BUILDING THE NEXT ECONOMY

Uncle Matt’s Organic Revolutionizes Florida’s Citrus Groves

July 31, 2014

With its subtropical climate and rich pest population, Florida has been slow to embrace the organic movement: fewer than 8,000 of its 541,328 acres of citrus groves are organic. Matt McLean has made it his mission to change that. As the founder and CEO of Uncle Matt’s Organic—the largest and oldest organic orange juice company in the U.S.—McLean not only sells delicious juices, he’s making it easy for other small Florida citrus growers to transition to organic.

noelle mcleanUncle Matt’s sells a huge quantity of organic orange and apple juices, lemonade and whole fruits to retailers such as Whole Foods and Publix each year. But its most innovative initiative is its agricultural management company. Uncle Matt’s Ag provides “one-stop shopping” for grove owners who want to go organic. The company actively recruits conventional farmers, handles all the paperwork for them throughout the transition and certification process, creates a full farm plan and oversees every aspect of caretaking, from riding the tractor to tamping down the weeds. Uncle Matt’s then markets all the grower’s fruit at top dollar, ensuring that organic farming is economically viable.

It’s a model that—with the help of a credit line from RSF—has fueled both consistent sales growth and positive changes in Florida agriculture.

Inspiration

McLean didn’t set out to be an organic grower. A fourth-generation Florida citrus grower, he grew up working in the groves, and escaped to college as soon as he could to get away from “manual labor in Florida’s summer heat.” After earning a business degree from the University of Florida, he started an import-export company, selling juice to companies in Europe. When one of his clients asked for biologic white grapefruit juice, he consulted his father and grandfather.

His grandfather, who had used organic methods in the past, insisted that “not only could we grow that way, we should be growing that way,” McLean says. “We are too focused on single-factor analysis—if you have a pest, then you’re told to find a pesticide. Instead, we should think holistically: why is that pest attracted and how can we help the trees’ immune systems defend against it through better soil and plant health? This is an organic farmer’s way of thinking.”

UMO

Innovation

McLean started Uncle Matt’s Organic in 1999 with just five acres. As the company grew, it needed more fruit, which meant it also needed more organic farms. But farmers were hesitant, even afraid, to go organic—despite the fact that prices for organic fruit are consistently higher—and McLean knew he had to make the process as easy as possible. Thus Uncle Matt’s Ag was born in 2002.

One of the biggest challenges in persuading grove owners to grow organically was—and is—the threat of citrus greening disease, or Huanglongbing (HLB), a bacterial infection spread by gnat-size psyllids that can wipe out groves. It hit Florida in 2005 and has killed millions of citrus plants in the southeastern U.S. While Uncle Matt’s groves have not fully escaped the disease, several groves have proved 100 percent resistant—an anomaly the University of Florida is studying. Uncle Matt’s Ag is experimenting with nourishing root and soil health to keep disease at bay, and unleashing parasitic wasps into groves to keep the psyllids’ population under control.

With its innovative approaches to grove management and increasing consumer demand for organics, Uncle Matt’s has grown continually. But like many food and beverage companies, Uncle Matt’s faces a cash flow gap between the time when it pays farmers for the harvest and when the juice hits grocery stores and starts generating a profit. By 2011, McLean needed more financing.

The company had a line of credit with a local community bank, “but it was post real-estate bubble in Florida, and the banks were very risk-averse,” he says. So Uncle Matt’s hired McLean’s friend Aubrey Hornsby, a manager of the Conscious Capital Fund, to help it find additional funding. “Aubrey introduced us to RSF in September 2011,” says McLean, “and at that point a lot of things came together.”

Several members of the RSF lending team visited Florida, where they toured the groves, packinghouse and storage facility and closely examined Uncle Matt’s business model. “They understood our business right away,” says McLean, “and they really had a passion for our space and our mission.”

Based on this, RSF provided a $1.2 million line of credit that Uncle Matt’s uses to finance the juice inventory from season to season—and keep growing.

