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Social Business in Developing Countries
A New Solution for Eradicating Poverty?

Dr. Linda Kleemann
02/12/2013

1
2
3
The plan for today
… in developing
countries?
introduction

Social
Business

(homework)
examples

… eradicate poverty?

The end

related concepts

4
Social Business in developing countries

5
The Pioneer I
1976 first time to lend money
1983 Grameen Bank
2006 Nobel prize
2011 6.2 Mio. people in 2.5 Mio.
groups, 97 % women, 8.7 Mia. US$
in loans
Today: Grameen group
The bank: owned 95% by customers,
5% government

6
What makes the Grameen Bank a Social
Business?
o Social Business Type 2
Profit-oriented business
Owned by target group
Dividends are ok

7
The Pioneer II: Grameen – Danone Joint
Venture
o Social Business Type 1
Business produces products or services for the „poor“
Main aim of business is social (or ecological)
No dividends, profits stay in the business

8
The German

9
A new idea?
o 12th century: model „Ehrbarer Kaufmann“ is born.
o 1521 Jakob Fugger creates „Fuggerei“.
o 1799 Robert Owen founds the cooperative movement
o 1853 Florence Nightingale develops the first modern hospital
o 1864 Friedrich Wilhelm von Raiffeisen founds the first
cooperative bank
o 1959 the first alternative trade society starts in the Netherlands,
1967 the first in Germany
10
Summary Social Business
o Business with a social mission
o Business case: products or services are sold
o Success is defined by social goal
o Financial return stays in the firm (type 1) or firm is owned by the
poor/the target group (type 2)

11
Social Business in developing countries

12
The starting point I
50 years of development aid without results?
Aid effectiveness debate and evaluation hype

13
An example

14
15
KAITE
Social Vision: improving social and economic welfare of smallscale farmers
and landless in Zimbabwe
Starting point for business: product quality achieved by smallholders is lower
than by commercial producers
Focus: product and process quality in organic farming
Social Investment instead of project basis brings long term engagement for
land and people
Break Even after 6-7 years
After that: financing of social-only activities through profits
16
KAITE
Vision: improving the social and economic living standards of small-scale
farmers and landless people in Zimbabwe
Families and
Communities
of farmers
Customers

KAITE e.V.
Donors

KAITE
Trust

KAITE
Company

Banks
(loans)

Microfinancing

Support of
orphans

HIV/AIDS and
health care
Schools

Training
Cultivation
advice

Processing

Banking

Certification

Org., UEBT, FAIR

Marketing
Social Business in developing countries - a new solution to eradicate poverty?
Training
Investment in production:
Dryers

Water Pumps
Wild collection of indiginous plants
Processing of wild aromatic plants in the communities
Sustainably wild collected Strafantus
Processing of Strafantus by Small scale farmers / wild collectors
Social Business in developing countries - a new solution to eradicate poverty?
Construction of wood saving stoves
KAITE‘s orphanage
The KAITE team says:
Thank you

Visit KAITE in Zimbabwe
You will see the difference!
Starting point II
Business Opportunities at the Bottom of the Pyramid: a lot of
potential new customers

29
A second example

30
Welcome to Blue Skies
About Blue Skies
• Founded in 1997.
• Producers of fresh-cut fruit and freshly
squeezed juice.
• Employ 2,745 people in factories in
Ghana (2), Egypt, South Africa, Brazil, UK
and Senegal.
• Committed to value-adding at source
• Supply 13 major European retailers.
• Presented with Queens Award for
Sustainable Development in 2008 and
2011
Social Business in developing countries - a new solution to eradicate poverty?
UK:
Head Office
and factory

