Growing Opportunity 2007

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  • 1. Growing Opportunity Entrepreneurial Solutions to Insoluble Problems
  • 2. Contents Acknowledgements To the 130 social entrepreneurs who offered their time and Forewords 1 This project has been a collective perspectives, a heartfelt thank effort — and an opportunity you for your candor, courage Executive Summary 4 to grow in various dimensions. and inspiration. And, our best First and foremost, we are wishes for your success. A list 1 Introduction 5 profoundly grateful to Jeff Skoll, of social entrepreneurs who Sally Osberg and their colleagues participated in our research 2 Survey Findings 11 at The Skoll Foundation, without is provided in Annex 2. We whose financial support and have omitted, however, those 3 The Business Case 23 wider inputs this program of organizations who asked for work would not be possible. confidentiality in their 4 Deeper Dive: Health 30 We also are enormously grateful responses. for the support of our corporate 5 Deeper Dive: Energy 36 In addition, we would like sponsors, Allianz (where we to thank others who made thank Paul Achleitner, Kay 6 Conclusions & Next Steps 44 helpful — in some cases Müller, and Nicolai Tewes) and usefully provocative — inputs: Annexes DuPont (where we thank Linda Gib Bulloch of Accenture; Bill Fisher and Dawn Rittenhouse). Drayton of Ashoka; José Manuel 1 Survey Instrument 48 Entrecanales of Acciona; Tim Our warm thanks go to the Freundlich of the Calvert Social 2 Participants 49 Project Advisory Board, whose Investment Foundation and members were: Jeroo Billimoria Good Capital; Jonathon Hanks of Child Savings International; of University of Cambridge Debra Dunn, Associate Programme for Industry; Gary Consulting Professor, Stanford Hirshberg of Stonyfield Farm, University Institute of Design Inc.; Kurt Hoffman of The Shell and Board member of The Foundation; Jean Horstman Skoll Foundation; Jed Emerson of InnerCity Entrepreneurs; of Generation Investment Oliver Karius of VantagePoint Management; David Grayson Global; Colin Le Duc of of Business in the Community; Generation Investment Pamela Hartigan of The Schwab Management; Martin Newman Growing Opportunity: Foundation; Jane Nelson of the of The Company Agency; Entrepreneurial Solutions to Corporate Social Responsibility Jacqueline Novogratz of Insoluble Problems Initiative, Kennedy School of Acumen; Eric Rassman of UCLA; First Edition 2007 Government, Harvard University; Linda Rottenberg of Endeavor Professor David Wheeler of Global; Samer Salty of zouk ISBN Dalhousie University; and ventures; Björn Stigson, World 1-903168-17-1 Jan-Olaf Willums of InSpire Business Council for Sustainable Invest and TH!NK. Development; Tom Vander Publisher Ark of The X Prize Foundation; SustainAbility Ltd The Project Team from and, from the SustainAbility SustainAbility comprised Faculty, Sir Geoffrey Chandler, Designer Maggie Brenneke, John Francesca van Dijk, Bob Massie Rupert Bassett Elkington and Sophia Tickell, and Andrea Spencer-Cooke. with invaluable help from Printer Meghan Chapple-Brown, Yasmin We hope that those who took Pensord Press Crowther, Kelly Cruickshank, part recognize most of their Jeff Erikson, Sam Lakha, Mark contributions in what follows. Paper Lee, Michael Sadowski, Jodie We gratefully acknowledge the Robert Horne Revive 50:50 silk Thorpe and Peter Zollinger. use of the ’10 Routes to Money’ The survey instrument (see framework, taken from The Copyright 2007 SustainAbility Annex 1) was designed with Power of Unreasonable People: and The Skoll Foundation. the help of John Thomas of How Entrepreneurs Create All Rights Reserved. No part LaunchBox, whose input to Markets to Change the World, of this publication may be every phase of the surveying by John Elkington and Pamela reproduced, stored in a retrieval and analysis was indispensable. Hartigan, to be published by system or transmitted in any Harvard Business School Press form or by any means, in February 2008. Finally, our electronic, electrostatic, gratitude to Rupert Bassett for magnetic tape, photocopying, his design. As ever, all errors recording or otherwise, without of omission or commission are permission in writing from the ours alone. copyright holders.
  • 3. Growing Opportunity 1 Skoll Foundation foreword Social entrepreneurs who are changing the landscapes of these industries, Fast forward: it’s 2020, and the world SustainAbility suggests, have a distinctive has changed. With perfect hindsight we way of ‘reperceiving’ many of the enormous take stock of what we did, or didn’t, to and urgent challenges before us — climate bring about what’s different — good, change, access to and delivery of healthcare bad and negligible. It’s a good bet that for developing world populations, and we will be saying that 2007 marked a overwhelming poverty — as opportunities turning point, and that John Elkington, ‘to leverage the power of markets and SustainAbility, and a relatively new business to have transformative, system- phenomenon called social entrepreneur- wide impacts.’ The report dubs this ship can take the credit for changing emergent, integrated approach ‘Mindset the way we think about business, 3.0,’ differentiating the advance from investment and social progress. predecessor 1.0 compliance-focused and 2.0 ‘cause related’ stakeholder-involved Sally Osberg For two decades, SustainAbility has tuned modes still dominant even at progressive its radar to pick up signals of what the corporations. future might hold, and then used this intelligence to advise mainstream Mindset 3.0, of course, is fundamentally corporations on how to re-tool for long- entrepreneurial; in ‘reperceiving’ well- term competitive advantage — with that entrenched but unsatisfactory systems advantage encompassing what founder as opportunities, Mindset 3.0 cracks the John Elkington has termed the ‘triple code of resistance inherent in any well- bottom line’ of economic, social, and established equilibrium — from fossil fuel environmental performance. So when dependence to health care delivery to over- John began tracking signals from social consumption. That social entrepreneurs entrepreneurs and considering their should excel at 3.0 thinking comes as relevance to corporations doing business no surprise. After all, social entrepreneurs in a globalized world, we at the Skoll are entrepreneurs first and foremost; it’s Foundation took note. just that their value propositions target neglected, disadvantaged or suffering This report is the first product of the Skoll segments of society. Underlying Mindset Foundation-SustainAbility partnership, and 3.0, I’d suggest, is the realization that this we hope our fellow travelers in the worlds segment of society matters, that it is no of business and social entrepreneurship longer possible to ignore two-thirds of the find it informative, useful, and provocative. planet’s population or fail to account for the consequences of industrialization in On one level, the report probes familiar the developing world. Our very survival themes: social entrepreneurs feel as a species and as a planet is at stake. hamstrung by their lack of access to capital, concerned for the visibility and Yes, mainstream business absolutely needs differentiation of their solutions in a what social entrepreneurs know and do. competitive landscape, and worried about And social entrepreneurs need much of their ability to attract the talent and what corporations have and take for commitment needed to expand their granted. Ultimately, this first SustainAbility impact. No surprises here, but humbling, report suggests that a better future — even sobering reminders for those of us for business, society, and the planet — committed to investing in these folks, may very well depend on how well both their models and their ventures. Serious learn and work together. challenges persist, challenges that constrain what social entrepreneurs will be able to Onward! achieve even as their ranks increase and Forewords their champions multiply. Sally Osberg President and CEO The report becomes more intriguing in the soundings it takes of the healthcare and energy sectors. Here the increasingly complex environments — geographic, economic, socio-political — in which business must operate today seem to cry out for what social entrepreneurs have to offer: innovative, highly adaptive models that directly and indirectly serve mainstream business’s larger interests.
  • 4. Growing Opportunity 2 Forewords SustainAbility foreword New initiatives network them in novel ways, among them xigi 4 and i-genius.5 The entrepreneurs we surveyed are And a growing wave of money chases for- experiencing growing pains, but their profit cleantech investments and markets capacity to see new market opportunities for healthy living, such as organic food. and experiment with novel business models and leadership styles makes Growing numbers of mainstream them an amazing source of insights corporations are switching on to the area — for mainstream business. and trying to work out what the business case might be for investment, partnership, A growing array of apparently insoluble or other forms of engagement. Take socio-economic, environmental, and DHL, with its new initiative, the Young governance challenges presses in on Entrepreneurs for Sustainability (YES) decision-makers — including climate Awards, initially launched in five Asian change, the risk of global pandemics, the countries and designed to support young Maggie Brenneke growing threat to natural resources like entrepreneurs working to help meet the water and fisheries, and the ever-present UN Millennium Development Goals.6 issues of poverty and hunger. Growing Or take the case of Groupe Danone, the Opportunity — the first in an annual series French dairy company, which is leading of surveys conducted by SustainAbility in the new trend with its breakthrough partnership with The Skoll Foundation 1 — partnership with the Grameen Group in explores the potential for more entre- Bangladesh. The aim: to supply fortified preneurial solutions to such challenges. yoghurt products to the nutritionally The key messages: At a time when such deprived. challenges seem to narrow our horizons, they are creating a wealth of new Coincidentally, the launch of Growing opportunities, but to enjoy them longer Opportunity at the Skoll World Forum term we must ensure real opportunity will mark the 20th anniversary of for a very much greater proportion of SustainAbility’s founding. The report is the global population. a companion piece to an ongoing study of the future of globalization, due to This first survey has been financially be published in mid-2007. Through its John Elkington supported by Allianz and DuPont, as noted evolving Skoll Program, SustainAbility in our Acknowledgements. We are proud to plans to develop and communicate a work alongside these partners and, over deeper understanding of the links between time, we believe that a growing number of social entrepreneurship and the six sectors mainstream business and financial on which we now focus: Capital Markets institutions will follow their lead in & Finance, Chemicals; Energy; Food & recognizing the extraordinary potential Beverage; Healthcare; and the Knowledge value of what social and environmental Economy.7 Our overarching aim: to help entrepreneurs are doing. That said, it is build bridges between the mainstream clear that many people in mainstream corporations and financial institutions, business still struggle to understand which make up most of our client and what is going on in this space and its partner base on the one hand, and — relevance for them. on the other — the extraordinary entrepreneurs and enterprises described More positively, a number of recent in the following pages. developments have helped ensure that growing numbers of business people do Maggie Brenneke Sophia Tickell at least invest the effort to learn.2 Indeed, Director and Skoll Fellow these are extraordinary times, with social 1 www.skollfoundation.org and environmental entrepreneurs alike on John Elkington 2 www.sustainability.com/ a roll. Muhammad Yunus — probably the Founder and Chief Entrepreneur downloads_public/skoll_reports/ world’s best-known social entrepreneur — business_primer.pdf won the 2006 Nobel Peace Prize,3 following Sophia Tickell 3 http://nobelprize.org/nobel_prizes/ in the steps of Wangari Maathai in 2004. Chair peace/laureates/2006/ The work of social entrepreneurs is also 4 www.xigi.net increasingly spotlighted at events like the 5 www.i-genius.org/home/ World Economic Forum in Davos, by the 6 www.dhl.com/yesawards Clinton Global Initiative and at summit 7 www.sustainability.com/sa-services/ meetings organized by Acumen, Ashoka, sectors.asp Endeavor Global, the Schwab Foundation, and the Skoll Foundation. The efforts of social entrepreneurs are extensively covered in the media — in the pages of Time, Newsweek, Fast Company, and the Financial Times.
  • 5. Growing Opportunity 3 Forewords Allianz foreword DuPont foreword As a leading financial services and The need for truly sustainable options insurance company, Allianz is acutely for 21st century life remains one of the aware of how global trends such as most critical challenges facing the global aging populations, climate change and community. The work of the social and the globalization of supply chains are environmental entrepreneurs profiled in affecting our customers and our Growing Opportunity is truly inspirational. communities. The sorts of questions we address on a daily basis include: As a science company, DuPont has an How can people ensure that their loved interest in being part of the solutions by ones and assets are protected from the putting our science to work in ways that full spectrum of risks, including ever- can design in — at the early stages of increasing manmade and natural disasters? product development — attributes that Do people have access to affordable and help protect or enhance human health, Paul M. Achleitner reliable health care — and, if not, what safety, and the environment. Through can be done to meet their needs? our science, we will design products and And where will the processes of processes that pass rigorous criteria for the globalization take our customers, our use of renewable resources, energy, water, industry and our company? and materials. We believe this is a direct route to a successful, profitable business We see it as our responsibility to empower that adds value to our customers, their our customers to prepare for and respond to customers, consumers, and the planet. these and other challenges. But we cannot do this alone. While we bring significant DuPont has broadened its sustainability experience, knowledge and passion to bear, commitments beyond internal footprint we also seek inspiration from partners who reduction to include market-driven can help us to think outside the box and act targets for both revenue and research as catalysts for innovation. and development investment. The goals are tied directly to business growth, Social entrepreneurs are one potential specifically to the development of safer wellspring of insight and inspiration. and environmentally improved new Linda Fisher Individuals from Bonn to Bangalore are products for key global markets, including seizing the chance to turn challenge into products based on non-depletable 8 Note: unless otherwise stated, opportunity, in the process identifying and resources. all $ references are to US$. pioneering new markets. Microfinance, as an example, is now a $9 billion market And we are investing to ensure that that is increasingly empowering citizens DuPont moves towards sustainable growth. to realize their full potential in society. By 2015, we have committed to: Our hope is that collaborating with creative thinkers will help our people to realize their — Double our research and development full potential — and to better serve the investment in environmentally smart needs of present and future customers. market opportunities; We are delighted to work alongside The — Double revenues to $8 billion 8 from Skoll Foundation and SustainAbility. This non-depletable resources; project has helped us to take a first look at what collaboration between mainstream — Grow annual revenues $2 billion or business and social entrepreneurs might more from products that create energy- look like. While this is new territory for us, efficiency and/or reduce greenhouse it is exactly the sort of opportunity space gas emissions for its customers; and that our business needs to explore. We look forward to ongoing conversation on ways — Introduce at least 1,000 new safety to develop and deploy new generations of products or services. sustainability solutions. Linda Fisher Paul M. Achleitner Chief Sustainability Officer Member of the Board of Management
  • 6. Growing Opportunity 4 A growing array of socio-economic, 3 The field is growing, but still relatively At a time when such environmental and governance small. To put rough numbers on the challenges seem to narrow challenges presses in on decision-makers three areas of social enterprise, cleantech — including climate change, the risk and philanthropy, we estimate that less our horizons, they are of global pandemics, the growing threat than $200 million is going into social creating a wealth of new to natural resources like water and enterprise worldwide from dedicated fisheries, and the ever-present issues of foundations each year, compared with opportunities, but to enjoy poverty and hunger. Growing Opportunity over $2 billion into cleantech in the USA them longer term we must — the first in an annual series of and EU and well over $200 billion into surveys conducted by SustainAbility philanthropy in the USA alone. ensure real opportunity in partnership with The Skoll Foundation for a very much greater — explores the potential for more 4 Money remains the main headache. entrepreneurial solutions to such Accessing capital is the No.1 challenge proportion of the global challenges. for the entrepreneurs we surveyed, population. with almost three-quarters (72%) The key messages: at a time when such putting this at the top of their priority challenges seem to narrow our horizons, list. Foundations are still the favorite they are creating a wealth of new source of funding for social entre- opportunities, but to enjoy them longer preneurs (mentioned by 74% of term we must ensure real opportunity for a respondents), but there is a wide very much greater proportion of the global recognition of the need to diversify population. The report attempts to assess funding sources. the current state of social entrepreneurship — the possibilities presented by new 5 Financial self-sufficiency is seen as a mindsets, the challenges entrepreneurs face real prospect within five years. 9 We adopted the 1.0 – 3.0 terminology in scaling their organizations and the The proportion of respondents expecting during an Australian tour early in 2006. opportunities for greater collaboration with to be funding their own operations, Fast Company also talk of Business 3.0 in corporations and others. with little or no dependence on grants, their 'Fast 50' survey report, Fast Company, jumped from 8% to 28%. March 2007. The terms label different The survey findings are discussed in Chapter aspects of the same phenomenon. 2 (pages 11–22) and the — increasingly 6 There is a real appetite to partner persuasive — business case for mainstream with business. Social and cleantech corporations and financial institutions to entrepreneurs are equally interested get involved is explored in Chapter 3 (pages in developing partnerships with business 23–29). We look at three different mindsets — but with different expectations. that have characterized business thinking Social entrepreneurs, in particular, in relation to the relevant issues. If 1.0 are acutely aware that they often was about compliance and 2.0 about lack the experience and skills needed. citizenship, 3.0 is about creative destruction A constant refrain was the growing need Executive Summary and creative reconstruction.9 Chapters 4 for brokering between the entrepreneurs and 5 then probe a little deeper into two and potential business partners. key sectors, health and energy. 7 Beware blind spots. There is a risk Our main conclusions are that: that we may become overly focused on narrow definitions of social and 1 Social entrepreneurship is on a roll. environmental entrepreneurship. For Social entrepreneurship is emerging as example, it’s easy to get excited about a powerful catalyst of the sort of change small start-ups in the renewable energy that governments and business are field, but we should remember the huge increasingly committed to — but rarely contributions already being made by know how to deliver. much larger companies like Acciona in Spain, Vestas based in Denmark or GE 2 The potential for breakthrough based in the USA. And there is also a solutions is considerable — and need to focus on ways of supporting growing. Among the routes to social intrapreneurs, change agents breakthrough solutions and scaling working inside major corporations and discussed by our respondents, the financial institutions. The potential following surfaced repeatedly: (1) leverage at their disposal is huge. grow individual social enterprises; (2) establish multiple enterprises; 8 For real system change, we must (3) get big organizations — whether focus on government and public policy. companies, public agencies or NGOs — Governments need to do more to shape to adopt the relevant models and public sector targets, tax incentives and approaches; and (4) spur public policy pricing signals to ensure that markets legislation designed to fix market drive change — and that the sort of failures. ventures covered in Growing Opportunity reach their full potential.