Impact

For the past three years, Uncle Matt’s sales have grown 20 to 30 percent annually. The company has also introduced two new juice blends, orange-mango and orange-tangerine, and has expanded to new retailers including Safeway, Kroger, Fred Meyer and Walmart Neighborhood Markets.

But the greatest proof of success is in the groves: In the last 12 years, Uncle Matt’s has converted more than 1,500 acres in Florida’s Lake, Highlands and Polk counties to organic cultivation.

“I started Uncle Matt’s as a business challenge,” says McLean. “But my grandfather’s passion just kept me thinking, ‘Hey, this is a better way to farm and we need to be a leader.’”

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Hana Health: Connecting the Dots between Local Food and Healthy Lifestyles

March 25, 2014

From Maui’s main population center of Kahului, drive east along the island’s rugged northeastern coastline for about two hours, crossing over 40 one-lane bridges, and you’ll find the remote town of Hana. Its pristine beaches and traditional village culture make Hana one of Hawaii’s most unspoiled gems. But seclusion sometimes brings challenges: like in the mid-1990s, when Hana’s state-run medical center ran out of money and planned to shut down, leaving the community without access to healthcare.

Concerned community members and legislators met that challenge by successfully bringing Hana Health, a private healthcare provider, to the area in 1997. Since then, this non-profit has been the sole provider of family practice medicine, dental care, preventive healthcare, and urgent and emergent care for the region’s 2,200 residents. Hana Health has also grown to become much more than a healthcare center: it now models and promotes a local, sustainable food system that creates jobs, builds community, and prevents illness.

INSPIRATION

“Hana Health was born out of pure necessity,” notes Hana Health Executive Director Cheryl Vasconcellos, who joined the organization after 13 years with Planned Parenthood Hawaii. “I thought the small community would allow me to be creative and have a big impact on the local economy and community health,” she says.

That has proved to be true. Over the years, the organization has grown to play an even deeper role in the community than its original mission envisioned. Hana Health took on the challenge of improving people’s lives by educating them about the link between good health and eating right—and providing accessible options.

INNOVATION

Vasconcellos realized early on, when funding sources reneged on their commitments, that Hana Health needed a reliable revenue source. “I didn’t want to live and die by the grant,” she says. “We needed to look at our own resources; we needed to be entrepreneurial.”

FILE PHOTOS 1-09 104

The answer: Hana Fresh Farms, which Vasconcellos and the Hana Health board conceived as a way to both serve the mission and earn income. The farm began in 2005 with a one-acre vegetable garden behind Hana Health’s clinic. Today, the venture encompasses a nine-acre organic farm growing more than 100 varieties of organic fruits and vegetables, and a farmer’s market that sells the produce and healthy prepared meals. In addition, Hana Health integrates diet and health education with after-school wellness and physical fitness classes as well as incentive programs such as farmer’s market discount days and farmer’s market gift certificates for patients after preventive health screenings.

When the farm began generating a surplus, Vasconcellos researched potential buyers for organic produce and found a huge demand. They now sell produce to Whole Foods Market, Mana Foods (Hawaii’s largest independent natural food store), local restaurants, and smaller establishments.

Hana Fresh Mixed Cherry  TomatoesPart of the Hana Health vision was to create a Hana Fresh Nutrition Center, which would enable Hana Fresh to sell prepared meals and “value added” products, such as jams and salad dressings, at the farmer’s market. “As demand for prepared meals at the farmer’s market increased, it became glaringly apparent that our 100-square-foot kitchen and outdoor tent were inadequate,” Vasconcellos says.

Hana Health secured funding for the building, site work, and equipment from government grants, but they weren’t enough to complete the project. Enter RSF Social Finance. Ted Levinson, RSF’s director of lending, was on vacation in Hawaii when he came across Hana Fresh products at Whole Foods. After learning about Hana Health’s model and mission, Levinson called Vasconcellos to inquire about their funding needs.

