Why social change is good for business

From Forbes:

In her book SuperCorp, Harvard Business School Professor Rosabeth Moss Kanter provides many more examples of the benefits companies derive from addressing social issues. These include “market entry (public goodwill and relationships before commercial transactions), learning and capability building for new or different markets, and innovation – creative approaches or technology that gets embedded in successful commercial products.”

Of all the things I can think of this kind of practical orientation towards investing in social change for for-profits organizations is a good thing. Not sure about corporate responsibility.


Is Impact Investing financial returns or non-financial returns quantified?

From Huffington Post (HT: @AcumenFund):

Investors in these companies will look for a commensurate financial return, as well as measurable social impact on the ground. While some prefer the terms venture philanthropy or social investment, impact investing represents a distinct style of responsible capitalism which has become particularly popular among foundations, endowments and high net worth individual investors.

Industry pioneers, such as the $3 billion Rockefeller Foundation in New York, see impact investing as a way to find solutions to poverty reduction and other social problems; but more importantly to access the private sector capital markets that ultimately hold the wealth required to scale up these solutions globally. While charitable donations by high net worth individuals were down 35 per cent in 2010, according to Bank of America Merrill Lynch and Indiana University, the impact investing sector is expecting steady growth.

In 2010, JP Morgan forecast potential impact investment capital of $400 billion to $1 trillion globally over the next ten years. Much recent activity in impact investing has been effectively direct investing, with the typical venture capital approach sometimes supplemented by grants and capacity building. The Omidyar Network, for example, launched in 2004 by eBay founder Pierre Omidyar, "has invested $450 million in equity and grants to promote microfinance, entrepreneurship, technology and government transparency, mostly in developing countries."

Investment managers such as the Acumen Fund and the Capricorn Investment Group, which manages the Skoll Foundation’s multi-billion dollar portfolio, are active in emerging markets across Asia, Africa and Latin America.

Impact investing does present significant challenges to investors. It can be difficult to obtain basic investment information in emerging markets, and equally hard to monitor and track the performance of small companies and projects. This is compounded by the complexity of trying to quantify the non-financial "impact" of investments: it is not that simple to compare the social benefits of investing in, for example, vaccinations in Ghana versus cleaner burning cooking stoves in India.To help donors and investors tackle this issue, the Global Impact Investing Network (GIIN), a non-profit company supported by the Rockefeller Foundation, has worked with B Lab to develop industry infrastructure aimed at improving information flow and creating a more efficient marketplace.

For me a clear definition is still lacking. Is impact investing expecting financial returns from the investment or will accept non-financial returns expressed in financial terms. I cannot imagine pension funds (reponsible to support employees when retired through pension) investing in areas where they will not get a financial return. What happens to the pensioner?

This is a troubling development like "social innovation". It’s ok if social innovation is confused but "impact investing" will effect real dollars and can put projects on the wrong path.

Recently, I looked at a grant from a prominent foundation in Australia and their definition of social enterprise was any for-profit that does good or a not for profit which has a percentage of its revenues coming from sale or business. Is this the best definition that will filter the right organisations to be funded?

John Wood and Room to Read

From Knowledge@Wharton:

Wood devotes much of his book to explaining how he has modeled Room to Read on key features of Microsoft’s corporate culture. Noting that most nonprofits lack a hardline approach to managing costs and leveraging outcomes, Wood offers Room to Read as an example of how a well-run NGO should raise money, market its work and maximize results.

He is especially intent on data-driven accountability. For Wood, a successful nonprofit must answer to donors, who deserve to know where their money goes. He is careful to publicize Room to Read’s results continuously: Even his email signature file documents how many schools have been built, how many libraries have been established, how many books have been donated, and how many girls have received long-term scholarships to allow them to stay in school.

Moreover, for Wood, accountability doesn’t just satisfy existing donors — it creates new ones. An iconoclast when it comes to development, Wood doesn’t bother with direct mail campaigns or other standard trappings of non-profit fundraising. Instead, he relies on the human touch, travelling to fundraising parties organized by regional volunteers and convincing prospects, through an irresistable combination of personal charisma and a compelling business model, that their money will go places if they give it to him. This approach works with both individual donors — he once raised $150,000 in less than two minutes at a fundraising party when donors began matching one another’s gifts — and with foundations. One of Room to Read’s most generous and consistent funders is the Draper Richards Foundation, an offshoot of a firm run by renowned venture capitalists Bill Draper and Robin Richards Donohoe. Impressed by how Wood’s strong business sense had informed his non-profit mission, DRF finances Room to the Read to the tune of six figures a year.

