For the Black Community, Social Enterprise Turns Market Failures into Business Opportunities
“Within a square mile you don’t have people making a fortune, but what you have is a lot of people in that square mile. And people have to buy certain types of items, regardless of their incomes.”
-Drew Greenwald
Without the proper context, Americans misinterpret the racial wealth gap and ascribe Black poverty to Black cultural pathology. However, history reveals that these wealth disparities are rooted in unaddressed economic exploitation. But even once we come to terms with this fact, how do we reconcile the country’s history of racial oppression with its rhetoric of opportunity? How do we begin what Martin Luther King called, “the second phase” of the Civil Rights Movement and start financially investing in communities blighted by racism?
It starts with dispelling the narrative that poor, urban Blacks exist in a void beyond all hope. Quite the contrary, the Black inner city is ripe for equitable growth in the form of jobs and business development. A 2007 study by the Initiative for a Competitive Inner City spells out this opportunity clearly:
“The retail market [in the inner city] is approximately $122 billion… and approximately 35 percent of that total, or $42 billion, currently is served by businesses located outside the inner city. Unmet needs range across all retail categories…grocery stores, pharmacies, and building supply centers, among others, are still in short supply.”
In other words, the demand in these communities is much higher the than supply. But even with this huge opportunity for growth, investors and entrepreneurs continually neglect poor and Black urban markets.
“Most products and services have been designed for white consumers and businesses. As a result, product configurations, retail concepts, entertainment, and personal and business services have not been adapted to the needs of inner city customers” writes Harvard Business School Professor Michael Porter. He further asserts that this “ lack of businesses and jobs in disadvantaged urban areas fuels not only a crushing cycle of poverty but also crippling social problems.” But while these social problems, like convenient access to fresh food or health services, are troubling, the mistake is to look at these issues only as government and market failures, when they are really business opportunities.
When businesses and investors begin making a concerted effort to enter these markets, they will be poised to capture a large share of the $42 billion inner city supply gap, and they will bring much needed economic development to these communities as well.
And while it is true that there are barriers to operating businesses in the Black inner city (things like finding useable land, startup capital, quality infrastructure, and zoning regulations). These barriers, do not negate the inner city residents’ social needs nor their multi-billion dollar purchasing power. However, it does mean that the businesses and investors that enter these markets will have to be as dedicated to addressing social problems, as they are making money, and the type of business best prepared to accept this challenge is social enterprise.
A social enterprise is a for-profit company that has the intention to generate measurable social and environmental impact alongside a financial return. These businesses are more willing to grapple with the market barriers and social challenges in inner city Black communities. And, because of their community centric design, social enterprises are better position to reap the financial benefits of doing business in Black inner city markets. For Blacks still trapped in poverty social enterprise and social entrepreneurship presents one of the best means of scalable economic impact.
This blog is the final in a series of three that explores how the private sector can address the racial wealth gap in the U.S. If you would like to read from the beginning, click the link below.
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