Three innovative companies that care

A BAY ST. NUMBER-CRUNCHER WHO ACCIDENTALLY became a poster boy for solar energy. A musician turned seller of hemp-based T-shirts. A philanthropist turned entrepreneur who makes ‘giving back’ part of the corporate mission.

Meet the new world of companies that care.

Sure,more big businesses today are coming ’round to the view that business has social responsibilities that go beyond merely making a profit. But it remains to be seen whether most corporate CEOs—shackled by tradition, bureaucracy and a fairly short tenure at the top—have the clout or the time to make lasting changes in how their companies do business.

The good news, though, is that for creativity, commitment and ‘giving back,’ you won’t find better leaders than Canada’s small business entrepreneurs. What their companies lack in scale and influence they make up for in sheer numbers, innovation, and infectious enthusiasm—and the commitment to make social responsibility a permanent part of their business.

Consider the adventures of Alex Winch, a 39-year-old engineer and investment analyst.

Back in the mid-nineties as an analyst, Alex Winch got in tussle with Garth Drabinsky when he questioned the theatre baron’s accounting practices at Livent. Drabinsky was livid and sued Winch for libel and $10 million. After tiring of the Bay Street rat race and then running his own successful hedge fund in New York, he semi-retired to his home in Toronto’s trendy Beach community. Deciding to manage his own money for   change, he started out buying a couple of commercial buildings, as many hands-on investors do. But what happened next was different.

In September 2002 Winch took control of a dowdy older building on Queen Street East consisting of one empty store, an apartment, and a laundromat with 18 washers and 10 dryers. He found a friend who agreed to run the laundromat and pay him a percentage of sales, but the deal fell through—and Winch became the accidental launderer.

Still, Winch approached this task with gusto. As you’d expect of a number-crunching engineer, he cleaned up the place and overhauled the heating system. An upgrade was definitely in order; water in the upstairs apartment was heated with electricity. An oil-fired boiler heated the radiators, and natural gas heated laundry water. “There was no integration, no attempt at energy conservancy,” says Winch. “You couldn’t hav run it worse.”

A few years earlier, Winch had discovered the power of natural energy when he built a solar-heated shower at his in-laws’ cottage. The device was absurdly simple: copper water pipes heated under a pane of glass (a neighbours’ old storm door), along with an insulated tank that kept the water hot for up to 36 hours. But Winch remembered the wonder of a hot shower on an island without electricity, and decided to install a solar-heating system in his new property.

He hired Solcan Ltd. of London, Ont. to install solar panels on the roof and a new gas boiler. The solar panels pre-heat the laundry water, nudging it to a full 120 degrees F before the gas system boosts it to stronger-than-dirt temperatures. The gas system also warms water for th  apartment, while a heat exchanger draws energy for space heating. Winch also installed a water-based air conditioning system. In all, the new system has cut natural gas consumption (per laundry load) by a full 30 per cent.

Officially, the $44,000 systems will take 10 years to pay for themselves, but a ‘green dividend’ is already at work.Winch says revenues have doubled in the past year, as many customers come to the Beach Solar Laundromat simply to support alternative energy. Others like the fact that Winch passes his savings on to them. (He has held his prices at $1 per wash, compared to the $1.50 charged by his nearest competitor.) Overall, Winch maintains, the business is “nicely profitable, and it’s been hugely fun.”

But Winch has done more to make his business a responsible part of the community. He recently installed a new fluorescent lighting system that reduces his lighting costs by 65 per cent; it will reduce emissions of greenhouse gases by almost seven tonnes a year. Then, because sustainability is a journey, he realized that he couldn’t just throw away his old fluorescent tubes, which contain mercury and other environmenta  nasties. So he found a local business that could use his old lights, saving the landfill at least one unnecessary load.

