The Phoenix Economy
50 Pioneers in the Business
of Social Innovation

    The Business of Social Innovation

Forewords                                      1   50 x 7.2º = 360º

Executive Summary                        ...
Volans Foreword                                                                                     1

Darwin lives, in ...
Skoll Foundation Foreword                           SustainAbility Foreword                        2

Seismic change is ...
Net Impact Foreword                                UNEP Foreword                                    3

Many Net Impact m...
Executive Summary                   4

A new economic order is rising
from the ashes—and a new
generation of innovators...
The Phoenix Economy                                                                                    5

The Phoenix Ec...
The Phoenix Cast                                                                             6

Organisation              ...
The Phoenix Economy                                                                     7

JumpStart                    ...
1.0 Introduction                    8

Times are tough and getting
tougher, but leading social and
environmental entrep...
The Phoenix Economy                                                                                9

Commentators have ...
1.1 Entering the Discontinuity                                                                    10

In discussing the ...
1.2 The Surveys                                                                                   11

Since the late 199...
2.0 Paradigm Shift          12

A paradigm shift is under
way—with profound implications
for society, and for politics,...
The Phoenix Economy                                                                               13

The thing about pa...
2.1 The ‘Pathways to Scale’ model                                                                  14

So what exactly a...
Pathways to Scale                                                                               15

A key element of our...
The Phoenix Economy                        16

Figure 2.2

The Phoenix Decade (2010–2020)

Fear                         ...
2.2 The Phoenix Paradigm                                                                          17

Twentieth century ...
The Phoenix Economy                                                                                18

Figure 2.3

Across ...
2.3 Surprises                                                                                      19

There were a numb...
3.0 2009 Survey Results        20

Entrepreneurs say that five
trends are driving change—
though the impact and
The Phoenix Economy                                                                            21

It is an uncomfortabl...
3.1 Weathering the Storm                                                                                                  ...
Necessity Mothers Reinvention                                                                                            2...
How Entrepreneurs are                                                                        24
Responding to Downturn

Future Funding                                                                 How the Phoenix 50 are                     ...
3.2 Upgrading the Business Case                                                                  26

Although entreprene...
The Phoenix Economy                               How the Phoenix 50 are                 27
3.3 Evolving the ‘Ecosystem’                                                                        28

Entrepreneurs ar...
How The Phoenix 50 are                                                                                                    ...
3.4 Bridging the Macro-Micro Divide                                                              30

Entrepreneurs see a...
The Phoenix Economy                                 How the Phoenix 50 are                 31
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
Volans - Phoenix Economy report
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Volans - Phoenix Economy report