  • 7. Growing Opportunity 5 How do you grow economic, social, Some definitions can be found on page 7, One thing that is likely educational, and political opportunity but as Jed Emerson — one of the field’s to bewilder mainstream to the degree required to ensure that most influential thought-leaders — warned the 21st century is significantly less us, an over-emphasis on definitions can be business brains entering turbulent and violent than the 20th? distracting. ‘We risk wasting the coming the world of social enter- Part of the answer will be to invest in years in endless discussions of how many entrepreneurial solutions to the world’s angels dance on the head of a pin,’ he prise is the near-fetish pressing problems, and to build the argued, ‘as opposed to what wonderful for discussing definitions. system conditions in which solutions garments we might collectively stitch are encouraged to replicate and scale. together.’ Huge effort has been In this sense, the social and environ- invested — and continues mental entrepreneurs discussed in The key point is that a range of social, Growing Opportunity are models of how environmental, and governance challenges to be invested — in defining to push towards a more sustainable increasingly demand something more social and environmental future. than corporate citizenship responses. They require innovative, entrepreneurial, entrepreneurship and in But that’s not always how they are seen.10 and — often — disruptive strategies which identifying and classifying Business people encountering the world of incumbent companies are often ill-prepared social entrepreneurship for the first time to develop or deliver. the relevant entrepreneurs often emerge confused, at least to begin with. The sort of questions they raise This isn’t an either social entrepreneurship include: Why all the excitement? How are or big business agenda, but will involve these people different from NGOs? Isn’t both together. Looking at the worlds of entrepreneurship what business already our three sponsoring organizations, the does? How can you expect the world’s evidence is clear. A company like the US 10 www.sustainability.com/ poorest to represent any sort of market? chemical giant DuPont, with its long- downloads_public/skoll_reports/ And how can ventures operating at this standing ‘sustainable growth’ strategy, business_primer.pdf relatively small scale ever hope to change has the capacity to bring new solutions to the world, as they proclaim their ambition scale. To take just two of DuPont’s 2015 to be. All great questions, but before we goals: it aims to grow annual revenues from start looking for answers, it is worth products that create energy efficiency or remembering the critics at the time could cut greenhouse gas emissions by $2 billion, easily have expressed — indeed often did — and to nearly double revenues from non- the same skepticism about the likes of depletable resources to at least $8 billion. Pasteur, the Wright Brothers or, in more The involvement of German financial recent times, Steve Jobs and Steve Wozniak, services group, Allianz, underscores the who not only founded Apple but also growing role of the financial sector in catalyzed the early growth of the personal supporting entrepreneurial solutions to the computer industry. broad spectrum of sustainability challenges. And Jeff Skoll’s background as a co-founder No doubt a great deal of debate went into of eBay spotlights the emergence of very what a germ was, into what sort of future different thinking on how business models Introduction aircraft might have or whether PCs would can be designed to replicate and scale — ever challenge the computing power of even, if the X Prize Foundation has its way IBM’s ‘Big Iron.’ One thing that is likely (page 29), in such demanding areas as to bewilder mainstream business brains poverty alleviation. entering the world of social enterprise is the near-fetish for discussing definitions. Huge effort has been invested — and continues to be invested — in defining social and environmental entrepreneurship and in identifying and classifying the relevant entrepreneurs. Important work, no question, but you tend to know these people when you meet them. The air crackles with energy. They aim to turn apparently insoluble crises into tomorrow’s political, social, and market opportunities. 1
  • 8. Growing Opportunity 6 Introduction So why are a growing number of business In preparing this study, we interviewed ‘At its core, the corporate leaders suddenly so interested in the 20 entrepreneurs in depth — and over 100 pursuit of sustainable linked worlds of social and environmental more completed an online survey (page 48). entrepreneurship? And, with intensifying It is clear that they are as determined as development is not just investor interest and lively media ever to drive change, but it is also clear that about “doing good.” coverage, what is the current state of many of their enterprises are experiencing the key sectors now busily developing significant growing pains along the way. It makes companies more entrepreneurial solutions to the world’s entrepreneurial, nimble looming sustainability challenges? These are questions SustainAbility is exploring Key drivers and competitive.’ in its three-year Skoll Program (2006- Björn Stigson, WBCSD 2009).11 Growing Opportunity is the first in Focusing down on today’s world, at least a planned survey of studies into key aspects four factors seem to be central in driving of this increasingly important field. the growing mainstream interest in social and environmental entrepreneurship: Why should business be interested in all of this? We asked Björn Stigson, — First, 20 years after the Brundtland 11 www.sustainability.com/insight/skoll.asp President of the World Business Council Commission first put sustainable 12 John Elkington, The Chrysalis Economy: for Sustainable Development (WBCSD). development onto the political agenda,13 How Citizen CEOs and Corporations He replied: ‘At its core, the corporate a number of major challenges once Can Fuse Vales and Value Creation, pursuit of sustainable development is seen to be (and often dismissed as) Capstone/John Wiley & Sons, 2001. not just about “doing good.” It makes the preserve of activist NGOs and wider 13 Our Common Future, Report of the companies more entrepreneurial, nimble civil society have pushed forcefully into World Commission on Environment and and competitive. One of our largest the political and business mainstream — Development (‘Brundtland Commission’), manufacturing members has taken the a process often reinforced by the Oxford University Press, 1987. concept of eco-efficiency so seriously that withdrawal or weakening of government 14 See Harvard Business Review, it began focusing on selling less material activity. Successive summit meetings of December 2006. product and more knowledge, with great the World Economic Forum, for success. A Latin American member example, have focused on an increasingly understood base-of-the-pyramid business interconnected agenda linking such as a theory, but then found by experience issues as poverty, hunger, pandemic risks, that it makes good bottom-line business terrorism, human rights, energy security, sense. Coping with sustainability challenges and the growing threat of climate builds stronger companies.’ destabilization. In 2001, SustainAbility concluded that the — Second, despite the huge progress early decades of the 21st century would achieved in corporate citizenship and see a series of interlinked economic, tech- corporate social responsibility over the nological, social, political, and managerial past 10–15 years, there is a growing transitions that would transform the global concern that we may be reaching the economy, in very much the same way as the ‘limits of CSR.’ The Harvard Business rapacious caterpillar is transformed inside a Review 14 neatly captured this mood with chrysalis. We are now embarked on a period a twinned pair of articles by Michael of profound economic metamorphosis, of Porter and Mark Kramer (‘Strategy and what the economist Schumpeter dubbed Society: The Link Between Competitive ‘creative destruction.’ Think of the Advantage and Corporate Social entrepreneurs profiled in the following Responsibility’) and Clayton Christensen pages as the global economy’s equivalent (‘Disruptive Innovation for Social of the ‘imaginal buds’ that drive the process Change’). The conclusion: too many that converts a caterpillar into a butterfly companies have seen the new, inside the chrysalis.12 interconnected agenda as remote from their core business interests. The reality is that these complex issues pose increasingly strategic choices that need to be addressed in suitably radical and higher leverage ways — something that most corporate citizenship departments seem ill-equipped to do.
  • 9. Growing Opportunity 7 Introduction Panel 1.1 Ashoka16 defines social entrepreneurs as, One key reason why Definitions ‘individuals with innovative solutions to mainstream business needs society’s most pressing social problems. Entrepreneurs are people who, through They are ambitious and persistent, tackling to pay attention is that the practical exploitation of new ideas, major social issues and offering new ideas these people aim to achieve establish new ventures to deliver goods for wide-scale change. Rather than leaving and services currently not supplied by societal needs to the government or higher leverage than existing markets. That said, people like business sectors, social entrepreneurs find conventional philanthropy Greg Dees (Adjunct Professor of Social what is not working and solve the problem Entrepreneurship and Nonprofit Manage- by changing the system, spreading the and NGOs, often aiming ment, Fuqua School of Business, Duke solution, and persuading entire societies to transform the systems University) argue that there is a spectrum to take new leaps.’ of enterprise, from the purely charitable whose dysfunctions help through to the purely commercial.15 Our The Skoll Foundation puts it this way: create or aggravate major version of that spectrum — or landscape — ‘Social entrepreneurs share a commitment can be seen in Figure 1.1. to pioneering innovations that reshape socio-economic, environ- society and benefit humanity. Whether mental, and political On the purely charitable side, ‘customers’ they are working on a local or inter- pay little or nothing, capital comes in national scale, they are solution-minded problems. the form of donations and grants, the pragmatists who are not afraid to tackle workforce is largely made up of volunteers, — and successfully resolve — some of the and suppliers make in-kind donations. world’s biggest problems.’ 17 At the purely commercial end, all these transactions are at market rates. Most Environmental entrepreneurs may be of the really interesting experiments, interested in social objectives, but their however, are now happening in the middle main focus is environmental. Many ground, where hybrid organizations pursue consider environmental entrepreneurship ‘blended value’ and where less-well-off to be a subset of social entrepreneurship, customers are subsidized by better-off but they are distinct. A major rebranding customers. of the sector began in 2002, as the ‘cleantech’ sector. The Cleantech Venture Social entrepreneurs are entrepreneurs Network (CVN) defines cleantech as whose new ventures (social enterprises) embracing ‘a diverse range of products, prioritize social returns on investment, i.e. services, and processes that are inherently 15 J. Gregory Dees and Beth Battle improving quality of life for marginalized designed to provide superior performance Anderson, ‘Framing a Theory of populations by addressing issues such as at lower costs, greatly reduce or eliminate Social Entrepreneurship: Building on health, poverty, and education. One key environmental impacts and, in doing so, Two Schools of Practice and Thought,’ reason why mainstream business needs to improve the quality of life. CVN includes in Rachel Moser-Williams (Editor), pay attention is that these people aim to the following sectors: energy generation; Research on Social Entrepreneurship, achieve higher leverage than conventional energy storage; energy infrastructure; ARNOVA occasional paper series, philanthropy and NGOs, often aiming to energy efficiency; transportation & Vol. 1, No. 3, The Aspen Institute, transform the systems whose dysfunctions logistics; water purification & manage- Washington DC, 2006. help create or aggravate major socio- ment; air quality; materials & nano- 16 www.ashoka.com economic, environmental, and political technology; manufacturing/industrial; 17 www.skollfoundation.org/ problems. agriculture & nutrition; materials recovery aboutsocialentrepreneurship/whatis.asp and recycling; environmental IT and enabling technologies.’
  • 10. Growing Opportunity 8 Introduction Figure 1.1 — Zone 1 (The Drain) is where money — Zone 4 (The Pump) is where The opportunity landscape drains from the system, because of predominantly non-profit or hybrid poor management — or because of the non-profit/for-profit ventures leverage It’s remarkable how much of the financial bribery and corruption that blights so resources to create blended value — world’s vocabulary relates to water and to many economies and new ventures. and, through lobbying, promote wider hydraulic imagery. We have liquid assets Enron operated in this space, as do the systemic change. Organizations like and liquidations, we manage cash flows fraudulent ‘briefcase NGOs’ that blight Grameen Bank, OneWorld Health, and solvency, we float companies and countries like India. and PATH create change here. exchange rates, there is sunk capital and there are investments below water, money — Zone 2 (The Well) is where — Zone 5 (The Geyser) is where goes down the drain, we try to deflate communities under stress — or those deep-seated seismic forces (think bubbles, and we — or at least some people that help them — dip into capital demography, economic development, — launder money. reserves and the benevolence of technology trends, and eco-pressures ordinary citizens, although (like wells) like climate change) build a head In this spirit, Figure 1.1 plots five zones public benevolence can be over- of pressure that powerfully, if un- of the opportunity landscape for entre- pumped to the point of exhaustion predictably, erupts in showers of preneurs. On the vertical axis, we plot or ‘donor fatigue.’ Médecins sans new wealth — laying down deposits of ‘Impact’ (think leverage, blended value Frontières and the Red Cross are value and helping irrigate the entire creation,18 and system change), from Low leading players here. catchment area. Powerful players here to High, and on the horizontal axis we include Acciona, GE, Vestas, and much plot the degree to which the ‘Drivers’ — Zone 3 (The Siphon) is the area of of the cleantech sector. of action are ‘purely’ Moral or ‘purely’ corporate philanthropy, where Financial. Clearly, entrepreneurs of businesses create shareholder returns, different types will spot opportunity but channel off a percentage, partly right across this landscape. to ensure their continuing license to operate. Think of the Danone Communities Fund, Shell Foundation, or Google.org. Zone 5 High Zone 4 Geyser Zone 3 Zone 2 Pump Zone 1 Impact Well Siphon Drain Drain Drain Low Conscience Drivers Capitalism
  • 11. Growing Opportunity 9 Introduction 18 For more on blended value, see — Third, a number of major corporations (2) The ‘cleantech’ sector, in part a www.blendedvalue.org have begun to rebundle existing rebranding of environmental and energy- 19 http://ge.ecomagination.com/ activities, and in some cases launch new related enterprise, has seen rapid growth @v=022120072196@/site/index.html ones, designed to meet sustainability- thanks to growing concerns around 20 One of the most notable actors in this related needs. A case in point has been energy security and climate change — sector is the Cleantech Venture Network. GE, with its ‘ecomagination’ initiative.19 and the recent ‘greening’ of US state and www.cleantech.com To illustrate the scale at which such mayoral politics.20 21 The five-yearly summary of events is companies can drive change, if minded to illustrative only, to give a sense of what do so: when GE released its 2005 else was going on at the time. ecomagination report, it revealed that Closer than you think? revenues from the sale of energy efficient and environmentally advanced At the 2007 World Economic Forum summit products and services had hit $10.1 in Davos a key question asked was: What billion in 2005, up from $6.2 billion in could be done to spur entrepreneurial 2004 — with orders nearly doubling to solutions to global sustainability $17 billion. challenges? The business media picked up on the theme. ‘Imagine a world,’ the front — Fourth, we have seen the emergence cover of BusinessWeek encouraged readers of two separate movements that have in its Davos issue, ‘in which socially helped push entrepreneurial solutions responsible and eco-friendly practices further into the spotlight. (1) The social actually boost a company’s bottom line. It’s enterprise sector has been building for closer than you think.’ This trend aligns decades, but has been given a major closely with the emerging ‘Fourth Wave’ boost by the work of Ashoka and agenda SustainAbility has been tracking. initiatives launched by The Schwab Foundation, The Skoll Foundation, Just as a series of waves run through the Acumen, Endeavor, and Fast Company caterpillar to uncover the chrysalis, so the (particularly its Social Capitalist Awards). global economy has been powerfully shaped by a series of societal pressure waves — at least in the OECD region (Figure 1.2).21 Figure 1.2 Upwaves and downwaves Waves record US Supreme Court opts for Bush / CSR + SD on WEF agenda Nelson Mandela freed / East and West Germany reunite World population Waves (average) projection Saigon falls / Oil begins to flow from North Sea / Angolan civil war Billions Population record Earth Day / US passes Clean Air Act / Tidal wave kills 150,000 Robert Mugabe elected President, Zimbabwe / Solidarity, Poland Population projection Mikhail Gorbachev becomes Soviet leader / LiveAid JFK’s ‘New Frontier’ / Sharpeville massacre, South Africa / U2 crisis Oklahoma City bombing / Netscape goes public 7-7 attacks, UK / Hurricane Katrina, US 10 Total 9 US troops go into battle in Vietnam 8 7 6 Urban 5 4 Rural 3 2 1 0 1960 1965 1975 1980 1985 1990 1995 2000 2005 2030 2035 2040 2045 2050 2020 2025 1970 2015 2010
  • 12. Growing Opportunity 10 Introduction Given that 2007 marks the year when the 2007 survey and report This report attempts to human population becomes predominantly assess the current state of urban for the first time, the three blue lines This report attempts to assess the current map the trends in the rural, urban, and state of social entrepreneurship — the social entrepreneurship. global populations. By our analysis, the possibilities presented by new mindsets, waves have run as follows: the challenges entrepreneurs face in scaling their organizations and the opportunities — Wave 1 (peaking 1969–72) focused for greater collaboration with corporations on new policies, rules and regulations, and others. To explore these themes, we: largely in the environmental, safety, and health areas. During this period, — E-mailed a quantitative survey there was much counter-cultural instrument to 400 entrepreneurs, entrepreneurship, particularly in areas selected from the networks of the like whole foods and ‘alternative’ or The Skoll Foundation, The Schwab ‘intermediate’ technology. The Foundation,23 The Hub,24 Columbia compliance agenda continues to evolve University’s RISE project,25 and Fast globally. Company.26 Over 100 completed the 22 Four scenarios based on SustainAbility’s full survey, representing a 27% response pressure waves analysis will feature in — Wave 2 (peaking 1988–91) drove rate. The survey instrument can be another report part-funded by The Skoll voluntary market initiatives in such found in Annex 1; Foundation, focusing on the future of areas as reporting and certification, globalization. Due out in June 2007. including the evolution of standards — Undertook extensive desk research, 23 www.schwabfound.org such as ISO14001 and the Global including ‘Deeper Dives’ into the health 24 www.the-hub.net Reporting Initiative. Here, much of and energy sectors, and took part in a 25 www.riseproject.org the entrepreneurship focused on number of major events in the field; and 26 www.fastcompany.com/social environmental and sustainability- related services and socially responsible — Interviewed 20 entrepreneurs in depth, investment. either face-to-face or by telephone. — Wave 3 (peaking 1999–2001, before We rounded out this research with feedback being knocked back sharply by 9/11) from our growing network. From Acumen drove concerns around globalization and to zouk ventures, we invited perspectives both global and corporate governance. about the main challenges and oppor- This period saw a dramatic increase in tunities facing social and environmental the number of networks linking social entrepreneurs today. The survey findings and environmental entrepreneurs. follow in Chapter 2. — Wave 4 (which is just getting into its stride) appears to be rebounding energetically, with a growing focus on innovation and entrepreneurial solutions to sustainability challenges.22 The promise is that mainstream players now get involved, potentially overwhelming or outflanking smaller players. Equally, however, the prospect of alliances, partnerships, mergers, and acquisitions will also likely grow.
