again, and again with help from RSF. The Children’s Village, an early childhood education center that fulfills the school’s master plan, is taking shape next to a biodynamic community farm. “We’re really excited about The Children’s Village,” says Jennings. “This is a space where we can protect and honor the needs of the really young child. We’re also doing publicly accessible parent education, which is a way to contribute to the whole community.”
Pine Hill child care center
IMPACT
“Without RSF we would not have been able to develop as full a master plan and model school,” says Auer, adding that the impact is not just local: The Children’s Village speaks to other Waldorf schools about the value of establishing their own early childhood education centers.
“One could become very anxious about taking such a risk in a recession,” Auer says. “But I think The Children’s Village is the right decision, to have the courage to go outward and serve the community. Others might say this is not the time to do it, but we are not doubting. Having gone through two fires has proven that Pine Hill has a strong body of life forces. I always have had confidence that those forces will prevail and bring us through to another new phase.”
VITALS
Organization name Pine Hill Waldorf School Impact area Education & the Arts RSF relationship Loan recipient, RSF investor HQ Wilton, New Hampshire Annual budget About $2 million Employees 20+ Students 180 children, 125 teacher trainees (summer campus) Communities served Local area and Waldorf education nationally
Seventeen years ago, Indigenous co-founders Scott Leonard and Matt Reynolds were picking burs out of hand-knit South American sweaters before delivering them to The Nature Company. Today, their company produces a full line of premium fashion knits sold online and at 500 independent stores, as well as clothing for major brands and private labels hanging on racks at the likes of Bloomingdales, Neiman Marcus, and Nordstrom.
That might not sound like lightning progress, but consider this: Indigenous works with a supply chain of more than 1,500 artisans from small knitting groups around the world; pays fair living wages; and uses organically grown fibers, low-impact dyes, and handmade fabrics. They pioneered Fair Trade certification for apparel and developed the Fair Trace Tool™, which lets consumers see their clothing’s supply chain. And they’ve done all this in an industry where labor conditions cause ongoing protests and “organic” often translates to “unfashionable” or “unaffordable.” Viewed in that light, Indigenous looks like a revolution.
INSPIRATION
The spark was Leonard’s travels in Ecuador. “I had seen firsthand that women were not necessarily being honored for their weaving and knitting skills,” says the Indigenous CEO. “They weren’t being paid the wages that they could have been, or they didn’t have the opportunity to apply those skills to the marketplace.
“We really wanted to make a difference in the world with women in economically marginalized communities,” Leonard says. “We thought that bringing in fair wages and technical assistance, and marrying environmentally friendly fibers with more sophisticated designs, was a way to do that.”
INNOVATION
Indigenous had two major problems: quality control and financing. “How do you elevate a cottage industry’s quality control? When you’re dealing with 1,500 artisans and they’re in pockets of three to 30, how do you aggregate their work and have continuity and consistency that’s truly premium? There were a lot of quality-control glitches, from fibers to knitting, to consistency of sizing and fit, to timing of delivery,” says Leonard, a serial entrepreneur whose past businesses include an environmentally friendly surf shop.
Indigenous President Reynolds, who is a store buyer and has a background in developmental economics, adds that systems integration was a major issue. “We’re dealing with a unique production model—it’s diversified, it’s spread out—and we had to create a new systems model,” he says. “That took a lot of time and collaboration and money.”
Financing was a huge obstacle. “It’s not just that we were a start-up, visionary company trying to do something no one else had done,” Leonard says. “But once we collect an order and give it to an artisan, how does that artisan pay for the fibers, and if they’re the lead, how do they pay the other people in the group? They don’t want terms. They do the work and they want to be paid.”
Looking for a better way to finance its supply chain, Indigenous began engaging with RSF around 2001. “Conventional banking was just not going to work. That our balance sheet was not looking so great was a difficult hurdle,” says Leonard. “RSF provided working capital, helped us to formalize our financial strategies, and helped us attract other socially minded investors.”
RSF encouraged Indigenous to include a section on social returns in the business plan for its Series A funding round. That ended up being the aspect some investors were most impressed with, Reynolds says, adding, “RSF has been a pioneer and supportive spirit in trying to push the social and environmental return aspect into financials and into evaluating the success of a business.”
In 2010, RSF provided Indigenous with a PRI Fund loan to assist in creating standards and procedures for the Fair Trade apparel pilot program and to develop the Fair Trace Tool, which allows shoppers to scan a hang tag QR code to find out where the garment originated, who made it, how the fibers were raised, and what the social impact was.
