Regulation, Evaluation, and Accountability in Social Ventures

Questions about the federal government’s roles in the regulation and evaluation of other sectors are ubiquitous yet rarely correspond to simple answers. Even in areas for which the government has long since assumed responsibility for evaluation, such as education, it meets frequent debate over its size, reach, and duties. For example, many education professionals and policy makers have criticized the framework which structures the ESEA reauthorization “No Child Left Behind,” questioning the wisdom of having states set their own standards while the federal government determines procedure for reaching standards [1]. In the public education sphere, the need to demonstrate performance sometimes leads frontline administrators to alter critical tasks to serve the accountability system’s craving for evidence of success (e.g. increasing testing), while simultaneously undermining the substantive goals that the system’s designers hoped to achieve in the first place. There is certainly a danger in overstating the application of this education-based logic to the arena of social innovation. Nevertheless, the level of the government’s involvement in funding and evaluating ventures which aim to make a positive social impact is a crucial element affecting the future of social innovation, and potential costs/benefits should be considered.

            One factor harkens back to the old federalism question – should the federal government assume the main role of fostering social innovation, or should state/local governments take up the task, using federal funds at their own discretion? The latter would enable the federal government to play a more limited and defined role, as Michele Jolin advocates [2]. It could also ensure that evaluative methods are better tailored to operate in specific contexts, taking into account the restrictions and advantages of local environments. On the other hand, this option could limit the pool of intermediaries and philanthropies with whom social entrepreneurs could form partnerships in the social impact bond system.

            Another important consideration is the potential for the evaluation process to constrain innovators in reaching their full potential. Jolin suggests that the federal government should “invest in tools to determine what works,” but possible outcomes may be extremely varied and difficult to measure. At least part of this process should perhaps fall into the control of local actors, government or otherwise, to support (at a minimum) a slightly higher degree of contextual specificity when appropriate. Additionally, it might be difficult to standardize timeline parameters for social innovations to demonstrate success. Apart from the fact that creating a universal definition of “success” is a near-impossible task, government evaluation processes run the risk of focusing too much on short-term, measurable results. It seems that an unintended consequence of social impact evaluations might be the privileging of social innovation projects that yield greater “impact” in the short-term. Moreover, this short-term yield might peter out eventually, or might not be easily brought to scale even after initial success prompts investment in infrastructure for the organization. If evaluations employ constraining timelines, they can exclude social innovations that slowly generate impact over time, or accidentally promote investment in innovations that produce diminishing returns.

            Bearing all these considerations in mind, is it possible to determine an optimal level of government involvement in the evaluation of social ventures, even in specified locales?

 [1] Ravitch, Diane and John Chubb. “The Future of No Child Left Behind,” Education Next (2009). http://educationnext.org/the-future-of-no-child-left-behind/

[2] Jolin, Michele. “Innovating the White House,” SSIR (2008). 

Enablers for social innovation

In order to be successful, socially innovative policies, products, and ventures must have impact, be financially stable and sustainable, and should use concrete metrics as benchmarks for success. But how do social ventures get to that point? In order to achieve stability, the venture needs financial support, and in order to gain financial support the organization needs evidence, but the venture cannot generate evidence without the funds to implement their ideas—we’re in a vicious circle. Theoretically, in a system of supply and demand, investors interested in supplying the funds should be able to match and transact with the social ventures seeking those funds. But what if this doesn’t happen? This is where the government can step in and correct these market failures.

Governments have the ability to help innovative ideas achieve their true potential and allow others to recognize that potential. Governments, while they can be flawed and problematic (take a look at our current state of affairs in the US), can steer research and development; they can also provide huge sources of funding compared to even the largest private donors.[1] There are already several federal funds and organizations in place to do just this, including the White House Office of Social Innovation and Civic Participation, the Small Business Administration Impact Fund, and the Pay for Success Incentive Fund.[2]

The idea for government involvement in directing investment and research is one that is discussed by the author Anthony B. Atkinson. His book Inequality: What can be done? discusses policies to reduce inequality and help improve society.[3] One of his points is how important the government’s role is in research and development in technology, the sciences, and in socially responsible ventures. It is important to recognize not just the profits to made, but also the impact to society—both negative and positive—and the government is in a key position where they can steer the nature of investments. In fact, government-supported research has led to some of the biggest breakthroughs in technology and innovation, such as GPS and cellular networks.[4] Government involvement is important not just to fund projects, but also to direct the course of innovation and change.

