Urban Outreach Ministries' organic gardens: developing a sustainable, triple-bottom-line business for a nonprofit social enterprise.

Stephenson, Harriet ; Brock, Matt ; Loughead, Michele 等

CASE DESCRIPTION

The primary subject matter of this case is a for-profit or nonprofit organization developing and implementing a triple-bottom-line strategy, including concern for people, profit, and planet, to help assure the profitable sustainability of its operation in the long run. Secondary issues include the challenges of developing a business plan that will accomplish the desired results, identifying and weighting relevant stakeholder values in order to develop organizations that maximize the value of stakeholders in the long run, and issues of the competency and capacity of the management team, including the Board of Directors, to implement such a strategy. The case has a difficulty level of 3 to 5 and works well in the undergraduate senior Business Policy Strategy class, first-year MBA, as well as final policy course in MBA. It can either be used requiring 50 to 75 minutes of class time with no outside preparation or 30 minutes to 2 to 4 hours of outside preparation.

CASE SYNOPSIS

Nonprofits or for-profits with an explicitly responsible social agenda, from microenterprise to highly scaleable operations, are increasingly venturing into new territory--how to do social good, make money, and be responsible to relevant stakeholder groups, especially the people, profit, planet of the triple bottom line. This case study can give useful insights to potential clients and consultants inside and outside the classroom who have been previously assumed to not be affected by triple-bottom- line/sustainability issues. In this post-Enron era, these issues are seen as a basis for strategic competitive advantage that will help maximize a profit or social agenda. These issues will be increasingly relevant to doing business in the 21st century.

The executive director of the nonprofit Urban Outreach Ministries engaged a team of consultants to do a business plan for an organic garden that would be environmentally friendly, provide jobs, and job training for Urban Outreach's target immigrant population. In addition, it would generate profits, which could help support other Urban Outreach activities and its outreach. A preliminary feasibility study showed a profit the first year if the $200,000 startup and land costs would be donated. What should the executive director do with the study results?

What are the critical factors for long-term success in an entrepreneurial startup within an organization? Social responsibility, triple bottom line, sustainability, ethics, values, and environmental consciousness are issues increasingly vital to business and nonprofits in this postEnron era. What else needs to be measured? How does one compare/weigh social return on investment?

A FOR-PROFIT TRIPLE-BOTTOM-LINE ORGANIC GARDEN FOR A NONPROFIT SOCIAL ENTERPRISE: A CASE STUDY

In June 2005, Marc Greenburg, the executive director of Urban Outreach Ministries, had successfully started a fitness center and was looking for ways to satisfy his entrepreneurial urges while expanding the reach of services of Urban Outreach. He decided he wanted to create a sustainable business that would make a profit and that would have a multifaceted positive impact on society. His desire was to be environmentally friendly and provide jobs to low-income individuals and homeless youth living in South Baldwin. After brainstorming many ideas, he determined that many of his neighbors were from Southeast Asia and were wonderful gardeners and often did so in local pea patches.

He wanted to capitalize on this skill by creating organic gardens beginning with a pilot garden on a plot of land in the middle of South Baldwin. He envisioned profit centers which included:

* Selling compost

* Using worms to compost and selling those online ($30/pound for worms)

* Selling produce to local Pacific Consumer Co-op

* Selling produce at local farmers' market

* Selling produce on site

* Selling "shares" to buyers prior to harvesting the produce

In addition, he wanted to set aside a portion of the produce to have an on-site organic food bank.

It would be great to develop a model that could be replicated in Portland and then by other cities and organizations.

Urban Outreach Ministries was in the process of merging with another similar organization, and this was taking all of Marc's time. He contacted a local university to get a team of MBAs from a class that was working with nonprofits to help them establish "Triple Bottom Line Social Enterprises" ... revenue-generating activities which kept in mind maximizing value to relevant stakeholders, especially within people, profit, and planet arenas.

Ten weeks later he received the following:

LETTER OF TRANSMITTAL

Dear Marc:

You requested our consulting services to do a feasibility study for an organic garden. We have completed that, and it is attached. The plan is set up to accomplish the following triple-bottomline returns: People

* Wages paid to underemployed staff/trainees: at least $29,120 each year (assuming no expansion of training center)

* Hours of useful skill training: 2,080 hours/year (again, assuming no expansion)

* Other gardeners who want to realize the benefits of worm casting over conventional fertilizers

Planet

* Estimated solid waste diverted from landfills: 21 tons

* Estimated emissions avoided by local sales: 75%-95%

* Estimated fossil fuel consumption avoided by local sale: 80%-90%

* Pounds of produce grown through organic methods: 31,000

* Beautification of local community

Profit

* Estimated yearly net income to fund the social goals of the organization: $34,866

For your interest, we have attached Starbucks mission statement as an interesting model for incorporating the triple bottom line into one's mission statement.