  • 13. Growing Opportunity 11 27 www.grameenphone.com/ To our surprise, the entrepreneurs Panel 2.1 index.php?id=64 interviewed and surveyed were Organizational mission 28 www.ashoka.org significantly more interested in 29 www.acumenfund.org responding than we had imagined — Each organization was asked to identify www.fastcompany.com/social and the thrust of our questions was its ‘primary area of focus.’ Social equity, wwwschwabfound.org; particularly appreciated. Indeed, it selected by most respondents, includes www.skollfoundation.org soon became clear that even the best organizations addressing poverty, entrepreneurs are experiencing real economic development, and empower- growing pains, mainly in the field of ment of marginalized citizens. Not funding — but also in a number of other surprisingly, a significant number of areas. For the sake of simplicity, let’s respondents selected ‘something else’ — boil down the questions to three main an illustration of how social entrepreneurs areas of interest: see these challenges as interrelated and their solutions as out-of-the-box. Most 1 Who are these people, what are they used the ‘something else’ response to trying to do, how do they view the signal ‘several of the above.’ The results prospects for scaling what they do, are shown in Figure 2.1. and how optimistic/pessimistic are they currently? 2 What are the critical challenges they face in replicating and scaling successful solutions to sustainability challenges? 3 And how do they think of mainstream business in all of this — whether as a route to funding, a source of potential partnerships, or as a roadblock to progress? We cover the first two areas in Chapter 2, the third in Chapter 3. 1 Meet the entrepreneurs Survey Findings Who are these people? For non-experts who know something of the field, Muhammad Yunus of the Grameen Bank is probably the first person who comes to mind. But Dr Yunus is not a typical social entrepreneur, however much many entrepreneurs may see him as their model. Not only does he now have a Nobel Prize, but he has been working in the area for over 30 years, his institution is large, successful and globally known, and already partnering with a number of major corporations — including Danone and Telenor.27 By contrast, perhaps the best way to get a sense of the more typical high-performance social entrepreneur is to take a look at Ashoka’s website.28 Or, to focus on people who have gone through further hoops, visit the websites of Acumen Fund, Endeavor Global, Fast Company, The Schwab Foundation, and The Skoll Foundation.29 2
  • 14. Growing Opportunity 12 Survey Findings Figure 2.1 As far as the respondents to our — Laura Peterson, Primary mission of quantitative survey is are concerned, Hands to Hearts International organizations surveyed their missions and geographic focus are Health Care, Portland, OR N=109 summarized in Figures 2.1 and 2.2. ‘Right now there is a ton of hype around % social entrepreneurs. There are pros and cons to this, but the reality is that very How do they think of — or label — few social entrepreneurs will ever get off 100 themselves? the ground. I am a therapist, a supervisor, and an administrator. Now people call 90 Many respondents and interviewees clearly me a “social entrepreneur,” but I'm not considered themselves to be ‘social’ or entirely comfortable with that. This title ‘environmental’ entrepreneurs, while others seems to come with super-human 80 thought of themselves as entrepreneurs, expectations that go beyond talent, innovators or even campaigners. Here are innovation, and integrity and into 70 replies from four US respondents that unrealistic extremes of personal self- underscore the diversity of perspectives sacrifice.’ even among entrepreneurs of the same 60 nationality: — Josh Tosteson, HydroGen LLC Cleantech, Cleveland, OH 50 — Rick Surpin, ICS ‘We are a commercial business in the Health Care, New York, NY clean energy industry. So, we manu- ‘I consider myself a social entrepreneur, facture fuel cell systems for industrial 40 but that is an approach to the work; applications, and as such, I wouldn’t it's not my vocation and no one would characterize our business strictly as a 30 give us money, except Skoll possibly, on “social entrepreneurial” venture. It has this basis. If people ask me what I do — clear social benefits that motivate and I work on transforming the health care animate some of the reasons why I and 20 and social service system for low income some of my colleagues are involved with adults with disabilities and create decent it in the first place. On the other hand, 10 jobs for low income people at the same we are casting this as a straight up time. This is how I see myself and what commercial venture subject to all of I think is interesting and challenging and the challenges and opportunities Institutional responsibility Social equity Something else Education Environment / Energy Tolerance / Human rights Peace / Security Health Housing generally what makes other people inherent in that kind of a corporate interested as well.’ enterprise. Even though we pay attention at a certain level to the social outcomes — Chris Elias, PATH of the work we do, and focus intently Health Care, Seattle, WA on how we operate as an ethical ‘We are a relatively new entrant into enterprise both in internal and external this discourse and community of social dealings, as an investor-backed, public entrepreneurs. It is clear that there are company we need to retain a first-order two groups. There are the organizations focus on business metrics that reflect that were basically built around an our principal obligations to shareholders individual social entrepreneur who had and investors.’ a strong vision and charisma and created an organization to meet that vision. Then there are groups like PATH and Technoserve, that may have started that way, but are now big organizations whose directors are certainly entre- preneurial . . . but it no longer makes sense to talk of PATH as the product of any one person. We have 550 staff worldwide with variable degrees of entrepreneurship. If I were to I ask, probably 100 or more of them would raise their hand and say “Yes, I’m an entrepreneur.” ’
  • 15. Growing Opportunity 13 Survey Findings Figure 2.2 Where are they on the Panel 2.2 Primary regions of operation optimism–pessimism spectrum? Regions N=109 % Successful entrepreneurs, by their very We asked where each respondent’s nature, tend to be optimists — highly organization ‘primarily’ operated, which pragmatic optimists. No surprise, then, allowed for multiple answers in terms of to find that, despite the challenges, the geographies. North America came top 100 entrepreneurs we interviewed were (54%), with the South Pacific — perhaps overwhelmingly optimistic. Most cited not surprisingly — bottom. The low 90 what some might see as extremely positioning of Europe is notable. aggressive growth plans, such as doubling their operations in the next three to five 80 years, and taking local programs national or, if already operating at the national 70 scale, international. Our survey results reflect this optimism — 32% believe they will move away from foundation funding 60 to more sustainable source of funding in the next five years.30 That said, several — 50 including PATH — expect to scale significantly mainly on the basis of foundation funding. 40 Reading between the lines, however, we 30 did detect a difference in tone from those addressing poverty issues as compared with the rest of the social enterprise 20 community. We often heard a more frustrated (sometimes even desperate) 10 tone, a sense that the challenges are much greater than currently acknowledged, and that — because this is an area of intense North America Asia South America Africa Europe Middle East South Pacific market failure — social entrepreneurs have to compete for limited foundation funding. Typical comments noted the need to live a ‘hand-to-mouth existence,’ and another spoke of the challenge of, ‘Gaining recognition in a very crowded non-profit marketplace.’ More fundamentally still, another respondent argued that, ‘There needs to be a paradigm shift in order to reduce world hunger and poverty.’ More positively, the emergence and growth of the base-of-the-pyramid movement is seen as an optimistic trend, an attempt to reframe the issues in terms of the potential commercial opportunities. It will be fascinating to see how The X Prize Foundation,31 which stimulated a huge wave of private enterprise in relation 30 Note: there may be a risk of survey bias, to space travel and is now working in such on the basis that those responding could fields as genomics and automobility, applies be more optimistic about their ventures, the same approach with its planned prize although there could equally be a reverse for poverty alleviation (page 29). One key effect. is to set the targets in ways designed to 31 www.xprize.org switch on the entrepreneurial juices of a wider group of innovators.
  • 16. Growing Opportunity 14 Survey Findings How do they view the prospects for Finally, a significant minority of the ‘If I had twice as much replication and scaling? entrepreneurs stressed the need for money, I’d make at least government to play a more effective role For the new breed of funders, the capacity in making scaling possible. In particular, four times as much impact.’ of social or environmental entrepreneurs entrepreneurs suggest that government: Jim Fruchterman, to replicate and scale is fundamental. For many, scalability — of beneficial — Needs to provide an enabling Benetech impacts, business models, and enterprises — environment, through policies that is the Holy Grail. And that also creates a create, as a minimum, a level playing sense of frustration with the current order. field for solutions and, at best, that Some respondents see the nature of much strongly incentives the development current funding as part of the problem — and deployment of new solutions; encouraging a sense of dependency. partly by developing incentives that A related comment came from Keerti allow the most cost-effective solutions Pradhan of Aravind Eye Hospitals, in to compete, for example by removing relation to the state of other NGOs, perverse incentives. In many countries, particularly in India: ‘NGOs get hooked more fundamentally still, governments on a sense of getting when they rely on also need to provide basic infrastructure, foundation or non-sustainable funding such as sewers, roads, and schools. sources. As a result, people don’t apply their brains to different ways to break — Must make social and environmental that barrier of dependency on foundations. issues a political priority. A number The question is: whose responsibility is of respondents expressed concern that it to help NGOs with this? NGOs have their issues were not top priorities for huge potential, but huge knowledge gaps politicians in their country. exist about how to access market-rate funding sources that could help support — Should explore alternatives. Sylvia non-profit work.’ Aruffo of Careguide Systems in the healthcare sector said, ‘It’s very difficult Perhaps not surprisingly, most interviewees for any entrepreneur when you have and respondents are enthusiastic about a breakthrough idea and the structure the ability of their model to replicate and is already set up for another way to scale. This trend seems to be independent solve that problem. What do you do of geography. Only one entrepreneur when your solution is better, but it just suggested that their model is too complex doesn't fit?’ to scale at the pace that the Skoll and Schwab Foundations, and others, are — Has a role to play in setting minimum pushing for — and clearly felt a great standards for provision, and in scaling deal of pressure to do this beyond the solutions, not just as service providers, organization’s ability. but as policy makers, procurers of services, landlords, experts, and so on. The drive to scale is seen to raise its own very particular challenges. In — Can be a major stumbling block in addition to the financing, marketing, some countries, particularly where and maturation/development challenges there is widespread corruption. Some highlighted in the next section, social governments, we were told, don’t want entrepreneurs underscore issues such social entrepreneurs to succeed, because as: ‘finding the right partners’ for joint it would make them look bad and ventures and franchising; maintaining accentuate their failures. the quality of service, particularly when working with third parties; and the question of pace of growth — ‘How fast can I grow, continue to deliver and not compromise my mission?’ Anyone working with mainstream entrepreneurs will recognize the thrust of the questions.
  • 17. Growing Opportunity 15 Survey Findings Figure 2.3 Panel 2.3 Challenges facing social entrepreneurs 2 Critical challenges Critical challenges, 2007 Respondents select the top two challenges they face in growing their organizations The central thesis of Growing Opportunity 1 Raising capital N=109 is that the undoubted progress of the Overwhelmingly, social entrepreneurs % social enterprise sector is often being cited access to capital as one of bought at the expense of growing human, their two primary challenges (72%), 100 organizational, and opportunity costs. because capital is what enables the This is inevitable, given that the same entrepreneurs to hire talent, market, 90 could be said of all entrepreneurial rent space, pursue pilot projects, and ventures, but the conclusion calls for a carry out other activities related to thoughtful, coordinated set of responses growing their organizations. 80 from those who fund and otherwise support these people. The pains, as Panel 2.3 2 Promotion and marketing 70 suggests, come in various areas: funding, Promoting or marketing their promotion and organizational development. organizations and offerings was the The majority of respondents operate in the second most frequently mentioned 60 not-for-profit sector, which intensifies the challenge (41%). The focus: making challenges of raising funding and recruiting consumers, businesses, funders, and 50 and retaining talent. other relevant stakeholders aware of the good work that the organization A number of challenges raised by not-for- is doing. Like mainstream entre- 40 profit enterprises are clearly much less of preneurs, however, social and an issue for their for-profit counterparts, environmental entrepreneurs are 30 particularly in terms of the ability to usually ahead of the curve and it takes attract and hold talent. But for-profit time for the rest of the world to catch social enterprises have their own up, including funders, government 20 challenges. Since a number of for-profits policy makers, and potential (both independent and owned by others) mainstream business partners. 10 were included in our interviews and survey, it is worth focusing on one case which 3 Developing organizations seems to provide a benchmark for quality Key issues here include: recruiting, Accessing capital Promoting / Marketing Maturing / Professionalizing Recruiting talent Adapting to landscape Other scaling. Our interviewee: Gary Hirshberg, developing and retaining talent; President and self-styled ‘CE-YO’ at and balancing professionalism with Stonyfield Farm, Inc.,32 now part of the entrepreneurialism and passion for French food and beverage group Danone.33 the mission. Attracting talent was cited We asked what he had had to give up when by most entrepreneurs as a priority Stonyfield was acquired by Danone. challenge, but more specifically, social enterprises are challenged to find the ‘First,’ he said, ‘I don’t feel that I gave up right kind of talent for their ventures — very much in doing this deal. They bought a blend of entrepreneurship and pro- out all of my non-employee shareholders, fessionalism, coupled with an ability which was something that I needed to do to: (1) work as effectively with the in any case. But even though they were communities served by the enterprise going to own 80% (it is now 85% as I have (often very poor and marginalized) as sold some shares to them) of the company, with corporate management/boards; they left me with majority control by (2) bring leading edge technical granting me the right to vote three of the capabilities to bear; (3) have business five board seats for as long as I remain know-how; and (4) buy into the active as Chairman and/or CEO. In fact, enterprise’s mission and vision. the only veto rights that I did give them A tall order, especially without 32 www.stonyfield.com were that they had to approve (a) any competitive salaries. 33 www.danone.com capital improvements over $1 million and (b) any acquisitions of other companies.’
  • 18. Growing Opportunity 16 Survey Findings ‘Otherwise, things today are pretty much So what are the main financial ‘We must find the right the way they’ve always been, except that challenges? leaders for the next phase we now have access to a global network of resources and talents, and of course Business people wanting to understand of growth. We need we are engaged with that network to and engage these entrepreneurs need entrepreneurs who have create organic enterprises in many other to understand the world in which these countries. Parenthetically, I have proposed people operate — and the challenges the business skills, social three investments/acquisitions since the they face. ‘Attracting top management dedication, and sense of partnership began and they have approved and, in particular, providing sufficient all three.’ compensation is a primary challenge,’ said humor that are essential Linda Rottenberg, CEO of Endeavor Global. to success.’ Danone has stuck to the spirit — not just ‘From NYC to Bangalore, people will make the letter — of the bargain. ‘Danone has the trade-off between making a difference Education Sector not wavered at all from the original deal, and making money at 2x earnings disparity, even though there have been plenty of but not at 5x or 10x.’ Time after time, opportunities for them to do so,’ Hirshberg research has shown that it is easy to start commented. ‘For instance, we have required a non-profit or social enterprise, but very far more Cap-Ex [capital expenditure] than much harder to bring it to scale. anyone ever dreamt back in 2001, and they have fully funded our requirements without It was clear that raising money was seeking any additional advantage or trade- the single greatest challenge that most off on my part. Reciprocally, we have grown entrepreneurs face — see Figure 2.3, faster than they or we expected and we where ‘access to capital’ ranks top at have certainly delivered excellent results for 72%. And there were no easy answers. them, so everybody has won something.’ ‘All sources of money come with their own challenges,’ was the way one entrepreneur ‘Additionally, I expect to see many more put it. Four key issues surfaced in the organic/bio launches in many other survey and interviews: countries, and each one will be adapted not only to the local market conditions, 1 Square pegs: social entrepreneurs but to the various Danone organizational don’t fit the existing system structures. I also expect to continue to have There is a widely held sense that the a big influence on Danone’s climate and unique approaches of social entre- organic policies around the world.’ preneurs are hard to fit into existing investor models and criteria, although This sounds like a virtual Nirvana, not the same point probably could be made only for non-profits but also for most for- about all forms of entrepreneurship. profits needing an exit strategy to ensure Foundations and governments are seen a financial return on early investment. as siloed and conservative, with the A more typical response from our survey result that they struggle to take on was this: ‘We would like to be free from the grantees that don’t fit their narrower rat-race of fundraising and proposal- sense of solution options. More, these writing, and have our own private sources groups typically do not lend to for-profit of income. They are the most stable and organizations, which leaves out a predictable.’ Unfortunately, this is a distant significant segment of social entre- dream for most of the entrepreneurs we preneurs. Traditional debt instruments spoke to — and likely to remain so, given are sometimes used, but can present the challenges they spotlight. major challenges in terms of entre- preneurs’ ability to service the debt. Current equity investments are seen as shorter term than what is needed — and are often too expensive for entrepreneurs with a social mission.
  • 19. Growing Opportunity 17 Survey Findings 2 Lack of consistent, flexible, and Private investment funds ‘We are a small organization long-term financing The New York City Investment Fund was that is up against the over- Nearly every entrepreneur interviewed cited as a helpful source. Its investments noted the importance of time horizons. typically range in size from $1 million to head wall. To get and retain In particular, the work they are engaged $3 million. The Fund provides equity or qualified staff we need to in tends to have long time-frames debt, structured to meet the needs of (5–10 years to results was typical) the project. It will invest at any stage of pay more than we are able and requires partnerships and funding business development, but seeks to exit to. To be able to pay more that match these needs, i.e. is consistent in about five years. The particular focus and long-term. The need for flexibility here is on ventures that provide benefits we have to raise more funds, was also a consistent theme: most to NYC. but to raise more funds we entrepreneurs are able to access specific project financing, but have a harder time 3 Lack of knowledge about — and need more staff. A perfect accessing funds that will support more access to — capital markets vicious circle.’ general infrastructure needs. Some Like their mainstream counterparts, at current funding sources that appear to least early on in their careers, most of Poverty Alleviation Sector be meeting these needs include: the entrepreneurs we interviewed lack in-depth knowledge of capital markets Innovation capital and the best ways to finance their This term was used to refer to organizations. They rely on trusted unrestricted donations from high advisors, mostly on their boards of net-worth individuals that enable the directors, for this information as well as entrepreneur to take risks, enter new for access to investors. There is a strong markets, hire ahead of the curve or do sense, however, that social entrepreneurs pilot projects, ultimately helping to could benefit from increased knowledge leverage additional funding, whether about the best financing options, as grants or loans. There is a sense that well as better access to open-minded innovation capital only needs to be a financiers. small percentage of total funding, but offers the opportunity for incredibly 4 Sustainable sources of financing high leverage. bring their own challenges As entrepreneurs move toward more self- Angel investors financing models, whether for-profit or For profit-making enterprises, Angels non-profit, they encounter challenges. (individuals who make very early-stage Companies considering ‘Robin Hood’ investments in start-ups) were cited as business models — where revenues from particularly helpful because they are those able to pay for services subsidize often patient investors, sharing the provision to those who can’t, or can’t vision. pay the full cost — face challenges in ensuring that as they provide services to Funding from unusual foundations customers with a higher willingness to Certain foundations, with Skoll often pay, they don’t lose sight of their mission. instanced, appear to ‘get it,’ providing longer term funding for entrepreneurs. Fees and service-based approaches Still, the maximum grant length is about to financial sustainability may appear three years, which falls short of longer promising, but can also pose challenges term needs. for some entrepreneurs. They run the risk of stretching too far afield from their International aid organizations core competencies, with the result that The Asian Development Bank, World Bank the poorest people, whose needs were and IMF were cited as potential ‘patient’ the original spur to action, cannot access investors. A downside to these sources, the service. however, is that they mainly fund non- profits, so entrepreneurs set up as for- profits may fall through the cracks.
  • 20. Growing Opportunity 18 Survey Findings Figure 2.4 For-profit social enterprises face There is, however, a potential fly in this Preferred sources of financing challenges as both government and ointment. Wood expressed concern that, N=109 investors expect them to act like typical, ‘some organizations tell us that we have % for-profit companies, and so expect gotten big, “so you no longer need us”. ’ standard income tax payments and This reaction, he noted, ‘is very different market rates of return. Restrictions also from the private sector, where success apply, such as an inability to access attracts capital. Why should an NGO be 100 donations from the general public, apply penalized for being successful, and why for certain types of foundation/ should any donor want an NGO they have 90 government funding, and pursue more funded in its early years to remain small?’ 35 charitable elements of their businesses. He went on to note, ‘Getting financing for 80 For some, the business case for support your NGO is a bit like trying to compose a is easy to articulate, for others less so. mosaic that is made up of thousands of 70 Consider the Partnership for Global tiles. Funder A wants to fund tiles #389 Security,34 which lobbies for more effective and #672, whereas Funder B wants to fund action to control weapons of mass other tiles, but wants different reports on 60 destruction. They noted that they are different timelines than those required by ‘looking beyond foundations to joint Funder A. It eats up a lot of management 50 ventures with local/state government and bandwidth to keep up with it all.’ commercial entities that have a stake in our issues.’ They also want to raise funds Others were more positive, among them — 40 from the public and ‘venture capitalists’ in the same sector, but focused on the who ‘understand that preventing a WMD US rather than on developing countries — 30 catastrophe is essential for global economic First Book, whose mission is to provide growth — and that government structures disadvantaged children with new books.36 are currently insufficient for the task.’ ‘We have already developed the necessary 20 mechanisms and the enterprises are already Non-profits who have been able to clearly successful,’ said Kyle Zimmer, the 10 state the benefits of their work have, organization’s co-founder and President. as a result of clarity of message, done ‘It is now a matter of scaling up.’ Their spectacularly well at fund-raising. As an business model is worth a close look, as Foundations Sales / Fees Fundraising Government Venture capital Help-in-kind Joint venturing Other Franchising Own pockets Going public example, Room to Read, which aims to a leading edge example of a financially bring books and libraries to countries like sophisticated social enterprise, because Nepal and Vietnam, has gone ‘from zero they have worked out how to target an to $12 million of annual revenue in seven unmet need at a price point that works for years,’ according to its Founder and CEO, all — and because they have developed a John Wood. Room to Read has raised business model that fits in very well with money through corporate relationships, the interests of the publishing industry. high net worth individuals and over 200 public speeches per year. The ‘10 Routes to Money’ (below) are sequenced in the order that a composite entrepreneur might try them out, but the 34 www.ransac.org actual ranking by frequency of reported use 35 As one of our interviewees noted in was quite different, and is shown in Figure response to this point, ‘Here is the elephant 2.4. The question asked here was: ‘Thinking in the room. Let’s talk about the nature of about financing your initiatives, which foundation boards. This question reflects the sources of funding do you feel will be the thinking of foundation boards about their best avenues for you to pursue?’ own personal clout and their attention levels. When [a named] foundation took a capacity building approach, the staff found the biggest challenge was managing the board’s boredom level. It just wasn’t very exciting to see a list of performance indicators making an incremental and upward change. The board got bored. The program officer developed a way to utilize the board members as development consultants with the grantees and this helped to stem the boredom tide. Understanding the motivation and stimulation of foundation board members is key to working on this one.’ 36 www.firstbook.org/site/ c.lwkyj8nvjvf/b.674095/k.cc09/home.htm
  • 21. Growing Opportunity 19 Survey Findings Panel 2.4 In-kind help ‘It is now beyond urgent 10 routes to money Perhaps surprisingly, this came in seventh, that we create a new at 31%. That said, volunteering was a Our survey listed 10 potential routes key resource for many. And some social social financial services to money and other resources typically enterprises — among them CDI 42 in Brazil sector.’ pursued by social and environmental and the Furniture Resource Centre 43 entrepreneurs, plus an ‘Other’ category, in the UK — create revenues by taking in Bill Drayton, Ashoka to ensure we did not miss anything.37 goods or equipment that others no longer In any event, the 10 Routes seemed to have a use for, reconditioning them, and cover pretty much all the bases. They are then making them available, or selling listed here in the order that they are likely them on. But volunteer labor and the to be addressed by the typical social donation of in-kind resources are not an entrepreneur. automatic guarantee of successful outcomes. Consider the problems Habitat Funding from own pocket for Humanity 44 has faced in trying to This is where many mainstream entre- rebuild homes in the wake of Hurricane preneurs start out, tapping the resources of Katrina, among them government 37 The 10 routes are derived from their families and friends — although only regulations and insurance costs.45 John Elkington and Pamela Hartigan, 8% ticked this box. Not surprisingly, given The Power of Unreasonable People: How that few people have the money or Foundations and high net worth donors Entrepreneurs Create Markets to Change inclination to finance a venture using their Foundations came in first place in terms the World, due out in January 2008 from savings or credit card, this was the second of preferred funding sources (74%). Harvard Business School Press. least preferred for the future. It was clear Despite some frustrations, those relying 38 www.acumenfund.org that those who had considered tapping on foundations — in whole or in part — 39 www.endeavor.org friends and family sources had concluded see them as a dependable funding source. 40 www.witness.org that it comes with intense personal One advantage in countries like the US was 41 www.phulki.org pressure, so tends to be avoided. articulated by Jim Fruchterman, President 42 www.cdi.org.br/portalcdi/indexeng.htm of Benetech: 46 ‘There are the advantages 43 www.frcgroup.co.uk That said, we spoke to several entrepreneurs of size in the case of foundations and very 44 www.habitat.org who are developing hybrid enterprises rich people. An amount of effort is likely 45 www.nytimes.com/2007/02/22/us/ (part for-profit, part non-profit) during to land $250,000.’ A typical answer here 22habitat.html?ex=1172811600&en= the survey, and it was clear that this can was, ‘Foundations will likely remain our 5be31f901a3b80e6&ei=5070&emc=eta1 be a pretty taxing route to funding. One mainstay.’ Where market failures are being 46 www.benetech.org entrepreneur noted that their latest round addressed, this obviously makes a good deal 47 www.summersearch.org of funders was asking for such demanding of sense. As Summer Search 47 put it, ‘This 48 www.globalfundforwomen.org/cms personal guarantees that the family would is the landscape we know.’ Moreover, they 49 www.nyof.org ‘probably end up selling our grandmothers’ noted, ‘We feel that it is highly sustainable.’ wedding rings — if not our kidneys!’ More Others felt a growing need to learn more positively, the handful of people who had about this sector. ‘We need to deepen and taken this route, for whatever reason, expand our understanding of philanthropy,’ saw at least one key advantage: those said the Global Fund for Women.48 using their own money tended to practice intense financial discipline. A small number of respondents mentioned that they were trying to expand their Public fundraising focus from foundations to high-net-worth This (just) came in second, at 54%, with individuals, partly because they felt this entrepreneurs underscoring the independ- was an untapped source, partly because ence of action potentially derived from their expectation was that any funding funding raised in this fashion. Fund- might come with fewer conditions. raising events are more common in some It may take a good deal of effort, but countries than others, with US groups successful cultivation of such relationships particularly likely to go this route, among is seen as the bedrock on which other them Acumen,38 Endeavor Global,39 fundraising can proceed. ‘Over 16 and WITNESS 40 — with celebrities often years, we have built up a donor base of being used to draw in potential givers foundation and individual funders who or investors. The general point about the are very loyal to our organization, and desire for unrestricted funding was under- give year after year,’ said the Nepalese scored by Phulki,41 based in Bangladesh, Youth Opportunity Foundation.49 which noted that, ‘donor priorities change almost every year, so our goals and objectives will not always match with those of the donors. To maintain our own individuality, it is necessary to have unrestricted sources of income.’