Compromise seems to be rare in Washington these days, but I wonder if government programs for social investments have the potential to bridge that gap. It is a way to combine big business, government, and social initiatives—three things that don’t always work well together in politics. Do these social innovation funds and organizations have the potential to be non-partisan and truly focused on creating a benefit to society, or will they become politicized and polarized like everything else?

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[1] Carttar, Paul, Why We Aren't Getting the Full Benefit of Social Innovation -- and What the Government Should do About it (2012), Forbes, http://www.forbes.com/sites/skollworldforum/2012/11/12/why-we-arent-getting-the-full-benefit-of-social-innovation-and-what-the-government-should-do-about-it/

[2] D’Andrea Tyson, Laura & Greenblatt, Jonathan, Opportunity for All and Social Innovation: Obama’s Policy Agenda (2014), The New York Times, http://economix.blogs.nytimes.com/2014/04/14/equal-opportunity-and-social-innovation-obamas-policy-agenda/

[3] Atkinson, Anothy B, Inequality: What can be done? (Cambridge, Massachusetts: Harvard University Press, 2015).

[4] Atkinson, Inequality, 118-119.

I to Q: Innovation in Finance to Quarterback Models

I’m wary of “innovation” in the financial sector. My unease is motivated by the 2007 mortgage crisis. There were many activities by many parties that led to the crisis, but one aspect of the collapse of the financial system that I think particularly drove the financial market into the ground was great distance between the investor and the impact or hedge fund and homeowner.

The Economist article, “A place in society” highlights that social finance is not new but does point to the new interest of mainstream financial institutions and investors.[1] The article goes on to describe a microfinance market that was once a charitable activity in the past as now a highly profitable business in some cases. “More and more microfinance institutions are tapping conventional capital markets through securitization, arranged by banks such as Citigroup, and even share offerings.” I hope that a thirst by investors for highly profitable businesses combined with creative financing tools does not create such a multifarious financing system that the simplicity of trying to “do well while doing good” is not lost.[1]

Innovation is not a bad thing though. The concept of community-level fundraising or “locavesting” is an example of an innovative direct financing model with a narrower distance between investor and impact. In the booming crowdfunding market, according to “The $5.1 Billion Future of Crowdfunding Is More Than Kickstarter” article, one can anticipate a future with more specific fundraising sites.[2] This is a good thing. More specific fundraising sites may allow investors to compare investments qualitatively (as industry sectors in traditional financial markets) in addition quantitatively, such as a rate of return. The ability to invest in one’s area of expertise and interest—which may be one’s neighborhood or a topic in which one is particularly knowledgeable—is a benefit for the investor, the invested, the market, and the target population which is being served.

            Social Impact Bonds (SIB) are interesting tools in providing capital to social enterprises. I appreciate that SIBs are multistakeholder partnerships.[3] As an advocate for a holistic approach to problem solving and integrative leadership, I think one key intangible benefit of the financial relationship is many stakeholders being focused on the same goal. I am interested to learn how these partnerships have formed, whom they consist of and—beyond the structure of the SIB—what framework are these stakeholders using to work together.

The intermediaries appear to play a critical role. “The intermediary links all the other stakeholders together in the service of the constituents.”[3] I am reminded of the role of convener. I have heard many organizations in the social space speak the value of the convener in accomplishing complex, cross-sector goals. Unfortunately, these organizations also note that the role of convener is often not funded; funders prefer to fund organization delivering direct services to the target population. Since ‘what gets funded, get’s done’ the role of convener is often unsustained.