“We hope that by educating people to actually look into things, they’ll see how clothing can be made responsibly,” Reynolds says.
IMPACT
Indigenous has worked with its longtime suppliers in South America to obtain Fair Trade certification, and the company was the only clothing manufacturer certified in South America as of mid-2012. On top of that, the Fair Trace tool is a breakthrough that could change how organizations verify supply chains and microfinance results, Leonard believes.
Indigenous now runs at a profit and has invested in RSF’s Social Investment Fund as a way to help other social enterprises grow (and earn a competitive return, Reynolds points out). In addition, Leonard and Reynolds have created a donor-advised fund with RSF to support their artisans’ communities through grants.
“We are proud to say that we are now hanging next to mainstream, high-end fashion design brands in stores across the country, and we were able to do that without sacrificing values,” Reynolds says. “The other thing is that even though we still are a small business, we’ve put over $20 million into the artisan and organic supply chain, and that has really affected lives.”
VITALS
Company name INDIGENOUS Impact area Food and agriculture RSF relationship Former working capital borrower, current PRI Fund loan recipient, Social Investment Fund investor, donor-advised fund advisor HQ Santa Rosa, CA Revenue About $6 million annually Employees 15 Communities served Weavers and knitters in South America and elsewhere; U.S. consumers
Jay Coen Gilbert and Bart Houlahan are a business success story. They were part of a team that created the basketball footwear and apparel maker AND 1, built it into a $250 million company, and sold it profitably. One of the lessons they learned: the definition of success needs to change.
“It became clear to me that business, if harnessed appropriately, could create tremendous positive change. But the current legal environment in the U.S. doesn’t support that work,” says Houlahan. “There needed to be a way for a company to scale, raise capital, have a liquidity event, and remain true to a social and environmental mission.”
The solution: Houlahan and Gilbert, with investor Andrew Kassoy, created B Lab, a nonprofit that’s building a community of Certified B Corporations, which meet rigorous governance, social, and environmental performance standards. At the same time, B Lab is driving the state-by-state movement to pass benefit corporation legislation that allows such businesses to protect their mission as they grow.
INSPIRATION
Houlahan and Gilbert ran AND 1 as the kind of business they wanted to work for, treating employees and suppliers like family and minimizing the company’s environmental impact. But as the company grew, staying true to those values became more challenging. As a result, the commitment to employees, the environment, and community lagged. “Not because investors weren’t supportive; it was just that we were acutely aware of our fiduciary duty to maximize shareholder value,” Houlahan says.
Gilbert, Houlahan, and Kassoy believed that others could succeed where AND 1 hadn’t—with the right cultural and legal support. B Lab, founded in 2006, provides that support by promoting the B Corporation certification as a way to differentiate good companies from companies that simply have good marketing, spreading the use of its Global Impact Investing Ratings System (GIIRS) among institutional investors, and establishing the benefit corporation—a legal form that bakes high standards of purpose, accountability, and transparency into a corporate charter—as an option in all 50 states.
“We are not a change agent—our change agent is the entrepreneur,” Houlahan says. “We exist so they can scale, they can affect change, and they can solve society’s greatest challenges.”
INNOVATION
Houlahan is quick to note that B Lab stands on the shoulders of giants. The B Impact Rating Assessment, used to certify B Corporations and as a basis for GIIRS, was built on the work of the Global Reporting Initiative (GRI) and the thinking of a host of sustainable business pioneers; ideas about new corporate forms have been developing for decades.
B Lab’s great step forward was to build the infrastructure for a movement that could make those ideas reality. Prior to the B Corporation, Houlahan says, “all the certifications were focused on a particular product or practice; the B Corporation certification was the first to focus on the whole business.”
And by certifying B Corps, B Lab created a community that could advocate for the legal changes needed. Policy makers work for constituencies, not ideas, Houlahan points out, and B Corps form the constituency for benefit corporation legislation. “Without the businesses that would use legislation for a new corporate form, earlier initiatives didn’t get much traction,” he says.
B Corp certification also represents a shift in thinking for corporate social responsibility, from focusing on doing no harm to focusing on doing good. “Our assessment only provides points for positive impact. We don’t measure whether you’re doing no harm,” says Houlahan. “We assess whether you are improving society and the environment.”
