Administrator | September 8, 2016

The power of profit and social impact

By Rebecca Singer

A few weeks ago, I visited a small vegetable farm just outside Bangalore where I met a farmer named Balaji. For the past year, Balaji has used an automated irrigation system by Flybird Farm Innovations that increases his annual income by 10-15% by reducing labor costs.

Weeks before that, I had the opportunity to visit primary, secondary, and tertiary care centers in New Delhi where I watched urine and blood samples be analyzed on diagnostic machines by Biosense Technologies that deliver fast and accurate results.

Finally, in Bangalore, I visited a neonatal intensive care unit where I encountered the smallest babies I had ever seen. There, I watched a baby weighing only about five pounds, wear a tiny orange bracelet by Bempu that continuously monitors his temperature and sounds an audio-visual alarm if he goes hypothermic to alert a doctor or a parent. Keeping babies warm reduces neonatal mortality and makes them less susceptible to infection.

What do these innovations by Flybird, Biosense, and Bempu have in common? All these Indian social enterprises combine a for-profit business model with meaningful social impact by improving the lives of low-income populations. (They are also all incubated by social enterprise incubator Villgro, which supports early-stage social enterprises, and where I interned this summer.) Why is this combination of profit and social impact important? Because these business models hold great potential for scale and sustainability.

Some see social impact as mutually exclusive with profit. Last year, I took a course called ‘Practical Ethics’ at Princeton University, where I am currently completing my undergraduate studies. The course was taught by Peter Singer, an Australian moral philosopher well-known for his ‘drowning child’ analogy that is meant to convince his audiences that they should reallocate money spent on unnecessary possessions towards charities working to alleviate global poverty.

While I found this altruistic argument charming, I could not look past the limitation at its heart: Singer’s argument is focused solely on non-profit, charitable models, and ignores the reality of for-profit models that also create meaningful social impact. Over the course of my internship with Villgro, I have observed firsthand the intersection of for-profit business and social impact. These experiences confirmed my suspicion that Singer’s argument misses this powerful and exciting combination of profit and social impact.

Companies like Flybird, Biosense, and Bempu are well-positioned to ultimately grow into scaled and sustainable businesses. This has powerful implications for improving the lives of the poor since each company’s growth is directly correlated to social impact, whether it comes in the form of optimized crop yield and increased income for small and marginal farmers (Flybird), better diagnostic services leading to improved health outcomes (Biosense), or a reduction in the neonatal mortality rate (Bempu). The theory is that after early-stage investment from funders like Villgro, these companies will eventually be successful enough to exit from donor grant funding and sustain themselves financially.

Social enterprises like Flybird, Biosense, and Bempu have contributed to the development of a fast-paced ecosystem in which the definition of success includes both financial returns for investors and social returns for low-income populations, and it takes the most talented entrepreneurs to achieve success in both arenas. Companies that thoughtfully combine a profitable business model with social impact deserve attention from philanthropists and impact investors alike, because here lies the greatest potential for scaled and sustainable impact to improve humanity as we know it.

Rebecca Singer is a student at Princeton University, USA. She did a summer internship with Villgro where she spent time with Villgro incubatees and the incubation team