  • 22. Growing Opportunity 20 Survey Findings Some social entrepreneurs have been Jim Fruchterman of Benetech noted that, ‘Earned income is a mark of successful in winning one or more of the ‘Earned income is a mark of the value of the value of your product — growing number of corporate foundation your product — and provides feedback awards. Barefoot College, for example, from your customers.’ Easier to do, clearly, and provides feedback from won the 2006 $1 million Alcan Prize for where markets are working to some degree, your customers.’ Sustainability.50 In addition to the annual than where there are clear market failures. Prize, nine shortlisted organizations for the Some saw their sector as less suited to this Jim Fruchterman, 2007 prize will be awarded a $15,000 model. ‘Education is an area where there is Benetech Alcan grant to invest in capacity building a lower expectation of profitability,’ as the training for the organization. Developed in Fascinating Learning Factory 52 put it. partnership with IBLF, the Prize is awarded to ‘any not-for-profit, civil society or non- A fair few respondents mentioned a tension governmental organization based anywhere at the heart of social entrepreneurship: in the world that is demonstrating a on the one hand, there is a desire to give comprehensive approach to addressing, away information for free, while on the achieving and further advancing economic, other there is a need to earn revenue to environmental and/or social sustainability.’ be sustainable. ‘We’ve not yet worked out 50 www.ethicalperformance.net a way to earn income from selling our alcan_barefootcollege.html Not all corporate foundations are heading knowledge,’ said EarthLink.53 ‘In the recent 51 www.shellfoundation.org into the social enterprise space, however. book, The Spider and the Starfish, the role 52 www.fascinating.tv As Kurt Hoffman, Director of The Shell of an intermediary, or catalyst, was 53 www.earthlink.net Foundation,51 told us, ‘Our main focus, described. Such people have a difficult time as you know, is “enterprise solutions to earning income from ideas they give away poverty” in poor countries, where the lack to anyone who will listen. Our aim is to of sufficient numbers of enterprises of all create a hybrid, where we draw people from kinds is the major constraint on self- around the world to our website because sustaining development emerging in those the causes we address are important to countries. Rich countries — and rich donors individuals, foundations and people in like The Skoll Foundation — are best able industry, and we earn income by the types to afford to focus on promoting “social” of services and tools we use to support the entrepreneurs. Poor countries mainly need learning and interaction of these people.’ entrepreneurs. So we tend to avoid hooking up or into the social enterpreneuring sector, Franchising as worthwhile as it is.’ Both in the qualitative, in-depth interviews and in the quantitative survey, this option Governments and public sector seemed to be somewhat outside the This route was favored by a significant mainstream, coming in eighth place (15%). proportion of entrepreneurs, coming in A rare example of a social enterprise that fourth place at 43%. Even for-profits saw is considering some degree of franchising public sector agencies as a key funding is Child Savings International, which source. ‘They represent the shortest paths has at least thought of franchising its to the level of funding we require,’ said Aflatoun brand to banks and other financial one solar photovoltaics company, perhaps institutions. Founder and Chair, Jeroo surprisingly. While some accessing Billimoria, is pursuing a dual franchise government funding noted upsides, such model: one level addressing non-profits as collaboration with leading scientists at and one for-profits. On the for-profit side, government laboratories, public relations where the target is to partner with banks, benefits, and access to government she is setting up Aflatoun, Inc., which will procurement avenues, others felt frustrated own the brand and also, longer term, open by the significant constraints associated up the option of raising money through with government funding and by its capital markets. prescriptive nature. Not surprisingly given its accountability to citizens, government On the non-profit side, Jean Horstman is often much less able to offer flexible (CEO, InnerCity Entrepreneurs) reports funding guidelines that would match the that, ‘We are in the process of testing out needs of most social or environmental licensing as the way to scale our impact entrepreneurs. quickly while growing our organization at a reasonable pace. We are exploring creating Sales and/or fees branches in the state of Massachusetts to Over half (57%) of the respondents prefer learn to scale at the state level, while to draw at least some of their revenues licensing our curriculum and support from this source, which came in third place. services nationally.’
  • 23. Growing Opportunity 21 Survey Findings On the for-profit side, Orb Energy is also One respondent even spoke of ‘venture ‘We have had a significant using the franchising model to scale its capital gifts.’ increase in companies operations in India, preferring this route rather than raising additional capital. More typically, Drishtee 55 — which wanting to sponsor us. The franchise model, based on setting up aims to empower entrepreneurs in India, The challenge is to remain branches, enables them to get closer to village-by-village — spoke for many social customers, while establishing a common entrepreneurs in saying that they look, in selective and not to sell out.’ ‘look and feel’ and affording greater all areas of funding, for ‘sources of funds Anonymous respondent economies of scale. A key challenge in that look for a commercial and social return this approach, CEO Damian Miller notes, on investment (ROI), simultaneously.’ The is to ensure that franchisees do not problem with the venture capital field, as sacrifice quality for revenues. normally understood, is that considerations about social ROI are likely to be even more Joint ventures squeezed than in the financial mainstream. Around a third (30%) of respondents mentioned joint ventures as a form of IPOs and market listings resourcing — and it was clear that a fair This was very much bottom of the heap, 54 www.landminesblow.com few entrepreneurs plan to develop such coming in tenth place (2%) — and with 55 www.drishtee.com partnerships, though a surprising number a degree of unease about the implications 56 www.gexsi.org expressed anxiety about their ability to and constraints expressed by a couple of 57 www.sports4kids.org identify suitable partners and strike a the entrepreneurs we interviewed in depth. 58 www.itnamerica.org balanced deal. That said, they all felt they The relatively slow progress of initiatives had significant value to add. And those like the Global Exchange for Social taking this route saw many non-financial Investment (GEXSI)56 hasn’t helped. benefits. Such partnerships, said Landmines Blow!,54 help both parties ‘leverage their As John Wood, Founder and CEO of Room assets, such as their expertise and client to Read put it, ‘The capital markets for base, with other advantages including NGOs are blatantly inefficient. There is sharing knowledge, the cultivation of new no mechanism that has the efficiency of relationships, developing a continuum of the private sector (e.g. NYSE, NASDAQ, care, working successfully in different private placements, venture capital) when cultural settings, and [gaining] approval it comes to raising large amounts of capital from the United States Federal Government — especially unrestricted funding. This, and the United Nations.’ of course, is one reason why SASE (Skoll Awards for Social Entrepreneurship) Optimistically, perhaps, the vision is that, recipients are so grateful for the large, ‘In a new world of virtual integration, unrestricted, multi-year funding. The NGO the walls between enterprises crumble.’ world needs to have every large foundation It is clear that those thinking about seriously study — and hopefully emulate — this option are concerned about the this model.’ And what is true for NGOs is implications. ‘We have had a significant also true for most social enterprises. increase in companies wanting to sponsor us,’ said one, who asked to remain ‘Other’ sources anonymous. ‘The challenge is to remain This category was selected by 17% of selective and not to sell out. To maintain respondents. The main additional source the purity of our program.’ The need to of funding identified was corporate find out how to do such due diligence partnerships or sponsorship, although was an issue often raised. that could potentially wrap in under ’Sales and Fees’ or ‘Joint Ventures’. Most suited Venture capital to this option are enterprises that address One respondent described his challenge issues of interest to high-brand companies. as, ‘raising money for ideas that others Take Sports4Kids,57 which argued that, have not accepted as workable.’ One ‘because of our emphasis on youth and way the mainstream economy deals sports, we are uniquely well-positioned to with this challenge is via venture capital. establish significant corporate partnerships Surprisingly, this came in fifth place, with with a range of industries, including more than a third (39%) of respondents footwear/apparel, food, and professional saying they plan to draw to some extent sports.’ Another enterprise, ITNAmerica,58 on venture funding. If true, this is a striking which focuses on dignified transportation result, though it may reflect the inclusion for seniors,’ noted that corporate of a number of cleantech entrepreneurs sponsorship ‘is our riskiest revenue stream in our sample and, possibly also, a mis- — but we feel it has great promise, as we understanding on the part of at least some represent a large and growing market.’ social entrepreneurs of what venture capital funding entails.
  • 24. Growing Opportunity 22 Survey Findings Figure 2.5 How will funding patterns change over Attracting talent when they can’t offer Manner of funding the next 5 years? competitive salaries was cited by many Current N=92 organizations as a key development Expected in five years N=99 One of most striking findings was the challenge. But, while the dominant % remarkable collapse in the number of sentiment, it wasn’t universal. Some entrepreneurs expecting to be relying organizations cited high retention rates completely on grants in five years — even though they offered lower than 100 from 27% to 8%. On the other side of the market salaries. They believe that this is due equation, there is an equivalent jump in to their ability to offer a work environment 90 those expecting to be funding their own that is challenging (including professional operations, with no reliance on grants — growth, learning opportunities), enabling up from 8% to 28%. In the middle ground, their staff to focus on using their highest 80 we see a somewhat less dramatic fall in the and best value skill sets (bringing in lower proportion of respondents saying that they skilled labor to do less fulfilling work), and 70 expect to be still relying on grants, but with providing a culture that is mission-driven. some income — 27% to 22% — and a more A key advantage of the ability to retain striking growth in the proportion expecting and develop staff is that an organization 60 a significant rebalancing in favor of earned keeps the tacit knowledge they have built income — from 38% to 50%. up of the field and players. 50 Balancing entrepreneurialism with What are the main organizational professionalism and maintaining a focus 40 development challenges? on the mission and culture of the organization. As social enterprises mature, 30 ‘Social entrepreneurship is still seen by they require more professional and some as a “niche market”,’ said Jacqueline business-oriented talent. But this poses Novogratz, CEO of Acumen Fund,59 challenges in at least two ways. First, 20 ‘comprised of a rather unique sort of existing staff may find it difficult to adapt individual who feels comfortable straddling to the changing environment, when their 10 business and social incentives. There are generalist skills are no longer sufficient. thus three main challenges around whether Second, new staff that bring more and how it will move along the adoption professional capabilities may not have No grants / Completely other income Some grants / Primarily other income Primarily grants / Some other income Completely grants / No other income curve and be accepted by a much larger the highest degree of sensitivity around client base (translated into funders and the mission. Also, not everyone in an foundations). First, the circle of visible organization can or should be entre- social entrepreneurs needs to be expanded preneurial; social enterprises struggle significantly so that experts are not always to find the right balance between those pointing to the same examples of success. who should be creative and entrepreneurial Second, there need to be more social and those (think lawyers and accountants) enterprises demonstrating scale in terms who need to support the entrepreneurial both of the number of people they reach culture with more professional and as well as the number they impact structured approaches. Those entrepreneurs indirectly — and this means better measures who appear to be getting it right are to communicate quantitative as well as very focused on these elements during qualitative impact. Finally, there need to be the recruiting process, foster a culture of more enterprises moving toward financial entrepreneurship through storytelling in sustainability — or at least having plans the organization, and make quick decisions that demonstrate they will be around in the about letting people go who don’t fit the long-term. Associated with this is whether desired culture. funders will be able to “exit” successfully, but this is more derivative of the last point.’ Succession planning/leadership 59 www.acumenfund.org development. Many entrepreneurs For our sample as a whole, the cited challenges around grooming their overwhelming challenge flagged up in successors, in particular around finding relation to developing their organizations talent that shared their vision for had to do with people and talent. Specific growth/success of the organization. points raised included the following: At the extreme, there were two fascinating responses from Afghanistan that touched on this issue of drawing talent from a pool of people that have been beaten down by war for nearly 30 years.