We foresee increasing challenges with your missions being housed under one umbrella organization.

1. Urban Outreach Ministries Mission Statement: Partnering to empower city people to find wholeness through their lives and communities.

2. Educational Excellence Mission Statement: To enhance the educational experience of students through an adaptive learning environment and prepare them with the skills to excel in the classroom and succeed in life.

3. South Baldwin Health and Fitness: To provide an easily accessible high quality and education based health and fitness center resulting in healthy lifestyles and strong bodies. You started South Baldwin Health and Fitness in February and are hoping that will become a self-sustaining operation. It is noted that entrepreneurship is in your blood and experience base.

ATTACHMENTS

Starbucks Mission Statement

Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.

The following six guiding principles will help us measure the appropriateness of our decisions:

* Provide a great work environment and treat each other with respect and dignity.

* Embrace diversity as an essential component in the way we do business.

* Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee.

* Develop enthusiastically satisfied customers all of the time.

* Contribute positively to our communities and our environment.

* Recognize that profitability is essential to our future success.

ORGANIC GARDENS

Feasibility Study

Mission.

Bring healthy organic food to the local community while enhancing the neighborhood, creating jobs and job training for community members, and creating a sustainable revenue source to further the social values of the Gardens.

Defining Principles:

* We create jobs and provide job training for community members, build their equity in the operation, and help them become entrepreneurs.

* we provide education and awareness about nutrition, food security, and environmental issues.

* We generate organic products for the local community in an environmentally sustainable manner.

* We enhance the community by creating a beautiful space.

Markers of Success.

The Organic Gardens should be self-sufficient by year three, without assistance of outside funds.

* Garden should have a sustainable and fruitful operation, without sacrificing organic principles.

* Employees working the garden are trained, efficient, knowledgeable, and feel ownership over their jobs.

* Our neighbors appreciate our presence in the neighborhood, due to beautification efforts and the value of our services.

Value Propositions

Overview.

Organic Gardens plans to create a half-acre prototype garden that hires one full-time person to sell vegetables directly to the public through farmers' markets, provide direct vegetable sourcing to restaurants, and grow a micro worm farm. The intent of this prototype garden is to train individuals with the purpose of starting and owning their own urban garden. Organic Gardens is a self-sustaining job-training entrepreneurial center for the under-employed.

Long-term plans to the social service components of the organization include providing free/discounted produce to the poor, as well as providing classes on individual gardening and nutrition.

Value for Trainees.

Training to include growing vegetables, worm farming, organic practices, marketing and sales, computer skills, business startup, professionalism and communication skills, managing retail, operations management, purchasing, negotiations, finance, and bookkeeping. These trainees will be able to start their own urban garden, or take these skills to market in other jobs.

Value for Direct Consumers.

Portland has a ready population of consumers who are used to purchasing fresh, usually organic, produce direct from farmers. We will provide fresh produce to them at a competitive price through their local farmers' market sales channel. The fact that our produce will be sustainably grown and distributed by an organization with a triple-bottom-line mission will add to their value perception.

Value for Restaurants.

Restaurants need fresh produce, and Organic Gardens' proximity to restaurants will allow the freshest possible supply. Since we will work with restaurant customers to grow what they want and deliver to them, they will benefit from having more control over their supply and greater convenience to get it. Restaurants could also benefit from the worm farm part of our operation, because that could help them manage their solid waste related expenses. Finally, restaurant staff might perceive greater value in working with a triple-bottom-line organization.

Value for Organic Gardeners.

Our worm products would create value for those who want to garden more sustainably. However, since worm castings are actually more effective than conventional fertilizers, they would also appeal to conventional gardeners who just want their plants to grow bigger. As with other customer segments, people oriented toward sustainable gardening would also find value in our overall triple-bottom-line orientation.

Stakeholders and Triple-Bottom-Line Goals

Stakeholders and accompanying goals by category and in priority order:

Our First Priority is the People.

1. Employees: We will not compromise our focus on job and entrepreneurship training and skill building. We commit to providing a living wage--based on median home prices in the area and socioeconomic studies--and positive working environment.

2. Customers: We will not compromise our goal of providing good quality produce and garden products, at competitive prices, created in an environmentally sustainable manner.

3. Neighbors: We want our neighbors to appreciate and support our presence. Decisions will be made in a manner that minimizes negative impacts to neighbors and maximizes positive impacts.

Our Second Priority is the Planet (considered as itself a stakeholder). Goals:

1. We will reduce solid waste streams by using organic and paper waste as inputs in our vermicompost production process and as natural compost for crops.

2. We will reduce groundwater pollution by using only organic fertilizers and by containing runoff from the vermicompost operation.

3. We will reduce air pollution by focusing on nearby markets, thereby minimizing emissions from transporting products to market.

Our Third Priority is Profits (considered as a means of attracting social investor stakeholders).

