Raven + Lily, betting on social and for-profit

Hello dearest readers,

Today we address a major common myth: in the end, all corporations are just in it for the money (a.k.a. profit). Let’s face it, the evil corporation has become a very common trope in popular culture, and vast scandals about “corporations ruining lives and the environment in the pursuit of the highest profits possible” have become regular headlines. As a consequence, a growing number of professionals, both young and more experienced, turn to nonprofit, low-profit and social entrepreneurship, in short mission-driven organizations aiming at having a positive impact on society and the planet, as a direct and firm statement against for-profit corporations.

But why should a social for-profit business be an oxymoron? Why do some mission-driven businesses choose a for-profit business model? How do they find the right balance between fulfilling their mission and growing profit?

To get some answers, we met with Kirsten (CEO and founder), Cameron (partnerships manager) and Wendy (COO) from Raven + Lily, a social business, certified Fair Trade and B-corporation, in Austin working in fashion design to empower and alleviate poverty among women all over the world. Simply put, they try to address poverty, women empowerment needs and environmental issues all at once in a for-profit yet social business. Talk about challenge! Let’s find out how they make it work.

From nonprofit to for-profit: what drives R+L

Let’s go back to its creation. Its very name is a reference to a gospel, stating that “life is more than food, and the body more than clothes”, invoking ravens and lilies as examples of God’s promise to provide food and clothing to the creatures He created. To Kirsten and her co-founding partner, this summed up what they wanted their project to be: discarding all superficial elements and focusing on what is important. Their long term ambition was to help employ marginalized women at fair trade wages in safe environments with sustainable income, health care, education, and a real chance to break the cycle of poverty for themselves and their families.

“How do you move fashion into something that still benefits the people?” Kirsten

R+L was organically funded in LA in 2008 as a nonprofit organization to answer this question. Traditionally, people buy fair trade fashion accessories or clothes as a “pity buy”, a one-time buy that most will not actually wear or use. Kirsten’s ambition was to find a way to apply design to a sustainable business and have a give back aspect to it: in a few words, do good without doing charity.

As she had some experience working in both the humanitarian and fashion worlds, she started early on with going to Africa and India, mainly depending on its founders’ existing contacts, self-funding almost everything and designing clothes in Kirsten’s garage from scrap fabric and materials. At some point, it became clear that they could build something more sustainable, develop partnerships and design products that were scalable, confident that they could sell in the States. However, nonprofit organizations in the States have to receive most of their revenues through donations, which confines them to a dependency model. Like many other social entrepreneurs (), Kirsten had to face the dilemma to choose between a nonprofit or for-profit business model. R+L didn’t want to  depend on charity; they wanted an empowerment model, for them, but also for the people they intended to help through their business. Moreover, moving to a for-profit business model made sense as it would give them more freedom to expand, to be more creative in their offer and make them more sustainable, too. In other words, their profit is supposed to fuel their mission, and vice versa. Inspired by microfinance, Kirsten built her business model to encourage business on the ground.

Today, R+L is a for-profit social and Fair Trade business, counting 13 people in house, working with 2 contracted workers in the US and 2 in Africa, and working directly with approximately 19 artisan partners (employing 20 to 700 artisans) both in developing countries and in the USA. It’s also a woman-focused business, with only one male employee. They’re working on their environmental footprint too, as if they weren’t tackling enough world problems already! So what does all that imply in their business’ daily activities?

Running a social business: R+L’s hacks

Let’s talk practices. Where running a social and Fair Trade business differs from running a more classic business, is in the accountability that R+L has to show towards its partners and customers, and in the resulting constraints.

One of the biggest challenges they’re facing when it comes to Fair Trade is controlling their supply chain. They’re looking more and more at working with the people manufacturing fabric in the partnering countries, to “move a step beyond” have a better grasp on their supply chain. To do that, they need a better auditing of their supply chain.