As we discuss intermediaries, I would like to compare and contrast SIB to the “quarterback model.” As summarized in the article, “Community Development Needs a Quarterback” the community quarterback concept was first introduced in the book, “Investing in What Works for America’s Communities.”[4] The model prescribes that a single organization serves as a “systems integrator” and bridges stakeholders across sectors working towards a shared goal:

Under the quarterback organization’s leadership, these stakeholders work as a team toward agreed-upon goals, such as improving public safety or academic performance among children. The quarterback marshals the funding sources to support the work, tracks progress in achieving goals over time, adjusts strategy based on performance, and holds everyone accountable.

Sounds like an intermediary to me!

            When has innovation gone too far? What responsibility does the innovator have to insuring his or her innovation is used properly? How dependent is the innovation of SIB on the performance of the intermediary? Quarterbacks in the NFL, on average, are the highest paid positions on the team.[5] Interestingly, defensive ends are the next highest paid position. Continuing the football analogy—who are the defensive ends in SIBs?

[1] A Place in Society (The Economist, September 26, 2009); www.economist.com/node/14493098

[2] The $5.1 Billion Future of Crowdfunding Is More Than Kickstarter (Fast Company, April 19, 2013); www.fastcoexist.com/1681808/the-51-billion-future-of-crowdfunding-is- more-than-kickstarter

[3] From Potential to Action: Bringing Social Impact Bonds to the US (Callanan, et. al., May 2012) at: http://mckinseyonsociety.com/downloads/reports/Social- Innovation/McKinsey_Social_Impact_Bonds_Report.pdf

[4] Community Development Needs a Quarterback (Stanford Social Innovation Review, July 22, 2014); http://ssir.org/articles/entry/community_development_needs_a_quarterback

[5] CHART: The NFL's Highest-Paid Positions (Business Insider, October, 8, 2013. http://www.businessinsider.com/chart-nfls-highest-paid-positions-2013-10

Why Measure Social Value?

Geoff Mulgan uses an economical view of approaching the problem to measuring social value, stating that social value is result of a relationship between supply and demand. This article also gave great insight on the current approaches and shortcoming of measuring social value. However, I feel that this article lacks a plan on how exactly these measurements are to be created.    I feel that a plan of how to execute these measurements is essential in order to fill the gap in funding provided to social enterprises. In the article, The Funding Gap, one of  the primary reasons social enterprise is not fundis due that fact that it does not fit into the nonprofit or for-profit model. If a social enterprise could provide funders with a clear cut universally measurement of the social value this could be used as a guideline to prove impact that they are having on their recipients. This measurement could outweigh the investors need to place the organization in the category of non-profit or for-profit.  If social enterprises can measure their social value they will have a competitive advantage and ability stand out from the crowd.  This measure can always be a form of performance monitoring that would be a visible way to judge success of an organization and show that it delivering to its recipients.  This is a signal to funders that the organization cares about improving delivery and being held responsible for its performance.   There must be a reliable way to reporting the impact of how funds are being applied in order to be credible with investors.  What would you suggest is the first step of standardizing social value?

The domino effect of doing well by doing good

The world is changing in several ways. Technology is evolving and shaping people’s lives, new services are available, changing the way we see and do things. However, this changes’ pace varies significantly from reality to reality, and while some people are benefiting from holograms and augmented reality, some others are struggling with health issues caused by poor sanitization. But as I mentioned earlier, the world is changing, and one of the changes I want to outline is that nowadays there is more awareness around the BoP’s problems and there are more efforts being done around that. I do believe, as well, that we are not just facing a trend but an actual change in heart.

Gen Y-ers and their seek of purpose

There is something remarkable and very different about the millennials that is valuable for our means: this new generation is more socially conscious. And as they try to project that on their daily activities, the workplace has been highly impacted by this change of priorities. Millennials don’t just go after a salary, but after a job that satisfies them and that is aligned with their philosophy of life.(1)

Why is this important? Social enterprises can highly benefit of this. They can fulfill many millennials’ expectations and priorities, and get an injection of world class talent to their businesses. And having a quality workforce enhances excellent results, which later attracts investment.