RSF Social Finance played a central role in all these developments and continues to be a core supporter. “RSF has been a pioneer in B Lab’s work from day one,” says Houlahan. In addition to providing a $250,000 loan from the RSF PRI Fund and ongoing fundraising support, “they were on our first board and on our first standards advisory council. They were the first to use the impact rating system to evaluate loan prospects, their RSF Capital Management unit is a Certified B Corporation, they are a pioneer fund for GIIRS, and they are a pioneer investor for GIIRS. They’ve participated in every level of our development.”
IMPACT
B Lab has certified close to 600 B Corporations, provided GIIRS ratings for nearly 300 companies, and signed on 60 GIIRS pioneer investment funds. Eleven states, including California and New York, have enacted benefit corporation legislation. B Lab is working with a group in Chile to pilot expansion throughout South America. And the B Corp brand is gaining power.
“For more than five years, companies joined this community out of an act of leadership,” lending their own brands’ power to build the B Corp brand, Houlahan says. Now the B Corp community is at a tipping point, where the B Corp brand will enhance the value of companies that earn it.
“Our mission from day one has been to harness the power of entrepreneurs to solve social and environmental problems,” Houlahan says. “We want to redefine success in business so that people are competing to be not only the best in the world, but the best for the world.”
VITALS
Company name B Lab Impact area Supporting social enterprise RSF relationship PRI Fund, field-building partner HQ Berwyn, PA Budget $4.5 million in 2012 Employees 29 Community served Mission-based businesses in the U.S. and abroad (pilot program)
When Tatiana Garcia-Granados and her husband, Haile Johnston, moved to North Philadelphia’s Strawberry Mansion neighborhood in 2002, they found themselves in a fresh-food desert.
“Most of our neighbors were getting their food from corner stores. You walk into these stores and there’ll be all these different flavors of potato chips and Twinkies, but no fruits or vegetables,” says Garcia-Granados. The couple started working to bring a farmers market to the neighborhood and discovered a much bigger problem. “It wasn’t just neighborhoods like ours that didn’t have a link to the farmers right around us; it was also hospitals, universities and schools.”
Working with other local farm and food advocates, they created Common Market in 2008 to forge a distribution link between threatened farms and fresh food-deprived urban communities. Today, with a crucial assist from the RSF PRI Fund, Common Market supplies about 200 customers—institutional kitchens, retailers, restaurants and buying clubs—with produce, dairy and meat from about 100 sustainably run regional farms.
INSPIRATION
“Fifty years ago there were deep connections between the farmland right around Philadelphia and city residents,” notes Garcia-Granados. “With the rise of global commodity agriculture, that has changed—we’re more likely to find peaches from California than peaches from New Jersey.”
“When we started planning this, the distribution void was not on people’s radar,” she says. “We got blank looks when we talked about what we were working on. People didn’t realize this was a problem.”
What drove them forward was making the connection between health problems in the city and the loss of farmland. “We were seeing the health disparities that exist in our neighborhood and realizing what a huge role food plays in people’s lives and their ability to pursue opportunity. And every time we went to Lancaster County we would see more farmland being turned into housing developments.”
INNOVATION
Common Market’s key insight—the big step forward in solving the farm-to-city problem—was the value of cultivating institutional customers.
“With the amount of food an institution like a hospital is purchasing, we could have an immediate impact on the farms,” says Garcia-Granados. “We also targeted institutions that serve a cross-section of the population. That allows us to reach people who didn’t already have access to fresh food through farmers’ markets and high-end retail.”
Common Market had ready suppliers and buyers; the big challenge was cash flow—institutions are used to paying in 60-100 days. “But supporting farmers requires paying them quickly, as close to 15 days as possible,” says Garcia-Granados. “As we grew we realized we were facing a huge cash flow gap. That’s where RSF came in.”
The founders made the rounds of commercial banks and state and municipal development lenders, “but no one understood our business model or the sustainable agriculture piece and why what we were doing was meaningful,” says Garcia-Granados. “Common Market is a nonprofit social enterprise—it runs like a business but will invest any profits in expanding access to markets for farmers and to fresh food for urban communities. “The people at RSF were the only ones who understood.”
In 2010 RSF provided a $150,000 credit line (it’s now $350,000) through the RSF PRI Fund, which supports non-profit and for-profit social enterprises addressing key issues in food production, food access, value-added processing, distribution, retail and waste management.
“We had the customers and the infrastructure, but it was that access capital that allowed us to increase our sales and have an impact,” says Garcia-Granados.
IMPACT
Common Market nearly doubled its sales from 2010 to 2011 and its customers include more than 50 public and charter schools in Philadelphia and New Jersey. That’s a key audience given the enterprise’s big goal: changing what people eat and how they get their food.