Wood’s insight is simple, but transformative: Corporate savvy is not opposed to humanitarian aims, but may be used to assist them. Just because a charitable organization does not seek to make a profit, that doesn’t mean it shouldn’t bring in as much money as it can, and manage that money well. To do any less is to shortchange the organization’s mission. There is also a crucial correlative here for Wood: While donors deserve to know where their money goes, the organization should not accept money from sources that could try to dictate organization policy. For that reason, Wood told The New York Times, "We don’t seek government funding here in the U.S. We don’t want to get into a fight with the U.S. government over whether we are allowed to teach kids about condoms or AIDS."

Corporate Citizenship?

From Fast CoExist:

There are, according to the study, 25 companies that have the magic mix of corporate citizenship and superior marketplace performance: Adidas, Apple, Avon, Bosch, Canon, Coca-Cola, Danone, Electrolux, Ford, Google, Heinz, Honda, Lego, McDonald’s, Microsoft, Nestle, Nike, Nokia, Philips, Puma, Sharp, Sony, Toshiba, Visa, and Volkswagen.

As the comments confirm, it is very subjective and in most cases you can actually connect what they are doing with regulations, market demand, consumer expectation and perception (marketing) and pure economics. The title actually misleads by connecting good deeds as it calls with making money as if there is a causation.

Solved is solving Australias Social Issues

There are many different social issues affecting Australians, and one organisation is taking to the community to find solutions.Solved is the new campaign from the Australian Centre for Social Innovation, a non-profit organisation aiming to create and facilitate ideas and techniques that contribute to positive social change. The CEO of The Australian Centre for Social Innovation, Brenton Caffen, says the aim of the 6 week online campaign is to help solve Australias social problems by sharing ideas and solutions that come directly from the community to benefit the community.


Featured in story

Brenton Caffen: CEO of The Australia Centre For Social Innovation

Sarah Stokely: Solved Campaign Lead

via Solved is solving Australias Social Issues.

Acumen Fund: 10 years of patient capitalism

Acumen Fund was started 10 years back in 2011 as an investment model to fight poverty around the world. It is a great model to initiate social enterprises and social entrepreneurship around the world.

These are the ten things they have learnt in the last ten years. According to them in the last 10 years more and more organisations have come up in the “impact investing” sector and they are now about 1999 as of 2010.

So the lessons learned:

  1. Dignity is more important to the human spirit than wealth
  2. Neither grants nor markets alone will solve the problems of poverty
  3. Poverty is a description of someone’s economic situation, it does not describe who someone is
  4. We won’t succeed in the long term without cultivating local leaders, local money and strong communities
  5. Great people, every time, no exceptions
  6. Great technology alone is not the answer
  7. If failing is not an option, you have ruled out success as well
  8. Governments rarely invent solutions, but they can scale what works
  9. There is no currency like trust, and there are no shortcuts to earning it
  10. Patient capital investing is built upon a system of values; it is not a series of steps to be followed

Jacqueline Novogratz founded Acumen Fund and she has written about the background and growth of the sector in her book, The Blue Sweater.

From the Economist:

In “The Blue Sweater”, her recently published autobiography, she describes her past frustrations working in such pillars of finance and development as Chase Manhattan bank, the African Development Bank and the Rockefeller Foundation. She found them bureaucratic, distant and condescending to those they sought to help. So in 2001 she set up Acumen Fund, a “social venture capital” outfit, to promote what she calls “patient capitalism”. Acumen is an odd mix of charity and traditional investment fund. It takes donations from philanthropists in the usual fashion, but then invests them in a businesslike way, by lending to or taking stakes in firms. The recipients—private ventures aiming for profits—must serve the poor in a way that brings broader social benefits. Acumen goes to great lengths to measure those benefits, and thus the efficiency of its work.