  1. 1. The Phoenix Economy 50 Pioneers in the Business of Social Innovation VOL ANS The Business of Social Innovation
  2. 2. Contents Forewords 1 50 x 7.2º = 360º Executive Summary 4 1.0 Introduction 8 1.1 Entering the Discontinuity 10 1.2 The Surveys 11 2.0 Paradigm Shift 12 2.1 The ‘Pathways to Scale’ Model 14 2.2 The Phoenix Paradigm 17 2.3 Surprises 19 3.0 2009 Survey Results 20 3.1 Weathering the Storm 22 The downturn has hit funding—but entrepreneurs are confident that, as the shake-out continues, necessity will mother invention. 3.2 Upgrading the Business Case 26 Although entrepreneurs see growth in the need for their services, the market research informing their business cases needs to be strengthened. 3.3 Evolving the ‘Ecosystem’ 28 Entrepreneurs recognize the need to be part of ‘ecosystems of change’— and to map and pursue ‘pathways to scale’. 3.4 Bridging the Macro-Micro Divide 30 There is an urgent and growing need to converge bottom-up with top-down approaches—to span the micro and macro levels of change. 3.5 Delivering ‘Government-as-Unusual’ 32 Entrepreneurs expect government to play a central role in shaping markets—but want to help provide ‘government-as-unusual’. 4.0 The Phoenix Agenda 34 4.1 The Phoenix Manifesto for 36 Political Leaders and Governments 4.2 The Phoenix Prospectus for 38 Business Leaders 4.3 The Phoenix Syllabus for 40 Business Educators 5.0 Pioneers 42 The Phoenix 50 List 44 Notes 48
  3. 3. Volans Foreword 1 Darwin lives, in the sense that natural selection In this report, we aim to show that a new pressures are working across global markets Phoenix Economy is, nonetheless, self- in powerful new ways. In 2009, we seem to be assembling—focused on providing social and at one of those infrequent economic tipping environmental solutions, where markets and points, also experienced in years like 1919, governments have failed. If the pioneers of the 1929, 1939 and 1989. Among other things, Phoenix Economy are to succeed, they will still the current economic discontinuity is forcing need substantial assistance from governments, a profound reassessment of public and foundations, investors and businesses, and private sector investment in areas such as we identify urgent opportunities for facilitation, corporate responsibility and sustainable collaboration and support. We also celebrate development—all at a time when climate a roll call of the Phoenix 50 pioneers in the change and global inequalities are reaching business of social innovation, nominated by critical limits and demanding urgent attention. entrepreneurs and other stakeholders. The uncomfortable reality is that we still have a great deal to do if the new century’s Please note that this is a report to—not by— challenges are to be addressed effectively, the Skoll Foundation. We are profoundly in time and at the necessary scale. grateful to the Skoll team for their support, but underscore the fact that they only saw It may be understandable, but disproportionate the text of the report at a very late stage. effort continues to be lavished on shoring up In future years, we plan to broaden out our the dinosaurs of the old order, rather than coverage to a Phoenix 500, with change- investing in the new pioneers, who are working makers themselves driving the selection and hard—and often against the odds—to assessment processes. Please help us incubate and scale market solutions essential towards that goal by commenting on our for a sustainable future. version 1.0. E-mail us at John Elkington Co-founder of SustainAbility (1987) and Co-founder of Volans (2008) Alejandro Litovsky Head, Pathways to Scale Program, Volans Charmian Love Chief Operating Officer, Volans John Elkington Alejandro Litovsky Charmian Love
  4. 4. Skoll Foundation Foreword SustainAbility Foreword 2 Seismic change is clearly underway, with the In our 20 years experience of analysing collapse of global financial markets threatening and advising companies on sustainable to make already critical challenges—climate development, SustainAbility has found that a change, water scarcity, geopolitical instability— ‘burning platform’ is often a prerequisite for much worse. But times of upheaval are also radical action. Be it Shell’s Brent Spar or BP’s times of opportunity, as this latest report from Colombia experience, it took an unwelcome— our partners at Volans and SustainAbility and unexpected—shock to the corporate makes clear. system to lead to an overhaul of business as usual. In this seminal year we see burning A new generation of entrepreneurs, together platforms everywhere. with old warriors fighting the good fight, is coming up with big, bold ideas and Throughout the economy—from high finance exceptional innovations that light the way to manufacturing—companies are fighting for forward. Growing Opportunity (2007), the first survival. What their leaders decide now will report in this series for Skoll, charted the rise determine not only their organisation’s fate, of an emerging breed of social and environ- but that of the market system as a whole. mental entrepreneurs. The second report, The stakes are high and leaders across The Social Intrapraneur (2008), revealed the government and business face an opportunity inside story of transformative practices to re-frame the terms of the debate. Winner- underway in mainstream corporations. takes-all business models—concentrating Against the backdrop of a global economy wealth in the hands of a few or depleting in crisis, The Phoenix Economy breaks our natural resources in the pursuit of profits— important ground once again, identifying the no longer hold credibility. entrepreneurial organizations whose work speaks to a new order emerging from the But, what will take their place? The Phoenix ashes. Economy introduces us to an inspiring group of changemakers whose bravery and vision The report you hold in your hands also makes may just be sufficient to blaze sustainable clear how tackling the Bull and Bear markets— pathways out of the economic maelstrom. that have dominated our ideas of value This compelling report highlights opportunities creation in recent decades—demands that that—if sufficiently supported and scaled— we slay the dragon of fear and convention. could contribute to economic re-birth. Once again, John Elkington and his team give We look forward to continued work with us good reason to hope. The Skoll Foundation Volans and the Skoll Foundation to support is proud to support this pioneering research promising innovators and entrepreneurs and trusts you will find the achievements and wherever they may be found. ambitions of ‘The Phoenix 50’ both provocative and inspiring. Maggie Brenneke Mark Lee Sally Osberg Sophia Tickell President, Skoll Foundation SustainAbility Sally Osberg Maggie Brenneke Mark Lee Sophia Tickell
  5. 5. Net Impact Foreword UNEP Foreword 3 Many Net Impact members may be Recent work by UNEP on sustainable ventures experiencing market conditions that are and entrepreneurial partnerships in developing unique in their (often short) working lifetimes, countries has highlighted the need to have a but The Phoenix Economy underscores the good understanding of market conditions. fact that times of crisis are also times of This is all the more critical today, as market opportunity. Net Impact is pleased to have conditions are changing rapidly. It is both a been involved in selecting the first round of time of crisis and opportunity, as we work the Phoenix 50—and we look forward to with governments, business and others on continuing the conversation on how we can the greening of economic bailouts and ‘New extend the discussion and the joint working, Deal’ packages. to build a new order from the ashes of the old. The Phoenix Economy is a useful reminder that this is a multi-dimensional challenge. Liz Maw It helpfully spotlights some of the market Executive Director, Net Impact pioneers now developing the entrepreneurial mindsets, technologies and business models needed to drive the necessary scale of change. UNEP looks forward to working with Volans and others in engaging leading innovators and ‘superpreneurs’ across the spectrum of issues and potential solutions identified in this report. We welcome the prospect to convene these champions and help build a ‘voice’ for their agenda in the worlds of government policy- making and investment. Sylvie Lemmet Director, United Nations Environment Programme (UNEP) Division of Technology, Industry and Economics Disclaimer Designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of UNEP or other Volans partners concerning the legal status of any country, territory, city or area or of its frontiers or boundaries. Moreover, the views expressed do not necessarily represent the Liz Maw Sylvie Lemmet decision or the stated policy of UNEP or other Volans partners, nor does citing of trade names or commercial processes constitute endorsement.
  6. 6. Executive Summary 4 A new economic order is rising from the ashes—and a new generation of innovators, entrepreneurs and investors is accelerating the changes essential for delivering scalable sustainable solutions to the world. 00 10 20 30 40 50