1. Employees--the primary use of profits will be incentive compensation for employees and expansion of the operation, thereby allowing more people to be trained and employed.

2. South Baldwin Health and Fitness--the secondary use of profits will be to support these sister organizations with compatible missions under the Urban Outreach Ministries umbrella.

3. Other service clients--the third use of profits will be to expand the service component of the organization, for example, into nutrition classes, gardening classes, and possibly a produce food bank for local urban poor.

Business Description.

Organic Gardens plans to create a half-acre proto-type garden that hires one full-time person to sell vegetables directly to the public through farmers' markets, provide direct vegetable sourcing to restaurants, and grow a micro worm farm. The intent of this proto-type garden is to train individuals with the purpose of starting and owning their own urban gardens. Organic Gardens is a self-sustaining job-training entrepreneurial center for the under employed. The business model is predicated upon operations running on donated property, which is not owned by Organic Gardens. Due to the probability of high turnover of property, it may be necessary for Organic Gardens to run more than one training center to ensure there is no downtime between properties. The focus of this business plan is to start up the initial training center, which can be duplicated for the new gardens.

Products.

The benefit of organic food and organic farming practices are becoming more well known. We will be selling to people who want to eat food that tastes better, that is healthier and more nutritious, and that promotes sustainable growing practices. Examples of high yield, high margin crops that would be appropriate for our climate and market include tomatoes, beets, onions, lettuces, garlic, and carrots. Winter crops could be sold through a subscription plan allowing customers to enjoy seasonal organic food year-round. In addition to food, the garden will produce worms and worm castings for market.

Markets.

Interest in healthy eating and safely produced foods is growing in the United States, and there is already a high awareness in the Portland area. Nationwide the organic food market has experienced 20% growth rate since the '90s, and this rate is expected to continue through 2010. In addition, home gardening is a huge pastime in the United States. The market for organic fertilizers hit $11.7M in 2003 and is expected to grow at 10% through 2020. Consumers place a high value on organic products and will pay a premium, in some cases, up to 30% higher than non-organic products. Because the garden will be located in a dense urban environment, customers are nearby and plentiful. South Baldwin is also beginning to gentrify, bringing in even more educated customers for this type of product.

Distribution Channels.

Because of the ready availability of direct selling channels like farmers' markets, produce will be sold to individual consumers via farmers' markets, walk-ups, and subscription plans, as well as to local restaurants. Worms and worm castings will be sold via the same channels, and they could also be sold through the Internet and garden publications.

Competition.

Demand for these products is high and there seems to be room for more producers. The primary competitors for produce and flowers are other growers at farmers' markets, local subscription farms, and local and national organic retailers such as Pacific Consumer Co-op and Whole Foods. Worms and worm castings competitors include local nurseries, garden supply stores, and Internet suppliers such as Happy D Ranch and the Yelm Earthworm Farm.

Management.

In the initial stages, management of Organic Gardens will be undertaken by a current trainee/client skilled in gardening, Mr. Oh, in the nonprofit's program under the umbrella of Urban Outreach Ministries. A professional, S.W., will provide organic farming and composting consultation. Over time, the plan is to transfer ownership of the enterprise to local community members.

Revenue Projections.

Startup costs will be approximately $101,250, and land would cost approximately $100,000 for an unoccupied parcel in that area. We will attempt to get as much as possible donated. Not including startup costs and land, net income for the first four years will be $8k, $38k, $38k, and $28k. Worm castings will be sold at $2.50 per pound, and worms sold at approximately $17 per pound.

Harriet Stephenson, Seattle University

Matt Brock, Seattle University

Michele Loughead, Seattle University Table 1: SWOT/Risk Analysis Strengths: Weaknesses: Good SME support on growing Idea not tested in this and fertilizer form--numbers only an estimate, lots of experimentation will be required. Minimal internal Urban location increases risk organizational conflicts (main of vandalism, increasing decision maker on the project security costs (i.e., fences). has the authority) Parent organization, NWUM, High startup costs/financing recognized in the community needs for an operation that creates few jobs. Location close to markets Land tenure--keeping costs low creates tradeoff with ownership Existing direct sales channels Would not be able to be (Farmers' Markets) certified organic for 3 years. Lots of possible support Neighbors may not like the organizations within Portland garbage involved in worm area (for both produce and operation. worms). Opportunities: Threats: At risk youth organic Portland Youth Garden Works gardens--partnership. (similar model and goals) May be able to get good prices Organic is becoming more even if we don't reach full mainstream, creating more organic certification (as long competition as stay transitional). Job training center Weather risk Paid classes as a revenue Land tenure issues source Could capitalize on bad Merger partner and its board weather in other regions that may not be receptive to social affects imported produce enterprise model Organic distribution subscription (CSA) on our own, or partner with other services (e.g. Cascade Organics).