Building public benefit and shared value into business was a presentation delivered at the Schulich School of Business Greenedge Conference 2011. The presentation covers the motivation for public
Building public benefit and shared value into business was a presentation delivered at the Schulich School of Business Greenedge Conference 2011. The presentation covers the motivation for public benefit
East African drought of 2009: five year drought affecting Kenya, Ethiopia, Somalia, Uganda, Sudan, Djibouti and Tanzania. Estimated that 23 million struck by a crisis with a shortfall of water, food and livestock. Livestock deaths on a massive scale; tens of thousands. A can of water increased in cost by four times in a single year. Assets held in cattle
Windsor: 91 years after the first job was created when the Fisher Body Company of Detroit established a branch operation here. In between, as many as 6,800 Windsorites worked for GM at its peak.Unemployment rate of 10 per cent for the better part of the last two yearsHundreds of thousands of jobs lost in manufacturing
Poverty costs us money: over $30 billion annually in Ontario alone.Cost of climate change: By 2025, cost US $271 billion; by 2100, cost $1.8 trillion (four climate change areas: hurricanes, real estate, energy costs and water costs)World: Cost of $4 trillion (Sir Nicholas Stern, former Chief Economist at the World Bank) [He called for 1% of GDP investment to fight climate change.]Climate change: responsible for the deaths of 315,000 people in 2009 growing to 500,000 by 2030 (Global humanitarian forum);Environmental refugees: over 800,000; Currently 50 million people at risk of displacement due to climate changeInternational Red Cross reports that climate change is a bigger cause of displacement than warUnprecedented spending will now turn to brutal austerity.
Transition to “shared value”; leadershipHe is a leading authority on company strategy and the competitiveness of nations and regions. Michael Porter’s work is recognized in many governments, corporations and academic circles globally. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations.Founder of the Monitor Institute
$1B impact investing fund
Investment size and term: Up to $7.5 mil (new build) or $15 mil (acquisition); lending period of up to three yearsFinancial return (investor): variable interest rate currently indexed to prime (minus 40 – 60 basis points)Partners/Investors: Collaboration with the City of New York, major foundations (ie. Ford Foundation, Rockefeller Foundation), and private investment groups (ie. JP Morgan Chase Bank)Layered: Bank consortium provides senior debt as lending capital while other investors provides guarantees in the form of low-interest subordinated loans
Regent Park Development Initiative: six phases of development over 15 years for mixed housing, including 2,083 Rent Geared to Income (RGI) units, 700 affordable rental units, 3,500 market rental units, and 250,000 sq ft. of commercial spaceTotal cost: $1 billion [TCHC and the City of Toronto: $450 mil., Priv. interests and commercial service providers: $500 mil., Fed. and prov. govts: $60 mil.]Motivation: flat, fixed revenues; aging buildings with significant capital repair needs; poorly planned community in need of revitalizationNontraditional financing provided flexibility and scaleRBC (no bank in community for 62 years), Sobeys FreshCo, mixed residential/commercial usage
SCP worked with Jennifer to articulate the ideal candidate characteristics for entry level positions. SCP then identified the key organizations that would be able to find and screen applicants according to these entry level requirements, helped foster relationships with Mohawk College, YMCA, Youth Employment Centre, and City of Hamilton Community Services. These organizations administer the Job Connect program - an initiative funded by the Ontario Ministry of Colleges.Other social hiring with major Canadian corporations (FI and major food industry player)
TurnAround Couriers recruits only at-risk youth for all its bicycle courier positions and back office staff. This affords job-ready young people a chance to gain the experience, confidence and financial means they need.Over 500 clients from a range of companies and organizations and a broad cross section of business interests, but the majority of clients are in the professional services industries, especially law and financial services. TurnAround Couriers is comprised of 13 staff – 10 couriers and 3 back office staff$350k in revenuesImpact: Average change in contribution - $7,500; six year cost savings of $432k; 79 per cent of target population were able to move from social assistance to independence
A simple plastic carrying case nestles between the rows of bottles delivering a "new mother's kit" including water purification tablets and oral rehydration salts. The AidPod is being piloted in Zambia and began in late 2010. AidPod container itself may have a cradle-2-cradle function as a SODIS water purifier vessel--in short water left in this container to sit in the sun for a day becomes purified and safe for children to drink.
Danone and the Grameen Group signed a joint venture in 2006 whereby a social business was created with an initial capital of $1 million. The business would manufacture and distribute fortified dairy products in Bangladesh without incurring losses and maximizing the benefits of the clients served.The price of each 80 gram cup of yogurt will is Taka 5 only equivalent to Euro 0.05 (five cents). It is an affordable price even for the poor people of Bangladesh.ShaktiDoi from pure full cream milk that contains protein, vitamins, iron, calcium, zinc and other micronutrients to fulfill the nutritional requirements of children of Bangladesh and contribute in improving their health
Hitachi social innovation strategy
Net Impact: GreenEdge 2011 Conference York University, Schulich School of Business Building public benefitand shared value into business:Models in Canada and around the world
The Cost: Billions & trillions of dollars. Hundreds of thousands of lives.
We have a fundamental responsibility to act. We need to change the way we live and the way we do business.
An agenda driven by: Consumers Thought Leaders Political Leaders Investors Ventures
Professor Michael Porter Bishop William Lawrence University Professor at Harvard Business School
“ In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community...The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges…The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy.
The concept of shared value recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses frequently create internal costs for firms—such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. And addressing societal harms and constraints does not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets. ”
Case Studies in Affordable Housing New York City Acquisition Fund Goal: support the development of 30,000 low income housing units in New York City to address housing shortage Target: for-profit and non-profit affordable housing developers to refurbish or build units Fund size: ~$200 million
Serviam Gardens: $3.6 million loan an 83-unit complex for low-income seniors in the Bronx via NYC Acquisition Fund.
Regent Park Revitalization: Public benefit financing and enterprise focus
Partnership Model: Local Social Venture Exchange (SVX) A local, impact-first market connecting social ventures, impact funds, and impact investors in order to catalyze new investment capital geared towards improved social and environmental outcomes. Public benefit partnership led by Social Innovation Generation (SiG) at MaRS and the TMX Group Inc. with the support of the Government of Ontario Focus on debt and equity offerings for non-profit and for-profit ventures reducing poverty, increasing opportunity and enhancing sustainability (affordable housing providers to solar power firms) private online market platform with venture listings, fund listings, a resource centre, investor collaboration tools, and a service provider listing modeled on private markets in the US and other evolving impact market platforms
Partnership Model: Global Mission: to bring health through food to the largest number of people in Bangladesh INVESTMENT REINVESTMENT RETURN/REFUND LOCAL DEVELOP. Value: Combating malnutrition through the sale of a low cost yogurt cup.
Base of the Pyramid(BoP) Model Finestrella:Regional mobile phone company focused on low-income customers.
Challenges Skeptics Getting the business model right: hiring and training, authenticity, fit Entire mission vs. focused brand Balance: Investor demands, profitability and patient capital Philosophical: basic service delivery by government or private sector Impact measurement