SENEGAL &
GAMBIA
Pack houses

BRAZIL:
Processing Tropical,
deciduous and exotic
fruits

EGYPT:
Processing deciduous and
some sub tropical fruits

GHANA:
Processing
tropical fruits

SOUTH AFRICA: Processing
deciduous and sub tropical
fruits

www.blueskies.com
Customers

Certification

Awards
West African Challenges
SOCIAL & ECONOMIC
•Agriculture, land and the mind-set.
•Industry and Exports.
•ECOWAS.
ENVIRONMENT
•Climate change and fruits
•Energy and airfreight
•“Sand winning” and urbanization
The Blue Skies Solution
• for meeting consumer demand and crushing
poverty:
North-South Partnership
Encouragement for involvement in agriculture and
industry. Role models, rewards and
acknowledgment.
The JEE.
Joint Effort Enterprise

Employing people from
different backgrounds
and cultures
because we believe that
we will generate better
ideas if we have a diverse
range of skills, experience
and perspectives.

Respecting people
equally
because we believe that if
we respect each other for
who we are, then we will
feel happier about our work
and proud to do a good
job.
This is our culture.

Operating profitably and
efficiently
because we know that we
cannot continue to produce
the best fruit products in the
world unless we generate
the funds that will enable us
to survive and grow.
Proactive Initiatives
• Our Blue Print for Sustainability
Compost
Biogas
• Taking responsibility
Demonstration farms > focus on quality
Education and awareness > mind-set
• Developing more value added products
Product diversification
Varietal innovation
Blue Skies Foundation
• Partnership between Blue Skies, Albert
Heijn and Waitrose
• €170,000 per year for community
projects.
• Intended to improve the lives of farmers
and their communities who supply Blue
Skies and our staff.
• Projects focused on improving education
and health
• Comprehensive project selection and
prioritisation process
Social Business in developing countries - a new solution to eradicate poverty?
A step at a time…
Summary
•
•
•

•

Our ideals embrace the ideas
of differentiation and quality.
Fresh From Harvest
guarantees quality.
More value-adding at source
will change fortunes faster for
Africa.
Africa is the future
Thank you
The context
o No social security systems, often
weak governments >> many
opportunities
o Poverty >> who pays for your
product?
o Political and legal insecurity >>
sustainability?
o No support system for start-ups
o Donors >> help or competition?
45
The reality
o Often started by local or
international elites
o A social aim does not mean
it is less risky
o Time to break even longer
than in „normal“ businesses
o Difference to development
aid: impact through
continuity
46
What are the others doing?

47
http://www.youtube.com/watch?v=Rm0Fov0U-Nw

48
Social Entrepreneur

Discover a
concrete social
issue to be
solved,

Develop a novel
solution for this
problem
benefitting the
target group,

Do the next
step and
implement the
solution idea,

And, while
implementing,
combine social and
economic
sustainability.

49
Related concepts…

50
1) The big guys
o Mpesa Kenya: Safaricom/
Vodafone Group
o Other examples of big
corporations:
Siemens, Nokia,
Allianz (Indien),
Barclays Bank (Ghana),
Bosch & Siemens home
appliances (Indonesien / Philippinen), Manila Water Company
(Philippines)
51
Inclusive Business

o “Inclusive business integrates people living in poverty into the

value chain as consumers or producers, thus making a positive
contribution to the development of companies, the local
population and the environment.” (Gradl, Knobloch 2012)

o Known world wide through the World Business Council for
Sustainable Development (WBCSD), SNV and UNDP

52
Other names for inclusive business
IFC,
IBLF

Business
linkages

Responsible
supply chain
management

Full Economic
Citizenship
(FEC)

Pro-poor
value chain
development

BOP

MMW4P/ M4P

53
2) Classical examples
o BASF: reducing emissions by 10% (air) and 40% (water) until 2012.
o „Seitenwechsel“: managers work in a charity for one week.

54
Shared Value

The concept of shared value includes rules and practices that increase
both the competitiveness of a company and improve the economic and
social conditions of the community the company works in. (Porter and
Kramer)

55
3) Classical examples
o OTTO: „Code of Conduct“ on social standards for their suppliers.
o Deutsche Post World Net: logistical support for emergencies
(earthquakes, etc.).
o HSH Nordbank Run: running to support children in need.

