A healthy profit: a new kind of business is redefining the private role in addressing social problems.

• Author: Hansen, Melissa
• Position: ENTREPRENEURSHIPS

Harnessing the power of private enterprise for social good may just be the key to improving our health-and reducing costs.

Pennsylvania and Maryland think so, and are trying to attract socially minded investors and entrepreneurs who want to make a profit--and make a difference.

The business model may prove to be more efficient and effective than the government approach alone.

"Pennsylvania is open for business, the business of combining the best of capitalism with American idealism," says Representative Gordon Denlinger (R).

What kinds of businesses is he talking about? Companies, for example, that offer prepackaged, healthy and inexpensive meals in neighborhoods with limited choices. Or a fresh, healthy food service that provides lunches to schoolchildren, to name a couple.

These companies with a cause strive to make a positive difference while making a profit, often in communities that struggle with problems such as a lack of healthy, inexpensive food, a high unemployment rate, low average wages, poor quality of schools, and a lack of available and affordable public transportation. All these "big picture" problems are what researchers call "social determinants of health." And together they can have a harmful-and very costly--effect on the community's health, resulting in higher-than-average rates of chronic diseases and premature death.

By addressing a void or a need in these communities, entrepreneurs are discovering they can make a profit while making a difference. Policymakers may want to examine what support or barriers may exist in their districts for these mission-driven start-up businesses.

These mission- or impact-driven businesses are "not just a fringe interest," says Don Shaffer, president and CEO of RSF Social Finance. "The whole impact-investing field is growing very fast." His firm saw a 33 percent growth rate in its Social Investment Fund in 2012 over the previous year. With assets exceeding $145 million, RSF has invested more $275 million in these so-called "impact-oriented businesses" since its inception in 1984.

Making Money While Doing Good

Private, for-profit businesses "can do good if they have the support they need to enter these untapped markets," says entrepreneur Saloni Doshi who, along with Chelsea Katz, started Fresh Takes Kitchen, a for-profit business in Denver, Colo., that sells healthy, prepackaged foods to the low- to moderate-income market--a market no big name companies were interested in targeting...