  7. 7. The Phoenix Economy 5 The Phoenix Economy, subtitled 50 Pioneers —Entrepreneurs, like all businesses, face in the Business of Social Innovation, is the first increasingly tough financial challenges, but Volans market intelligence report. It reveals there is evidence that this is helping drive how leading entrepreneurs, investors and necessary adaption. Many of our survey businesses are thinking as they develop and respondents anticipate new funding flowing scale market solutions to a broad array of into key sustainability ventures from a variety economic, social, environmental and of sources, including ‘green new deal’ governance challenges. investment programs launched by governments. But these same entrepreneurs The report draws on new surveys of experts must now also develop the political ‘voice’ and entrepreneurs to identify trends and and presence to ensure their views and examples of how respondents are dealing proposed solutions carry weight and build with the current economic discontinuity, and— the necessary momentum to achieve uniquely—spotlights 50 pioneers driving the scale and impact. development of a new, more equitable and more sustainable Phoenix Economy. —Strikingly, in spite of the anticipated growth Key findings include: in markets for social and environmental solutions, timely, reliable and affordable —The economic crisis has shaken confidence market research is still generally lacking, in old priorities, mindsets, incentives and particularly in emerging economies, leaving investments, which are seen as increasingly many entrepreneurs ill-served when it bankrupt. This has helped to create growing comes to building their business case. public and political appetite for an alternative paradigm, driven by a very different set of The report concludes with a ‘Phoenix Agenda’ sustainable values, priorities and targets. for enabling a paradigm shift, which sets To date, however, most initiatives have been out how governments, investors, businesses driven by short-term panic rather than by and business schools can best support any clear-sighted, long-term vision of how new market pioneers in achieving the scale our economic priorities must evolve. essential for more sustainable markets—and more equitable societies. —Any market transformation must be based on scalable solutions that bridge the micro- macro divide. This will require entrepreneurial successes at five key stages of business and market development: (1) breakthrough insight; (2) experimentation; (3) enterprise development; (4) creation of alliances and replication of success, and ultimately (5), mass market infiltration, involving economic and institutional transformations. “We must be more creative and innovative in a time of crisis, and also be more efficient and effective.” Albina Ruiz Ríos Ciudad Saludable
  8. 8. The Phoenix Cast 6 Organisation Pages ABB 48 Eden Project 38,39 Accenture Development Partners EMBARQ 15,37,47 (ADP) 11,38 Evergreen 26 Acumen Fund 26 Extractive Industry Aflatoun 28,29,44 Transparency Initiative (EITI) 37 AIDG 26 First Book 23,26 AMEE 27,36,44 First Peoples Worldwide 26 American Council on Renewable Flambard Holdings 24 Energy (ACORE) 26,33,39,44 Forest Stewardship Council (FSC) 37 Apopo International 31,44 Foster & Partners 30 Aravind Eye Care System 27,40,44 Freeplay Foundation 23,26 Arup 30,31,37,44 Fuqua School of Management, Ashoka 13,25,37,44 Duke University 40 Bain 26 Generation Investment Banco Real 11 Management 28,39,45 BELL 24,26 GE’s Ecomagination Initiative 18,19,45 Benetech 21,23 GlaxoSmithKline (GSK) 18,19,27,45 Better Place 19,28,31,37,44 Global Footprint Network (GFN) 15,45 Bridgespan 26 Global Impact Investing Build Change 48 Network (GIIN) 18,28,39,45 Business and Human Global Reporting Initiative (GRI) 38 Rights Resource Centre 25,44 Goldman Sachs 39 BYD Auto 27,44 Good Energy 45 C40 28,30,33,36,44 19,31,33,38,45 Carbon Disclosure Project 38 Grameen Group 31,38,44,45 Celador Productions 37 Green for All 9,25,36,45 CellBazaar 29,44 Haas School of Business, CERES 28,39,44 UC Berkeley 26,40 Ciudad Saludable 5,23 Hagar 38 Cleantech Group 29,30,36,45 Harvard Business School 40,48 Climate Change Capital 27,45 Health Care Without Harm 9,26,27,37,46 Climate Group 48 Himanshu Parikh Clinton Climate Initiative 44 Consulting Engineers 31,37,46 Coca-Cola 11 Homeless World Cup 10,24 Corporate Leaders Group on Climate Honey Care Africa 26 Change, University of Cambridge 39 IDEAAS 48 Danone 38,45 Independence Care Systems (ICS) 26 Dialogue in the Dark 26 Innocentive 27,46 E+Co 25,45 INSEAD 40 Earth Policy Institute (EPI) 9 Institute for One World Health 26,27,46 Econcern 25,45 Interpeace 29,46 EcoVadis 36 J Craig Venter Institute 25,46 The Phoenix Economy references and celebrates a variety of organisations that are helping to develop and scale market solutions to some of the world’s most pressing social and environmental challenges. A more detailed listing of the Phoenix 50 pioneers can be found on pages 42–47.
  9. 9. The Phoenix Economy 7 JumpStart 26 Roundtable on Sustainable Palm Oil 37 Kennedy School of Government, RugMark Foundation 24 Harvard University 15,40 Säid Oxford Business School 15 Khmer Legacies 24 Self-Employed Khosla Ventures 28 Women’s Association (SEWA) 22 Kiva 23 Shorebank 39 Kleiner Perkins Singapore’s Economic Caufield & Byers 28,31,33,46 Development Board (EDB) 15,18,37 London Accord 38,48 Skoll Centre for Social Entrepreneurship, Marine Stewardship Council Oxford University 40 (MSC) 28,29,37,46 Skoll Foundation 1,2,10,11 MaRS 29,36,37,46 Solar Aid 15,28 Mobility Aid and Appliances Research and Solarcentury 15,25,47 Development Centre( MAARDEC) 48 State of California 33,47 Monitor Group 26,48 Summer Advantage 24 Morgan-Stanley 11 SustainAbility 1,2,11,43 Mothers2Mothers 25,46 Sustainable Asset Movimento Nacional dos Catadores Management (SAM) 27,47 de Materiais Recicláveis 28,29,46 Tällberg Foundation 15 MyC4 25,46 Team Stupid 37 National Endowment for Science, Technoserve 48 Technology & the Arts (NESTA) 36 TNT 19,31,38,47 Net Impact 3,11,30,40,43 Toyota 17 New Profit Inc 26 Triodos 39 NOVICA 24 US Climate Action Partnership (USCAP) 38 Novo Nordisk and US National Intelligence Council (NIC) 26 Oxford Health Alliance 19,29,38,47 United Nations 18 Nuestras Raices 26 United Nations Development Obama Presidency 19,21,30,32,33,36,47,48 Programme 17 Office of the Third Sector 21,36 United Nations Environment Participant Media 18,37,47 Programme (UNEP) 3,28,36,39 PATH 24,35 Urban Logic 26 PDA 25,47 Virgance 29,37,47 PricewaterhouseCoopers 38 Wikipedia 13 Recycla Chile 23 World Business Council for Sustainable Renault-Nissan 19 Development (WBSCD) 27,33,38,47 Responde 26 World Resources Institute (WRI) 15,27,47 Riders for Health 26,27 World Toilet Organization (WTO) 25,47 Rocking the Boat 24 Youth Entrepreneurship Root Capital 26,48 and Sustainability (YES Inc.) 15 Roundtable on Sustainable Biofuels 15,28,37 “I am convinced we are about to go over the awareness tipping zone to an ‘everyone a changemaker’ world.” Bill Drayton Ashoka
  10. 10. 1.0 Introduction 8 Times are tough and getting tougher, but leading social and environmental entrepreneurs are confident that—with the right assistance—the time is ripe for a true paradigm shift to a more sustainable economy. Inner Feathers 3.6º
  11. 11. The Phoenix Economy 9 Commentators have struggled with what Good news, as far as it goes, but likely only the to call the current downturn—a recession, beginning of a transformative process that will a slump or a depression? We call it a take decades to work through—a point long ‘discontinuity’. Early on, politicians and made by Lester Brown of the Earth Policy business leaders predicted that the recovery Institute in his inspirational work on Plan B,2 would come within months or, at most, a few addressing the challenges of ‘rescuing a planet quarters. Soon, however, the sense grew that under stress and a civilisation in trouble’. something different was afoot—and parallels were drawn with the onset of the Great Meanwhile, although blame is being heaped Depression of the 1930s. on the governance and management of the financial sector for the failure of the banks As a result, 2009 started with a flurry of to count, manage and hedge their risks, we bailouts and talk of Keynesian ‘New Deals’.1 must look deeper for the true culprits. The Much of this effort, however, was reactive and root cause ultimately tracks back to a flawed poorly coordinated. Huge amounts of money mindset—part of our prevailing paradigm— went to prop up iconic giants of the old that both permitted and drove high-risk economy, money that might have been better appetites and behaviours with consequences invested in the new market solutions and far beyond the world’s financial system. infrastructures necessary to meet twenty-first century needs: the proposed Phoenix As James Lovelock recently observed at the Economy of this report. launch of his book—The Vanishing Face of Gaia: A Final Warning—our ecological debt far Still, the economic discontinuity is engendering outweighs our financial debt and the ensuing a radical economic clear-out that is likely to ecological crunch will be severe. This open out new opportunity spaces for scalable sentiment was echoed by our survey entrepreneurial solutions to many of the world’s respondents and interviewees who stressed critical economic, social, environmental and that the world now faces multiple crunches in governance challenges. Indeed, as The areas such as energy security, food, Phoenix Economy report raced towards the biodiversity, pandemic risks and climate finish line, Van Jones of Green for All—one of instability, amongst others. our Phoenix 50 pioneers—wrote to say that $500 million had gone into the US economic recovery bill for green jobs training. “The 21st century economy is going to be a green economy. Health Care Without Harm is right in that slipstream.” Gary Cohen Health Care Without Harm