“RSF contacted us exactly when we needed them,” she says. “We had begun construction to avoid losing some of our grants, but didn’t have enough to finish. Financing from the state didn’t come through as expected and local banks wouldn’t provide us with a loan. I don’t know where we would be if RSF hadn’t come to the rescue.”

IMPACT

TAnnual Report 2006-2007he 1300-square-foot Hana Fresh Nutrition Center opened its doors in August 2012. The fully equipped commercial kitchen has allowed the organization to double the number of prepared meals it produces to 54,000 annually. Farm revenue grew by 150 percent from 2009 to 2012. Hana Health now has 40 employees, up from 29 in early 2012.

Hana Fresh Farms and Hana Fresh Nutrition Center are cornerstones of Hana Health’s approach to preventive healthcare and an integral part of the Hana community. Collectively, they promote healthy lifestyle choices, empower individuals to take responsibility for their own well-being, provide employment and training opportunities for residents, increase food security, and contribute to Hana’s overall economic vitality.

Next up: Hana Health is developing a prepared meal program for patients with diabetes and other chronic health conditions that can be improved with dietary changes.

“Given our remote location, we didn’t have organizations we could model ourselves after,” Vasconcellos says. “We had to be innovative and creative. We’d love to serve as a model for other healthcare providers who want to serve their communities by promoting healthy lifestyles and a healthy economy.”

VITALS

Company Name: Hana Health
HQ: Hana, Maui, Hawaii
Impact area: Food & Agriculture
RSF relationship: Social Enterprise Lending Program
Community served: Hana
Employees: 40  
Revenue/budget: $3.2M

RecycleForce Keeps Electronic Waste Out of Landfills and Ex-Felons Out of Prison

May 21, 2013

Building the Next Economy

Since 2006, Indianapolis-based RecycleForce has paid over $10 million in wages and employed 650 ex-felons to recycle over 20 million pounds of electronic waste. RecycleForce, a non-profit social enterprise, has a dual mission: to help people coming out of prison successfully transition back into civil society, and to keep as much electronic waste as possible out of Indiana’s landfills.

RecycleForce deconstructs electronic waste and other recyclables provided by residents and corporate partners, separates the reusable materials, and disposes of the waste safely and cleanly. The scrap metals and other recyclables collected are sold to help pay for job training programs and employment opportunities for formerly incarcerated men and women.

INSPIRATION

The day he laid off 150 men was Gregg Keesling’s last straw—and the genesis of RecycleForce. For several years Keesling had been running a staffing agency that employed ex-felons. By having the staffing agency be liable for the employees, he was able to get his clients a foot in the door, but finding them steady employment was a struggle. When he lost a big contract because the manufacturer decided to outsource to China, and then had to make those painful layoffs, Keesling decided he’d had enough: “I no longer wanted to be at the mercy of someone who just wanted to make money and throw these people away.”

With his business partner, Tom Gray, Keesling set out to found an operation that would offer steady employment for the ex-felons he was committed to helping re-enter society. He was in the midst of failing negotiations on a prospective opportunity when he stumbled upon a literal gold mine. “The owner of the building we were meeting in took us down to his basement and asked us if we could do something with all of his junk,” Keesling recalls. This “junk,” which filled a 100,000-square-foot warehouse, floor to ceiling, was the remains of a computer refurbishing business. “It turns out there was more gold in a ton of that junk than in 55 tons of ore from the ground.”

Recycleforce de-manufacturing a TVINNOVATION

When RecycleForce opened in 2005, employing a marginalized workforce by recycling what most viewed as trash was unexplored territory. Keesling and Gray, building on the foundation of their newfound goldmine, created a new system of working with ex-offenders that would support them in their re-entry and prepare them to succeed in the workforce.

Ex-offenders face a myriad of challenges upon release. They often have no home to return to, no job prospects, and no job skills. When they do find a job, they have to fit work hours around court requirements like drug testing or counseling, and most employers aren’t flexible enough to accommodate that. “They’re faced with tough decisions: go to work or go back to prison,” says Keesling. “It’s a catch-22.”