Achieving that goal will require many more Common Markets, and the enterprise increasingly serves as a model. “Every other week we get a call from an enterprise or development agency,” says Garcia-Granados. “We share our business plan and feasibility study widely and invite people to come see our operation.”
The benefits accrue widely, she says. “For our farmers it’s giving them the ability to differentiate their product and take it out of the global commodity chain. For entrepreneurs, it’s allowing them to serve and sell local produce. For people who wouldn’t otherwise have access to local produce, it’s changing the food they are eating.”
VITALS
Company name Common Market Philadelphia Impact area Food & Agriculture RSF relationship PRI Fund HQ Philadelphia Revenue $1.6 million in 2012 (projected) Employees 12 Community served Delaware Valley (New Jersey, Pennsylvania and Delaware)
“We had this incredible product—yerba mate—that gives you the strength of coffee, the health benefits of green tea and the euphoria of chocolate. We thought if we work with people on forest projects we can make the mate be the driver for reforestation, and inspire other companies to do similar work,” says Guayakí founding partner Chris Mann, describing the genesis of the company’s pioneering “market-driven restoration” business model.
California-based Guayakí sells the stimulating rainforest plant as a loose-leaf tea and in canned and bottled drinks. The company partners with farming communities in South America’s Upper Paraná Atlantic rainforest to produce shade-grown organic yerba mate and to reforest their land with native hardwoods, and it pays a premium to support living wages, healthy working conditions and community development projects.
INSPIRATION
Co-founder Alex Pryor introduced the four other Guayakí founding partners to yerba mate in the 1990s, when he arrived in the California central coast college town of San Luis Obispo from Buenos Aires toting a traditional gourd cup for the hot brew—favored over coffee by a wide margin in several South American countries.
Yerba mate is mostly cultivated on industrial farms in full sun, but it is native to the canopy of the Upper Paraná Atlantic rainforest, which stretches across Argentina, Paraguay and Brazil. When Guayakí’s founders started their business in 1996, they thought they would help preserve the rainforest—one of the world’s most endangered—by giving local communities a way to make a living from it without cutting down trees. A few years in, faced with a map showing 95 percent deforestation since 1900, they realized that preservation was not enough.
“We needed to develop a model for how they could get paid to plant hardwood and nurture it,” Mann says. “We were really surprised there weren’t many people doing restoration. The timber companies were planting monocrops to cut down again. One of the large conservation groups had a project, and there were a few smaller-scale research things, but we didn’t find any market mechanisms.”
INNOVATION
Guayakí’s market-driven restoration model, developed in pursuit of a mission to restore 200,000 acres of the Upper Paraná Atlantic rainforest and create more than 1,000 living-wage jobs by 2020, involves cultivating relationships with indigenous communities that often have had “hellish” experiences with outsiders, Mann says. “It’s little by little, building that trust network and educating the community on what we’re trying to do, and listening and being educated on what’s working for them and what they want to do. It’s a slow process,” he says.
Guayakí made steady progress and by 2008 it was delivering on its mission. Revenue was at about $8 million a year—but the company was losing money. “We’re competing with a lot of brands that are just trying to grow market share as fast as possible, which means paying distributors and giving away tons of product,” says Mann. Guayakí needed more capital to thrive, but the founders wanted to maintain control of their business—and their mission—and banks weren’t lending money to pre-profit companies at the depth of the recession. “We were in the lurch,” Mann says.
RSF Social Finance had just launched its Mezzanine Finance fund to fill precisely this sort of funding gap: growth capital for social impact businesses that don’t want to take on more equity partners and aren’t seeking a quick exit. When RSF stepped up with $500,000, Guayakí was able to roll out its canned beverage line, develop its small-store delivery distribution model and build inventory.
In addition to its financial relationship, Guayakí is engaged with RSF to advance thinking on business structures and practices that respond to community needs and are sustainable in the long term. For example, Mann has participated in RSF meetings that bring together investors and borrowers to discuss and recommend interest rates. The last pricing meeting session was inspiring, he says: “If you create a system that’s not based on every single person having to maximize, there’s room for everyone to do well.”
IMPACT
Guayakí’s moves with the RSF capital infusion paid off, and the company was profitable on $15 million in revenue in 2011. With its strengthened financial position, Guayakí now qualifies for RSF’s Social Enterprise Lending Program and has a $1.9 million line of credit.