The other face of corporations

This perspective and motivation shift hasn’t only affected people. Markets in general had to evolve and react to this new factors. Furthermore, as the diffusion ways were highly effective, sticking to a new way of doing business is highly appealing for companies too and is being seen as a competitive advantage. I particularly find the following trends very interesting:

• Important companies are making socially responsible “investments”. And the one that I found very impressive is Goldman Sachs’s interest in Social Impact Bonds. They were the biggest investors for the first US SIB program, giving $9.6 million for the cause (2), and even that it is generating loses instead of revenues, they are not planning to give up. Furthermore, they are willing to invest another $4.6 million in a similar program (3). Although not all companies have Goldman Sachs’s liquidity, having them setting an example is a big step for this kind of programs to gain traction.  
• Corporate citizenship has become a big deal. Being a good corporate citizen gives companies visibility and make them more appealing for investors and potential employees. There are annual rankings measuring this and being published on important media, such as Forbes magazine. (4)
• Companies are willing to work with social enterprises. As this alliance can empower both parties’ employees and make them gain more skills (among other benefits), some companies are finding very appealing to participate in this symbiosis. One interesting example I found was Deloitte UK, incorporating social enterprises to their target customer’s list not just to make profit but to benefit their employees (5).

Why am I bringing this up? I believe this new dynamic will have an impact in the market, promoting an environment where social innovation is an important player. It is right now impacting people and companies. Even more importantly, I believe this will also continue in the mind of investors, and when the market is finally stable for social enterprises, SIBs, and similar social motivated investments, it will be not just a trend but a way of profitable investment that will be here to stay.

(1) The Guardian: Generation Y: why young job seekers want more than money. February 19, 2014. http://www.theguardian.com/social-enterprise-network/2014/feb/19/generation-y-millennials-job-seekers-money-financial-security-fulfilment

(2) Goldman Sachs: Social Impact Bonds. October 2014. http://www.goldmansachs.com/our-thinking/pages/social-impact-bonds.html

(3) Reuters: Wall Street not giving up on U.S. social impact bonds. July 28, 2015. http://www.reuters.com/article/2015/07/28/us-usa-socialbonds-idUSKCN0Q22GF20150728

(4) Forbes: America’s 100 Best Corporate Citizens. April 13, 2013. http://www.forbes.com/sites/jacquelynsmith/2013/04/11/americas-100-best-corporate-citizens/

(5) Social Enterprise Buzz: Why Deloitte UK is choosing to work with social enterprises. June 25, 2014. http://www.socialenterprisebuzz.com/2014/06/25/why-deloitte-uk-is-choosing-to-work-with-social-enterprises/

Globalizing the Social Market

Impact investing has been getting more and more attention in a context where the urge of finding alternative solutions to dealing with social problems has become pressing. Governments have a crucial role to play in facilitating this dynamic as they can create a friendly environment where resources can be more easily linked to needs and where impact can be better monitored. Impact investing could grow even more exponentially if the conversation is taken beyond the national level to the global scene where a common language and assessment tools would help expand the reach of such initiatives. But how feasible is that?

Indeed, in the past decades, the public sector has been rethinking the models through which it delivers public goods. For instance, public-private partnerships (PPP) have been gaining momentum as it has been proven that collaborative efforts between the public sector and the private sector are often far more efficient than what each one can do separately. In the same vein, another emerging model is also taking-off where the private sector simply takes over the responsibility of managing basic necessities. This can take many forms such us social ventures focusing on delivering social impact or large companies dedicating a portion of their revenues to impact investing. Recently, new innovative ideas like social bonds – a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings¹- have also started to appear, which paves the way to new win-win partnership models for the public good. The public sector has everything to gain in being the catalyst triggering the growth of these new models as it would help decrease its direct intervention in managing complicated social issues while increasing efficiency. To do so successfully, it should initiate and build a comprehensive ecosystem around social innovation and facilitate the creation of formal networks of organizations who can help supervise and boost this ecosystem.