“You have to start somewhere" Cameron

And somewhere is with their partners, artisan workshops all over the world, making sure that they respect the Fair Trade principles and are aligned with the company’s missions. R+L certifies its partners by an outside 3rd party: the World Fair Trade Organization (WFTO), which is also guiding R+L in the elaboration and expression of their ethical standards. R+L base many of their business practices and decisions on a daily basis on the 10 WFTO Principles (shared by the Fair Trade Federation (FTF) as well), basically stating the golden rules of running a fair trade, for both the business and its cultural environment.

The auditing and recruiting of new partners is actually a very long process, as it usually takes 1 to 2 years to develop a new partnership and have a product ready. During this phase, 3 main areas are being audited:

1/ Mission: does the partner answer to WFTO’s principles? If not, do they have the potential and will to move in that direction?

2/ Communication: do they have access to an english speaking contact to make the partnership work between R+L and the workshop?

3/ Women: are they employing a majority of women, or at least a minority of women with special skills that could mainly take part in the production?

Still, the company’s accountability doesn’t stop there: it extends to co-developing products with their partners and making sure they help them grow and prosper over the long haul. Which means more constraints.

Let’s take a simple example.

They are currently working with an artisan workshop group in Kenya, helping them improve their production to meet R+L’s principles, and moving forward to become a WFTO business. This represents a big change and commitment for this workshop: once they move to WFTO, they can’t turn back, and they need to have a sales commitment because they’re probably going to lose their existing customer base through transitioning to become part of WFTO. So when building this partnership, R+L needs to make sure they’re able to make that sales commitment, and thus able to secure sales on their end.

Trust, commitment and responsibility start taking another dimension. It is R+L’s responsibility to be careful and adjust their orders to demand, choosing wisely the groups that are capable (have the people and equipment) to deliver. Otherwise these groups might be inclined to invest in people and equipment for a one time large order, which wouldn’t serve the community at all. They also work closely with them on the designs (colors, patterns…) to make sure it’s an accurate design for these artisans.

Thus a large focus is made on their communication with the workshops. They need to remain open and sensitive, and be conscious about the pace and pressure that can be met to finish the work without compromising quality and ethics. Cultural challenges are also very present: they need to build trust and overcome cultural challenges, using video conferences when hard conversations and decisions are needed.

“If we decide to move fast and get into a ‘getting-things-done’ mode, that’s when mistakes are made" Kirsten

And what kind of practices make R+L an environmentally involved social firm? Mainly its eco-friendly packaging and its vision for slow fashion. However, they are also looking into reducing their environmental footprint in transports: although they are still shipping merchandise to customers and mainly relying on air shipping on the supply-side, they favor locally sourced materials whenever they can.

How they remain profitable

With that many constraints piling up in order to protect and fulfil the company’s mission, how does R+L remain profitable?

This is actually something R+L is currently working on, as its revenue has been growing but its profitability lags behind: it needs to become more profitable. Staying competitive is the key here. It’s all the more important since they’re now not only competing in the fashion industry, but also on the slow fashion scene where there are a lot more social businesses today than when R+L started out. R+L needs to remain flexible and pivot a lot in order to remain sustainable as a social business.

Part of remaining competitive is to be responsive to and aware of the market context. Let’s consider distribution channels for example. As the highest pressure in this industry is to meet wholesales demands (quantity, timing…), on top of having their own online direct sales platform, they’re trying to move as much as possible towards other partners and online sales, which are more flexible and closer to their customer target. The fact that the industry is trending towards ethical products helps a lot, as more large companies will have to make it work with social businesses to meet their customers’ demand and expectations. This enables R+L to negotiate short term payment and deposits with these large corporations that are willing to adapt their demand and take into consideration that they’re working with a social business.

On the marketing and communication side, another important aspect of succeeding in slow fashion for R+L is training its customers and encouraging them to buy less, to be imaginative and to buy better quality products. To be entirely truthful to their values, they don’t have a sales culture but rather a recommendation culture, highlighting the origin, story and impact of the products they’re selling. Their biggest strengths? Storytelling and quality products.

“It’s all about educating and training your customer" Cameron

But is it possible to educate and train investors? As a growing for-profit business, R+L needs to bring in investors and thus show profitability. How do they protect their social mission and find the right balance between fulfilling their mission and growing profit?