56
Corporate Social Responsibility
„Corporate Social Responsibility (CSR) means that companies or
other organisations or institutions take societal responsibility
voluntarily, and above their legal obligations.“ (Bundesministerium
für Arbeit und Soziales)
„CSR is a system which serves as a basis for companies to voluntarily
integrate social and environmental concerns into their activities
and their relations with their Stakeholders.“ (EU)

57
Overview of related concepts

58
homework
Imagine that you work at the tax office. You have to decide how to tax an
organisation. If an organisation has a social purpose it can profit from a
reduced tax rate. There are three categories*:
• Normal rate of 20% (profit maximising company)
• Reduced rate of 7%
• Charitable rate of 0%
Which rate would you charge the following organisations?
*rates are hypothetical and do not correspond to real rates.
59
Fairtrade is an alternative approach to conventional trade and is based on a partnership
between producers and consumers. Fairtrade offers producers a better deal and
improved terms of trade. This allows them the opportunity to improve their lives and
plan for their future. Fairtrade offers consumers a powerful way to reduce poverty
through their every day shopping.
When a product carries the Fairtrade Mark it means the producers and traders have met
Fairtrade standards. The standards are designed to address the imbalance of power in
trading relationships, unstable markets and the injustices of conventional trade.
60
Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good Food,
Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of
food and beverage categories and eating occasions, from morning to night.

„Nestlé Ghana wins award for sports
development in schools„

61
Proximity Designs
We design for impact: In a country where 70% of the population depends on agriculture,
improvements in farming technology and techniques - and the credit to access them - are vital to
improving living conditions and ending poverty.
Proximity Designs works to increase the productivity and incomes of rural households in Myanmar
by designing and selling simple, highly efficient agricultural products. Proximity has developed an
extensive distribution network in order to reach the most isolated customers.

62
SEKEM was founded with the idea of sustainable development and giving
back to the community. The vision that brought Dr. Ibrahim Abouleish to
dig the first well in the vast desert land still resounds in SEKEM’s approach
of conducting business. Like a compass, our vision, mission and values
guide us in the everyday work in all SEKEM companies.
The SEKEM Initiative established several specialized companies to ensure
productions and marketing of its products.
Since May 2007 the German GLS Gemeinschaftsbank and the Dutch
Triodos Bank are shareholders of the SEKEM Holding and support the
finance for future investments.
SEKEM Companies: ISIS: Produce & Foodstuffs, ATOS: Herbal Medicine,
NATURETEX: Textiles, SEKEM Europe, LOTUS: Herbs & Spices, LIBRA: Cattle
& Compost, MIZAN: Seedlings, PREDATORS: Biocontrol, SEKEM for Land
Reclamation, SEKEM Holding

63
 Creating a better future every day
We aim to provide people the world over with products that are good for them and
good for others.
 Our vision
We will develop new ways of doing business with the aim of doubling the size of our
company while reducing our environmental impact.

No matter who you are,
or where in the world
you are, the chances
are that our products
are a familiar part of
your daily routine.
Every day, around the
world, people reach for
Unilever products. Our
brands are trusted
everywhere and, by
listening to the people
who buy them, we've
grown into one of the
world's most successful
consumer goods
companies. In fact, 150
million times a day,
someone somewhere
chooses a Unilever
product.

64
Grameen Veolia Water has set up a
water treatment plant to provide safe
drinking water to people living
in villages in rural Bangladesh. The
project aims to provide 100,000
people with drinking water that meets
the highest WHO standards, at a tariff
they can afford.
The project means that local people
finally have access to drinking water
that doesn’t make them ill.
Grameen Veolia Water works in
partnership with some of the world’s
leading companies and academic
institutions to invent a new economic
model to bring drinking water to rural
Bangladesh.
65
VisionSpring has developed several innovative models for bringing high-quality, affordable
eyeglasses to customers in developing countries. Through mobile optical units, optical shops, and
Vision Entrepreneurs, more than 600,000 pairs of eyeglasses have been sold.

