Nov 22, 2019
How to start a social-impact business: Kotn and Gift-a-Green
In a global survey published this year by Deloitte[i], 40% of the Millennials polled said they believe the goal of businesses should be to improve society. By 2020, Millennials will make up 40% of all consumers according to the same survey, influencing about $40 billion in annual sales.
This desire for businesses to play a bigger hand in social change is of little surprise when you consider that we live in economically, political and environmentally turbulent times, and brands will increasingly have to demonstrate their commitment to social impact in order to win consumers over.
More businesses are also marketing their efforts to address social needs through their business models. A social enterprise is a term that describes a business that is finding ways to address these needs through sourcing or hiring practices, the services they offer or in other ways. But what sets these businesses apart from more traditional models, and what unique challenges do they face? We asked two such entrepreneurs to share stories about their growth, challenges and advice for others looking to do the same.
Benjamin Sehl (BS), is co-founder of Toronto-based clothing retailer, Kotn, and Bryan Kinney (BK), is president and founder of Gift-a-Green. Kotn is a clothing retailer based in Toronto that produces Egyptian cotton garments and operates by practicing direct trade with suppliers and then selling directly to consumers. Kotn directs 1% of each sale (plus all proceeds from special projects, like their Black Friday initiative), to reinvesting into the farming communities it operates in by building schools to improve literacy and decrease instances of child labour and child marriage.
Gift-a-Green, allows customers to mail a greeting card filled with certified organic microgreen seeds, such as kale and arugula microgreens, to a chosen recipient allowing them to sow, grow and eat. Throughout the year, Gift-a-Green partners with various charities across Canada, like the Make a Wish Foundation, and offers up to 50% of its sales to Canadian charities.
Tell us about your social impact business
BS: We are a clothing retailer that produces Egyptian cotton garments and operates by practicing direct trade and going direct to the consumer. In traditional retail, nearly 90% of the value of garments is captured by the brands, distributers, and retailers — the remaining amount then gets split up into several pieces — leaving people like farmers with just pennies. We started Kotn to challenge that model — practicing direct trade, and going direct to consumer in order to create better products in a better way and without sacrificing a better price. Our sales have enabled us to fund five elementary schools in Egypt to date and we have reinvested hundreds of thousands of dollars into our supply chain. This ripple effect has provided nearly 700 smallholder cotton farms with aid like private subsidies for fertilizer and agricultural consultants.
BK: We provide our customers with the opportunity to mail greeting cards filled with certified organic microgreen seeds like kale and arugula microgreens to someone so that this person can then watch their microgreen garden grow. Throughout the year, we partner with various charities across Canada, like the Make a Wish Foundation, and offer up to 50% of our sales to Canadian charities. We also work with the registered charity, Community Crew, where each sale of a Gift-a-Green product helps contribute to feed vulnerable kids in their school lunch program.
What were your challenges of creating a social impact business model?
BS: Often these challenges are systemic in my view, so [a one-size-fits-all] solution doesn’t help long term. It’s important to break down social issues into a framework that accounts for the variables in the system, the metrics you believe you can impact, and to create short, medium, and long-term goals and outcomes that are realistic (but not easy) to tackle so that you are actually creating impact. You then hold yourself accountable to those by employing contractors such as third-party auditors and governing bodies to help make sure you’re really doing the things you say you’re doing. Otherwise, it can be easy just to focus on other business operating and growing activities.
Do you find there are as many resources for business owners that are social impact/sustainably focused businesses compared to more traditional operations? Do you face any specific challenges?
BK: Not as many, but things are getting better. A couple of years ago my business was accepted into a business accelerator program based in Calgary which focuses on providing resources to businesses in the food and beverage and health and wellness industries. So, there are resources out there, you do need to look for them, but they're there.
The main [challenge] in operating sustainably is cost. The positive thing is that consumers are leaning more towards sustainability as a whole, and as a result costs to operate sustainably are coming down. And as consumer support for these types of businesses and services grows, we're able to continue to progress our offerings. We are developing a pouch [to grow your microgreens in] for example, that is completely compostable. Something we wouldn't have been able to do in a cost-effective manner a few years ago.
What advice do you have for entrepreneurs wanting to begin a social impact business?
BS: There are a ton of people out there looking to support businesses like yours so make sure you’re reaching them, asking their opinions and advice, and telling your story effectively on running a social impact business that people will be interested in. Ask for help from your family, your community, your heroes, everyone because as a new business owner you need all the help available.
BK: There's always this push to move rapidly as a business owner but there's value in moving slowly and staying true to your business as you grow incrementally and taking the time to network. There's something to be said for sticking to your plan and truly believing in what you're doing. And not worrying about beating others toward the finish line. Entrepreneurs need to remember the value in consulting with business advisors, regulations, testing and gathering consumer feedback before going to market. Slow down, put in the work and keep believing in yourself. If you truly believe in it, things will work out.