Minor parole violations, like missing a court appearance or not paying child support, are the primary reason people go back to jail. RecycleForce addresses this issue with a comprehensive program allowing ex-felons to earn a living while complying with strict supervision. Participants receive six months of transitional employment with on-the-job training, plus additional services focused on job skills, character development, and personal counseling.

RecycleForce sources its “trash” through contracts with city and state agencies, public drop-off locations for toxic waste, collection events with local business and churches, and reverse logistics—products that are returned or never make it off retailers’ shelves.

IMPACT

In the fall of 2010, RSF provided crucial financing for RecycleForce to purchase an industrial shredder, affectionately known as “the Beast.” That investment has improved productivity, dramatically increased the amount of material RecycleForce is able to recycle (6.3 million pounds in 2012 versus 3 million pounds in 2010), and opened up new markets. But it almost didn’t happen. “We went to bank after bank after bank,” Keesling says. “RSF offered us a loan when no one else was interested or able to understand our model.”

The Beast is a massive piece of equipment, measuring around 60 feet high by 120 feet long. It allows RecycleForce to disassemble electronics that can’t be broken down by hand. Once the large electronics are shredded, a heavy-duty magnet removes the metals and staff “pickers” sort through the remains, separating the materials they then sell for recycling: copper, aluminum, plastic, steel and precious metals such as gold.

“When you toss out electronics you might as well be throwing away money,” notes Keesling. Electronic waste contains many valuable materials, and countries that don’t have much of them or can’t mine them are eager to purchase the millions of pounds of materials Americans get rid of every year. RecycleForce generates over $50,000 per month in sales of gold and other precious metals.

The Beast has equipped RecycleForce to divert millions of tons of electronic waste from the landfill. The organization quickly surpassed its goal of 600,000 pounds of processed materials per month; its new goal is 1 million pounds per month. That’s an immense positive environmental impact, and RecycleForce is achieving remarkable social benefits as well. The recidivism rate in Marion County, where RecycleForce is based, is 52 percent in the first year following prison release. RecycleForce’s goal is to cut that to 25 percent for the ex-offenders who go through its program, and it’s on track to do much better than that. For the current cohort of 250 ex-offenders, the recidivism rate when results are tabulated in later next year is expected to be well under 20 percent.

“We embrace a labor force on which the rest of the country has turned their backs,” Keesling says. “Without effective support, we can’t expect folks with limited job skills to feed their families and overcome a host of mandates that challenge their ability to improve themselves.”

VITALS

Company name RecycleForce
Impact Area Education & the Arts, Ecological Stewardship
RSF Relationship Social Enterprise Lending Program
HQ Indianapolis, IN
Annual Revenue $3.5 million
U.S. Employees 250+
Communities Served Marion County, IN (employment opportunities); U.S. (recycling services)

Building the Next Economy

October 8, 2012

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:

Guayakí Pioneers Market-Driven Restoration

Common Market Boosts Urban Access to Fresh Food, Helps Local Farms Thrive

Indigenous Sets Out to Remake the Apparel Industry

B Lab Seeds a Movement Toward a New Kind of Corporation

Strong Vision Helps Pine Hill Waldorf School Persevere and Lead

RecycleForce Keeps Electronic Waste Out of Landfills and Ex-Felons Out of Prison

 

Strong Vision Helps Pine Hill Waldorf School Persevere and Lead

September 24, 2012

Building the Next Economy

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

 

Indigenous Sets Out to Remake the Apparel Industry

September 19, 2012

Building the Next Economy

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


 


 

B Lab Seeds a Movement Toward a New Kind of Corporation

September 14, 2012

Building the Next Economy

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)

 

 

Common Market Boosts Urban Access to Fresh Food, Helps Local Farms Thrive

September 6, 2012

Building the Next Economy

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)


 

Guayakí Pioneers Market-Driven Restoration Business Model

August 27, 2012

Building the Next Economy

“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.com
Impact 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

 

BUILDING THE NEXT ECONOMY

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