Business and Financial News

“Buy local” campaigns normally encourage consumers to shop at small downtown stores—the funky café, indie bookseller, or boutique grocer. Getting big institutions to switch to local suppliers has rarely been part of the equation.

But small business groups and economic developers are beginning to push big buyers like governments, universities, and hospitals to see what goods and services they can purchase locally. Advocates say a small shift in spending by these organizations can yield a profound benefit for small businesses in their communities.

In Cleveland, some of the city’s largest institutions have committed to buying more of their goods and services from local suppliers. The plan, five years in the making, aims to build new businesses, jobs, and long-term wealth in the low-income neighborhoods that surround the Cleveland Clinic, Case Western Reserve University, and University Hospitals, a four-square-mile area known as Greater University Circle. Together, those institutions purchase $3 billion annually in goods and services, and most of that money leaves the neighborhood where their campuses are. Redirecting 10% of that spending into neighborhood businesses would inject $300 million into an area where the median household income is $18,000 a year.

Worker-Owned Co-Ops

Economic developers from the nonprofit Cleveland Foundation approached these so-called anchor institutions in 2005 to see what it would take to steer more spending to local businesses. “We realize that in this neighborhood right now there are not businesses that have the capacity to meet these needs,” Lillian Kuri, a program director at the Cleveland Foundation, recalls saying. Working with the anchors, the Cleveland Foundation developed ideas for a series of environmentally friendly, worker-owned cooperative businesses they could start in the inner city to serve neighboring institutions and others in the region.

Each venture aims to get a commitment of about half of its target revenue from the anchor institutions at the outset. The first of these, Evergreen Cooperative Laundry, opened in October to clean some 12 million pounds of bed linens and towels from hospitals and nursing homes each year. (The Cleveland Clinic alone does close to double that each year.) The business was capitalized with $5.8 million in funds from the city of Cleveland, bank loans, and contributions from the Evergreen Cooperative Development Fund. That was set up by the Cleveland Foundation and the anchor institutions to seed the co-op businesses, which, once profitable, must return 10% of their profits to the fund to create future ventures.

The worker co-op model helps employees build long-term wealth through equity in the company. The green aspects of the businesses appeal to clients’ interest in reducing carbon emissions—a priority for many institutions like colleges and hospitals. (The laundry, for example, uses energy-efficient washing, drying, and ironing systems and occupies a LEED-certified building.) Two other nascent ventures follow the same model. Ohio Solar Cooperative installs rooftop solar panels, and Green City Growers, to launch this year, will farm local food in a hydroponic greenhouse on 10 acres in Cleveland. When fully running, they’re each expected to employ 50 people recruited from the neighborhood. Plans for other businesses are in the works.

Competitive Bidding Factor

Evergreen Cooperative Laundry is on track to turn a profit within 18 months of launching, says CEO Jim Anderson. Everyone involved agrees that the enterprises must be profitable to succeed.

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