We are all pretty familiar with the idea of Charity. It’s a very important part of our society. You sign up to a direct debit; ask your friends not to buy you gifts for your birthday and instead donate to a cause; raise funds for a cause by shaving your head, jumping from an airplane, riding halfway around the world on a bike and so on. The basic concept behind charity is that you donate your money to a charity to carry out charitable work and there is often a small admin fee associated with this. It’s safe to say, we all understand Charity.
Now intro Social Enterprise. It sits in the middle of charity and business. The question I get asked more often than not is, “If I buy a bottle of Thankyou water for $2, does my whole $2 go to funding water projects?” The reason people ask that question is because they understand charity, not social enterprise. The answer is simple, no. I then explain the following:
When you purchase a bottle of Thankyou Water you are not giving Thankyou Water $2; you are purchasing a product. For that product to get to your hand it first started out as raw materials, was then produced, transported to warehouses, sent to distributors and finally retailers. Eventually, it got to the fridge or shelf near you at which point, you reached in and purchased it. Every link in the chain has serious costs involved. On top of this, like any organisation, Thankyou Water has operating costs that ensure that our vision is reached. What’s left after these costs is our profit. It’s our profit that funds water projects and we make enough profit to fund at least 1 month’s worth of drinking water to someone in need.
It’s at this point I start to lose most people as they wonder if it’s really worth going to all the effort, with all the costs involved to do what we are doing.
To put it into context, let’s take a deep breath and look at a business that you’re familiar with. Coca-Cola Amatil (CCA), who own the brands of bottled water; Mt Franklin and Pump in Australia, definitely think it’s worth going to all the effort! These guys currently hold 48.5%* of the $570 million Australian bottled water industry. I think it’s safe to say that both Coca-cola Amatil and their shareholders definitely see the point in running a bottled water company, even though there may be lots of costs involved.
I hope this is where Social Enterprise starts to get a little clearer. See, we are running a business that aims to make as much profit as possible, just like Mt Franklin. The only difference is that all of our profit funds water projects in areas of need in developing nations, instead of just making shareholders wealthier.
There is room for both Charity and Social Enterprise. If you had $2 in your hand and wanted to make the biggest impact with your money, I would tell you right now to give it directly to a charity that builds water projects. But if you had $2 and were about to purchase a bottle of water…well, let’s just say I would definitely recommend Thankyou Water.
More thoughts on social enterprise to come…
*IBIS World Industry report C2186