  12. 12. 1.1 Entering the Discontinuity 10 In discussing the potential of the current Our respondents believe that the prospect economic discontinuity to drive change in of a true paradigm shift has never been desirable directions, we acknowledge that greater—in the original sense of the term such turbulent periods also tend to trigger ‘paradigm’: a prevailing worldview and what reactive measures and behaviours, such is taken for normality. The implications for as protectionism, xenophobic sentiment, their organizations and agendas are extremist politics and intergenerational tension profound—indeed a number of respondents and conflict, particularly where inequities requested anonymity on the basis that are severe and mechanisms of governance their projections could raise real question and justice are weak. In short, a positive marks over their prospects. Most, however, outcome to our current crisis is by no means remain upbeat. guaranteed, which places a premium on bold, far-sighted and effective leadership in the public, private and citizen sectors. Success will depend crucially on the initiative and achievement of many of the innovators and entrepreneurs covered in our 2009 survey—the third in a series carried out with the help of the Skoll Foundation and other partners. “People are looking around for solutions—we have them. We are exactly in the right space just now.” Mel Young Homeless World Cup
  13. 13. 1.2 The Surveys 11 Since the late 1990s, members of the Volans —The second, in December 2008 and team have been spurred by the conviction January 2009, tested practitioner views that the early decades of the twenty-first on the implications of the current economic century would indeed see a true paradigm discontinuity via a survey of social and shift, accelerated by the end of one long-wave environmental entrepreneurs, with 114 economic cycle and the beginning of another.4 responses. The market leaders highlighted during our Skoll Foundation-funded work, we believe, —The third, in February 2009, explored wider provide important early clues as to where professional views via a survey of experts mainstream enterprise, business, financial and opinion-formers, receiving responses institutions and governments will need to from 391 members of the Volans and Net head in the coming years. Impact networks and 36 members of the SustainAbility Faculty. While our initial 2007 Skoll Survey (conducted by SustainAbility) investigated the business Net Impact is a leading global network of implications of the work pursued by social students and alumni committed to having and environmental entrepreneurs 5 and the a positive impact on society. They represent second—carried out by SustainAbility in the sort of thinkers and leaders who will 2008—focused on the work of social and help drive the development of the Phoenix environmental intrapreneurs working in Economy over the next decade. The thinking mainstream corporations like Accenture, and priorities of their members are threaded Banco Real, Coca-Cola and Morgan- through what follows, including their Stanley,6 our aim in The Phoenix Economy suggestions on the organizations that should is to begin an exploration of how we can be listed in our first Phoenix 50 (Chapter 5). harness today’s economic turmoil to spur the long-term transformation of capitalism In this report, we look at the growing need and markets. for transformational change (Chapter 2), introducing the need for a greater focus on To gauge the impact of ongoing market entrepreneurial ‘pathways to scale’. Then trends on leading social and environmental we explore five trends that emerged from entrepreneurs, Volans conducted several our analysis of the surveys (Chapter 3). linked surveys in 2008 and 2009: Finally, we lay out an agenda for: political leaders and governments; business leaders —The first, in June 2008, explored the interest, and financial institutions; and business and experience, of over 50 entrepreneurs educators (Chapter 4). in working with mainstream business.
  14. 14. 2.0 Paradigm Shift 12 A paradigm shift is under way—with profound implications for society, and for politics, economics and entrepreneur- ship in particular. Outer Feathers 7.2º
  15. 15. The Phoenix Economy 13 The thing about paradigms is that they persist By extension, the ‘Phoenix Economy’ for what seems like an eternity—and then turn symbolizes the various strands of social inside-out in what seems disconcertingly like and environmental innovation and enterprise an instant. As the older economic order begins that will help create a more equitable to implode, the potential for a shift towards a and sustainable future. At a time when more equitable and sustainable Phoenix governments are attempting to ‘green’ the Economy is emerging from conversations with growing number of bailouts and ‘New Deals’, leading innovators and entrepreneurs around the Phoenix Agenda is a reminder that there the world. While our survey respondents and is a wider spectrum of challenges that will interviewees accept that the near-term future need to be tackled in the coming decades. may seem dark, they also recognize that the resulting shake-out of the older order promises Some leaders in the field are bullish. “I am to create the conditions for the emergence of convinced we are about to go over the new thinking, new models, and a new awareness tipping zone,” says Bill Drayton landscape of opportunity—much of which of Ashoka, “to an ‘everyone a changemaker’ underlies our framing of the Phoenix Economy. world. Over the last summer, we studied the patterns of transformation (as in the civil rights Turn to Wikipedia and you find that the phoenix and women’s movements) and found they is a mythical bird with many-hued plumage. It all followed the same pattern. We are now symbolizes longevity—sustainability—with a life moving into a time when the public at large expectancy of at least 500 years. At the end of engages—and the small pioneer islands its life cycle it is consumed by flames, and a swallow the whole.” new bird rises from its ashes. Even today, the phoenix is understood in many countries as a Paradoxically, however, at precisely the symbol of regeneration. moment when awareness of, and need for, the services these entrepreneurs provide is skyrocketing, their funding—particularly the financing needed to replicate and scale their impact—is coming under growing pressure. And, with few exceptions, they believe things will get worse. The Phoenix Economy symbolizes the various strands of social and environmental innovation and enterprise that could help create a more equitable and sustainable future.
  16. 16. 2.1 The ‘Pathways to Scale’ model 14 So what exactly are these pioneers trying to Ultimately, if anything like a truly sustainable achieve? Drawing on survey responses and and equitable future is to be achieved, interviews, we evolved a simple, 5-stage entrepreneurial initiatives will need to scale ‘Pathways to Scale’ model of change (Figure up further to Stage 5 system change—typified 2.1). Each new business model will typically by broad-based market and societal adoption begin at Stage 1, with the early recognition of of new mindsets, models and technologies. an opportunity for a new solution: the ‘Eureka!’ Success in moving from Stages 4 to 5 will moment. In Stage 2, that initial idea is put to involve the transformation of political priorities, the test, with prototypes and experimentation. governance process, market rules and Over time, successful experiments evolve into cultures. The Phoenix 50 pioneers, spotlighted solutions around which new, Stage 3 business in this report, are helping to catalyze such models and enterprises are created. Stage 4 changes, though their ability to replicate and sees the focus shift to the evolution of broader scale their successes—to reach critical mass. ecosystems of change agents—involving a Their longevity and impact will depend on growing number of public, private and citizen their ability to respond in good order to the sector partnerships, followed by secondary challenges identified in Chapter 3, including waves of imitation. coping with the evolving funding crisis. Figure 2.1 5-stage ‘Pathways to Scale’ model of change Stage 1 Stage 2 Stage 3 Eureka! Experiment Enterprise Opportunity is revealed via Innovators and entrepreneurs Investors and managers the growing dysfunctions of begin to experiment— build new business models— the existing order a period of trial-and-error creating new forms of value