But what if we could go beyond the national level and were able to implement a global scheme that would propel impact investing? Indeed, speaking a common language and using the same assessment tools would probably facilitate collaboration around this topic and enable a globalization of access to funding and resources. Think about the carbon credits model. If we could build something similar, say “social credits”, which can be circulated and marketed around the world, more money and efforts can be transferred towards social initiatives and research. The social footprint is becoming more and more important to companies which are increasing their social responsibility investments but it could become even more important if there is a formal market and quantifiable benefits to it. However, the biggest hurdle in this case is how to uniformly measure the impact generated and give it a precise numeric value that could serve as a market price. Indeed, in the case of carbon credits, a ton of CO2 can be easily quantified but the impact of a social endeavor may not be as easy to measure because of the nature of its value. Could it be broken down to numbers? It has been done with some abstract notions like governance or happiness. Or should we create new global organizations like social impact auditing firms, or global rating agencies, or even a market index? This would add a qualitative assessment to quantitative measures which would result in a more complete review and assessment. The implementation of such a global measure seems very complicated but, in my opinion, the discussion around social innovation is now mature enough to start having this discussion. What do you think?

¹ https://en.wikipedia.org/wiki/Social_impact_bond#cite_note-1

Public Sector Social Value Metrics

One line of Geoff Mulgan’s article, “Measuring Social Value” in the SSIR from 2010 stuck out to me in particular.  “In the nonprofit sector, good managers are very rigorous about tracking costs and income…Meanwhile, in the public sector, political judgment counts more than cost-benefit assessments.”  While I understand the crux of this sentiment, I think it is slightly missing the point.  In the public sector, political cost-benefit is more important than economic cost-benefit or social cost-benefit.  This revision may appear minute, yet it is critical.  In the public sector, political capital reigns supreme over social impact or economic considerations.

There is a brilliant book by the author Bruce Buena de Mesquita titled, “The Dictactor’s Handbook” in which Mesquita argues that the fundamental objective of all politicians, whether authoritarians or democrats, is to remain in power.  This is true of much of the political class as well.  In advanced democracies such as the United States, politicians must appeal to an approximate majority of the people in order to get reelected.  Political capital is the influence a politician wields over the public or other political figures.  There are times when political capital is congruent with good social policy and good economic policy, and there are times when it is not. 

Mulgan argues that often public policy makers and professionals ignore social value metrics and considerations when crafting their policy.  This is true, not because the public sector does not value social value, but the social benefit a venture creates must always overcome the political cost of that venture.  The best example of such an equation is the public investment in solar and renewable energy.  Clearly the long-term social benefits of clean and renewable energy far outweigh the costs.  However, because of the United State’s wealth of natural resources, an entrenched a well-funded oil and natural gas lobby, and the political aversion to large public sector investment in green energy, we have seen a flatlining of public funding and concern for such projects.  The political capital is simply not there.

 The greatest obstacle to introducing effective metrics for public sector innovation is not the availability of know-how, or data, or resources, rather it is aligning political will with social benefit.   

The Power of a Sticker

When I first learned about crowdfunding, I thought it was a cool new way for small-scale entrepreneurs to get the public interested in their product. After reading more about crowdfunding this week, I am amazed at the number of available platforms, and the amount of power these platforms give companies and organizations. In 2013, the global Venture Capital investment activity reached $48.5 billion (1). In that same time period, Masssolution approximates crowdfunding totals to be over $5 billion (2). That means the average population was able to generate just over 10% of what VC investors did….and that is crazy to me! The idea that an average person like you and me can give a few dollars and make the same impact as a VC firm will give new ventures and companies a great deal of power in the market.

People inherently want to be rewarded when they invest their money, whether it’s $5 million from a VC firm, or $5 from an average person. Imagine you are an organization in need of funding to provide a clean water well to an African village. You may be able to find some money from a philanthropist, but there is very little incentive for a VC firm to invest. The organization would be much more successful if it crowdsourced the funding using a site like Kickstarter. Let’s say you offer a sticker to someone who donates $5, and the sticker costs $1 to make and ship…that means for every $1 you spend, you make $4. If 1 million people donate $5, you’ve made $4 million, and all you had to do was pay for stickers. Those 1 million people may be willing to accept a sticker as payment for their investment, but you can’t pay a VC firm with 1 million stickers for their $5 million investment. And therein lies the power of crowdfunding sites like Kickstarter– you can pay your investors with non-monetary benefits. Funding is not the only benefit of crowdfunding, though.