Acumen’s charges are a diverse bunch. In India, Drishtee runs a network of internet kiosks in rural areas, while LifeSpring runs low-cost maternity hospitals. A to Z Textile Mills, a manufacturer of antimalarial bed nets, has grown to become one of Tanzania’s largest employers. Some ventures, including a Pakistani mortgage provider and an Indian pharmacy chain, have flopped. But many others manage to repay their loans (granted at below market rates) or generate dividends. Acumen reinvests its profits in other companies, thus stretching the initial donations further.


Ms Novogratz dismisses those such as Jeffrey Sachs, an influential economist, who think that the bottom billion are too poor to be treated as consumers, and should sometimes receive handouts instead. “When Jeff Sachs says every poor person should receive a free bed net, I agree—but in reality many end up not receiving one,” she says. “And I don’t live in a world of shoulds.”




Education as a Social Enterprise

I strongly believe that education needs a resurgence and that education is the key for developed and developing countries. However, our current system of education is not enough. As Seth Godin explains, it was designed to produce workers for factories who will follow instructions and not individuals who use their creativity and imagination.

Anika, my daughter, will be 20 years old in 2019. What would the world be then? It will definitely not be about cheaper factory work. We have enrolled her in a Waldorf school. There are other models of education but in the end we need real innovation in this area.

From Seth:

If you do a job where someone tells you exactly what to do, they will find someone cheaper than you to do it. And yet our schools are churning out kids who are stuck looking for jobs where the boss tells them exactly what to do.

Do you see the disconnect here? Every year, we churn out millions of of workers who are trained to do 1925 labor.

The bargain (take kids out of work so we can teach them to become better factory workers) has set us on a race to the bottom. Some argue we ought to become the cheaper, easier country for sourcing cheap, compliant workers who do what they’re told. We will lose that race whether we win it or not. The bottom is not a good place to be, even if you’re capable of getting there.

As we get ready for the 93rd year of universal public education, here’s the question every parent and taxpayer needs to wrestle with: Are we going to applaud, push or even permit our schools (including most of the private ones) to continue the safe but ultimately doomed strategy of churning out predictable, testable and mediocre factory-workers?

As long as we embrace (or even accept) standardized testing, fear of science, little attempt at teaching leadership and most of all, the bureaucratic imperative to turn education into a factory itself, we’re in big trouble.

The post-industrial revolution is here. Do you care enough to teach your kids to take advantage of it?

From Wikipedia on comparison of Waldorf education to mainstream:

Australian studies

A major quantitative and qualitative study of senior secondary students in the three largest Steiner schools in Australia was undertaken by Jennifer Gidley in the mid-nineties.[74][75] It investigated the Steiner-educated students’ views and visions of the future, replicating a major study with a large cross-section of mainstream and other private school students undertaken a few years prior.[76] The findings as summarised below contrasted markedly in some areas with the research from mainstream students at the time.[77]

  • Steiner-educated students were able to develop richer, more detailed images of their ‘preferred futures’ than mainstream students.
  • About three-quarters were able to envision positive changes in both the environment and human development; almost two-thirds were able to imagine positive changes in the socio-economic area;
  • They tended to focus on ‘social’ rather than ‘technological’ ways of solving problems;
  • In envisioning futures without war, their visions primarily related to improvements in human relationships and communication through dialogue and conflict resolution rather than a ‘passive peace’ image;
  • 75% had many ideas on what aspects of human development (including their own) needed to be changed to enable the fulfilment of their aspirations. These included more activism, value changes, spirituality, future care and better education;
  • In spite of identifying many of the same concerns as other students – global-scale environmental destruction, social injustice and threats of war – most of the Steiner students seemed undaunted in terms of their own will to do something to create their ‘preferred future’;
  • There were no gender differences found in the students’ preferred futures visions or in the richness and fluidity of their creative images.

An Australian study comparing the academic performance of students at university level found that students who had been at Waldorf schools significantly outperformed their peers from non-Waldorf schools in both the humanities and the sciences.[78]

In 2008, the Rudolf Steiner Schools Association of Australia funded a research project to investigate the relationships between Steiner pedagogy and related 21st century academic discourses. The report on the project is called “Turning Tides: Creating Dialogue between Rudolf Steiner and 21st Century Academic Discourses”.[79] A bibliography[80] of all the studies that were identified is also available online as is the extended project data.[81]