  17. 17. Pathways to Scale 15 A key element of our work on the Phoenix —Nick Sireau, Executive Director of Solar Aid, Economy has been our Pathways to Scale and Jeremy Leggett, founder and Chairman Program, headed by Alejandro Litovsky. This of Solarcentury and Solar Aid, explain how action-research program builds on earlier work to scale up markets for solar businesses in reported in The Power of Unreasonable East Africa and South America. People7 and is building the methodologies, tools and activities based on the Pathways to —Charlotte Opal, Coordinator of the Scale 5-stage model, to help leaders scale up Roundtable of Sustainable Biofuels, the impact of their initiatives. This work is reflects on how to scale up market rules featured on the Volans website—and includes for the sustainable production and trade ‘market intelligence’ briefs on Phoenix markets of biofuels, as they launch the first version and ‘ecosystem’ briefs on how trailblazers are of the voluntary standard. working together to shape tomorrow’s markets in areas such as solar power and sustainable —Nancy Kete, Director of EMBARQ, the mobility. Our series of ‘Conversations on Scale’ Center for Sustainable Transport of the profile the thinking and strategies of leaders for World Resources Institute (WRI), reflects growing their impact. Early postings include: on the success of transport partnerships in Istanbul and Mexico City, and the —Jonathan Kua, Director of International strategies for reaching the world’s most Organisations Programme Office (IOPO) at populated cities. the Singapore Economic Development Board (EDB), explains how the city state The Pathways to Scale team is taking this plans to grow the social enterprise sector work forward in a number of ways, including: by being home to international social a session on scaling up sustainable mobility enterprise enablers as well as regional solutions at the 2009 Skoll World Forum at social enterprises. the Säid Oxford Business School in the UK; an action-research project conducted with —Mathis Wackernagel, Executive Director Harvard Kennedy School of Government of the Global Footprint Network (GFN) graduate students; and a project with the explains how Footprint metrics work for Rework! initiative, a global partnership between companies and countries, and how the Tällberg Foundation in Sweden and GFN intends to go to scale. Youth Entrepreneurship and Sustainability (YES Inc.). Stage 4 Stage 5 Ecosystem Economy Critical mass is achieved The economic system flips to through alliances and a more sustainable state— imitation driving market and institutional transformation
  18. 18. The Phoenix Economy 16 Figure 2.2 The Phoenix Decade (2010–2020) Fear Hope Dragon Phoenix Decade 2 2010–2020 Bear Bull Decade 1 2000–2010
  19. 19. 2.2 The Phoenix Paradigm 17 Twentieth century capitalism was driven by The Phoenix Economy, by contrast, blurs alternating ‘Bull’ and ‘Bear’ markets, and the across national borders and works to integrate twenty-first century’s first decade (2000-2009) the triple bottom line of economic, social and has seen the collapse of the greatest Bull environmental value added into its DNA—as a market in history. By contrast, a very different triple helix of change and new growth. oscillation is now emerging as a driver of political, economic and business priorities. This involves what Thomas Kuhn—author We expect the coming decades to see of The Structure of Scientific Revolutions— growing competition between ‘Dragon’ called a paradigm shift in the way we think and ‘Phoenix’ models of wealth creation, about the future and about value. As the superimposed upon—not replacing— Phoenix paradigm evolves, inevitably, traditional Bull and Bear dynamics extraordinary new market opportunities (Figure 2.2). will be created. One way to grasp and map the new opportunity spaces is to think in The Bull and Bear fight it out in a single bottom terms of a spectrum of value (Figure 2.3). line world. Both tend to be short term in focus. Biotechnologists label application areas By contrast, Dragon and Phoenix mindsets by color, with ‘red’ standing for health tend to be longer term in orientation. Dragon applications, for example, and ‘green’ markets, particularly China’s (until-recently- for environmental applications.8 booming) economy, are often based on longish term planning, but are powered by business Innovators like the Phoenix 50 operate freely models and value chains that largely follow the across that spectrum of value creation, path of Western industrialization, and—as a delivering new or improved ‘value blends’. result—are likely to be increasingly taxed by Growing effort is being devoted to environmental and natural resource understanding their dynamics and pathways constraints. to scale, as in the work of the United Nations Development Programme 9 and the To date, Dragon economies have focused, Cleantech Group. But given that the problem at best, on a double bottom line of economic is often market failure, no amount of market growth and the maintenance of sufficient research can bridge the gaps. That’s why social cohesion to keep the national the market-shaping policies of the Obama locomotive on the rails. In hard times, Presidency—which recently recruited another Dragon mindsets are likely to default to of our Phoenix 50 pioneers, Van Jones of economic nationalism. Green for All—are so extraordinary. They speak of a new paradigm, of a fledgling Phoenix Economy. The Phoenix Economy, by contrast, blurs across national borders and works to integrate the triple bottom line of economic, social and environmental value added into its DNA—as a triple helix of change and new growth.
  20. 20. The Phoenix Economy 18 Figure 2.3 Across the Value Spectrum Organisation Principle Valuation General Electric (GE) Market demand for Revenues from GE’s range of energy efficient ‘Ecomagination’ solutions is growing and environmentally targeted products and Initiative fast services surged to $17 billion in 2008, with a projection of $25 billion by 2010.10 GlaxoSmithKline The ‘access’ agenda, GSK cut its prices for all drugs in the 50 least (GSK) in such areas as drugs, developed countries to no more than 25% energy and water, is of the levels in the UK and US—and less if a real pain for main- possible—and pledged to make drugs more stream companies, affordable in middle-income countries such but also signposts as Brazil and India.11 future markets Global Impact Even the biggest Over the next 5–10 years, social impact Investing Network animals and markets investing could grow to represent about 1% of (GIIN) start with small seeds estimated current assets under management— about $500 billion.12 Participant Media Culture change must The producers of films like An Inconvenient involve the media Truth have developed active working industry relationships with over 80 non-profits in mainstream media projects, focused on sustainability issues and reaching over 20 million people. Singapore Economic Don’t just focus on EDB has announced a S$350 million fund to Development Board green jobs, focus on support the development of the cleantech (EDB) clusters industry in Singapore, estimating the sector will generate S$1.7 billion in value-added business, creating 7,000 jobs by 2015.13 Stern Review on A new paradigm In 2006, the Stern Review of the Economics the Economics of means new ways of of Climate Change, produced for the UK Climate Change looking at our world government, argued that the benefits of taking and at markets action to stabilise greenhouse gases by 2050 (minus the costs) would amount to a ‘profit’ of $2.5 trillion (£1.32 trillion).14 Lord Stern now warns governments need to prepare for temperature rises of 4–6 ºC. United Nations United action is The UN already argues that ‘one third of the crucial for global around $2.5 trillion-worth of planned stimulus change packages should be invested on 'greening' the world economy. The estimated $750 billion of green investment, equal to about 1% of current global GDP, could trigger significant, multiple and potentially transformational returns.’ 15 US Green Deal Government policy $43 billion out of a $787 billion spending bill and spending is earmarked for renewable energy. central
  21. 21. 2.3 Surprises 19 There were a number of surprises in the survey We were also struck by the way that the results. We were forcefully struck, for example, United States—and the Obama Presidency by the number of mainstream companies that in particular—dominated the nominations. made it into the final list—when we had started But if any one organization summed up the out thinking mainly in terms of social and Phoenix mindset and approach for us, it was environmental enterprises. Shai Agassi’s Better Place. Based in the USA, it is increasingly global in its operations. They included General Electric (GE), with its ‘Ecomagination’ Initiative,16 Agassi, formerly a top executive at German for its focus on renewable energy and other software company SAP, has developed a sustainability issues, GSK for its industry- business model that treats cars as if they consensus-shattering announcement that it were mobile phones, with drivers able to pay would radically cut the cost of its drugs to the a monthly fee to charge their vehicles at world’s poorest countries, Novo Nordisk for easy-to-use battery stations. The aim is to its work with the Oxford Health Alliance convert cities and ultimately countries to (which is about preventing and reducing the electric vehicles. Already countries like global impact of chronic disease, around three Australia, Denmark and Israel have signed risk factors—tobacco use, physical inactivity up, together with states like California and and poor diet) and TNT for its work on Hawaii, and cities like Toronto. Their providing the logistics for disaster relief and approach—which involves mobilizing all other large-scale initiatives, including tree levels of government, major companies planting in East Africa. (like Renault-Nissan) and investors—is a prototypical example of what expect to see as the Phoenix paradigm takes hold and the relevant forms of innovation and entrepreneurship takes flight. Question: do you see anything good about the economic downturn? “Yes. Publishers and book distributors are much more interested in dealing with us, and the terms are more flexible.” Kyle Zimmer First Book