Venture Capitalists are a small group of people, so when you first start up a business, you have to spend a lot of time and money marketing your product and building interest, in order to generate income. What crowdfunding has over traditional VC investment is immediate “buy-in” from the potential customers. This is very much the same idea we discussed last week with turning social aid into a business. When the people you help are monetarily invested in the aid they receive, everyone benefits because the community is involved in the process. The money in crowdfunding comes from people who are invested in your ideas and the services you plan to provide. The crowdfunding platform gives you the opportunity to market your business and adjust your product based on feedback from these numerous “investors,” even before you have an actual business. For this reason, I see crowdfunding becoming an even bigger part of the economic system, especially for social ventures who are dependent on the community involvement and buy-in. 

What do you think? Will crowdfunding be the next generation of social venture funding?

1)  http://www.ey.com/Publication/vwLUAssets/EY-venture-capital-insights-2013-year-end/$FILE/EY-venture-capital-insights-2013-year-end.pdf

2) http://www.fastcoexist.com/1681808/the-51-billion-future-of-crowdfunding-is-more-than-kickstarter

Accounting for Social Impact

            Since B Corps represent a new approach to business and attempts at addressing social problems, it’s perfectly reasonable that they would require their own designation, tax breaks, funding mechanisms and incentives. Like nonprofits, B Corps have a social goal, however they ultimately seek to create a self-sustaining mechanism that delivers not just on that goal but profits to sustain the business that performs that goal. While B Corps make a profit, they also have significantly more criteria to both with whom and how they do business and pursuing a supply chain and process that is sustainable and socially responsible will likely require a set of business practices that would leave less of a surplus on the balance sheet.

            In order to compensate for these costs, B Lab created service partnerships that helped participants use a network of discounted business services to offset certification and business costs otherwise generated from the running of a socially responsible business. In a similar vein, the city of Philadelphia worked with B Lab to create a $4000 tax break for businesses that were certified as sustainable. Yale University also made a move to extend the same loan forgiveness provisions that exist for students working for nonprofits to students at B Corps. These benefits help to make up the cost in resources to pursue a sustainable strategy, but when it comes to receiving just money to fund the solution to a problem, novel solutions like crowdfunding and social impact bonds are also particularly useful.

            The most famous example of crowdfunding is Kickstarter, which allows backers to spend various amounts to provide funding to get projects off the ground. Kickstarter is only a drop in the bucket, as numerous other sites tailoring themselves to niche markets have sprung up. Crowdfunding outfits are interesting because they allows people to directly fund innovation on a smaller scale, which sometimes means that these upstarts are able to fund their projects without worrying about shareholder input.

             Another funding mechanism is the social impact bond, where an organization can seek funding from a private institution and then set a benchmark for success. Based on performance the financier is then paid by the government like with any bond, however if goals are not met the financier is not paid. While this is low-risk for project managers, it represents a gamble to the financier. This is how the first SIB in the United Statesplayed out when Mayor Bloomberg’s 2012 effort to reduce recidivism rates atRiker’s Prison failed to meet benchmarks and Bloomberg was left covering costs. Strategies found to have worked in other locations were found to have failed when they hit 44% of milestones but not the goal. A major problem with the SIB is that in its focus on results, progress towards the goal is ignored and instead of pro-rating, the SIB can hold a financier to a standard that disincentives future investment. This hurdle might be why there are so few established in the United States.

Crowdfunding: The New Charity Organization

We all have seen the success of strange and creative ventures launch through the hands of generous citizens. In 2013, crowd funded was projected to reach $2.1 billion. Today's crowdfunding markets have launched tech products, movies, and even created a platform for citizens to serve as investors for small businesses in developing nations. All at a catch-all gain for the entrepreneur. They get all the funding (at times 10 fold) required to launch or scale and you never have to pay it back or share stake in your company. One company, Pebble, received over $30 million for its watch ventures. That is some serious money to be donated by the average citizen. 

So this leaves me to wonder, what is the future of crowdfunding? How can we tailor it for sustainable impact? 