Winch has also become a local hero by helping new immigrants get a start in the job market. It began when he realized how underused his laundry was during daytime hours. When no one responded to his ad seeking an entrepreneur to run a wash-and-fold laundry business in his laundromat, he teamed up with a community group that helps new immigrants to Canada. They found two women recently arrived from China who were eager to work—one had her master’s degree in mathematics—but had had trouble finding jobs.

By advancing a few thousand dollars for startup costs, Winch got the two women started in a wash-‘n’-fold business. The work was hard, but it gave the women experience working in English and handling cash—as well as a track record to impress their next employers. Winch will earn back his investment through a 3.5 per cent royalty, which should leave the agency a chunk of profit to help fund its other programs.

Now Winch has had a foot in both worlds. On one hand, he’s become a public advocate of alternative energy. He leads tours of his solar syste  for students and building owners; he allowed his store to be used for a media stop by Green Party of Ontario leader Frank de Jong in the recen  Ontario election; and he has joined the steering committee of Cool Shops, a Toronto agency that helps small businesses benefit from green energy. And yet, five nights a week, he goes into his store at 10:30 p.m. to close, clean and fix any broken machines.

For the future, Winch is eyeing several options. He could open more laundromats, although he’s concerned about finding reliable help. But he’s also investigating getting into the solar power business: installing new energy systems for other building owners, and making his money from the savings his clients would enjoy. This process is becoming common in sun-drenched regions such as Arizona or Israel, but the economics in Canada remain dicey. But with increasing recognition of the ‘green dividend’ that accrues to businesses that embrace renewable energy, Winch thinks third-party ownership of solar equipment may just be the investment he’s been looking for.

SOMETIMES, SOCIALLY RESPONSIBLE BUSINESSES arise when an individual has a ‘Eureka’ moment. Almost a decade ago, James Finnis, then a music student at the University of Victoria, read about making paper from hemp, a fibrous plant with many uses. An acre of hemp produces as much paper as four acres of trees, and its paper lasts much longer and needs no bleaching with toxic chemicals. Investigating this miracle plant, Finnis discovered what most of our society has forgotten: that hemp fibres, leaves and seeds have been used for centuries, for everything from medicines, foods and textiles to building materials and fuels. But in the 20th century hemp got a bad rap, its production widel  banned because it comes mainly from cannabis, the marijuana plant (although most commercial cannabis plants contain very low levels of THC, the active ingredient in marijuana).

With his girlfriend (now fiancée) Larisa Harrison, Finnis started a business in his basement selling hemp-based foods and textiles at music festivals and craft fairs. But it was a classic business mistake. Finnis and Harrrison were trying to sell too many products to too broad a market. In 1998 they refocused their struggling business, now known as Hemptown Clothing Inc., on a single product and a unique niche. They now sel  T-shirts made from a hemp-cotton blend for use as corporate promotional merchandise. Hemptown’s shirts are stronger than those made of cotton, and they get softer with every wash. Plus, there’s a huge environmental bonus. Hemp can grow just about anywhere, using less water than cotton and fewer chemicals. “It takes a third of a pound of pesticides and chemicals to grow enough cotton for a T-shirt, and 257 gallons of water,” says Finnis.

Hemptown’s direct customers are mainly screen printers, who produce T-shirts for organizations such as the CBC, the B.C. Lions football club, Hyundai Motors and Warner Brothers. Some Hemptown end-users like to make a political statement about the value of hemp, while others just like the feel of its shirts. Either way, they have turned Hemptown into a fast-growing, $3 million a year business, with 30 employees.

Like many new entrepreneurs, Finnis, 32, is also a big supporter of the triple bottom line. “It’s fundamental to our business,” he says. “We ar  putting profit, human resources and the environment all on the same level.” Hemptown avoids use of chlorine and heavy metals in production, and recently conducted an environmental audit of its Vancouver office. Hemptown is also committed to enlightened employment practices, especially at its factories in China. “We would never use sweatshops,” says Finnis. “We think businesses should prosper through hard work and innovation, not just by using cheaper labour or materials.”