  22. 22. 3.0 2009 Survey Results 20 Entrepreneurs say that five trends are driving change— though the impact and implications of the evolving economic discontinuity are currently top of mind. 000º 270º
  23. 23. The Phoenix Economy 21 It is an uncomfortable fact that economic and Happily, the contributions of such social systems—like ecosystems—go through entrepreneurs are increasingly recognized and periods of convulsive change. Social and celebrated by some governments, from the environmental entrepreneurs and intrapreneurs UK with its Office of the Third Sector to the may be in the spotlight as never before, but United States with the Obama Presidency’s we are seeing a shakeout that will hit both broad-spectrum change agenda. In ending his weak and strong organizations. “Down cycles Inaugural Address with the words “future weed out weak players,” Jim Fruchterman generations”, President Obama underscored of Benetech comments, and, sadly, “some the challenges the world faces as the human great groups get weeded out because of population adds another 1.5 billion people bad timing.” by 2025 and systemic stresses linked to climate, water, poverty and disease intensify.18 Many survey respondents were increasingly The challenge of developing economic and somber, seeing a profoundly challenging period business models that will work in today’s ahead. This should be of concern to leaders world is increasingly urgent, but we also need in the public, private and citizen sectors alike, models that will create real value and impact given that the work of many entrepreneurs efficiently, effectively, equitably and above spotlights and seeks to address critical issues all sustainably in a world projected to reach like climate change, water scarcity, poverty, 9–10 billion by mid-century. disease, corruption and an expanding array of human rights concerns. Entrepreneurs So how do leading entrepreneurs see the are worth watching because they are challenges and opportunities today? experimenting with new technologies Our survey results spotlight five trends that and business models, underscoring the will shape the agenda: potential for transformational solutions and change.17 1 Weathering the Storm 2 Rebooting the Business Case 3 Evolving the ‘Ecosystem’ 4 Bridging the Micro-Macro Divide 5 Delivering Government-as-Unusual Figure 3.0 Weathering to Delivering Five trends that will shape the agenda 1 2 3 4 5 Weathering Rebooting the Evolving the Bridging the Delivering the Storm Business Case ‘Ecosystem’ Micro-Macro Government- Divide as-Unusual
  24. 24. 3.1 Weathering the Storm 22 Most entrepreneurs say the downturn In fact, SEWA’s members have been has already hit funding—but even as the experiencing financial crises for the last three shakeout builds and cost efficiency years. Bhat continues: “SEWA was in a measures are put into effect, necessity situation where it could have succumbed to will be the mother of profound reinvention. this crisis. However, our members turned this around as an opportunity to revise our strategy As the downturn began to bite in earnest, and achieve financial self-reliance. As a result, entrepreneurs found themselves—and their members’ economic organizations have been beneficiaries—caught in a tightening vise. able to achieve 70% financial self-reliance. 50% of respondents had already been This has reinforced our confidence of affected (Figure 3.1). reaching our impact.” From India, Self-Employed Women’s Less positively, the global situation is likely Association (SEWA) founder Ela Bhat to worsen as capital flows to emerging reported that, “SEWA’s members in the markets are choked off by the financial crisis informal sector specifically construction in the advanced economies.19 The credit workers, rag pickers and garment stitchers, crisis is also squeezing funding to leading have been adversely affected because of the social and environmental entrepreneurs, economic crises. They have lost their work impacting the value of foundation and employment. As a result children are endowments—and thus the disposable funds. being withdrawn from the school and joining Although some entrepreneurs report increasing their mothers in work, particularly girls— support and growing confidence, a clear and there is widespread starvation.” majority notes a deteriorating prospect for future funding. One consequence will be growing interest in the diversification of revenue streams. Figure 3.1 Figure 3.2 Impacted Adapting To what extent have you been affected What level of adaptation is the global by the global economic crisis? economic crisis demanding of you % and your work? % 50 50 40 40 40 37 35 30 30 31 20 20 15 14 10 10 11 8 5 4 Not at all Marginally Affected Seriously Badly Very low Low Medium High Very high
  25. 25. Necessity Mothers Reinvention 23 Rather than a profound process of adaptation, Further south, Fernando Nilo of Recycla what we see to date from our survey is mainly Chile noted that the smelters they sell metals a process of cost reduction—hardly surprising, to held payment for 60 days—and were only given that less than a fifth of our respondents persuaded to pay with the support of lawyers. said the pressure to adapt was already ‘high’ or ‘very high’ (Figure 3.1). Significantly, Adaptation is well under way in many however, 40% said the pressure was organizations. “We have shifted staff ‘medium’—although the comments made it substantially towards our revenue engine, clear that many respondents expect the The First Book Marketplace,” explained pressures to grow. Asked how long they Kyle Zimmer of First Book. Kiva co-founder expect the downturn to last, 45% of our and CEO Matt Flannery replied that the respondents thought 1.5 to 3 years (Figure micro-lending organization planned to 3.3), though there were outliers expecting a “return to a scrappy attitude,” emphasizing more protracted crisis. Our own assumptions the opportunistic, irrepressible and determined skew strongly to the right hand side of the mindset and behaviors of a start-up. time-line. Once again, however, there is a sense that whilst the funding crisis is profoundly Respondents were eloquent on the scale of unwelcome, coming at a time when many the impact to date: “Our microfinance program entrepreneurs are under pressure to replicate is suffering because local banks are not and scale their operations, there could lending us money,” said one prominent Latin be significant upsides. “New ideas and American entrepreneur, who asked to remain approaches will spring forth,” noted Kristine anonymous. “When they do, they have short- Pearson of the Freeplay Foundation ened the term to 3 months and doubled the “necessity, once again, will be the mother interest rate, from 10% to 20%.” From Peru, of invention.” Albina Ruiz Ríos reported that the price of the PET plastic that Ciudad Saludable recycles The key challenge for many, as Benetech’s had dropped from $500 to $150 a ton. Jim Fruchterman put it, is to get through “the valley of death”. For that to happen, respondents see an urgent need for key Figure 3.3 actors to adopt elements of the agenda outlined on pages 35–40. Assumptions How long do you think the global economic crisis is likely to continue? % 50 45 40 30 31 20 19 10 4 1 0–1 Years 1–1.5 Years 1.5–3 Years 3–5 Years 5+ Years
  26. 26. How Entrepreneurs are 24 Responding to Downturn In terms of the types of adaptation required, —Closer internal oversight respondents made the following points: Governance and management are increasingly important. “We’ve set up a —Focus on efficiency committee of board and staff to ensure Many respondents are aiming to do more we’re constantly monitoring the situation with less. “We made plans to reach the and considering how to adapt our strategies same targets with less income,” reported accordingly. We’re not in emergency mode, Yuval Wagner of Access Israel. “While but rather looking for ways to find new maintaining quality,” said former BELL and opportunities in a changing landscape.” current Summer Advantage USA CEO said Nina Smith of the RugMark Earl Martin Phalen, “we are making decisions Foundation. about what we can do without.” —Develop scenarios —Adopt a defensive posture Organizational strategies will have to be This approach was reported with some adaptive to the context of considerable frustration by entrepreneurs with a passion uncertainty. “We are developing multiple to grow. “We have a great core business,” 2009 budgets that react to varying degrees said Roberto Milk of NOVICA, “it’s just that of income reduction,” reported Adam all plans are delayed through the crisis.” Green of Rocking the Boat. Many respondents were already slowing recruitment or actively cutting staff. —Adapt business models “We have become very cautious about There is a growing need for flexibility adding new positions that may not be and diversification. Some not-for-profit sustainable if the economy gets worse. entrepreneurs are setting up for-profit At the same time, we must continue to arms, and vice versa. add those positions necessary to manage continued growth,” said —Think about mergers Chris Elias of PATH. “I am considering allowing the organization to merge with other organizations,” admitted Socheata Poeuv of Khmer Legacies. —Don’t forget growth Such times open out “opportunities to make long-term moves,” as Rory Stear of Flambard Holdings put it. As a result, some entrepreneurs are distinctly upbeat. “We plan to grow significantly,” said Mel Young of the Homeless World Cup. “We have made plans to reach the same targets with less income.” Yuval Wagner Access Israel