The company is about 15 percent of the way toward its 2020 goal, providing about 150 jobs (including 35 U.S. employees) and restoring 30,000 acres of forest. Because of the carbon those new trees capture, purchasing one pound of Guayakí yerba mate tea reduces atmospheric CO2 by 1.26 pounds, according to a third-party life-cycle analysis.
“A core aspect for us is providing a dignified way of life and dignified working conditions” in indigenous communities, says Mann. In the U.S., he adds, “we’re really passionate about the need to create local living economies. There is no business if there is no community.”
VITALS
Company name Guayaki, guayaki.comImpact area Food & Agriculture
RSF relationship Mezzanine Finance (2009), Social Enterprise Lending Program (current)
HQ Sebastopol, CA
Revenue about $15 million (2011)
U.S. employees 35
Communities served U. S., Canada, and south-central America
If you take a long hard look at a landfill you’ll see both tremendous need (where do we continue to put all this waste?) and undertapped opportunity (how can we redesign, reuse and repurpose to avoid the landfill altogether?)
We’ve been exploiting natural resources at an unsustainable level for nearly a century to create material goods for our well-being and pleasure. Over that time we’ve become a consumer society, increasing our demand for goods and pushing the limits of our ecosystem. Products are often manufactured with planned obsolescence and there’s little accountability for disposal. With true costs of manufacturing externalized, it’s easy to keep the cost low and the demand for the latest and greatest high. Not only does the creation of material goods create waste at the end of the product’s life but also throughout the extraction, production, and distribution processes.
In stark contrast to our wastefulness, in nature there is no such thing as waste. Waste is a design inefficiency of human creation. In nature, one organism’s waste is another’s nutrient. It’s a closed-loop self-rejuvenating system. Manufacturing is a linear non-restorative system where raw materials are used to create goods which are eventually disposed of. This linear system isn’t sustainable in the long run for the planet, people or business.
The business case for ecological responsibility surfaced in the 1990s when several thought leaders showcased the cost saving and worker productivity potential. The opportunities for innovation inspired by nature, such as biomimicry, and the possible positive social and environmental impacts were brought to life. Over the last decade several businesses have changed course to address environmental issues, and reimagined the way their organizational processes interact with nature. We also saw the birth of social enterprises, businesses created with the mission to confront the world’s most pressing environmental (and social) issues. The goals of social enterprises are as wide and varied as the problems we face, but many of them have committed themselves to addressing how to deal with the abundance of waste, and in the process, are designing beautiful products, attracting dedicated customers, creating jobs, and reducing ecological impact.
Several RSF borrowers are tackling waste by finding opportunities in recycling or diverting materials from the landfill. Electronic waste is increasingly becoming an environmental offender and only 14% of it is recycled annually. Much is exported to developing countries for processing. RecycleForce provides comprehensive, innovative and responsible recycling services, keeping valuable materials in the U.S. while creating jobs for formerly incarcerated individuals.
Here are other examples: to challenge the more than 18 billion “disposable” diapers that end up in landfills every year, taking up to 500 years for each of them to decompose, gDiapers offers fun and fashionable cotton diaper covers with disposable, biodegradable inserts. New Leaf Paper strives to emulate the cyclical processes of nature by offering 100% recycled products, sourcing Forest Stewardship Council certified materials, and choosing paper mills that incorporate the most sustainable design principles. Inspired by the durability and beauty of glass, IceStone transforms waste glass, of which only 34% is recycled every year, into gorgeous countertop materials.
Opportunities abound for social enterprises interested in confronting our wasteful habits. With nature as a source of inspiration and ideas, we’re sure to see some profound and regenerative business models that will one day make landfill either obsolete or productive. We at RSF look forward to continuing to find and fund the innovative social entrepreneurs leading the way.
Melinda Cheel is Manager, Partnerships and Communications at RSF Social Finance
This article was originally published in the Summer 2012 RSF Quarterly.
Morgan Simon is the co-founder and CEO of 
You’ve probably heard of the “new economy,” which often refers to social media, sharing-based businesses, and sometimes socially responsible businesses. RSF Social Finance is working to build the next economy: one that’s rooted in community, considers everyone’s needs, and restores trust in financial relationships through transactions that are direct, transparent and personal.
By Melinda Cheel
Several RSF borrowers are tackling waste by finding opportunities in recycling or diverting materials from the landfill. Electronic waste is increasingly becoming an environmental offender and only 14% of it is recycled annually. Much is exported to developing countries for processing.