66
The Waitrose Way:
Waitrose believes in championing British produce, treading lightly on the environment, supporting
responsible sourcing and treating people fairly.
In recognition of the work that we do, Waitrose has received a Big Tick Award in the Sustainable
Supply Chain category at the Responsible Business Awards 2013.
John Lewis Partnership:
We’re not owned by shareholders and the City. Instead, we’re owned by everyone who works for
the Partnership, which is why we’re all on the same mission to bring you the best.
67
contact:
linda.kleemann@ifw-kiel.de
kleemann@heldenrat.org

69

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Social Business in developing countries - a new solution to eradicate poverty?

  • 1. Social Business in Developing Countries A New Solution for Eradicating Poverty? Dr. Linda Kleemann 02/12/2013 1
  • 2. 2
  • 3. 3
  • 4. The plan for today … in developing countries? introduction Social Business (homework) examples … eradicate poverty? The end related concepts 4
  • 5. Social Business in developing countries 5
  • 6. The Pioneer I 1976 first time to lend money 1983 Grameen Bank 2006 Nobel prize 2011 6.2 Mio. people in 2.5 Mio. groups, 97 % women, 8.7 Mia. US$ in loans Today: Grameen group The bank: owned 95% by customers, 5% government 6
  • 7. What makes the Grameen Bank a Social Business? o Social Business Type 2 Profit-oriented business Owned by target group Dividends are ok 7
  • 8. The Pioneer II: Grameen – Danone Joint Venture o Social Business Type 1 Business produces products or services for the „poor“ Main aim of business is social (or ecological) No dividends, profits stay in the business 8
  • 10. A new idea? o 12th century: model „Ehrbarer Kaufmann“ is born. o 1521 Jakob Fugger creates „Fuggerei“. o 1799 Robert Owen founds the cooperative movement o 1853 Florence Nightingale develops the first modern hospital o 1864 Friedrich Wilhelm von Raiffeisen founds the first cooperative bank o 1959 the first alternative trade society starts in the Netherlands, 1967 the first in Germany 10
  • 11. Summary Social Business o Business with a social mission o Business case: products or services are sold o Success is defined by social goal o Financial return stays in the firm (type 1) or firm is owned by the poor/the target group (type 2) 11
  • 12. Social Business in developing countries 12
  • 13. The starting point I 50 years of development aid without results? Aid effectiveness debate and evaluation hype 13
  • 15. 15
  • 16. KAITE Social Vision: improving social and economic welfare of smallscale farmers and landless in Zimbabwe Starting point for business: product quality achieved by smallholders is lower than by commercial producers Focus: product and process quality in organic farming Social Investment instead of project basis brings long term engagement for land and people Break Even after 6-7 years After that: financing of social-only activities through profits 16
  • 17. KAITE Vision: improving the social and economic living standards of small-scale farmers and landless people in Zimbabwe Families and Communities of farmers Customers KAITE e.V. Donors KAITE Trust KAITE Company Banks (loans) Microfinancing Support of orphans HIV/AIDS and health care Schools Training Cultivation advice Processing Banking Certification Org., UEBT, FAIR Marketing
  • 21. Wild collection of indiginous plants
  • 22. Processing of wild aromatic plants in the communities
  • 24. Processing of Strafantus by Small scale farmers / wild collectors
  • 26. Construction of wood saving stoves
  • 28. The KAITE team says: Thank you Visit KAITE in Zimbabwe You will see the difference!
  • 29. Starting point II Business Opportunities at the Bottom of the Pyramid: a lot of potential new customers 29
  • 32. About Blue Skies • Founded in 1997. • Producers of fresh-cut fruit and freshly squeezed juice. • Employ 2,745 people in factories in Ghana (2), Egypt, South Africa, Brazil, UK and Senegal. • Committed to value-adding at source • Supply 13 major European retailers. • Presented with Queens Award for Sustainable Development in 2008 and 2011
  • 34. UK: Head Office and factory SENEGAL & GAMBIA Pack houses BRAZIL: Processing Tropical, deciduous and exotic fruits EGYPT: Processing deciduous and some sub tropical fruits GHANA: Processing tropical fruits SOUTH AFRICA: Processing deciduous and sub tropical fruits www.blueskies.com