  27. 27. Future Funding How the Phoenix 50 are 25 Weathering the Storm When it came to future funding, the sources All sectors and pretty much seen as most attractive are shown in Figure all geographies will be 3.4. The interest in relatively ‘soft’ money is impacted by the economic notable. Foundations (72%) lead by a wide discontinuity. Some Phoenix margin, followed by government grants and 50 organizations will go loans (56%). Moving to the harder end, we under, others will be sorely come to making sales/charging fees (49%), squeezed—and a proportion will emerge attracting help in kind (42%) and public fund- transformed. As the pressures build, some raising (40%), with joint venturing (33%) and Phoenix 50 pioneers are moving deftly into venture capital (28%) perceived as relatively the political game—among them Green less forth-coming sources of finance. For All. Others are redoubling their efforts to create new funding sources for It is clear, however, that even in tough times entrepreneurs, including MyC4. As the the optimism of entrepreneurs is unabated. social fall-out grows, there will be growing A significant majority (60%) remain confident need for the services offered by such that they will continue to achieve real impact. Phoenix 50 organizations as the Business & Human Rights Resource Centre, Mothers2Mothers, PDA and the World Toilet Organization (WTO). They will increasingly need the support of organizations like Ashoka. The parallel energy crisis will create new opportunities for such trailblazers as E+Co, Econcern and Solarcentury. And, in the background, some of our wild card listings continue to explore less obvious aspects of the Phoenix Economy, in the case of the J Craig Venter Institute focusing on synthetic biology and potential new routes to sustainable energy. Figure 3.4 Future funding sources Which sources of funding will be the best avenues to pursue under today’s conditions? 72 % 56 50 49 42 40 40 33 30 28 24 20 14 10 8 6 Public shares Unsure Franchising Own pockets Venture capital Joint venturing Public funds Help-in-kind Sales / Fees Government Foundations
  28. 28. 3.2 Upgrading the Business Case 26 Although entrepreneurs see an inexorable The downturn, said Gary Cohen of rise in the need for their services, the Health Care Without Harm, “has forced available market research is weak. As us to strengthen the business case for they move to scale, that is likely to be a environmentally responsible healthcare—and growing gap—and opportunity space. demonstrate how our programs save hospitals money that could be better used for patient Huge growth in demand is expected for what care.” “There is no better time for innovation or social and environmental entrepreneurs do invention than when facing broken systems,” and provide. The US National Intelligence said Jacqueline Novogratz of Acumen Fund. Council (NIC) reported, late in 2008, that by 2025 a whole spectrum of new challenges Given how important market research is to would test global leaders in the public, mainstream entrepreneurs preparing their private and citizen sectors.20 Alongside business case, we asked what sources of “the unprecedented transfer of wealth roughly market research entrepreneurs are using. from West to East now under way” and seen “Alas, this is not one of our strengths,” said as likely to “continue for the foreseeable one of our respondents, who asked to remain future,” the NIC foresaw a range of factors anonymous. “Market research for northern driving “unprecedented economic growth”, Haiti?” quipped Peter Haas of AIDG. “Sorry which, coupled with the addition of 1.5 billion mates, there is none.” To date, very few more people, “will put pressure on resources— entrepreneurs work with marketing or market particularly energy, food, and water—raising research agencies, though Jumpstart was the specter of scarcities emerging as demand one. Another was Dialogue in the Dark, outstrips supply.” where Andreas Heinecke noted that, “we went through an intensive Bain study to be The economic downturn will slow—but not ready for take-off.” stall—this momentum. Some of our survey respondents see the current downturn as Other pointers on market research options necessary, if painful. “This is an over-due included the following: “We all must struggle correction,” as Victoria Hale of The Institute to harvest useful knowledge from the flood of for One World Health put it. “This is a information today—from magazines, internet- moment for change—if we can do it based newsletters, research studies and deliberately,” said Rebecca Adamson of government reports,” said Mike Eckhart of First Peoples Worldwide. “People might ACORE. Other useful sources identified be a little less certain that greed is a driver include “the Monitor Group, New Profit Inc., for a sound economy,” as Barry Coleman of Bridgespan and other key advisors” (BELL), Riders for Health noted. His partner Andrea “industry reports” (Health Care Without also saw potentially positive impacts in that Harm), “in-house research capability and “charities will be forced to think in a socially work with think-tanks” (Independence Care entrepreneurial way.” As a result, others Systems), “foundation social impact data, argued, there needs to be even greater focus to help develop our high-transparency bank” on the business case for change. (Urban Logic), “World Bank reports” (Root Capital), “government surveys” and “national statistics” (Responde), “customers” (First Book), “listserves” (Nuestras Raices), “mainly the Internet” (Freeplay Foundation), “research carried out by NGOs” (Honey Care Africa), and “word of mouth” (Evergreen).
  29. 29. The Phoenix Economy How the Phoenix 50 are 27 Upgrading their Business Case The closer the entrepreneurs are to viable The new economic reality business models, the greater their appetite will force many actors to for market research. In particular there is an upgrade—and in many cases appetite for targeted, reliable, affordable reboot—the business case research—though in many cases the likelihood arguments they use to sell for many respondents is that free sources will what they do. Anyone win out over paid-for services for some time to wanting persuasive input to their business come. When we asked entrepreneurs what case would be well advised to take a questions they would want asked if market look at the work of Sustainable Asset research capacity were to be available, the Management (SAM), particularly its 2009 replies were predictably broad ranging, Sustainability Yearbook.26 Among the spotlighting the potential of well-targeted trailblazers rebooting health sector market intelligence to help them frame their business cases generally are the Aravind thinking, priorities and business cases: Eye Care System, Health Care Without Harm, the Institute for One World Health —A focused analysis of fair trade and organic and, perhaps most strikingly, GSK. product market trends and opportunities.21 In the area of sustainability policy, the World Resources Institute (WRI) and the —How will climate change investments be World Business Council for Sustainable impacted by the financial crisis?22 Development (WBCSD) stand out. In the energy sector, the Phoenix 50 —How do Chinese companies and includes AMEE, Climate Change Capital multinationals operating in China apply and, most powerfully, GE’s Ecomagination CSR programs in China?23 Initiative. In the automotive sector, we spotlight BYD Auto, which is morphing —What do companies most want in from a battery-maker to a producer of partnerships with social entrepreneurs?24 electric cars. In the wider field of innovation, we see Innocentive as a —Where are there untapped sources pioneer, with its focus on “sustainable of funding?25 breakthrough innovation”. “We have to make sure that we have the greatest impact at the lowest cost and do an increasingly good job at showing how lives are being changed in a sustained way.” Andrea Coleman Riders for Health