  • 25. Growing Opportunity 23 60 See Buried Treasure: Uncovering To have any chance of changing the Just as software morphs through successive the Business Case for Corporate world, entrepreneurial solutions must generations, 1.0, 2.0 and so on, we Sustainability, SustainAbility and UNEP, offer relatively high leverage, be able to conclude that the time has come for 2001; and Developing Value: The Business replicate and scale, and — fundamentally what we call 3.0 thinking in relation to Case for Sustainability in Emerging — become part of the market main- sustainability challenges. If 1.0 was driven Markets, SustainAbility, the International stream. Pretty much without exception, by regulators and promoted a compliance Finance Corporation (IFC) and Instituto the social entrepreneurs we interviewed mindset in business, 2.0 has been more Ethos, 2002. A ‘Developing Value 2’ project were supportive of the idea of partner- about corporate citizenship, based on is now under way. ships with corporations. They were also transparency, accountability and a growing 61 For more, see the work of scenario interested to further develop those array of voluntary initiatives (Figure 3.1). planners Pierre Wack and Peter Schwartz. partnerships they already had, and to By contrast, 3.0 thinking, strategy and develop more. ventures is different in that it seeks transformative market and sustainability But, why should business care? outcomes. It is about creative destruction, SustainAbility has covered the business as Joseph Schumpeter called it, and about case for corporate responsibility and creative reconstruction. sustainability elsewhere,60 so what follows is a headlines-only brief. In essence, Mindset 3.0 is about seeing — ‘reperceiving’ 61 — immense challenges, such as the growing risk of abrupt climate It’s time to think different change, as potential opportunities to leverage the power of markets and business The first reason that business needs to to reboot entire economic and political engage is that the world is changing — and systems. This is exactly what is beginning with it markets. Social and environmental to happen in the energy field. In some entrepreneurs do not have all the answers, cases the time-scales involved may be but they do see the world and markets generational, but the transformation is differently, and the more innovative are under way. While the cleantech landscape experimenting with new business models is now largely populated with pure-play that could potentially break out of their profit seekers, the industry was pioneered niches and help transform key elements by individuals who saw the opportunity to of the global economy. leverage market drivers — such as energy security, stability, and cost — to realize There is a real risk that many business significant environmental outcomes. The Business Case people will chalk this up as another fluffy, feel-good fad. There is every reason The situation is different in the developing to be skeptical of any new movement or country healthcare field, where pulling on agenda, clearly, but our industry analyses market levers does not work in the same (summarized in Chapters 4 and 5) way, largely due to weak end-markets. uncovered a variety of ways that social But the overwhelming unmet need for entrepreneurs are doing things differently, good, well-funded, state-provided health- realizing exciting sustainability outcomes care systems has not prevented social and offering innovative opportunities for entrepreneurs from experimenting with business. cross-subsidized business models (rich patients’ fees covering the costs of the poor, large companies’ assets and talents being loaned for health outcomes). Though their efforts often expose the limits of current market-based social enterprise approaches in areas like poverty, they are spotlighting potential new markets, experimenting with new business models and modeling new leadership approaches. 3
  • 26. Growing Opportunity 24 The Business Case Five building blocks 3 Business models Significantly, social entre- Much talked about during the New preneurs are experimenting If you stand back, Mindset 3.0 thinking Economy era, an understanding of and practice seems to have five main business models is now central to the not only with business components: debate about how to create tomorrow’s models but also with how value. Significantly, social entrepreneurs 1 Systems thinking and design are experimenting not only with business value is defined and created. Leading social and environmental models but also with how value is entrepreneurs are fabled for taking a defined and created. Many are pioneers systems approach to major challenges in the social return on investment (SROI) and related design issues. Like Michael space.64 They are also maximizing reach Braungart and Bill McDonough of with ‘Robin Hood’ business models that MBDC,62 they pursue ‘cradle-to-cradle’ enable services and products for poor solutions. Such systems thinkers ask deep citizens to be subsidized by those with questions with the customer in mind, a greater ability to pay. Examples here e.g. how do I provide transportation include the Aravind Eye Hospitals,65 services to my customer rather than Narayana Hrudayalaya Hospitals,66 62 www.mbdc.com how do I sell more oil? and Freeplay Energy.67 63 shop.easybeinggreen.com.au/ categories.asp?cid=71&fromhome=true 2 Consumer engagement 4 360° accountability 64 www.redf.org/results-sroi.htm and Market solutions depend on consumers — Any business — mainstream, SME, or www.svtconsulting.com/pdfs/ but social entrepreneurs have a rather social enterprise — increasingly needs sroi_analysis_1%5b1%5d.0.pdf and different take on customers. They work to work out how to be transparent and http://sroi.london.edu/ with potential customers and consumers accountable to a growing range of real 65 www.aravind.org to co-create new markets and new and self-elected stakeholders. Think of 66 www.narayanahospitals.com product or service categories. In the the work of such entrepreneurial organ- 67 www.freeplayenergy.com health field, they champion the rights izations as Transparency International 68 68 www.transparency.org of consumers to hold service providers and the Global Reporting Initiative 69 69 www.globalreporting.org to account, even if they are not paying to increase corporate accountability 70 www.danone.com/wps/portal/jump/ for the service. Villagereach, for and transparency. danonecorporateintl.press.commun2004 example, makes explicit its aim to pressreleases?ref=cms.danonecorporate mobilize communities to take greater 5 Emerging economies intl.press.2006pressreleases.trimestre1. ownership of health systems to promote At a time when there is growing cp_160306 a social atmosphere of higher mainstream interest in base-of-the expectations and greater accountability. pyramid markets, these people are in They understand that most people, most the thick of the BoP action. They aim to of the time, want to do the right thing. evolve new strategies to harness a wider But things need to be made easier for range of resources to the task, while them. Take a look at what Easy Being simultaneously experimenting with new Green 63 is doing in Australia. It was ways of meeting the myriad needs of founded to help people actively tackle poor people. Their hands-on knowledge climate change. A crucial key to success of such markets and of the political here is understanding the power of a and regulatory environments potentially million small actions to add up to truly offers hugely valuable market intelli- significant outcomes. gence to mainstream business. Consider the strategic alliance between Danone and the Grameen Bank 70 to bring valuable products and services to poor communities. Transformational Figure 3.1 Towards Mindset 3.0 3.0 Sustainability impacts against market drivers 2.0 Impacts 1.0 Incremental Risk Drivers Opportunity
  • 27. Growing Opportunity 25 The Business Case Paths to partnership The first, sketched in Figure 3.2, is ‘We already are seeing a where the company makes investments changing zeitgeist among When we asked Acumen Fund CEO in social entrepreneurs who are focused Jacqueline Novogratz how she saw the on sustainability areas of interest to the many employees of big interface developing between business company, such as climate change, poverty, corporations.’ and social entrepreneurs, she replied, or health care. The company provides ‘In many ways. First, we will see more financial resources to the social Jacqueline Novogratz, corporations reaching out to social entrepreneur, as well as talent and access Acumen Fund enterprises and traditional NGOs to to the company’s networks. In turn, the facilitate the strengthening, expansion, company potentially achieves enhanced and deepening of their own supply chains. sustainability outcomes and has the Corporations are designing and developing opportunity to boost its brand through affordable, useful products for the poor the promotion of its support for the social but they lack the real understanding of entrepreneur. Employees of the company how poor communities work and, in some who work with the social enterprise are cases, lack the flexible distribution systems often inspired by the experience and bring (and trust) to reach those communities this morale boost and creative thinking 71 www.ksg.harvard.edu/m-rcbg/CSRI/ effectively. NGOs and many social back to the company. publications/workingpaper_20_ entrepreneurs, on the other hand, can have nelson_jenkins.pdf a deep knowledge around markets serving Given the lack of capital and other critical the poor but may lack the infrastructure, business resources available to social resources, or management depth to bring entrepreneurs, this enhanced philanthropy needed products to them. A marriage — role is an important one for companies to or at least negotiated relationship between consider. As an example, the John Deere business and social enterprises can bring Foundation recently provided $3 million to significant synergies with benefits to both KickStart, an innovative social enterprise parties’ objectives. Second, we already are that creates and markets tools to help end seeing a changing zeitgeist among many poverty in developing countries. employees of big corporations, so we will likely see more activity from employees Despite the undoubted attractions of at all levels of a MNC that are focused on the Enhanced Corporate Responsibility serving social enterprises and the poor approach, however, a second partnership directly. NGOs also see that their funding approach — the Hybrid Value Chain™ is increasingly dependent on concrete — (Figures 3.3 and 3.4) — is emerging as reliable — results, and so we will see potentially even more promising. Anecdotal increasing activity on that front as well.’ evidence suggests that greater strategic engagement with social entrepreneurs Still, the paths to meaningful engagement offers the potential for greater returns and partnership are far from clear. The to both parties. best work we have found to date on partnerships in this area comes out of Harvard University, and was produced by Jane Nelson and Beth Jenkins.71 Below, we briefly look at two different types of partnership currently being tested: (1) ‘Enhanced Corporate Responsibility’ and (2) an approach that Ashoka calls ‘Hybrid Value Chains.’ Figure 3.2 Benefits of enhanced corporate responsibility Employee inspiration Financial contribution MNC Brand/reputation boost Management know-how SE Enhanced sustainability outcomes Network access Multinational Social corporation entrepreneur
  • 28. Growing Opportunity 26 The Business Case With continuing globalization, the potential — Access to information, markets, and Unexpected lessons from for social and environmental entrepreneurs networks: Many social entrepreneurs emerging markets can be to help multinational and more local are working with populations and in companies is growing all the time. Ashoka’s communities unfamiliar to large applied in more traditional program aims ‘to develop a framework for corporations. Collaboration offers markets. sustainable commercial partnerships where companies access to information about business and social organizations join potential consumers and partners and in forces to make critical products and many cases, lends additional credibility. services available to low-income citizens In addition, many entrepreneurs have around the world without being limited by an interest in helping build markets for the artificial divide between both sectors. affordable and accessible mainstream Each partner creates economic and social products. They can provide marketing value by leveraging each other’s core support for the company. The partner- competencies. Differing from traditional ship between CEMEX, a cement corporate social responsibility relationships, manufacturer, and SISEX, a sexual Hybrid Value Chains™ are commercial in education organization, to create nature with each partner receiving affordable housing solutions for low- 72 www.ashoka.org/hvc economic benefit according to their role income Mexican women is indicative and transaction in the partnership.’ Ashoka’s of the unique approaches being devised goal for the approach is to ‘tip the system’ between entrepreneurs and corporations. and to ‘create a mind-shift among business leaders and social entrepreneurs.’ 72 Interestingly, unexpected lessons from emerging markets can be applied in As sketched in Figure 3.4, potential benefits more traditional markets. Pre-pay mobile to the company partner include: phone payment structures applied first in developing countries due to the lack — Outsourcing risk: By outsourcing of bank accounts proved imminently research into sensitive or unfamiliar transferable to the youth market in the areas, such as pharmaceuticals for industrialized world. A knowledge and emerging markets, new energy alter- understanding of developing country natives, or enhanced foods, companies markets has the potential to yield lessons can minimize potential brand risks, yet for the development of new business ensure that they stay close to emerging models, based on the interconnected trends. They also may be able to bypass world, such as health tourism or the use strict internal controls around return on of technologies in healthcare compliance investment criteria that would prevent or market data for internet sales. the company investing internally in high risk, entrepreneurial ventures. PATH and — Inspiration: Collaboration with social GSK Bio and their joint development entrepreneurs can help companies to of a malarial vaccine is just one example tap — or recharge — their entrepreneurial of how a corporation can benefit from and creative spirits, resulting in collaboration on research and innovative new product development development. (e.g. microinsurance, ‘green’ products). Consumer goods companies, such as Nike and Marks & Spencer, are looking to social entrepreneurs as a source of innovation and competitive advantage in developing new products. Figure 3.3 Ashoka’s Hybrid Value Chain TM Business Citizen sector organization Product Production Distribution / Sales and Financing Low-income development Logistics marketing markets
  • 29. Growing Opportunity 27 The Business Case Employees can also be remotivated when — A number echoed the advice of ‘The potential for cross- working on inspiring projects. Many people more traditional NGOs,75 noting that fertilization between social within companies (in particular the partnerships work best when there is a technical experts, engineers, doctors, clear set of principles and expectations enterprise and mainstream scientists, etc.) want to feel they are guiding the partnership (e.g. we only corporations is huge — it’s contributing to wider social needs, and work on projects related to our mission, support for or engagement with social we respect commercial confidentiality, utterly revolutionary.’ entrepreneurs can be a way of permitting we understand our business partner’s Sara Olsen, Social Venture them time to do so. Through partnerships, need to pursue ventures that allow employees at big companies get ‘infected’ them to make a profit). Technology Group with a mindset and energy. Some companies are already aware of this — — They also stressed that the entrepreneur witness GSK’s commitment of staff to a and partner must have comparable number of developing country initiatives, levels of interest in the partnership. or Shell lending engineers to work on Where there is an imbalance of power or hydrogen-powered mobility with pioneers interest in the partnership, all-too-likely at Formula Zero.73 given the relative scales of the partners, 73 www.formulazero.nl the partnership is very unlikely to achieve 74 The results of a study by Sara Olsen and Those who have worked in this field for intended outcomes. Paul Herman on the environmental and some time are excited by the pace of social performance of 21 mainstream developments at the interface between — Longer term partnerships are typically corporations are due to be published in business and social enterprise. ‘The sleeping preferred, with social entrepreneurs Fast Company, April 2007. giant is awakening,’ says Sara Olsen of seeing their organizations — and the 75 See, for example, The 21st Century NGO: Social Venture Technology Group. ‘The environments in which they operate — In the Market for Change, SustainAbility, potential for cross fertilization between as complex, requiring time for an The UN Global Compact and United social enterprise and mainstream outsider to learn. Cleantech companies, Nations Environment Programme, 2003. corporations is huge — it’s utterly in particular, want to bring in corporate revolutionary.’ 74 partners early to ensure later options for potential acquisition, what they describe as a ‘locked-in exit strategy.’ Rules of engagement — The role of internal champions in While our survey revealed willingness on partner companies is cited as essential the part of social entrepreneurs to engage to building good partnerships. For corporations, it also highlighted concerns Gary Hirshberg of Stonyfield Farm, this about the potential for mission creep, brand has been Danone CEO Franck Riboud. erosion and power imbalances. Feedback Clearly, however, this approach poses from more seasoned entrepreneurs in our real dangers when the individual moves sample offered insights into what would or leaves. Even with engagements that make corporate partnerships most likely occur at the senior management / to work. corporate level, there are concerns about partners pulling out, indicating a need for entrepreneurs to be adaptable, have a Plan B, and avoid relying too heavily on any one individual or department for support. Figure 3.4 Benefits of the Hybrid Value Chain Credibility Financial investment MNC Access to networks Management know-how SE Reduced risks Network access Market insights New products Multinational New services Social corporation New business models entrepreneur
  • 30. Growing Opportunity 28 The Business Case Next, deeper dives As background to our analysis of the worlds ‘New faces, new energy of social and environmental entrepreneur- ventures, are beginning Whatever the sector, global challenges ship, we talked to Colin Le Duc, Head mean that it’s time to s-t-r-e-t-c-h (see of Research at Generation Investment to dominate the debate — coverage of X Prize Foundation, Panel 3.1). Management,76 and itself a form of social and leaving the incumbent To get a better sense of how all this is enterprise, about the differences between playing out, Chapters 4 and 5 take a closer the energy and healthcare sectors. He big energy companies in look at two key sectors: healthcare and noted that they ‘see a huge amount of their wake on the issue energy. Our twin aim is to deepen the dives innovation in both sectors, from the full in these sectors in the future — and to range of companies — large public to of innovation around expand the approach to look at more small cap to private. And globally, too.’ sustainable energy.’ sectors. On healthcare, he stressed that, ‘biotech is Colin Le Duc, Generation There are striking contrasts between where all the innovation is. We see a huge Investment Management the two sectors. As Acumen Fund CEO, amount of interest in DNA and genomics Jacqueline Novogratz, put it, ‘Health generally. Plus, we see a major trend around tends to be a more distorted market when the cross-over between health, food, and 76 www.generationim.com speaking of the poor. It is highly subsidized energy. The trade offs in biofuels — i.e. and largely government-driven. There land for food or land for energy — are well are huge opportunities to create social documented, but we also see innovation enterprises in this sector given the around nutraceuticals and new genetic significant resources available, but it materials. In addition, we track companies takes harnessing large government like CIPLA in India, who are innovating contracts, measuring output effectively around new HIV drug delivery systems. and navigating often tricky political terrain. And Novo Nordisk’s work around diabetes Energy, on the other hand, often overlooks continues to be stunning, too.’ This view the poor entirely and so markets for the from the emerging mainstream illustrates poor are often not distorted, but instead the difficulty faced by social entrepreneurs are simply out of reach for poor people. in the field, because their ventures and Look at solar energy as an example where predicted returns (where they exist) fall many effective technologies exist but very far below the radar of even the most few, if any, are truly viable at household progressive of investors. level. At the same time, there seems to be a tremendous surge of resources into On the energy front, he noted that, alternative energy, including for the poor. ‘The cleantech boom of recent years These resources still seem to be coming is manifesting in various ways: large more from private sources and so this corporates are buying an unprecedented differentiating characteristic — where number of private cleantech companies. funds come from — is still the critical For example, in 2005 alone Danaher differentiator.’ bought 78 cleantech companies. I believe the same dynamic that has happened Most social enterprises tackling health- in the Big Pharma sector - where all care continue to operate as charities the innovation is coming from biotech (i.e. foundation-funded non-profits). companies and Big Pharma gets ever While highly outcome-oriented, these less return on its R&D spending — is also organizations — with a few notable now happening in Energy. New faces, exceptions — struggle to secure more new energy ventures, are beginning to sustainable modes of financing. Energy dominate the debate — and leaving the start-ups, at least in the developed world, incumbent big energy companies in their tend to have the benefit of robust capital wake on the issue of innovation around and consumer markets for their products sustainable energy.’ and services. That said, exceptions remain, in large part among entrepreneurs focused on bringing energy to the world’s poorest. Here, too, however, promising examples are emerging, such as Orb Energy, a venture-capital-backed enterprise selling inexpensive solar systems to Indian customers, ranging from farmers to technology companies. Interestingly, much of the business was previously part of Shell India’s renewables business, but was spun out.
  • 31. Growing Opportunity 29 The Business Case Panel 3.1 There are at least five reasons, they say. ‘Revolution Through Time to s-t-r-e-t-c-h First, ‘because 40% of world oil output Competition’ fuels the automotive industry — and, in A significant proportion of those we the US, 65% of oil consumption is in the X Prize Foundation spoke to outside the fields of social and transportation sector.’ Second, because environmental entrepreneurship see a key ‘automotive emissions contribute impact of all this effort as being a useful significantly to global climate change.’ spotlighting of the need for all parts of Third, because ‘there are no mainstream business to be more innovative and consumer choices for clean, super-efficient entrepreneurial in meeting social, vehicles that meet market needs for environmental and governance challenges. price, size, capability, image, safety, and But for a real stretch, try the X Prize performance.’ Fourth, because the Foundation, which really encourages automotive industry is stalled — legislation, innovators and entrepreneurs to think regulation, labor issues, manufacturing outside the box.77 They create and manage costs, legacy costs, franchise laws, obsolete prizes that encourage innovators to solve technology, consumer attitudes, and many some of the greatest challenges facing the other factors have combined to block 77 www.xprize.org world today. Their motto: ‘Revolution breakthroughs. Fifth, because ‘increases in Through Competition.’ Now the Foundation engine efficiency have been “spent” on is moving beyond aerospace (its original increased vehicle power, acceleration, and area of focus) to tackle some of the weight, rather than on increased fuel challenges that social and environmental economy.’ And sixth, and fundamentally, entrepreneurs are concerned about. ‘because we believe there is great opportunity for technological change.’ We asked Tom Vander Ark, the Foundation’s President, what lay behind this shift. The obvious next question: is it any harder First, how did the decision to move beyond to pick suitable targets for social and aerospace happen? ‘Larry Page, Google co- environmental challenges? ‘Setting goals founder, believes in the power of prizes and and writing rules is hard in all cases — joined after we awarded the Ansari X Prize it’s the secret to a great prize,’ Vander for space,’ Vander Ark recalled. ‘He then Ark answered. ‘The difference between encouraged the board to consider a broader innovation and revolution is large scale mission.’ And how are the next generation adoption. We attempt to create goals, priorities being selected? ‘We’re attempting rules, competitions, and public campaigns to identify the world’s biggest problems, that result in revolutionary change, not particularly those susceptible to innovation just awards for good ideas.’ through competition, where it’s possible to set a difficult but achievable objective, Any guesses as to where all this is going and where it’s likely that we can secure a to take the Foundation? ‘By next year,’ he prize purse.’ said, ‘we will have launched prizes in four areas (space, genomics/medicine, Evolving at the moment is the Automotive transportation/energy, and education/ X Prize, which will encourage car designers poverty reduction), will have full prize worldwide to design, build and sell super- teams, and well-developed shared services. efficient cars that — crucially — people By 2009, we will have developed several want to buy. Why? revenue engines that will make it a sustainable world class prize platform.’ Watch this space.