Still, Finnis may be forgiven if he’s become more focused lately on profits. To acquire the capital needed to expand the company, and maybe move hemp and T-shirt production to Canada, he has recently taken the company public on the Nasdaq market (HPTWF). To promote sustainable social change, says Finnis, the company has to grow faster than cash flow alone would allow. And to attract investors, he says, “We have to be very profitable. I think that’s the only way new environmental technologies will become successful.”

Hemptown is already involved in developing a new machine for producing hemp fabrics more efficiently. It was Eli Whitney’s cotton gin of 1793, which removed the seeds from cotton fibre, which helped cotton become North America’s most popular textile. Now Finnis says “the cotton gin o  hemp production” will help produce quality hemp products faster than ever. That will make hemp prices more competitive with cotton, and should help Hemptown penetrate deeper into corporate America. “Offering hemp Tshirt is an out-front way of promoting your company as bein  environmentally friendly,” says Finnis. “Consumers want to support companies that show they care.”

INDEED, THAT’S A TENET THAT MARTIN CONNELL and Linda Haynes prove every day. In 1993, the Toronto couple (he a mining heir and philanthropist, she a broadcaster) founded Ace Bakery, a six-person bakery/restaurant devoted to producing quality artisan breads. Ten years later, the company has 120 full-timeequivalent employees and sells to retailers and restaurants across Ontario, as well as in Quebec, upstate New York and central Michigan. Ace uses unbleached flour, natural starters and no preservatives in its handmade breads, which range from Alpine Yeast-Free Rye to Rosemary Focaccia. But what really sets the company apart is its commitment to donating 10 per cent of pre-tax profits to community causes. That’s about 10 times what the average Canadian company donates to charity. As the former chairman of the Canadian Centre for Philanthropy, Connell played a big role in the ‘Imagine’ campaign of the 1980s, which helped increase average corporate donations from 0.5 per cent of pre-tax profits to 1 per cent. With Ace, Connell is raising the bar again.

“Business has a profound impact on the community in which it operates,” says Connell. “And we have a responsibility to support a strong, sustainable community around us.” That includes, he adds, “both community initiatives and the way companies treat their workforce.”

Despite his philanthropic background, Connell, 63, insists that Ace was founded as a ‘real’ company, not a charitable venture. “We saw a market for artisan bread that was not being served,” he says. “We’re just like everybody else, trying to make it work.” The payoff: the company has grown beyond expectation, enabling it to fund more good causes. Its contributions now approach $150,000 a year.

At first, Ace’s tithings went to the Calmeadow Foundation, which Connell founded in 1983 to fund microbusinesses in developing countries. As Calmeadow become self-financing, Connell asked the experts at the Toronto Community Foundation (of which he is chair) to identify local food-related agencies that are competent, creative—and small enough that a $20,000 donation might make a big difference. Ace now supports organizations involved in community baking and gardening, aiding farmers in their transition to organic agriculture, and helping people on
lower incomes get the most nutrition for their money. “We wanted to fund innovative leaders,” says Connell, “people out in front in terms of their approach to the issues.”

A veteran of many non-profit initiatives, Connell has advice for any business people looking to support community programs. Look for organizations with clear goals and sound management, he says. Make sure they have missions that make a difference—and are also sustainable. “They should have a clear understanding of reasonable objectives,” he adds. “It’s critical that they work from a plan.” Also look at governance practices, he adds; the best organizations have a strong sense of accountability and engaged board members who fulfil their duties enthusiastically.

In two decades of philanthropy, Connell has seen real progress in companies’ approach to social issues. “There are more people aware of corporate responsibility to the community than there were 20 years ago,” he says. “And I think it’s becoming pretty clear that it makes good sense—it’s good for morale, it’s good for the organization. Employees and customers feel good about a company that’s engaged in the community.”

Rick Spence is the former editor and publisher of PROFIT magazine.