Faced with declining resources and growing needs, nonprofits are finding new ways to survive and thrive by exploring partnerships, innovation and creative ways of doing business. Ellis Carter, a nationally recognized nonprofit law expert, addresses the variety of ways nonprofits are reinventing themselves.
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Ted Simons: With grant money and government funds harder to Come by, nonprofits are Looking for new ways to fund their social causes. In some cases, it means acting a little bit more Like entrepreneurs. Here to talk about that is Ellis Carter of the Phoenix-based Carter Law Group. She's a nonprofit attorney With 15 years' experience advising nonprofits and socially responsible companies. Good to have you here. Thank you for joining us.
Ellis Carter: Thank you for having me.
Ted Simons: The idea of nonprofits reinventing themselves, what are we talking about?
Ellis Carter: Talking about nonprofits acting more like mission-based businesses. Looking for more streams of income, innovative ideas to create recurring streams of revenue.
Ted Simons: The idea is here because of the impact of declining resources on nonprofits, it's real, isn't it?
Ellis Carter: It absolutely is. We have seen since the beginning of the recession, quite a few nonprofits go out of business. Other luckier nonprofits have been able to merge or collaborate with other organizations to keep their programs going, but these pressures continue to persist.
Ted Simons: What about taxpayer funds, government grants? Again, that well drying up a little bit?
Ellis Carter: You know, that is probably the area where we have seen the most shrinkage, the most cuts, government funded organizations, organizations dependent on government contracts have seen huge cuts to their bottom line and they see more coming.
Ted Simons: So, thus, reinvention. Give us an example of how nonprofits are quote-unquote, reinventing themselves with that kind of climate?
Ellis Carter: Yeah, well there is a lot more interest in collaborating with other nonprofits, for profit government -- nonprofits are starting to look at how can we increase our bottom line, but who do we need to partner with in the community to make a real impact on the mission that we were created to address? If that means collaborating with other nonprofits to have a nor cohesive approach to a problem, government agencies, even with business, then there -- they're becoming more open and more aware of the need to do that.
Ted Simons: People hear collaboration, though, and they worry that maybe some of the initial focus, targeted focus could be lost in something that is bigger than what it once was. Is that a valid concern?
Ellis Carter: I think it can be. Collaboration can take so many forms. A lot of times nonprofits when they hear collaboration, they start to think merger. We're going to lose our identity. Mergers can take many different forms. Collaboration is far broader than just a merger. Interestingly, we have a foundation here in Arizona, the lodestar foundation, in cooperation with ASU, did a -- a collaboration prize and they did a study through all of the entries of collaborative projects that were submitted and published that information about all of the different types of collaborative arrangements that they have seen, which is quite instructive. The -- it is really just limited by the imagination. All kinds of ways for nonprofits to work together.
Ted Simons: There are also all sorts of ways I would imagine from what we're hearing for nonprofits to act a little more like for profits. Give us some models there, examples.
Ellis Carter: A lot more calls from nonprofits looking for ways to take their assets, whether expertise, intellectual property, software, tools to help them do their job and actually turn them into for-profit businesses. So of those we call those social enterprises. Sometimes they are work force development programs, where they're creating a business in order to help train their clients and help them become more employable. Other times they are taking a tool or some sort of expertise that they have on their staff and they are trying to turn that into a business or another service that they're able to provide.
Ted Simons: Is that viable, in an economic climate where everyone is trying to get as much as they can and the bottom line is really a bigger bottom line, is it viable?
Ellis Carter: You know, I think it is. I think nonprofits struggle just as much as any company, and -- as you know, many new companies fail. But what we find is that a lot of people are more interested in working with a company that has a mission base -- not just about making money but accomplishing a social purpose.
Ted Simons: And I know that there are things called hybrid organizations and benefit corporations. Talk about those particular avenues.
Ellis Carter: That is a really interesting development. There is an interest around the country among for profits, a legal forum that permits you to pursue both a mission and making money. So, there are new legal forms that have developed in other states. The benefit corporation and the flexible purpose corporation in California, something called the low profit limited liability company. And those are all mechanisms for someone who wants to create a for-profit business but that has a -- a mission basis as well. Dual purpose company essentially.
Ted Simons: How do you define, how do you account for the mission -- I mean -- what is accomplished in terms of of the mission base? A for-profit company looks at the bottom line. What does the benefit corporation look at?
Ellis Carter: I can give you an example. My own firm is actually licensed B corporation. We don't have the statutory basis for a benefit corporation in Arizona, but you can achieve somewhat the same result by working with B-labs, you have to go through a very intensive process. And they look at how you handle -- how you handle your recycling, environmental practices, transparency, how you treat your employees, social benefit, the things you do for the community. If you meet the criteria, you can take a number of steps to become a licensed B corps. It is a mechanism to prevent green washing, companies go out and say we're doing all of these wonderful things but there is no mechanism to make sure that that is the case. My firm is being audited by B labs this summer. That will be very interesting. I told them I would be happy to welcome them to Phoenix in July.
Ted Simons: Do it outside, how is that? How successful are these B corps, benefit corporations, you have a little bit of dual purpose going on here.
Ellis Carter: What I'm seeing -- you can go to I believe it is B laboratories dot net to see all of the different B corps out there. But it's a growing list, they're growing like wildfire. One you may have seen is method cleaning products is a B corps. Goat milk ice cream that you can buy at whole foods. All sorts of interesting products, and a lot of these products, they have values in place before they ever became B corps. They're not necessarily having to change everything that they do. I know for myself, we had many of the values in place before we heard of the B corps. So it was just a natural fit.
Ted Simons: Were some of these ideas, these for profit and entrepreneurial ideas, in development before the recession, or was the recession the fire that forged what is happening right now?
Ellis Carter: A lot of the ideas were in development but I think it has accelerated the interest and adoption of these kinds of methodologies to try to create other sources of revenue. If you like, I can give you a couple of examples from right here in Arizona. There is a great company called just be, be just, that was a program that came out of the lone star day resource center. I wish I brought an example here. They make soap, lip balm, and people who were formerly homeless and they are learning job skills. So that's a work force development training program. They make wonderful products. We gave them away as Christmas presents last year. That is a great example. They are starting to get orders in commercial retail establishments.
Ted Simons: That is a great example. We do have to stop you right there. This sounds encouraging though and we will keep an eye on this. Thank you for joining us.
Ellis Carter: Thank you.
Ted Simons: Friday on Arizona "Horizon's" journalists' roundtable, Arizona gets the national spotlight with Senate bill 1070 getting the supreme court's attention. And Governor Brewer and GOP leaders are said to be close To a state budget deal. Those stories and more Friday On "Journalists' Roundtable." That is it for now. I'm Ted Simons. Thank you so much for joining us and you have a great evening.
Ellis Carter:Nationally recognized nonprofit law expert;