If, say, we launched a crowdfunding campaign for $10 million dollars to address child hunger in the United States. Structured another $10 million dollars to address malnourishment of children in African nations. Finally, another $10 million to train locals, improve access  and develop clean water resources for Somalia and Jordan. 

In the same price it took to launch a watch company, are we wiling to pay that much for products we cannot touch?

Most people want to make a difference and people are willing to invest in social causes. In that capacity, we can convert charities, and aid organizations into project based crowdfunding initiatives. Each organization would have a specific project with a timeline, impact goals, and proven metrics with a price tag where citizens can contribute. Imagine being able to personally contribute to the UN for the mass production and deployment of shelters for Syrian refugees. We hear much scandal about the misuse of foundation and charity organization’s donations. I believe this will create more accountability and quantifiable impact in nations. However, this will mean a massive paradigm and organizational shift. 

Is the world ready to shake up status quo?

The Spectrum of Social Enterprises

Social enterprise has always puzzled me for a number reasons. The primary reason is that there is no set definition for social enterprise, or at least not a standard definition that I have heard. To be considered as a social enterprise, the organization must be founded for the purpose of helping those who are not as well off -- this was my initial thought. Recently the term social enterprise has become a little murkier for me.

I can't confidently put my prior constraints on this when companies like Ikea are making strides to improve living conditions of refugees. Ikea has allocated time and resources to creating shelters for refugees that can be broken-down and moved. Not only are they accommodating displaced refugees, but they are striving to meet a sustainability standard by powering the homes using solar power. Ikea is a for-profit organization, one of the largest in the world. But what they are doing has strong positive social implications.

The typical spectrum tends to range from the conventional nonprofits to the conventional business, with social enterprise in the middle. Ikea falls on the side of conventional business, but what cannot be seen is the social impact they are having. There is no clear cut definition for these large companies. Because of this, creating a spectrum is important, but the knowledge gained about an organization from it is limited. Many companies do charity work, or form "social enterprises" within their existing structure for the positive branding or tax breaks. Although it helps those less fortunate, the decisions are made from a business viewpoint. I want to raise this question: do the intentions of a company matter, if the work they are doing is positively helping those who truly need it?

Be all that you can be

“Be all that you can be.” [1] Does that sound familiar? It was one of the many Army slogans used during the 80s thru the early 2000s.  When it comes to the article, The Funding Gap, for organizations (whether social enterprises or ventures) to be all they can be doesn’t always translate into dollars and cents.  Although the temptation to shift one’s mission to receive some investor dollars, there are larger payoffs for these organizations who focus upon social support.  Their impact can change the decisions made by other organizations but, more importantly, it has significant impact upon the mission they promised. 

For example, the Greyston Social Enterprise’s mission is: “Greyston is a force for personal transformation and community economic renewal. We operate a profitable business, baking high quality products with a commitment to customer satisfaction. Grounded in a philosophy that we call PathMaking, we create jobs and provide integrated programs for individuals and their families to move forward on their path to self-sufficiency.”[2] Not only does Greyston wish to be all they can be, but they also want the best for their employees and their families!  Through their combination of contract manufacturing baking and open hiring, anyone from any background or past has the opportunity to be employed. 

A milestone within the Greyston bakery was its B-Corp certification in 2008.   I do see why this would be a great marketing opportunity, but at the same time with this certification the bakery can join the conversation and work amongst other businesses with similar values.  At this stage in the game, Greyston is responsible for upholding various parts of their enterprise to make it all it can be.  In their recent 2015 impact report, the bakery does have some areas to work on BUT when it comes to community impact, they definitely exceed the minimum score (96 out of 32) [3].  But is that all that’s in it for the enterprise?  Not necessarily.  Through their achieved successes and certifications, Greyston can directly align itself with other social entrepreneurs who are making just as much of an impact or maybe more in their communities but also apply the “concepts of social entrepreneurship [;] conscious capital and sustainability.” [4] Greyston Enterprise has been fully capable to leverage its assets in order to achieve these concepts but I would argue that their relationships pushed the bakery to success.  One noteworthy example is the relationship between Ben Cohen (Ben and Jerry’s) and Bernie Glassman (Greyston Bakery) that started in 1987.  Not only does this relationship still exist, but it has leveraged both businesses to be more impactful through social good.  The bakery started as a small brick and mortar bakery, but now it stands at $17M community enterprise. The bakery and long-known ice cream manufacturer has an interdependence that gives those in need a second chance and set a stage for linked prosperity; “which creates benefits out of business decisions made.  So all along the value chain there is prosperity.” [5] In simple terms, everyone wins! Within this particular model, not only can the community change, but the business and its products.

