Cross-currents in SPO finance

Think of a social purpose organization as a ship at sea (hopefully not the Vasa!). The compass has two dimensions: North-South and East-West. North is the direction of positive social impact – achievement of the organization’s social mission. East is the direction of financial reward or surplus. All social purpose organizations want to head North but not necessarily true North. Traditional nonprofit organizations whose bottom line is social impact want to travel as close to true North as possible, allowing for sufficient margin of financial surplus to ensure their organizational integrity, growth and vitality. Cooperatives and other limited-profit distribution SPOs, such as the U.K.’s community interest companies (CIC’s) want to tack slightly more to the East to satisfy their chosen balance of mission impact and net remuneration to investors or members. Social businesses constrained less by strict limits on profittaking (for example, L3Cs as discussed later) would tack even further to the East, and avowedly socially responsible or sustainable businesses (for example, B corporations) even more so to the East. Purely profitmaximizing businesses wanting to be socially responsible would of course head a bit north of due East. All this seems clear enough, but as any sailor as well as Lewis Carroll’s Bellman, knows, the sea is a tricky environment, with few safe harbors, where the winds change and the weather is stormy as often as not. Moreover, the seas are not homogeneous, with different patterns of current flow in different regions – calmer seas in some places, rougher and more volatile in others – and in any case, different from one place to the next. In the environment of social purpose organizations, various winds have blown in and out over the past several decades, and different policies and conventions govern conditions in different parts of the world.