  • 32. Growing Opportunity 30 Few things are as important as our Good health is an important goal in Good health is an health and the health of our families. itself — a key human right — and, equally important goal in itself — A hundred and fifty years ago life important, a pre-requisite to allowing expectancy at birth in the rapidly individuals, families, communities, and a key human right. industrializing and urbanizing countries nations to achieve the economic of Europe was just 40 years. Since development that permits access to better then, income growth, better nutrition nutrition, housing, sanitation, and and housing, medical advances, and — healthcare. overwhelmingly — access to clean water and effective sanitation, have That said the provision and delivery of revolutionized public health so that healthcare services in all their many guises life expectancy has risen to between is immensely complex. Critically important 75 and 80 years in the industrialized are preventive measures such as health world. In contrast, for an unacceptably education, good nutrition, and access to long list of developing countries, clean water and sanitation services; including Afghanistan, Angola, Botswana, research and development into medicines, Lesotho, Liberia, Malawi, Somalia, diagnostics, vaccines, and other healthcare and Zambia, the needle still wavers products designed to diagnose, prevent, stubbornly around the 40-year mark. and treat illness and other conditions; healthcare delivery — the complex interplay Three diseases, HIV/AIDS, TB, and Malaria, between community and hospital care, disproportionately impact mortality and patients and medics, supply and demand, morbidity rates, though many developing governments and markets, expectations and countries have seen a rapid rise in the realities. It generates strongly held and incidence of so-called western diseases, hotly defended views about the role of including diabetes, cardiovascular disease, public bodies in setting standards, a strong cancer, and hypertension. Figure 4.1 regulatory environment, safety, and above illustrates the incredible gap that remains all equitable access to healthcare. between critical health needs and the current offering. Deeper Dive: Health Figure 4.1 The treatment gap Total current Total needed HIV/AIDS Antiretroviral treatments 384,000 40,000,000 Tuberculosis DOTs treatments 1,000,000 2,000,000,000 Malaria Pesticide-treated bednets 7,700,000 500,000,000 4 Source: Global Health Fund and WHO
  • 33. Growing Opportunity 31 Deeper Dive: Health The kaleidoscopic nature of these tasks and The result is an enduring belief in medicine For good or ill, there is a the immediacy and importance of the end as an entitlement, coupled with a resistance widespread and deeply goal has attracted hundreds of social to arguments about commercial realities entrepreneurs into the health space where such as profit maximization. However real held public unease at the they have applied ingenuity, determination, such considerations are for companies role of private enterprise and creativity to the huge challenges of delivering healthcare in poor markets, they meeting healthcare needs of the some of are all too readily interpreted by critics as at the heart of healthcare the poorest people in the world. Figure 4.2 ‘profiteering’ from sick, poor people in the delivery. highlights some of the challenges facing case of drug companies or, in the case of the healthcare sector. water utilities, putting profits ahead of a basic human right. Relevance to business Although this attitude may provide a mighty disincentive for companies to Even to frame the relevance to mainstream engage in these markets, paradoxically — business of what social entrepreneurs and here’s the rub — demand for their are doing in the health arena in terms active engagement as a partner in solving of a business case can be fraught with some of the more intractable health-related difficulties. For good or ill, there is a problems in the developing world continues widespread and deeply held public unease unabated and is likely to grow. at the role of private enterprise at the heart of healthcare delivery, and any high profile In a globalized economy, emerging markets reminder of commercial drivers can lead are increasingly critical to mainstream firms to an outpouring of moral outrage about — as a source of growth opportunities, cost distorted priorities. One key reason: since efficiencies and political risks. Forecasts the Greek philosopher and ‘Father of for drug and overall health expenditure Medicine’, Hippocrates, launched his increases in China and India between 2007 Hippocratic Oath in around 350 BC, and 2009, for example, are predicted to rise medical ethics have sought to put the from $30 to 40 billion and $132 to 163 best interests of the patient above all billion, respectively. other considerations. Figure 4.2 Challenges Prevention Low levels of health education Lack of clean water Low vaccination rates R&D High cost of medicine Drug development focused on ‘profitable’ markets Delivery Poor transportation infrastructure Insufficient numbers of health workers Inadequate government infrastructure
  • 34. Growing Opportunity 32 Deeper Dive: Health How healthcare firms respond to the need PATH, a not-for-profit organization In Africa, men, women, to balance market realities with access specializing in global health, is taking and children are dying of issues is likely to have an impact on their a systems approach to addressing these license to operate in all markets; to have challenges. Identifying critical gaps in easily preventable diseases, a bearing on the attraction and retention healthcare systems, PATH establishes simply because they cannot of talented staff; to offer opportunities unique partnerships and leverages tech- to develop the critical skill of partnering; nology to develop ‘resilient and enduring’ be reached. and may even come to be seen as a proxy solutions. Examples include the adaptation for competencies relating to the of food industry technologies to develop management of that core value driver of a means of telling health workers whether many industries: innovation. the polio vaccine they plan to use has gone bad on its long journey from Europe to Africa. The vaccine vial monitors Health sector milestones and (HEATmarker™), developed with TEMPTIME entrepreneurial solutions Corporation and the WHO, are printed directly on vaccine vial labels and darken Below, we highlight just a few of the with exposure to heat over time. This remarkable examples of how Mindset 3.0 simple technology means no more entrepreneurs are breaking log-jams and uncertainty, no more waste. advancing healthcare provision. While none of the models — unsurprisingly — delivers The organization’s vaccines work also direct returns to shareholders comparable involves partnership based initiatives with operating in mainstream markets, they dedicated to helping vaccines from the do provide examples of how out-of-the-box laboratory into clinical development thinking can turn at least some challenges efficiently and quickly, both to combat into opportunities. malaria and the deadly Streptococcus pneumoniae, or ‘pneumococcus,’ which causes the deaths of up to one million children under age five each year. Systems thinking and design: PATH to global health Elsewhere systems thinkers are considering a key missing link in relation to healthcare As already noted, healthcare delivery is delivery: transportation. In Africa, men, a highly complex system of prevention, women, and children are dying of easily research and development and delivery. preventable diseases, simply because they When one element of this system breaks cannot be reached. Riders for Health — down, it can have devastating born out of the world of motorcycle racing consequences. — tackles the problem by putting in place reliable, preventative maintenance systems Take vaccination for example. In developed for two and four wheeled vehicles used countries where vaccinations are in- in healthcare delivery. This innovative work expensive and accessible, diseases such is managed by wholly African teams, and as polio and measles have been all but means that healthcare in these areas is eradicated. Not so in poor countries. very much less likely to be undermined by Roughly one child in four does not receive vehicles failing, no matter how harsh the the vaccines s/he needs despite the fact conditions. that it only costs $30 to immunize a child against the greatest childhood threats. Villagereach is another social enterprise The value of vaccination — preventing attempting to ‘go the last mile’ in disease before it takes root and protecting healthcare delivery, according to founder children at their most vulnerable — and Blaise Judja-Sato. Its business is focused on the advances in technologies has led to the the logistical challenges and infrastructure development of large scale immunization gaps facing those who want to take programs such as GAVI and IAVI, and has affordable, safe, and effective healthcare made possible national immunization delivery into very poor environments — programs which the World Health be they transportation, issues of cold Organization (WHO) estimates averts storage, quality control, or staffing. around 2 million deaths a year. Yet, despite these advances, issues such as poor transportation infrastructure, inadequate delivery vehicles, and lack of funding still keep vaccines out of reach for most poor children.
  • 35. Growing Opportunity 33 Deeper Dive: Health Like many of the social entrepreneurs And, how do they ensure that they provide ‘Sadly, the health field featured here, Villagereach dedicates sufficient quality given customers’ inability still seems dreadfully considerable time and effort to developing to pay premium prices. The most successful strategic partnerships and mobilizing entrepreneurs in the field are those who stuck. Structurally, it has communities to take greater ownership have developed a hybrid model appropriate incentives for innovation of health systems to promote a social to the market in which they are operating. atmosphere of higher expectations and in a few limited areas greater accountability. Critical to its work Mainstream firms have found it impossible (certain pharmaceuticals is a desire to promote local economic to meet these needs and meet required development as a means of developing margins. Those same firms, however, and medical appliances) but sustainable healthcare delivery and the in partnership with social entrepreneurs virtually nowhere else in the support of weak government health and with some financial support from systems. government, have developed means to system. In fact, the human bring services to people, at profit margins, delivery dimension of health appropriate to the market environment. Critically, this means that the service care is an appalling mess. Empowering consumers: teaming up expands to meet the needs of more people, The current high-tech-led at prices they can afford. The initiatives Despite its ethical tradition, the health highlighted here are illustrative of how focus on the technical care sector struggles with the concept of entrepreneurial thinkers are taking on elements of health delivery consumer (patient) focus. As one US-based this challenge: social entrepreneur put it ‘health care for a few diseases in a few companies don’t develop products and — Challenges around secondary care places continues this services with consumer needs in mind India is a market that offers impressive and often financial incentives run counter opportunities, alongside considerable unhelpful imbalance.’ to the notion that patient health is challenges. With annual growth rates Bill Drayton, Ashoka paramount.’ Health education is one way of 8%, the growing middle class is now that social entrepreneurs are helping to made up of 150 million Indians. A further empower consumers to demand decent 300 million people live on less than a healthcare. From Afghanistan to America, dollar a day and 50% of all Indian entrepreneurs are emerging in this space children are malnourished. The majority with myriad creative and cost-effective of healthcare services are provided by solutions. the private sector. Government coverage — despite the abject poverty of so many EduSport, which runs programs like people — only accounted for 25% of ‘Go Sisters’ and ‘Kicking AIDS out!,’ is a total health spend in 2003. Out-of- community-driven NGO based in Lusaka, pocket health expenditure — as opposed Zambia. It uses sport to tackle issues like to social security or private insurance — HIV/AIDS, poverty alleviation and child accounted for 97% of total expenditure rights in underprivileged communities in in the same year. The net result is that Zambia. Sport is becoming a powerful tool secondary care — treatment in hospitals for change as entrepreneurial thinkers have — is way beyond the reach of millions realized activities like soccer are also of Indians. vehicles for communication and youth empowerment. More interestingly, this In response to this exceptionally grim unique approach is recruiting highly picture, Dr. G. Venkataswamy (Dr. V) influential players onto the field. created Aravind. What started in 1976 In particular, Nike is teaming up with as an 11-bed eye clinic in an old temple- GlobalGiving.com — an internet donation city has grown into the largest and most site — to raise awareness and money for, productive eye care facility in the world. social entrepreneurs who take a sport for Unlike many social enterprises, it is social change approach. completely self-sustaining and now treats over 1.7 million patients each year, two-thirds of them, for free. From its beginning it developed a ‘Robin Hood’ Business models: an Indian Robin Hood business model of ‘borrowing’ from richer eye patients to fund operations of the Creating a market-based solution to bring poor. The business model is stated up essential services such as water and front and built into discussions about healthcare to poor citizens is a sensitive fees. It has proved entirely socially proposition. How does a company balance acceptable to those who pay. the rights to basic services with the need to make money to sustain the enterprise?
  • 36. Growing Opportunity 34 Deeper Dive: Health Likewise, Narayana Hrudayalaya In an innovative attempt to address A company’s license to Hospitals are using a similar model these lessons, WSUP (Water and operate may come to to provide cardiac surgery and other Sanitation for the Urban Poor) brings health care services to patients in India. together companies (RWE, Thames Water, depend on managing such The company has also worked with the Halcrow Group, & Unilever) with NGOs expectations by supple- government to adapt this model for (CARE, WaterAid, WWF) and government health insurance provision. to develop commercial projects that: menting its business model deliver a return (at around 7% to 10% with creative, non-market — Clean water and sanitation services designed to guarantee sustainability, The strong link between improved human not maximize profits) to commercial or partial market-driven health and access to clean water and participants; promote community health; responses. effective sanitation is now incontro- have a positive environmental impact; vertible and explains why halving the and are sustainable over the long-term. proportion of the world population without access to safe drinking water and basic sanitation is a target of the Millennium Development Goals (Goal 7, 360-degree accountability: open kimono target 10). Despite this, 1.1 billion people still lack adequate access to clean water, For any company with global aspirations — 2.6 billion have no basic sanitation and wherever it may be domiciled — the government action to meet these needs challenges of doing business in markets falls far short of what is needed to get of great wealth disparity and weak state even close to the 2015 target. regulation are considerable. In many sectors, countries at the upper end of The privatization of many public the development scale offer important utilities in the 1990s, followed by the prospects for future growth. At the same enthusiastic expansion of western-based time, the needs of poor people for products water utilities into developing countries, and services — especially those with a did not deliver promised results either strong social component, such as water to the companies themselves or to or health, and where state provision is water consumers. The complexities of inadequate — will likely translate into increasing poor people’s access to water direct demands of companies. A company’s in highly fragmented markets (where license to operate may come to depend they face a bewildering array of service on managing such expectations by providers including public utilities, supplementing its business model with private stand-pipe operators, water creative, non-market or partial market- trucks, vendors in kiosks and agents) driven responses. proved insurmountable to some. Profit margin predictions, based on increased Even in developed markets, the sky- use following expansion of the service to rocketing costs of healthcare are more consumers, proved wrong as the challenging companies’ traditional price meant people consumed less water. blockbuster approach to profits. One World Health (OWH) and its ‘open Faced with political opposition to kimono’ approach to drug development privatization — irrespective of the poor is one to watch in this space. standard of much public service provision Pharmaceutical chemist, Victoria Hale — — and the difficulties of establishing now an icon of the social entrepreneur a license to operate, many companies movement — used her skills and expertise concluded that the provision of water to to create the world’s first not-for-profit poor people under the existing business pharmaceutical company. OWH is model was not going to work. Some firms dedicated to the development of safe, have withdrawn altogether. Others, have effective, and affordable medicines for absorbed the somewhat bruising lessons people with infectious diseases in the from the experience and, drawing on developing world. the complementary skills of a range of partners to deliver water and sanitation services, have tried to shift to a model that focuses on delivering returns at the same time as fulfilling a social contract and sustainability.
  • 37. Growing Opportunity 35 Deeper Dive: Health OWH takes dormant intellectual property, Consider the work of Vera Cordeiro in As companies consider owned by academia or companies in Brazil, who understands that the success these markets, they have the pharmaceutical and biotechnology of patient care is undermined by the industries, and develops it into medicines severe poverty in her country. Children much to learn from social to treat infectious disease in developing often leave the hospital and return to entrepreneurs who have countries. Its flagship project has inadequate housing, poor nutrition, and successfully taken paromomycin through other conditions that prevent them from developed successful cross- clinical trials as a treatment for Visceral healing. Her organization, Association subsidized business models Leishmaniasis. Partnering with the Indian Saúde Criança Renascer, is addressing this government has secured OWH a distribution problem by providing post-hospitalization that serve those who agreement to guarantee the treatment’s assistance to the families of poor children can and cannot pay availability for those who need it most — recently discharged from the hospital. India’s rural poor. The company’s The work of its network of volunteers simultaneously. transparent and collaborative approach to means that at Hospital da Lagoa — a large drug development provides an intriguing public hospital in Rio de Janeiro, where model for traditional pharmaceutical the flagship Renascer is based — paediatric companies and their stakeholders to re-admissions have dropped by 60%. 78 www.ssireview.org/site/printer/ consider. Interestingly, following interest The Renascer model has proved easily victoria_hale from investors, the company is considering transferable and ideal for locations in which the potential of a for-profit approach.78 disease is exacerbated by socio-economic factors. It has spread to an additional 17 hospitals in Brazil and served more than 26,000 people to date. Emerging economies: smart solutions Or take Laura Peterson, Executive Director Until now, the priorities for the global of Hands to Hearts International (HHI), health community have been infectious a nascent operation in India that promotes diseases, and in particular, HIV/AIDS, early childhood development. HHI combines malaria, and TB. Public-private partnerships, economic development/empowerment for and much of the work of social entre- disadvantaged women with desperately preneurs, have focused on these infectious needed health services for orphaned diseases. However, disease profiles in children. Their simple model is yielding developing countries are changing as a impressive results. Further, HHI is learning result of urbanization, a more sedentary important lessons about how to work lifestyle, less physically demanding work, effectively in India. HHI goes beyond simply changing diets and an increase in smoking. improving the conditions for the children Even among poorer communities, so-called in orphanages — HHI takes aim at the root ‘diseases of the affluent’ — diabetes, cardio- causes, forwarding women’s access to vascular disease, cancer, and hypertension education and economic empowerment. — are increasing at alarming rates. ‘The world has come to recognize that the health of our world’s children is inextricably Many pharmaceutical and healthcare tied to the empowerment of our world's companies see the emerging markets women,’ says Peterson. ‘Smart solutions as important sources of future growth. need to address societal factors to reach For example, in 2006 cardiovascular core causes. By looking at issues in a drugs already sold more than any other holistic context, entire communities reap therapeutic category in the Asia-Pacific long-term benefits and unpredictable and market. But the complex interplay of profound health outcomes follow.’ medical need and capacity to pay pose significant challenges. As companies consider these markets, they have much to learn from social entrepreneurs who have developed successful cross-subsidized business models that serve those who can and cannot pay simultaneously. In addition, they can gain significant insight into cultural and socio-economic factors that contribute to successful operations in these markets.