  30. 30. 3.3 Evolving the ‘Ecosystem’ 28 Entrepreneurs are increasingly aware As the Stage 4 opportunity space opens out of the need to build ‘ecosystems of in the form of new markets, there has been change’—and to mobilize strategic growing interest in its development from alliances in pursuit of ‘pathways to scale’. financial institutions, with Generation Investment Management and venture It takes an ecosystem approach to drive capital pioneers Kleiner Perkins Caufield true system change. Once basic survival is & Byers among the Phoenix 50—and ensured, the focus of most respondents and Khosla Ventures among those nominated. interviewees turns to questions of scaling The still-emerging Global Impact Investing their impact. Building critical mass through Network (GIIN) is a gamble in the Phoenix partnerships and alliances with other sectors 50 listing, but significant because it is is seen as a critical condition for moving up catalyzing new ways of blending private to Stages 4 (Ecosystem) and, ultimately, and philanthropic capital to help social and Stage 5 (Economy) (Figure 2.1, page 14–15). environmental entrepreneurs. Other 2009 This is the focus of our ‘Pathways to Scale’ Phoenix 50 organizations that demonstrate work, which has found that the key aspirations the importance of building ecosystems of entrepreneurs currently moving towards include Aflatoun, the C40 initiative and the Stage 4 include: Marine Stewardship Council. —Consolidating their business models and It is striking that social entrepreneurs evaluate financing mechanisms (Solar Aid). the ‘financial community’ as way below other sectors in terms of current importance in their —Evolving alliances to increase their access work. Generally this is because entrepreneurs channels and market share (Global address areas of market failure, where Footprint Network). investors tend to venture timidly, if at all. Cleantech entrepreneurs are an exception —Improving market regulation through here, because they address markets that are standards and better governance closer to market take-off. For example, Shai (Roundtable on Sustainable Biofuels). Agassi’s Better Place aims to create the system conditions for the roll-out of electric —Assembling the infrastructures required to vehicles on a large scale—and is unusual bring their solutions to scale (Movimento among the entrepreneurs covered here in Nacional dos Catadores de Materiais that they are venture-funded. The interface Recicláveis). between entrepreneurs and financial markets clearly merits further work. —Lobbying governments for new market- shaping rules that get the incentives right Although international government agencies (CERES Investor Network on Climate Risk). scored lowest in terms of their significance for our entrepreneurs, they too can play a key Most of the entrepreneurs interviewed see role. Consider India’s Solar Loan Programme, their initiatives and solutions as located led by the United Nations Environment somewhere between Stage 2 (Experiment) Programme (UNEP) from 2003 to 2007, and Stage 3 (Enterprise). The growing which created the necessary conditions for concerns about survival shown by Indian banks to support the scaling up of respondents underscore the difficulties of lending for solar home systems.27 That said, sustaining enterprises in Stages 2 and 3, the low score achieved by this sector suggests let alone moving on to Stage 4. Those we that the relevant institutions and agencies polled reported that their highest priority is need to rethink their role if they are to spur to find ways to influence the private sector. the rise of a truly global Phoenix Economy. But also seen as ‘very important’ is their ability to influence regulation and public support by engaging with national governments and by mobilizing grassroots and broader cultural change through engagement with the media in its many forms.
  31. 31. How The Phoenix 50 are 29 Evolving Ecosystems Getting to Stage 3 in our Among those spotlighted in the Phoenix 5-stage model of ‘Pathways 50 are Aflatoun, the Cleantech Group, to Scale’ (page 15) is never Interpeace, the Marine Stewardship easy, but is a good deal Council, Movimento Nacional dos simpler than the convening, Catadores de Materiais Recicláveis building and managing of and Novo Nordisk with its support for strategic alliances and partnerships the Oxford Health Alliance. Many are necessary to operate effectively at working on technologies and business Stage 4. The Phoenix 50 organizations— models that open out the landscape and many others covered in these of opportunity for others, including pages—are trying to build ecosystems CellBazaar, MaRS and Virgance. for change. The relevant skills will need honing, but the role of market-shapers like governments, stock exchanges, financial institutions and business can only become increasingly important. Figure 3.5 Stakeholder importance What sectors do you need to work with Irrelevant to scale your impact? Not very important Number of votes Important Very important 100 90 10 12 5 6 10 10 80 34 16 29 32 20 32 34 70 33 60 International Governemnt Agencies 30 50 51 46 46 42 40 40 National Governements Citizen sector / NGOs Financial Community 32 30 23 Foundations 20 Business Media 10
  32. 32. 3.4 Bridging the Macro-Micro Divide 30 Entrepreneurs see an urgent need to Despite its enormous ecological footprint converge bottom-up with top-down and its profound economic problems, the approaches—and to link micro-level US was seen by many as well placed to help solutions with macro-strategies. build the Phoenix Economy, “once (and if) the right incentive structures are put in place.” If any one characteristic stands out in the work See pages 36–37 for our Phoenix Manifesto and achievements of the most celebrated for governments. social entrepreneurs in the developing world, it is their focus on micro-models: micro-finance, Several of the pioneering Phoenix 50 micro-insurance, micro-energy generation and organizations aim to bridge micro and macro so on. When asked for their prescriptions for levels of change. They include the Cleantech future progress in their fields of interest, most Group, which since 2002 has been a leading social entrepreneurs working in these areas source of market intelligence in the cleantech continue to emphasize the micro, often sector and Arup, the global firm of designers, assuming—or stating—that the best way to engineers, planners and business consultants the desired macro outcome of system change that has been involved in the design and is by the aggregation of a growing number of planning of eco-cities like Dongtan, Shanghai, bottom-up initiatives. China. More significantly, Arup Director, Peter Head, told us that the 1,000 people working Others see things differently. “Macro solutions on sustainable development issues in the are key,” said one of our Net Impact firm are now helping direct new business respondents. “How else,” she asked, “are development across the 9,000-person we going to replace the 200-plus million organization. cars in the USA with non-carbon-based transportation?” Many of the social and Another similar organization nominated was environmental entrepreneurs we interviewed architect Norman Foster’s Foster & Partners, are increasingly aware of the need for macro- which is doing the master planning for the level support for their work. Indeed, many new eco-city of Masdar in the United Arab of our survey respondents were extremely Emirates, designed to be both carbon neutral enthusiastic about the promise of the and zero waste. Increasingly, cities around the Obama Presidency, precisely because world are trying to work out how to bring their of its aim to support social and environmental collective weight to bear on issues like climate entrepreneurship by building the necessary change. This is the focus of the C40 initiative, macro-level policy and incentive structures. among others.
  33. 33. The Phoenix Economy How the Phoenix 50 are 31 Bridging the Macro-Micro Divide Exciting though such eco-cities are, many No amount of micro-level more people will live in the world’s sprawling, innovation will flip the noisome slums than are ever likely to live in system to a new (macro) new cities of any type. Over a billion people are state. Significantly, the thought to live in slums worldwide, a number Grameen Group, founded that could double within a couple of decades, by Muhammad Yunus, placing a massive premium on approaches is most closely associated with micro- and initiatives that offer hope of raising living scale solutions, but has constantly and environmental standards in such areas. experimented with ways of scaling micro- level activities—and with partnerships Of the Phoenix 50 organizations, the most designed to address the macro-level relevant here is Himanshu Parikh Consulting challenge. Yunus even considered running Engineers, in India. Using what they dub for the highest political office. Venture- ‘Slum Networking’, they study the natural funded Better Place straddles the macro- topography and drainage of slum areas to micro divide, as do venture capitalists improve the environment and provide quality, Kleiner Perkins Caufield & Byers (KPCB) gravity-based water supply, sanitation, storm represented by ‘greentech’ champion drainage, roads and landscaping at costs John Doerr. Among Phoenix 50 lower than conventional solutions like public corporations selected on the basis stand posts and community latrines. of their macro-micro strategies are The various components of infrastructure architects and planners Arup, search are bundled, to cut the cost, integrated from engine pioneers Google and logistics micro to macro levels. “The Slum Networking giant TNT. But even solutions developed concept has been tried in several cities of by tiny enterprises can vault to the India such as Indore, Baroda, Ahmedabad, point of addressing macro issues, like Bhopal and Mumbai,” reports Himanshu Apopo with its ‘sniffer rats’ hunting out Parikh, “directly transforming lives of about landmines, helping to underscore the a million people.” significance of the multi-dimensional security agenda. Our market pioneers increasingly recognize the need to sniff out opportunities for change at micro, meso and macro scales. Question: do you see anything good about the economic downturn? “[We could see a] shift in societal values.” Bart Weetjens Apopo International