  • 36. West African Challenges SOCIAL & ECONOMIC •Agriculture, land and the mind-set. •Industry and Exports. •ECOWAS. ENVIRONMENT •Climate change and fruits •Energy and airfreight •“Sand winning” and urbanization
  • 37. The Blue Skies Solution • for meeting consumer demand and crushing poverty: North-South Partnership Encouragement for involvement in agriculture and industry. Role models, rewards and acknowledgment. The JEE.
  • 38. Joint Effort Enterprise Employing people from different backgrounds and cultures because we believe that we will generate better ideas if we have a diverse range of skills, experience and perspectives. Respecting people equally because we believe that if we respect each other for who we are, then we will feel happier about our work and proud to do a good job. This is our culture. Operating profitably and efficiently because we know that we cannot continue to produce the best fruit products in the world unless we generate the funds that will enable us to survive and grow.
  • 39. Proactive Initiatives • Our Blue Print for Sustainability Compost Biogas • Taking responsibility Demonstration farms > focus on quality Education and awareness > mind-set • Developing more value added products Product diversification Varietal innovation
  • 40. Blue Skies Foundation • Partnership between Blue Skies, Albert Heijn and Waitrose • €170,000 per year for community projects. • Intended to improve the lives of farmers and their communities who supply Blue Skies and our staff. • Projects focused on improving education and health • Comprehensive project selection and prioritisation process
  • 42. A step at a time…
  • 43. Summary • • • • Our ideals embrace the ideas of differentiation and quality. Fresh From Harvest guarantees quality. More value-adding at source will change fortunes faster for Africa. Africa is the future
  • 45. The context o No social security systems, often weak governments >> many opportunities o Poverty >> who pays for your product? o Political and legal insecurity >> sustainability? o No support system for start-ups o Donors >> help or competition? 45
  • 46. The reality o Often started by local or international elites o A social aim does not mean it is less risky o Time to break even longer than in „normal“ businesses o Difference to development aid: impact through continuity 46
  • 47. What are the others doing? 47
  • 49. Social Entrepreneur Discover a concrete social issue to be solved, Develop a novel solution for this problem benefitting the target group, Do the next step and implement the solution idea, And, while implementing, combine social and economic sustainability. 49
  • 51. 1) The big guys o Mpesa Kenya: Safaricom/ Vodafone Group o Other examples of big corporations: Siemens, Nokia, Allianz (Indien), Barclays Bank (Ghana), Bosch & Siemens home appliances (Indonesien / Philippinen), Manila Water Company (Philippines) 51
  • 52. Inclusive Business o “Inclusive business integrates people living in poverty into the value chain as consumers or producers, thus making a positive contribution to the development of companies, the local population and the environment.” (Gradl, Knobloch 2012) o Known world wide through the World Business Council for Sustainable Development (WBCSD), SNV and UNDP 52
  • 53. Other names for inclusive business IFC, IBLF Business linkages Responsible supply chain management Full Economic Citizenship (FEC) Pro-poor value chain development BOP MMW4P/ M4P 53
  • 54. 2) Classical examples o BASF: reducing emissions by 10% (air) and 40% (water) until 2012. o „Seitenwechsel“: managers work in a charity for one week. 54
  • 55. Shared Value The concept of shared value includes rules and practices that increase both the competitiveness of a company and improve the economic and social conditions of the community the company works in. (Porter and Kramer) 55
  • 56. 3) Classical examples o OTTO: „Code of Conduct“ on social standards for their suppliers. o Deutsche Post World Net: logistical support for emergencies (earthquakes, etc.). o HSH Nordbank Run: running to support children in need. 56
  • 57. Corporate Social Responsibility „Corporate Social Responsibility (CSR) means that companies or other organisations or institutions take societal responsibility voluntarily, and above their legal obligations.“ (Bundesministerium für Arbeit und Soziales) „CSR is a system which serves as a basis for companies to voluntarily integrate social and environmental concerns into their activities and their relations with their Stakeholders.“ (EU) 57