How they built their own, different path every step of the way (and still do)

Even though moving from a nonprofit to a for-profit model was crucial for R+L to be able to grow and be more sustainable, raising money to fund a social business is arduous, especially as a female focusing on advocating for at-risk women. First, simply because people hesitate to invest in that kind of business; and second, because Kirsten wanted to find the right type of investors, aligned with the company’s missions and vision. Furthermore, those that accept to be accountable for them. It took Kirsten 3 years to raise what usually takes 6 months to more classic businesses but she eventually dug her own financing path. R+L now has a pool of 15 Equity investors and they are now closing a series A raise.

“The goal is not just to be profitable, but to have profit as well as a positive impact” Kirsten

But even though she chose the right investors, how would she protect the company’s mission and make them actually accountable for it? Furthermore, how to make sure that R+L’s leaders, employees and partners are held accountable? How do their partners and customers know that it’s not another social washing b.s. and that all business decisions and practices are actually based on their missions? She figured that the B Corp certification (where B stands for Benefit) was her best bet, for two main reasons.

First, B Corporation is a registered status recognized in some American states, which means that beyond being simply evaluated and certified, R+L’s missions are written down in legal papers, holding all investors accountable to these missions. Moreover, R+L’s core missions are also embedded in their contracts with partners, which means that they cannot compromise on their social and environmental engagements to fill an order.

Second, the high standards set by B Lab and its certification help R+L grow and improve their practices to respect their social, environmental and transparency engagements. Each company is re-evaluated every two years and is held accountable.

Although B Lab does not perform on-site visits and evaluations of the companies seeking the B Corporation certification, the 3-step process these companies have to go through is quite rigorous, and the required paperwork, proofs, details and documentations apparently very extensive. Reports on each company (called ‘Impact reports’) are available online, which is supposed to guarantee the transparency of the certification, although we don’t have access to the detailed evaluations.

However the B Corp certification level-based system does lack some flexibility according to Cameron, who’s in charge of R+L’s B Corp Certification. Indeed, R+L went from 8 to 12 employees between its first and second assessment, which was not that big of a change for the business, but enough to move them onto the next category and increase (a lot) requirements, which eventually made them score lower while offering the same programs, working methods and missions. In other words, it may be difficult for the public to understand exactly what B Corp’s report results translate: is the company having trouble holding true to its mission and positive impact, or are they simply growing?

culture

Kirsten is not much involved in the day to day management as she doesn’t live in Austin, and relies mostly on Wendy (COO). R+L’s management style would be described as relational and relying on a lean team, where everybody is wearing several hats to make it work. The culture is overarchingly built around the company’s missions, and all employees are working hard there because they believe in their company’s mission and vision.

When working with so many partners spread out over the world, the cultural gap needs to be addressed and this naturally calls for flexibility and clear communication throughout the business. This is very much put into display in the design of the R+L stores and in their offices, where we find big windows, warm materials such as wood and wide, studio-like spaces.

Growing and scaling

Amongst their 19 or so current partners, 6 are extremely scalable (usually the ones involving about 700 women in the workforce), so that’s the ones they’re putting most of their focus on. Scaling is still possible with their other partners, as they all have potential to grow, but with the smaller groups (mostly indigenous groups) there might be either a lack of product demand on R+L’s end to develop new designs, or the groups might not have the equipment or simply the ability/possibility/aspiration to scale their production. However, most artisan groups they’re working with are willing to grow and scale, and once again it’s R+L’s responsibility to choose wisely who they’re able to help grow sustainably.

“Scaling right and ethically is a long process"

As they grow, they will need to find a better way to audit their partners, through potentially doing more on-site auditing for instance. Finding eco-friendly and recycled materials is also a major concern. They’re currently working with their different partners on selecting the right locally sourced materials and fabrics, and on building new partnerships to better control their supply chain. They’re inspired by companies like Eileen Fisher and Patagonia as companies that constantly reinvent themselves and are working on their core values to evaluate how they can do better.

Raven + Lily in a sentence

As a B Corp, Raven + Lily reinvents fashion and business by bringing together profitability and having a positive impact on its female communities and on the world through high standards of ethical and fair trade.

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