It’s remarkable that over the course of a couple of decades, a for-profit bakery can be housed within the non-profit enterprise of Greyston can stand still on solid ground but also climb up the rope of social innovation with its two hands.  I’m curious if this model can be adopted within the Pittsburgh area to tackle unemployment problems as well as creating more opportunities for those in need. Please watch the video below to understand the benefits of giving communities second chances. 

[1]https://en.wikipedia.org/wiki/Slogans_of_the_United_States_Army#2006_to_2015

[2]http://greyston.com/about-greyston/mission-history/

[3]https://www.bcorporation.net/community/greyston-bakery-inc/impact-report/2015-01-09-000000

[4] http://greyston.com/join-the-movement/

[5]https://www.youtube.com/watch?v=5oLfB3tIyHM

A New Category?

In "the Funding Gap" by Mickael Chertok, Jeff Hamaoui, and Eliot Jamison, it is mentioned that Social Enterprises don't really fit in the traditional for-profit and non-profit categories. We find social enterprise at the intersection of the two. Maybe this is a policy problem rather than a financial one. What if a new category for social enterprises was formed that defined how funding could and should be procured? Of course, there are fundamental issues with this. Are social enterprises prevalent and influential enough that they do in fact warrant their own category? Who would be the one to make that distinction and where would the line be drawn? Social enterprises have the potential to impact people's lives on a level that straight philanthropy can't match. The value of social enterprises must be more clearly defined before they are given their own category in the business world.

Social Value Is Subjective

Geoff Mulgan asserts that “Social value is not an objective fact. Instead, it emerges from the interaction of supply and demand, and therefore may change across time, people, places, and situations.” [1] This statement is true in current times as well as in many eras of history; we can see the flexible nature of social value through the evolution of child labor laws in American history. In nineteenth century during the American Industrial period, children toiled long hours in factories, mines, shops, etc. They were exploited as cheap and obedient labor; no laws protected them. This was an accepted way of life, as many families depended on the additional income from their children to survive. It was not until the twentieth century that public opinion raged against the working conditions in which children suffered. Although the same terms did not exist back then to define what happened, essentially the public saw that there was social value in protecting children from harsh and brutal working conditions. Groups such as the National Child Labor Committee fought for the rights of children. Finally, the government responded to this social issue by passing strict regulations on child labor. 

Why did it take until the twentieth century for the government to take action? It was only until then that the forces of effective demand and effective supply came into play. Geoff defines “effective demand” as “someone willing to pay for…an outcome”; “effective supply” has three requirements: “the service/outcome works, is affordable, and is implementable”. [1] We can see how the forces of effective demand and effective supply work in the instance of child labor reform in American history. On the effective demand side, the public wanted more laws protecting the rights of children—they were willing to stand behind this outcome and lobby relentlessly for it. This was their payment on the effective demand side. On the effective supply side, the government finally responded by passing restrictions and regulations on the employment of children. The outcome, laws protecting children from exploitation, worked, was affordable, and was implemented.

This is only example in history out of many. We could apply the forces of effective demand and effective supply to a number of social movements—the anti-slavery movement, the women’s suffrage movement, etc. Social value is indeed malleable and subject to the forces of context, effective demand, and effective supply.

[1] Mulgan, Geoff. (2010). Measuring Social Value. Stanford Social Innovation Review. http://ssir.org/articles/entry/measuring_social_value

[2] Hansen, J. (2011). The American Era of Child Labor. The Social Welfare History Project.

http://www.socialwelfarehistory.com/programs/child-welfarechild-labor/child-labor/