  • 58. Overview of related concepts 58
  • 59. homework Imagine that you work at the tax office. You have to decide how to tax an organisation. If an organisation has a social purpose it can profit from a reduced tax rate. There are three categories*: • Normal rate of 20% (profit maximising company) • Reduced rate of 7% • Charitable rate of 0% Which rate would you charge the following organisations? *rates are hypothetical and do not correspond to real rates. 59
  • 60. Fairtrade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping. When a product carries the Fairtrade Mark it means the producers and traders have met Fairtrade standards. The standards are designed to address the imbalance of power in trading relationships, unstable markets and the injustices of conventional trade. 60
  • 61. Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. „Nestlé Ghana wins award for sports development in schools„ 61
  • 62. Proximity Designs We design for impact: In a country where 70% of the population depends on agriculture, improvements in farming technology and techniques - and the credit to access them - are vital to improving living conditions and ending poverty. Proximity Designs works to increase the productivity and incomes of rural households in Myanmar by designing and selling simple, highly efficient agricultural products. Proximity has developed an extensive distribution network in order to reach the most isolated customers. 62
  • 63. SEKEM was founded with the idea of sustainable development and giving back to the community. The vision that brought Dr. Ibrahim Abouleish to dig the first well in the vast desert land still resounds in SEKEM’s approach of conducting business. Like a compass, our vision, mission and values guide us in the everyday work in all SEKEM companies. The SEKEM Initiative established several specialized companies to ensure productions and marketing of its products. Since May 2007 the German GLS Gemeinschaftsbank and the Dutch Triodos Bank are shareholders of the SEKEM Holding and support the finance for future investments. SEKEM Companies: ISIS: Produce & Foodstuffs, ATOS: Herbal Medicine, NATURETEX: Textiles, SEKEM Europe, LOTUS: Herbs & Spices, LIBRA: Cattle & Compost, MIZAN: Seedlings, PREDATORS: Biocontrol, SEKEM for Land Reclamation, SEKEM Holding 63
  • 64.  Creating a better future every day We aim to provide people the world over with products that are good for them and good for others.  Our vision We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. No matter who you are, or where in the world you are, the chances are that our products are a familiar part of your daily routine. Every day, around the world, people reach for Unilever products. Our brands are trusted everywhere and, by listening to the people who buy them, we've grown into one of the world's most successful consumer goods companies. In fact, 150 million times a day, someone somewhere chooses a Unilever product. 64
  • 65. Grameen Veolia Water has set up a water treatment plant to provide safe drinking water to people living in villages in rural Bangladesh. The project aims to provide 100,000 people with drinking water that meets the highest WHO standards, at a tariff they can afford. The project means that local people finally have access to drinking water that doesn’t make them ill. Grameen Veolia Water works in partnership with some of the world’s leading companies and academic institutions to invent a new economic model to bring drinking water to rural Bangladesh. 65
  • 66. VisionSpring has developed several innovative models for bringing high-quality, affordable eyeglasses to customers in developing countries. Through mobile optical units, optical shops, and Vision Entrepreneurs, more than 600,000 pairs of eyeglasses have been sold. 66
  • 67. The Waitrose Way: Waitrose believes in championing British produce, treading lightly on the environment, supporting responsible sourcing and treating people fairly. In recognition of the work that we do, Waitrose has received a Big Tick Award in the Sustainable Supply Chain category at the Responsible Business Awards 2013. John Lewis Partnership: We’re not owned by shareholders and the City. Instead, we’re owned by everyone who works for the Partnership, which is why we’re all on the same mission to bring you the best. 67