  • 38. Growing Opportunity 36 79 www.un.org/millenniumgoals Surprisingly, and unlike health, energy Taken together, these three factors could is not mentioned explicitly in the top well aggravate the energy picture, driving level of the UN Millennium Development many forms of fuel out of the reach of the Goals.79 Yet its availability, its pricing and world’s disadvantaged communities and the environmental sustainability of its populations. production, supply and use are absolutely intrinsic to meeting all the other Goals. As with the previous Deeper Dive into Meanwhile, even if activists see access to health, the purpose here is to investigate clean, affordable energy as increasingly the potential contribution of social and akin to a basic human right, the environmental entrepreneurs in relation prospects for providing a predicted global to a critical area of need, from several population of 9-10 billion people by different angles. The first thing to say about mid-century with adequate, sustainable the potential of such entrepreneurship is energy to meet their needs — let alone that this is still very much a micro-David their wants and desires — seems remote. and macro-Goliath situation, with any one of the major energy groups — among them That said, there are some grounds for hope the world’s great petrochemical companies in the recent coincidence and convergence — doing more in a single day to meet of three megatrends: oil price rises, growing human energy needs than all social and concerns about energy security in the environmental entrepreneurs do in a year, context of a political uncertainties around although the vast majority of these energy several major oil production regions, and flows are based on carbon-intensive gas the profound longer-term threat of climate and oil that is consumed in rich markets. destabilization. But the key point is that much of the potential of social entrepreneurship flows from a new mindset that these people model. Deeper Dive: Energy Figure 5.1 Sources for figures 5.1–5.5 World marketed energy: History: Energy Information Administration consumption 1980–2030 (EIA) International Energy Annual 2003 Quadrillion BTUs May–July 2005. History Projection Projection: EIA System for the Analysis of Global Energy Markets, 2006. www.eia.doe.gov/iea 1000 900 800 700 600 500 400 300 200 100 5 1980 1985 1990 1995 2003 2010 2015 2020 2025 2030
  • 39. Growing Opportunity 37 Deeper Dive: Energy As suggested in Figure 3.1, the way The business case ‘The biggest challenge? mainstream business frames sustainability Educating potential issues is moving from an early focus on So what is the mainstream business case compliance (involving a largely defensive for looking at social entrepreneurship in the customers regarding the business positioning), through a period energy sector? Clearly it has varied as the need for, and advantages of corporate citizenship (with a growing agenda for the energy sector has moved degree of engagement and beyond- beyond the basic compliance stage through of, sustainable solutions. compliance, voluntary effort) to a now- various forms of citizenship to a new Essentially, making the emerging phase, involving a fundamental generation of sustainability-focused shift to competitive strategies built around competitive strategies. business case for our innovative technologies, entrepreneurial services.’ solutions and potentially disruptive But the critical mass of the energy sector business models. is still mired in unsustainability. Even the Environment Sector best energy sector companies are largely Interestingly, energy is under-represented operating versions 1.0 and 2.0 (see Figure in current memberships of leading social 3.1) of the business case. In SustainAbility’s entrepreneurship networks. By our analysis, 2006 Global Reporters survey of inter- 80 The Global Reporters 2006 was an early only eight Ashoka Fellows (out of over national best practice in sustainability stepping stone in SustainAbility’s evolving 1,800) are operating in this sector, with report, a number of energy companies Skoll Program. two Schwab Foundation network members made it into our Top 50, including BP, Enel, and no Skoll Foundation entrepreneurs, to Shell, Statoil, and Suez.80 The sort of issues date. By contrast, the Cleantech Venture such companies are currently focusing on Network has a major focus on clean energy include: environmental and social footprints and 1,300 affiliate investor members. (BP); provision of micro-loans to help One venture capital fund told us it now has businesses develop cleaner indoor cooking over 2,000 cleantech firms on its database. stoves (Shell) and microfinance (BP); access to new forms of energy (Statoil); and the pursuit of sustainable development through better integration of different service offerings, including energy, waste management, and water (Suez). Figure 5.2 Figure 5.3 World marketed energy: World marketed energy: OECD and non-OECD consumption consumption by fuel type 1980–2030 1980–2030 Quadrillion BTUs Quadrillion BTUs History Projection History Projection 500 500 Non-OECD 400 400 OECD 300 300 Oil Coal 200 200 Natural Gas 100 100 Renewables Nuclear 1980 1990 2000 2003 2010 2020 2030 1980 1990 2000 2003 2010 2020 2030
  • 40. Growing Opportunity 38 Deeper Dive: Energy Overall, it is clear that even leading The current consensus is that markets for ‘Our biggest challenges? companies — and BP is a leader despite products designed with energy efficiency, First, managing the quality its recent catastrophic slip-ups — still renewable energy and/or clean energy have a long way to go in addressing the in mind are set to explode, but the of our programs while sort of issues that are second nature for projections in Figure 5.3 suggest that scaling them. Second, hiring most leading social and environmental renewables will still meet a relatively entrepreneurs. To achieve anything like small proportion of world marketed private sector talent on the 3.0 version of the business case for energy demand in 2030. In the a not-for-profit budget.’ sustainable development in the energy meantime, while renewable businesses sector, such companies would need to and other cleantech ventures scale up, Environment Sector address three key areas that are central there will be a continuing, growing to the work of such entrepreneurs: demand for affordable, clean fossil fuels. — Access — Security For many social entrepreneurs, the issue With continuing uncertainty around the of access to energy is crucial. Billions future of a number of key oil producing of people still lack access to reliable regions, energy security considerations 81 These figures are taken from the supplies of affordable, clean, and are very much in the ascendant. Among International Energy Outlook 2006, sustainable energy. And this is also an other things, this has been a critical prepared by the US Energy Information issue for mainstream businesses. To factor driving the growing interest in Administration. grow, markets need energy: no energy, biofuels and other forms of cleantech. www.eia.doe.gov/oiaf/ieo/world.html no growth. Figure 5.1 underscores the The access-to-energy agenda is closely predicted significant continued growth linked. At the extreme, picture an oil in energy demand worldwide,81 with non- company operating in West Africa, the OECD demand overtaking OECD demand complex’s lights blazing in the night within the next decade (Figure 5.2), even while all around there is a world in which given the uncoupling of energy demand reliable, affordable electricity remains a from GNP growth (Figure 5.4). distant dream. This could be a metaphor for the developed world sailing on in an ‘ocean’ of energy-poverty, a reality that raises many longer term security issues. Figure 5.4 Figure 5.5 World marketed energy: Growth in energy use and consumption in three economic scenarios GDP in non-OECD countries 1980–2030 1980–2030 Quadrillion BTUs Index: 1980 = 1 History Projection History Projection 1000 20 900 18 High growth 800 16 Reference 700 14 Low growth 600 12 GDP 500 10 400 8 Energy use 300 6 200 4 100 2 1980 1990 2000 2003 2010 2020 2030 1980 1990 2000 2003 2010 2020 2030
  • 41. Growing Opportunity 39 Deeper Dive: Energy — Climate and environment The cleantech surge ‘We have tracked more than The skies over China have darkened in $10.6 billion invested in the past five decades, thanks to a nine- Given the sheer scale of the challenges fold increase in fossil-fuel emissions.82 we face in the energy realm, it is important cleantech ventures since Around 80% of China's electricity comes to maintain a sense of relative scale when 1999 in North America from coal, and there are plans for well thinking about the potential contributions over 500 new coal-fired power stations of social and environmental entrepreneurs. and $2.6 billion invested to meet an apparently insatiable demand The sort of social and environmental in Europe since 2003.’ for energy. The country is expected to entrepreneurs who are pioneering new overtake the US in terms of greenhouse approaches include Fabio Rosa of IDEAAS,84 Cleantech Venture Network gas emissions in 2009, yet the surge of Brazil, Nic Frances of Easy Being Green,85 investment in heavy industry is under- Australia, and Maqsood Sinha and Iftekhar mining China’s ability to achieve its Enayetullah of Waste Concern,86 energy efficiency targets.83 Even without Bangladesh. But however successful such growing concerns about the implications people may be in scaling up what they do, of energy consumption trends for the and however much they may now deserve stability of our climate, the likely to be properly funded, we should note that 82 earthobservatory.nasa.gov/ increase in many forms of pollution they have a very long way to go in order naturalhazards/shownh.php3?img_ linked to energy in the emerging to make a significant impression on id=13333 economies can only increase the squeeze tomorrow’s energy challenges. Still, as 83 Richard McGregor, ‘China set to on energy producers worldwide. IDEAAS and Waste Concern demonstrate, miss target for energy efficiency’, Once seen as a softer set of drivers, the best among them are having major Financial Times, 17 February, 2007. environmental factors are now seen to impacts at the national or regional level, 84 www.ideaas.org.br/id_equipe_eng.htm be of crucial importance. and there are ambitions to go international 85 http://shop.easybeinggreen.com.au/ in some cases, as with Easy Being Green. categories.asp?cID=71&fromhome=true 86 www.wasteconcern.org Figure 5.6 Challenges Access Rising prices Limited infrastructure Ineffective government regulation Security Geopolitical considerations Growing divide between rich and poor ‘Resource curse’ Environment Climate change Unbanization Population growth
  • 42. Growing Opportunity 40 Deeper Dive: Energy The truth is that most of the significant Meanwhile, however, many mainstream ‘The energy sector shows developments to date have been happening energy groups remain relatively cool on signs of real systemic elsewhere, for example in the cleantech renewables. Some, like Exxon, pretty much space. Indeed, this is where definitions ignore the field altogether. Others are breakout. A host of new begin to blur. If social entrepreneurship investing significant sums — such as BP’s technologies are marching covers environmental entrepreneurs, for half-billion-dollar investment in a new example, does that mean it also covers biofuel research center that will link the their way up their learning cleantech enterprises? And given that University of California at Berkeley with and down their cost curves most cleantech entrepreneurs are for-profit, the University of Illinois and the Lawrence very much in it for the money, does this Berkeley National Laboratory.88 BP says that, — responding to a dramatic rule them out in terms of social entre- in addition to the new Energy Biosciences social risk and pretty clear preneurship status? In the end, it probably Institute at Berkeley, it plans to spend $8 doesn’t matter much — though we see billion over 10 years on its own alternative price signals.’ them all as part of a broad entrepreneurial energy efforts, which include building solar Bill Drayton, Ashoka landscape (see Figure 1.1). The really cells and wind farms. The company also has important question is where the truly a major biofuels partnership with DuPont.89 breakthrough technologies and business But for the big oil companies that have 87 Crossing the Divide? The Future of models are now evolving. For the moment been reaping record profits from high oil Renewables and Clean Energy, see that would largely appear to be in prices, such research typically remains a www.cera.com/aspx/cda/client/ what, since 2002, has been dubbed the small component of their overall R&D knowledgearea/servicedescription. ‘cleantech’ space. portfolios. Donald Paul, who oversees aspx?kid=199#39251 alternative energy programs at Chevron, 88 David R. Baker, ‘Big Oil cautious about It is clear that, as energy analysts CERA explains that the infrastructure needed to clean-energy spending’, San Francisco put it, ‘The race is on to invest in mass produce and distribute any type of Chronicle, February 9, 2007. renewables and clean energy technologies, fuel takes years to develop, and millions, if 89 www2.dupont.com/Biofuels/en_US yet the outcome is far from clear. not billions, of dollars to build. And, longer 90 www.opendemocracy.net/ Considerable uncertainties exist over the term, it is inevitable that such biofuel globalizationclimate_change_debate/ policy context, the technologies themselves, investment will generate second-order fixes_4311.jsp and the broader energy competitive social and environmental impacts.90 landscape. Who will be the winners and losers, and what will the implications be When we asked Samer Salty of London- for company strategies and the competitive based venture capitalists zouk ventures, landscape?’ CERA is running a multiclient whether he expected the clean energy study focusing on the role of clean sector to follow the trajectory of the New technologies in the future. The process Economy, he agreed that there were will involve building scenarios out to 2030, similarities — but stressed that, whereas the date already mentioned in relation Internet companies typically took relatively to International Energy Outlook. little capital to establish and could be sold for high multiples at the peak of the boom, energy technologies and infrastructures typically require massive investments. That doesn’t remove the risk of a bubble developing, he argued, but it does lessen the likelihood somewhat.
  • 43. Growing Opportunity 41 Deeper Dive: Energy Mindset 3.0 ‘Converting North America’s 200,000 Not only are billions of taxis to hybrids,’ he explains, ‘would have people denied reasonable In carrying out this Deeper Dive, we spoke tremendous financial, economic, health, to a range of companies and organizations, and environmental benefits. Hybrid cars energy services, but the from big petrochemical companies through reduce smog emissions by more than 70%. planet is running a fever to early stage start-ups like Innovalight.91 Taxis drive 10 times the distance of average This is a fascinating Silicon Valley start up vehicles every year. Changing 200,000 simply by meeting the which is using nanotechnology and silicon taxis to hybrids would have the same needs of those who are inks to create ultra-low-cost solar impact as converting 2,000,000 cars!’ photovoltaic modules. It has developed a currently served. silicon nanocrystalline ink that could cut The uncoupling of GDP from energy the cost of flexible solar panels to a tenth consumption — shown in Figure 5.5 — of current solar cell solutions — using a is by no means a foregone conclusion: it solvent-based silicon process that lends has to be fought for every step of the way. itself to low-cost production and high- That’s what makes the work of people like throughput manufacturing. Just one more Amory Lovins (of the Rocky Mountain example of the cleantech surge now Institute 92) and Bill McDonough (of MBDC 91 www.innovalight.com/index.html building. But in what follows, we will draw 93 and William McDonough + Partners 94) 92 www.rmi.org on the experience of the full spectrum of so important. Whether or not particular 93 www.mbdc.com non-profit to for-profit organizations, from designs like Lovins’ hypercar 95 (designed to 94 www.mcdonoughpartners.com foundation-funded social enterprises to achieve a three- to five-fold improvement 95 www.hypercar.com market-driven cleantech ventures. in fuel efficiency) actually get built any time soon, the spotlight has been placed Standing back, what these entrepreneurs squarely on the need to drive out energy have to teach the wider world has less to from our economies, value chains and do with how to develop a given technology businesses. or how to put together a particular product, than with how they think, act and lead. So, for anyone wondering where the Mindset 3.0 agenda (Figure 3.1, page 24) 2 Emerging economies: might take us, here are five points which use bigger BRICs struck us in looking over the shoulders of different types of entrepreneur working in Given the scale of the energy demand of the energy field. the BRIC economies (Brazil, Russia, India, China) and other emerging markets, the world needs to focus its attention here — and as soon as possible. Bill McDonough 1 Systems thinking and design: has already been working on a number of inefficiency is the enemy planned eco-cities there, an opportunity space that has also attracted EcoCities.96 One striking thing about leading social and Ask the organization’s Chairman, Lawrence environmental entrepreneurs is that they Bloom, why he is focusing on China, and he are dedicated to changing the system, not is very clear on the point. ‘Fundamentally, just to making marginal improvements. the first EcoCities project is under way in Whether or not they succeed in such China (in Dongtan, near Shanghai) because ambitious aims is quite another matter, the first opportunity was created there.’ but there is no question that the global energy system is dysfunctional: not only He explains, ‘China has both the “stick” and are billions of people denied reasonable “carrot” in large measure to drive her from energy services, but the planet is running her present polluting paradigm to cleaner a fever simply by meeting the needs of and more secure solutions. Currently, one those who are currently served. dirty coal power station comes on stream every eight days to fuel China’s continuing Take a taxi example. Jim Harris, Managing economic growth. When I was last in Partner with the evolving Cleantech Beijing, we took off from Beijing Capital Innovation Institute, is working out how International airport on a cloudless day, to get those who influence choices on what but could not see the sun until the plane sort of vehicles qualify as taxis — the auto- was at 12,500 feet. The pollution is nearly makers, taxi companies, leasing companies, two-and-a-half miles high and is currently regulatory agencies, insurers and others — considered to be costing the country 8% to focus on changing Toronto’s (and then of GDP in asthmatic and bronchial Canada’s and then North America’s) taxis conditions and lost working days. With to hybrid propulsion systems. 400 million people expected to migrate from the countryside to the cities in the next 30 years, that is a very big stick.’
  • 44. Growing Opportunity 42 Deeper Dive: Energy But, he notes, ‘the carrots are also profound A parallel initiative in the climate change While it is easy to over- — China could be a future world-leader field is the Carbon Disclosure Project estimate the readiness of and major global player in “green” (CDP),107 which provides a secretariat for industries and services — so from solar- the world's largest institutional investor consumers to take big steps panel manufacture and consequent collaboration on the business implications to save the planet or help intellectual property streams to carbon of climate change. CDP represents trading markets, her opportunities are an efficient process whereby many other people, it can also awesome.’ Part of the EcoCities plan is to institutional investors collectively sign be precariously easy to ‘create the EcoCities Foundation, sharing a single global request for disclosure of all the information we obtain on feedback information on Greenhouse Gas Emissions. underestimate their willing- loops from our developments, and we More than 1,000 large corporations report ness to take smaller steps. anticipate that it will become the centre on their emissions through this website. of a major resource offering sustainability- The CDP 5 information request was signed advice to individuals, corporations and by more than 280 institutional investors NGOs.’ with assets of more than $41 trillion and sent out on February 1, 2007 to 2,400 Not everyone is building cities and other companies. The responses will be made 96 www.ecocities.com infrastructure on the scale — or in the available in September 2007. 97 www.wasteconcern.org semi-orchestrated way — that China is. 98 www.barefootcollege.org Elsewhere in the emerging economy and 99 www.devalt.org developing country worlds, social and 100 www.kickstart.org environmental entrepreneurs are having 4 Consumer engagement: 101 www.transparency.org to wrestle with multiple forms of chaos lower the entry ramps 102 www.publishwhatyoupay.org/english brought on by over-rapid, ill-planned 103 www.globalreporting.org urbanization. Among them are organ- While it is easy to over-estimate the 104 www.ceres.org izations like Waste Concern 97 in Dhaka, readiness of consumers to take big steps to 105 www.accountability21.net Bangladesh. In rural regions, meanwhile, save the planet or help other people, it can 106 www.sustainability.com/insight/ energy needs are being developed by also be precariously easy to underestimate research-article.asp?id=865 pioneers operating in India’s Gandhian their willingness to take smaller steps — 107 www.cdproject.net tradition like Bunker Roy of Barefoot that collectively can add up to some form 108 www.solarcentury.com College, 98 who train barefoot solar of revolution. One man who has taken the 109 www.newenergies.ch/index_ei.html engineers, and his countryman Ashok step of moving out from the campaigning Khosla with his Development world to engage consumers head-on Alternatives.99 Similarly, in Kenya, is Jeremy Leggett, once a Greenpeace Martin Fisher and Nick Moon of KickStart campaigner, and more recently CEO of now — remarkably, directly or indirectly — Solar Century.108 He is also a director of account for 0.6% of the country’s GDP, with the world's first private equity renewable their appropriate technology solutions.100 energy fund, Bank Sarasin's New Energies Invest AG.109 Solar Century’s vision is immodest: 3 360° accountability: ‘Our aim,’ they say, ‘is to revolutionize the let the sun shine in global energy market. The sun bathes the earth in an incredible amount of energy — Given the extent to which bribery and in a day, enough arrives to power the whole corruption distort energy production and world for several years. Humanity can now supply systems, against the backdrop of effectively harness the power of the sun. the so-called ‘Curse of Oil’ that so often The 21st century must be the solar century. turns a natural resource treasure into We envisage solar systems on the roof of a socio-economic tragedy, the role of every building, backed up by a family of transparency and accountability cannot other micro renewables, supplying clean be exaggerated. That’s what makes the power and achieving deep cuts in related work of organizations like emissions. As the global market for Transparency International,101 Publish renewable energy grows, thousands What You Pay,102 the Global Reporting of jobs will be created in research, Initiative,103 Ceres,104 AccountAbility,105 installation, and manufacturing.’ and, yes, SustainAbility106 so important.
  • 45. Growing Opportunity 43 Deeper Dive: Energy Another venture that aims to make Whether from the basic needs angle ‘It was difficult for us sustainable energy choices more accessible or because of systemic challenges like to negotiate with large to ordinary people is Easy Being Green, climate change, energy is central to the founded in Australia by Nic Frances and sustainable development agenda. The UK corporations to begin with. Paul Gilding, but with plans to go Stern Review, which described climate They have more lawyers and international.110 In 2004, they set a goal change as effectively the biggest market for 70% of Australian homes to be 30% failure of all time, calculated that the a different style. I would like more energy and water efficient within dangers of unabated climate change access to training to “speak 10 years. Since then they have implemented would be equivalent to at least 5% of programs that have provided almost half GDP each year.114 Overall, it estimated that their language” and access a million homes with ‘Climate Saver Packs’; the dangers could be equivalent to 20% of to board-level contacts.’ reduced 620,000 tonnes of CO2 pollution GDP or more. In contrast, it argued that the per year, equivalent to taking 150,000 costs of action to reduce greenhouse gas Energy Sector cars off the road; saved 5.8 gigaliters of emissions to avoid the worst impacts of water, equivalent to 2,500 Olympic-sized climate change could be limited to around swimming pools; and saved households 1% of global GDP each year. People would A$32.3 million on their energy bills. pay a little more for carbon-intensive 110 http://shop.easybeinggreen.com.au/ goods, but our economies would continue categories.asp?cID=71&fromhome=true to grow strongly. According to one measure, 111 www.chicagoclimatex.com the benefits over time of actions to shift 112 www.climatechangecapital.com 5 Business models: the world onto a low-carbon path could 113 www.freeplayenergy.com take climate into account be in the order of $2.5 trillion each year. 114 www.hm-treasury.gov.uk/ Markets for low-carbon technologies will independent_reviews/stern_review_ Disclosing greenhouse emissions is one be worth at least $500 billion, and perhaps economics_climate_change/sternreview_in thing, putting a price — and a value — much more, by 2050 if the world acts on dex.cfm on them is quite another. Two organizations the scale required. 115 www.ceres.org have been working in this area: Richard Sandor’s Chicago Climate Exchange The potential impact of social and (CCX)111 is the world’s first, and North environmental entrepreneurs in this area America’s only voluntary, legally binding was dramatically illustrated by the success rules-based greenhouse gas emission of Ceres,115 led by its President Mindy reduction and trading system; and James Lubber, in helping stall plans by TXU to Cameron’s Climate Change Capital (CCC)112 build 11 coal-fired power stations in the is a leading investment banking group that USA. Even though 150 coal-fired power specializes in the commercial opportunities plants are currently proposed in the created by a low carbon economy. CCC country, TXU’s $10 billion coal expansion advises and invests in companies that plan drew intense criticism in terms of the recognize combating global warming is likely climate impacts. When the plans were both a necessity and an economic announced, Ceres convened some of TXU’s opportunity. Its activities include invest- largest shareholders, including CalPERS, ment management and financing emission CalSTRS, and the New York City reductions, and its aim is to make the Comptroller’s Office, to bring pressure to world's environment cleaner while bear. Some time later, it was announced delivering attractive financial returns. that two private equity firms — Kohlberg Longer term, it will be interesting to see Kravis Roberts & Co and the Texas Pacific what happens to such players when the — would buy TXU for $45 billion, and would Chinese get serious about greenhouse drop eight of the proposed power stations. emission trading. Strikingly, the private equity firms consulted Ceres and other critics ahead of the deal Then there are the ‘Robin Hood’ models. being signed. We expect a lot more of this Whether or not such a figure ever stole sort of power politics. from the rich to give to the poor, different people certainly place a different value — and are prepared to pay very different prices — for anything from their health to clean fuels. In the energy sector, the most outstanding example of this is probably Freeplay Energy,113 which started out offering wind-up radios and expanded to a wide range of other human-powered products.
