I believe it was Warren Buffet who said that innovation is applying the school of thought from one field or industry, on another industry.... And one great example of this in the past decade has been the application of more rigorous measurement of bottom-line results in philanthropy, to produce the school of practice now known as social enterprise.
Social-venture organizations, like REDF in San Francisco, are making strategic venture investments in non-profit organizations that run for-profit businesses that are producing jobs and revenues for their target populations. Success of these investments are measured in terms of ROI and SROI (social return on investment).
The new application of business practices to philanthropic missions-- social enterprise-- is innovative, creative, and growing, but there is an element that is also troubling. 'Social enterprise' is a buzzword now, and it's a way for non-profit organizations to show off their 'double bottom-line' of people AND profits. But, we have yet to see a social enterprise (in the strictest definition of the word) grow to a large enough scale that covers the expenses of its social mission AND generates a profit for its employees. The reason is that most of these social enterprises typically operate in low-margin industries at less-than-profitable scales. Typically these organizations remain part non-profit, part for-profit, and collect non-profit funding for their social services while generating some income in their for-profit activities.
There is nothing wrong with this model-- in fact, it's an incredibly efficient way to offer job training, social services, and create economic development, arguably much moreso than some of our more publicly-funded efforts! But the next step is to find and develop scalable social enterprise ideas that allow the businesses to stand on their own two feet without non-profit funding-- only then will they truly be sustainable. (See Jim Schorr of Juma Ventures talk about this: http://www.ssireview.org/pdf/2006SU_POV_Schorr.pdf).
I prefer to cast a wider net with the term 'social enterprise,' and define it as any company that is acting in a genuine way that considers people, profits, and planet. This definition would even include the American Apparels, Googles, and Wegmans of the world. Lacking the non-profit mission would rule them out of the traditional social enterprise definition, but in my mind these companies are doing just as much in terms of people, profits, and planet, though they do not have the progressive hiring models that your social enterprise run by a non-profit would.
No matter what way you define the term social enterprise, the introduction of social and environmental bottom-lines in for-profit companies, and the introduction of profitability and scalability into philanthropy, is the future of business.
Social-venture organizations, like REDF in San Francisco, are making strategic venture investments in non-profit organizations that run for-profit businesses that are producing jobs and revenues for their target populations. Success of these investments are measured in terms of ROI and SROI (social return on investment).
The new application of business practices to philanthropic missions-- social enterprise-- is innovative, creative, and growing, but there is an element that is also troubling. 'Social enterprise' is a buzzword now, and it's a way for non-profit organizations to show off their 'double bottom-line' of people AND profits. But, we have yet to see a social enterprise (in the strictest definition of the word) grow to a large enough scale that covers the expenses of its social mission AND generates a profit for its employees. The reason is that most of these social enterprises typically operate in low-margin industries at less-than-profitable scales. Typically these organizations remain part non-profit, part for-profit, and collect non-profit funding for their social services while generating some income in their for-profit activities.
There is nothing wrong with this model-- in fact, it's an incredibly efficient way to offer job training, social services, and create economic development, arguably much moreso than some of our more publicly-funded efforts! But the next step is to find and develop scalable social enterprise ideas that allow the businesses to stand on their own two feet without non-profit funding-- only then will they truly be sustainable. (See Jim Schorr of Juma Ventures talk about this: http://www.ssireview.org/pdf/2006SU_POV_Schorr.pdf).
I prefer to cast a wider net with the term 'social enterprise,' and define it as any company that is acting in a genuine way that considers people, profits, and planet. This definition would even include the American Apparels, Googles, and Wegmans of the world. Lacking the non-profit mission would rule them out of the traditional social enterprise definition, but in my mind these companies are doing just as much in terms of people, profits, and planet, though they do not have the progressive hiring models that your social enterprise run by a non-profit would.
No matter what way you define the term social enterprise, the introduction of social and environmental bottom-lines in for-profit companies, and the introduction of profitability and scalability into philanthropy, is the future of business.
2 comments:
The NGO I'm working with here in Uganda is just beginning to think about how to develop a "social enterprise". Up to now the gravity flow water systems (GFS) they've installed have not required the users to pay for maintenance. They are now moving to this model to keep the projects sustainable (I can't even tell you how many non-functioning GFS projects there are here). There's some resistance to this because the fees begin to look like taxes, which people are inherently suspicious of because they tend to be wasted due to corruption. Therefore, the NGO is looking for ways to invest the fees in a community enterprise to provide income from the fees. Basically, the collected fees would be invested in income generation with the profits going towards actual system maintenance. It would work similar to a trust fund.
There are potentially some problems with this model, but it is innovative thinking.
Alex- that's fascinating! thanks for posting. Sounds like a mini endowment, or as you said, trust fund. Though easy to see how people would be distrustful... and not just for corruption, but after the recent market collapse, who of us wouldn't be?! endowments collapsed! Sounds like a challenge in communicating the message appropriately so people are not distrustful. Good luck! I would love to hear what happens.
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