Impact startups have shown potential for positive environmental and social impact along with profitability

Every day, six days a week, Ling Gao works 18 hours as a factory seamstress. Working, living, and sleeping in tight quarters, she barely makes enough to make ends meet. Gao’s story is the same for millions of women in China’s lower-tier cities.

It’s the same story of survival, day-in and day-out.

While China as a nation is a story of an economic boom, there is widespread inequality, especially in rural areas where families continue to struggle despite efforts by the government to uplift citizens from poverty.

It’s the same story in the highlands of Benguet, in the Philippines. Farmers like Kuya Ronnie struggle to make ends meet, having to contend with the status quo of working with intermediaries.

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“Farming is a gamble,” he shares, with farmers growing their produce from 45-60 days, not sure if these will fetch a good price at the trading post. With oversupply and poor local demand, middlemen take advantage of low prices to sell higher elsewhere.

In recent news, tons of newly-harvested tomatoes were reportedly just thrown out or used as animal feed, because of oversupply.

The grassroots approach to philanthropy

There has been a wave of aspirational startups in recent years, which have focused on changing society. These startups are so-called impact startups.

While the focus of many impact startups is on the bigger picture, some entrepreneurs would prefer to focus on the grassroots approach, where even a little addition to the family or individual income counts.

“An overarching model sets the direction. It is aspirational,” says Steven Lin, co-founder and CEO of Gojoy, an e-commerce platform that rewards users for activity and engagement. “On the other hand, a grassroots approach is actionable.

It is moving the needle from the ground up. That’s how I distinguish the two. We need to set the direction (overarching model) to take the appropriate actions (grassroots approach).”

Lin’s company, Gojoy, addresses the needs of the rural poor in China. Like Ling Gao above by providing vendors and manufacturers direct access to consumers on the e-commerce platform, thus effectively reducing prices by bypassing the middlemen. The platform also rewards users each time they use the platform to make purchases or simply engage.

Lin says that impact startups benefit the end-users best when they have philanthropy designed into their corporate DNA from the start, as compared to simply doing charitable work as an afterthought.

He cites the company’s reward mechanism as an example of positively impacting households and families: “From the pennies and dimes that are rewarded on every transaction, Gojoy has impacted 500,000 families for simply shopping with us to the tune of over US$8 million.

An overarching model with no action plan cannot achieve such results.”

Profitable and charitable at the same time

The same grassroots approach is the same with Session Groceries, a Philippine e-commerce platform now providing a means for customers to order fresh produce directly from farmers in the mountainous Benguet province.

“Our main clients are baby boomer farmers who are about to retire, and they have always been vulnerable to failed business negotiations with Trading Post middlemen and traders,” shares Romy Miranda, who serves as tech and business advisor to Session Groceries.

“They lack education — statistics show that older farmers have mostly reached only fifth grade. Thus they lack the skill to negotiate with traders.

Sometimes, traders would dictate the pricing down to 1 Peso per Kilo of produce and sell these in the marketplace for much much higher, even 60 to 70 times higher or more.”

Produce bought from Session Groceries basically rides on the company’s existing e-commerce and logistics platform to bring the fresh goods straight to individual or business consumers at a fraction of the price of the marketplace.

That way, farmers get a fair demand-based price for their produce, while buyers need not pay for a middleman’s markup. The company receives a 10 to 15 per cent profit, however — which is considered fair compared with the previously cutthroat pricing and profit that trading post intermediaries implemented.

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Miranda says that poor farmers are one of the most vulnerable sectors in the country. “We know that Filipino farmers are among the poorest and soon-to-be endangered ‘species’. We give back their dignity and espouse the idea that farming is a good business, so their sons and daughters will continue to farm their land.”

The value does not only come from profitability, however. According to Lin, the impact of philanthropic activities to the startup’s bottom line includes “reduced marketing costs, increased brand value, and soaring goodwill.”

Humble beginnings

The best social entrepreneurs are perhaps those whose entrepreneurship journeys have been shaped by hardship and first-hand experience with making an impact.

In the case of Gojoy’s Lin, he is a second-generation immigrant in the U.S., and he recounts how his family struggled at first. “I grew up the eldest son of a poor immigrant Taiwanese family in Los Angeles. My father struggled to build a manufacturing business early on. He put me to work at a young age, and I developed a work ethic that’s second to none. From cleaning toilets to operating forklifts in the warehouse, I have done almost every job imaginable. Ultimately, through grit, resilience, and self-reliance, the family business became a success, counting large retailers such as Walmart and Carrefour as customers.”

He says that resilience brought success, although he encountered firsthand how workers often struggled to make ends meet. “If a poor immigrant family can make it, anyone can. I’ve always wanted to give back,” he adds.

Support from the ecosystem is also essential to success

Government agencies in the Philippines and China are always on the lookout for ways to address poverty in their respective jurisdictions, although contributions from the private sector have always been an essential component of these poverty-alleviation initiatives.

“Support from the entire ecosystem is crucial in order to synchronise efforts to combat poverty. All constituents need to buy in,” says Lin. “We need to reset how we (as a society) think about economic value. Equal opportunity to create wealth must be protected and cherished.”

“It’s a herculean task, especially when food is involved,” shares Miranda. “If we lack support from institutions like the government, we might soon be solely relying on importation. What happens when countries start to implement trade protectionism, as we see now? We will starve the nation. Thus, support from all stakeholders, be it private or government will be important in addressing such immediate needs.”

It’s not just about giving back, but all about taking action

For Lin, what’s essential is for stakeholders to take action. “It’s about taking action right away — no matter how small it may be.

Also Read: 6 things you can do to create an impact in an increasingly competitive environment

The impact can be felt one nickel at a time. A company doesn’t need to wait until it has reaped billions in profits before giving back. That’s broken (in my humble opinion) legacy mindset.”

With Lin’s Gojoy, the company took this “immediacy” and “bite-size” approach to heart and baked them into their business model. “It is the company’s genetic makeup.”

He concludes: “Every startup can engineer social impact and/or ‘giving back’ into their business model. It doesn’t need to be a lot for it to be meaningful. It could scale up. However, the impact on the lives of the poor will be irreversibly and positively affected.”

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