  • 46. Growing Opportunity 44 116 www.calvertfoundation.org/ We are entering a new era in which 117 www.goodcap.net today’s apparently insoluble problems Conclusions spawn tomorrow’s transformative solutions. The new breed of social and Social entrepreneurship is on a roll environmental entrepreneur is part of a new global order that is dedicated to — Social entrepreneurs are part of a much new levels of equity, quality of life and wider spectrum, or continuum, of entre- sustainability. Far from accidentally, preneurial effort dedicated, directly or there is a buzz around innovation — for indirectly, to addressing key sustainability example, it was chosen as the theme of challenges. the 2007 Skoll World Forum in Oxford. Indeed, the growing appeal of social — Social entrepreneurship is emerging as entrepreneurship was illustrated by the a potential catalyst and powerful lever of turn-out in 2006: nearly 700 delegates the sort of change that governments and from more than 40 countries. And the business are increasingly committed to — 2007 event ‘sold out’ well in advance. but rarely know how to deliver. But, in the midst of all of this excitement, — While there may be elements of a boom we should ask: Is there a danger that the in interest in social entrepreneurship, the social entrepreneurship industry will end risk of an entrepreneurial bubble bursting up intoxicated by virtue, to use a colorful appears low — and the opportunity space Americanism, of ‘breathing its own can only grow. exhaust’? Overall, our conclusion is that the optimism about these entrepreneurs Conclusions & Next Steps is well placed, but that that they are The potential for breakthrough solutions experiencing a range of growing pains — is considerable — and growing and there is an urgent need to steer more capital and business resources — The timing is more or less perfect, given into this area. that systemic change is increasingly needed. ‘Sure, entrepreneurs need to If this can be achieved, we very much be mavericks working outside the box,’ agree with Tim Freundlich (Director, said SustainAbility Faculty member Strategic Initiatives, Calvert Social Sir Geoffrey Chandler, ‘but they have Investment Foundation 116 and Founding an important voice which — if it can be Principal, Good Capital 117) that the outlook properly channeled — could help break is bright. ‘I see the social enterprise open the box.’ landscape rapidly prototyping strategies that corporations will incorporate, replicate — The fundamental challenge, said ‘blended — or just plain steal. These entrepreneurs value’ champion Jed Emerson who works act as fearless and fast actualizers, taking closely with Generation Investment the uncertainty and lack of imagination out Management, is not so much to scale of the equation for mainstream business. the enterprise as to ‘scale the solution.’ Global warming and poverty especially are conspiring in an accelerating way to — Among the routes to scale discussed by sensitize society towards considering and our respondents, the following surfaced experimenting with the integration of new repeatedly: (1) grow individual social models of doing business, focusing on a enterprises; (2) establish multiple enter- different and more nuanced sense of value prises; (3) get big organizations — — call it double bottom line, triple bottom whether companies, public agencies or line or blended value.’ NGOs — to adopt the relevant models and approaches; and (4) spur public So here are our conclusions and a summary policy legislation designed to fix of some of the next steps we propose. market failures. 6
  • 47. Growing Opportunity 45 Conclusions & Next Steps The field is growing, but is still Panel 6.1 Nothing changes relatively small Paradigm shifts don’t come easy without individuals, — As in any area of entrepreneurial activity, Various entrepreneurs talked in terms but nothing remains the risks of actual or perceived over- of the need for a paradigm shift in their without institutions. promising are real. The wider community field. But such shifts rarely come easy. needs to find ways to monitor, measure, So what needs to be done? Some answers evaluate, and report on progress in ways began to surface during the 2007 Schwab that build understanding and support. Foundation Summit in Zurich, where the focus was on the business case for social — Our analysis of the funding flows into entrepreneurship — and for strategic social entrepreneurship suggest that, business involvement with social while the overall levels have increased entrepreneurs. One business leader told significantly in recent years, the current the social entrepreneurs present that funding total is a small fraction of within a decade ‘everyone is going to that currently devoted to cleantech fall over themselves in a race to get your investments — let alone wider business.’ But at least three things need to philanthropy. change if we are to see a paradigm shift. — To put rough numbers on these three The first, according to Pamela Hartigan areas, to give a sense of orders of of The Schwab Foundation, is that magnitude, we estimate that less ‘the infrastructure to support these than $200 million is going into social ventures has to be put in place much enterprise worldwide from dedicated more quickly than is occurring if they are foundations each year, compared with to scale — and live up to their potential over $2 billion a year into cleantech in to achieve systemic economic and social the USA and EU and well over $200 change. The creation of social ventures billion into philanthropy in the USA is ramping up at breakneck speed as more alone. and more talented, innovative, passionate, and caring individuals come together to address widening and ubiquitous Money is the main headache inequities, but the financial, legal, and political support is still crawling along — Accessing capital is the No.1 challenge by comparison, stuck in antiquated for the entrepreneurs we surveyed, with institutional frameworks.’ almost three-quarters (72%) putting this at the top of their priority list. The second is that we need to expand While this is also true of mainstream the spotlight to illuminate not just heroic entrepreneurs, the pressures on social individuals but also the organizations and environmental entrepreneurs to grow behind them. ‘Too much rides on the are resulting in significant growing pains. founder of the venture,’ Hartigan argues. ‘Much more has to be done to support — ‘There is a lot of seed capital available, the founder and the leadership team’s angel-equivalent, for social entre- transition through their growth phases. preneurs,’ said Linda Rottenberg of In the words of John Monet, “Nothing Endeavor Global. ‘But there is not a lot changes without individuals, but nothing of later-stage funding available — series remains without institutions.” ’ We need to B and C equivalent — to take social focus on their No. 2, 3 and 4 colleagues. entrepreneurs to scale. There’s a huge gap in the social capital market that’s Third, a need constantly flagged up by our preventing many of the best models from respondents, there need to be better ways replicating and fulfilling their potential.’ of linking the worlds of social enterprise and mainstream business. ‘The degree of — Foundations are still the favorite source interface will depend on a host of factors,’ of funding for social entrepreneurs says Hartigan, ‘namely: the power of the (mentioned by 74% of respondents), business case argument for working but there is a wide recognition of the together; the extent to which people on need to diversify funding sources. both sides are committed to making the relationship work and the nature of the — At least among our sample, there was social enterprise itself — so, for example, a striking trend in their projections about leveraged non-profits might work best where their funding would come from with the philanthropic arm of a in the future. The proportion expecting corporation, whereas hybrids could be to be relying wholly on grants in five more in sync with the core business of years was down to 8%, compared with the corporation.’ 27% today.
  • 48. Growing Opportunity 46 Conclusions & Next Steps — On the other side of the coin, the — ‘We need to be brokering relationships ‘We need to be brokering proportion of those expecting to be now in the social enterprise/business relationships now in the funding their own operations, with little interface,’ said one interviewee. or no dependence on grants jumped from ‘Currently much of this is done around social enterprise/business 8% to 28%. Many still expect to rely on cause marketing, but we need more interface. Currently much a mix of funding types, but a significant guides who can identify possible partners proportion (up from 38% today to 50% and take entrepreneurs through the of this is done around cause in five years) expect a substantial courtship needed to create real marketing, but we need rebalancing in the coming years. partnerships of broad value. So many industries have matchmakers — where more guides who can are they in this sector, beyond what has identify possible partners Other growing pains been called the in-club of white male social entrepreneurs?’ and take entrepreneurs — Linked to the funding challenges, many through the courtship entrepreneurs noted the problems they — There is a risk in all of this that we face in offering competitive salaries to become overly focused on narrow needed to create real staff — with professional staff, in turn, definitions of social entrepreneurship. partnerships of broad value.’ often a key to attracting sufficient For example, it’s easy to get excited funding. about small start-ups in the renewable Anonymous respondent energy field, but we should remember — As these social enterprises grow, they the huge contributions already being increasingly face a tension between the made by much larger companies like need for professionalism and efficiency Acciona 118 in Spain, Vestas 119 based on the one hand and, on the other, the in Denmark, or GE based in the USA. need to maintain a focus on the mission, values and culture of the organization. — Listen to José Manuel Entrecanales, Acciona’s Chairman and a Spanish — Succession planning is another area businessman with big ambitions in of difficulty. The entrepreneurs them- sustainable energy. We asked whether selves are very aware that for their this ambition would require trade-offs? organizations to succeed, they them- ‘No,’ he replied. ‘Mainstream businesses selves need to change. This is true even must deliver shareholder value. But of the most successful entrepreneurs. Acciona has significantly increased its Bill Strickland of the Bidwell Training sustainability profile and investment in 118 www.acciona.es Center Inc. (BTC), a Pittsburgh-based areas like renewable energy in recent 119 www.vestas.com organization for urban change, once years, while recording substantial growth said that the biggest barrier to his and exceptional shareholder value. organization growing was him. For example, in 2005 our use of renewable energy sources avoided the — Novelty is an enormous strength, but emission of 4.5 million tonnes of CO2. like so many traits could also become I believe that there may be opportunities a weakness. Many others have been for a forward-thinking energy player to tackling the challenges social entre- create small-scale village-based preneurs are dealing with, at other renewable energy provision which truly times, in other places, in different breaks the mould.’ ways. There is a danger that in their enthusiasm to embrace — and be ‘Indeed I see interesting parallels rewarded for developing — radical new between the provision of energy to these solutions that a number of new wheels areas and the situation in commercial are unnecessarily invented. credit two decades ago which led Nobel Prize winner Professor Yunus to set up the Grameen micro-credit system. Partnering with business The application of a decentralised, bottom-up approach to providing — Social and cleantech entrepreneurs electricity to remote or impoverished turn out to be equally interested in areas is one we have been long developing partnerships with business, interested in at Acciona. It is one our but with different expectations. team is currently exploring, knowing Social entrepreneurs, in particular, well that there are situations and are acutely aware that they often lack locations where the provision of the experience and skills needed. clean and sustainable energy will not be commercially viable. That is why we — A constant refrain in the interviews are currently fundraising for projects was the growing need for brokering which may not prove profitable in the between the entrepreneurs and those immediate future. We welcome dialogue they need to persuade or recruit. with NGOs and others who share our vision.’
  • 49. Growing Opportunity 47 Conclusions & Next Steps Don’t forget the social intrapreneur Panel 6.2 ‘Over the last 25 years, Next steps the citizen sector has — Several interviewees also noted that we need to recall the potential of social Among the next steps planned for become as entrepreneurial intrapreneurship,120 with change agents SustainAbility’s Skoll program are the structurally as business in working inside big organizations to drive following: similar agendas. One example of a social most of the world — and, intrapreneur we interviewed was Gib — Skoll World Forum 2007 as a result, it has been Bulloch, Programme Lead at Accenture We will present the results of this Development Partnerships.121 He has first survey, and also test some of closing the productivity been part of a team for nearly five years our conclusions for the health sector gap with business very that has been working to switch this in a dedicated session. major consulting firm on to the potential rapidly. We now have the to help NGOs, social entrepreneurs, — Feedback opportunity to end the and major businesses to understand We will send the final report to all and manage the world’s great social, those who took part, inviting their accidental divorce of the environmental, and governance comment. This will be used to shape last three centuries. Doing challenges. further projects. so represents a gigantic — Many people still see such efforts — Roundtables and workshops productivity opportunity as part of corporate citizenship. During 2007–08, we will organize This, as Bulloch puts it, means that roundtables and workshops to for business, for the citizen they think ‘in terms of grooming debate, evolve, and communicate sector, and for the ultimate donkeys, sponsoring the opera or, at the conclusions. best, painting schools. Rather than, customer and citizen.’ say, helping Oxfam to become a high — Further deep/deeper dives Bill Drayton, Ashoka performance organization.’ In the context We aim to conduct at least two further of Accenture’s 145,000 employees explorations into our target sectors worldwide, ADP’s 70-going-on-100 may during the coming 12 months. seem small beer, but the potential to catalyze change — both inside Accenture — Explore potential for developing and among its clients — is considerable. ‘Wiki-Manual’ Given the interest in understanding — The key point, however, is that one how to develop partnerships with 120 www.iese.edu/research/pdfs/ way of achieving scale with entre- mainstream business and other op-04-16-e.pdf preneurial solutions is to switch large partners, we will consider developing 121 www.accenture.com/global/ organizations onto the new challenges either a published Manual or even about_accenture/company_overview/ and exploit their much greater leverage an online manual along the lines corporate_citizenship/philanthropy/ to further evolve and deploy the of Wikipedia123 on related themes. accenturepartnerships.htm solutions. 122 www.schwabfound.org/docs/web/ — Brokering linklaters_schwab_report.pdf Further develop our thinking, and over 123 www.wikipedia.org A growing need to focus on government 12–18 months, our offerings in this responsibilities and roles area. — Governments need to do more to shape — Capital flows public policy, public sector targets and Investigate ways to increase the capital wider incentives — for example, in flows into the social enterprise space. relation to tax breaks for the funding of social enterprise — if the sort of ventures — 2008 survey covered above are to reach their full Test themes for the next survey. potential. This is an area that has been covered by people like Linklaters,122 but where considerable further thinking — and action — is needed.
  • 50. Growing Opportunity 48 Annex 1 Survey Instrument 1 As a principal responsible 5 Five years from now, 7 Thinking about financing 10b Please tell us the region for the future direction of which of the following your initiatives, which of the world where you your organization, please statements best describes sources of funding do you primarily operate. select two areas that how your organization feel will be the best — Africa present the greatest expects to fund itself? avenues for you to pursue? — Antarctica challenge: (Please select one) (Please select all that apply) — Asia — Recruiting & retaining — We will completely rely on — Dipping into your own — Europe talent. grants, donations or other pockets. — Middle East — Accessing capital. sponsorship. — Raising funds from the — North America — Developing a more mature/ — We will primarily rely on public (fundraising). — South America professional organization. donor funding, but will have — Attracting help-in-kind — South Pacific — Adapting to a changing other sources of income. (donated time/products). external market/landscape. — We will have sources of — Foundations (grants or — Promoting or marketing earned-income / fees, but program-related 10c Please select your your organization. also will rely on grants and investment). organization's primary — Something else other funding. — Tapping government area of focus. (please specify). — We will fund ourselves (grants, loans). — Economic and social equity — Nothing else. through customer revenue — Making sales/charging fees. (development and poverty — These issues are not and mainstream capital — Franchising. alleviation). my responsibility. markets and will not rely — Joint venturing. — Education. on grants or donations. — Venture capital (including — Environment (including — Something else angel investments). energy and water). 2 Please briefly explain your (please explain). — Going public. — Health. biggest challenge. — Unsure. — Something else — Housing. (please specify). — Institutional responsibility — Unsure. and transparency. 3 Please briefly explain your 6a Are you attempting to — Peace and security. second most important track non-financial — Tolerance and human rights. challenge. performance for your 8 Why do you think these — Something else organization? sources are the best (please specify). — Yes. avenues for you? 4 Which of the following — No. statements best describes — Unsure. your organization? 9 In what ways do you think (Please select one) large corporations could — We completely rely on 6b How are you tracking be better partners for grants, donations or other this performance? you? (Please tell us about sponsorship. What metrics have you experiences that have — We primarily rely on donor developed or what other worked well or poorly in this funding, but have other approaches are you arena). sources of income. taking? — We have sources of earned- income/customer revenue, 10a Will you allow but also rely on grants and 6c How are you finding SustainAbility to associate other funding. this process? your name with your — We fund ourselves through (On as scale of 1 to 5) comments? customer revenue and 1 This is not working at all — No, I would like to keep my mainstream capital markets 2 comments confidential. and do not rely on grants 3 — Yes, you may associate my or donations. 4 responses with my name — Something else 5 This is working very well and organization. (please explain). 6 Unsure — Unsure.
  • 51. Growing Opportunity 49 Annex 2 Participants Below are the names of individuals who took part in our research. A number of survey participants requested that their responses be kept confidential and, as such, have not been included in this list. John Daniels ABT Insulpanel Limited Dave Pearce Miasolé Sakena Yacoobi Afghan Institute of Learning Dr Devi Shetty Narayana Hrudayalaya Hospitals Trevor Cree Agmachine.com Ltd Mia Hanak Natural World Museum Cyndi Rhoades AntiApathy of Environmental Art Keerti Pradhan Aravind Anil Pansari Naveen Gram Agrotechnologies Lisa Fitzhugh Arts Corps David Nuttle Needful Provision, Inc. Kamal Bawa Ashoka Trust for Research in Olga Murray Nepalese Youth Ecology and The Environment Opportunity Foundation Barbara Hofmann Association for the Damian Miller Orb Energy Children of Mozambique Dr Davida Coady OPTIONS Recovery Services, Inc. Chris Underhill Basic Needs David Gordon Pacific Environment Jim Fruchterman Benetech and Resources Center Karl Mundorff BioReaction Industries Faisal Islam Padma Daniel F Bassill Cabrini Connections Becky Crowe Hill Partners in Schools Sylvia Aruffo Careguide Systems Kenneth Luongo Partnership for Global Security Jim Rough Center for Wise Dr Chris Elias PATH Democratic Processes Daniel Salcedo PEOPLink, Inc. Thankiah Selva Ramkumar Centre for Social Reconstruction Suraiya Haque Phulki Jeroo Billimoria Child Savings International Lynne Patterson Pro Mujer Inc. Greg Ruebusch ColdBlast Scott Pearson Protonex Art Lilley Community Power Corporation Peter McFarren Quipus Cultural Foundation Satyan Mishra Drishtee Dot Com Ltd. Brett Jenks Rare Christopher London Educate the Children Andrea Coleman Riders for Health Bunnie Strassner Fascinating Learning Factory John Wood Room to Read Kyle Zimmer First Book Heidi Kühn Roots of Peace Marv Baldwin Foods Resource Bank Dennis Sizemore Round River Marcus Colchester Forest Peoples Programme Conservation Studies Nick Salafsky Foundations of Success Dr Antonia Neubauer Rural Education Rory Stear Freeplay Energy and Development, Inc. Martin Burt Fundación Paraguaya de Vera Cordeira Saúde Criança Renascer Cooperación y Desarrollo Graham Macmillan Scojo Foundation Daniel Taylor-Ide Future Generations John Marks Search for Common Ground Richard Wong Gifts In Kind International Cyril R Raphael Shri Bhuvneshwari Kavita Ramdas Global Fund for Women Mahila Ashram Shashi Tyagi Gramin Vikas Vigyan Samiti Russell de Lucia Small-Scale George Wagner Harvest Wind Sustainable Infrastructure Nevzer Stacey HasNa Inc. Development Fund, Inc. Gary Cohen Health Care Without Harm Ibrahim Natil Society Voice Foundation Josh Tosteson Hydrogen LLC William H Conklin SolarAMP, LLC Rick Surpin ICS Jill Vialet Sports4Kids Leland Stewart Independent Energy Corporation Sharon Walden Stop Abusive Karen Tse International Bridges to Justice Family Environments, Inc. Randall Hayes International Forum Mark Borchers Sustainable Energy Africa on Globalization Jay Jacobs Summer Search Garry Neil International Network Ron Smith Verdant Power for Cultural Diversity Charles Knowles Wildlife Conservation Network Katherine Freund ITNAmerica Gerald Chertavian Year Up John Tarvin Jumpstart Ali Raza YES Network Pakistan Elana Rosen Just Think Foundation Sharron Rush Knowbility, Inc. Alison Bock Landmines Blow Deborah Meehan Leadership Learning Community Linda Hahner Literacy Center Education Network Talia Aharoni MAALA (Business for Social Responsibility in Israel) Paul Holthus Marine Aquarium Council
  • 52. Growing Opportunity 50 Subheading Allianz DuPont The Skoll Foundation SustainAbility Founded in 1890 in Berlin, Founded in 1802, DuPont puts The Skoll Foundation was Established in 1987, and based Allianz is now present in more science to work by creating created by Jeff Skoll in 1999 in London, Washington DC, and than 70 countries with over sustainable solutions essential to pursue his vision of a world Zurich, SustainAbility combines 177,000 employees. Allianz to a better, safer, healthier life where all people, regardless consulting, research and public Group provides its more than for people everywhere. of geography, background or interest activities. 60 million customers worldwide Operating in more than 70 economic status, enjoy and www.sustainability.com with a comprehensive range of countries, DuPont offers a wide employ the full range of their services in property and casualty range of innovative products talents and abilities. Skoll, who insurance, life and health and services for markets was the first employee and first insurance, and asset including agriculture, nutrition, President of eBay, believes that management and banking. electronics, communications, strategic investments in the www.allianz.com safety and protection, home and right people can lead to lasting construction, transportation, social change. The Foundation’s and apparel. mission is to advance systemic www2.dupont.com change to benefit communities around the world by investing in, connecting and celebrating social entrepreneurs. www.skollfoundation.org