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Growing Opportunity

Entrepreneurial Solutions to
Insoluble Problems
Contents Acknowledgements To the 130 social entrepreneurs
who offered their time and
Forewords 1 This project has been a collective perspectives, a heartfelt thank
effort and an opportunity you for your candor, courage
Executive Summary 4 to grow in various dimensions. and inspiration. And, our best
First and foremost, we are wishes for your success. A list
1 Introduction 5 profoundly grateful to Jeff Skoll, of social entrepreneurs who
Sally Osberg and their colleagues participated in our research
2 Survey Findings 11 at The Skoll Foundation, without is provided in Annex 2. We
whose financial support and have omitted, however, those
3 The Business Case 23 wider inputs this program of organizations who asked for
work would not be possible. confidentiality in their
4 Deeper Dive: Health 30 We also are enormously grateful responses.
for the support of our corporate
5 Deeper Dive: Energy 36 In addition, we would like
sponsors, Allianz (where we
to thank others who made
thank Paul Achleitner, Kay
6 Conclusions & Next Steps 44 helpful in some cases
Mller, and Nicolai Tewes) and usefully provocative inputs:
Annexes DuPont (where we thank Linda Gib Bulloch of Accenture; Bill
Fisher and Dawn Rittenhouse). Drayton of Ashoka; Jos Manuel
1 Survey Instrument 48 Entrecanales of Acciona; Tim
Our warm thanks go to the Freundlich of the Calvert Social
2 Participants 49 Project Advisory Board, whose Investment Foundation and
members were: Jeroo Billimoria Good Capital; Jonathon Hanks
of Child Savings International; of University of Cambridge
Debra Dunn, Associate Programme for Industry; Gary
Consulting Professor, Stanford Hirshberg of Stonyfield Farm,
University Institute of Design Inc.; Kurt Hoffman of The Shell
and Board member of The Foundation; Jean Horstman
Skoll Foundation; Jed Emerson of InnerCity Entrepreneurs;
of Generation Investment Oliver Karius of VantagePoint
Management; David Grayson Global; Colin Le Duc of
of Business in the Community; Generation Investment
Pamela Hartigan of The Schwab Management; Martin Newman
Growing Opportunity: Foundation; Jane Nelson of the of The Company Agency;
Entrepreneurial Solutions to Corporate Social Responsibility Jacqueline Novogratz of
Insoluble Problems Initiative, Kennedy School of Acumen; Eric Rassman of UCLA;
First Edition 2007 Government, Harvard University; Linda Rottenberg of Endeavor
Professor David Wheeler of Global; Samer Salty of zouk
ISBN Dalhousie University; and ventures; Bjrn Stigson, World
1-903168-17-1 Jan-Olaf Willums of InSpire Business Council for Sustainable
Invest and TH!NK. Development; Tom Vander
Publisher Ark of The X Prize Foundation;
SustainAbility Ltd The Project Team from and, from the SustainAbility
SustainAbility comprised Faculty, Sir Geoffrey Chandler,
Designer Maggie Brenneke, John Francesca van Dijk, Bob Massie
Rupert Bassett Elkington and Sophia Tickell, and Andrea Spencer-Cooke.
with invaluable help from
Printer Meghan Chapple-Brown, Yasmin We hope that those who took
Pensord Press Crowther, Kelly Cruickshank, part recognize most of their
Jeff Erikson, Sam Lakha, Mark contributions in what follows.
Paper Lee, Michael Sadowski, Jodie We gratefully acknowledge the
Robert Horne Revive 50:50 silk Thorpe and Peter Zollinger. use of the 10 Routes to Money
The survey instrument (see framework, taken from The
Copyright 2007 SustainAbility Annex 1) was designed with Power of Unreasonable People:
and The Skoll Foundation. the help of John Thomas of How Entrepreneurs Create
All Rights Reserved. No part LaunchBox, whose input to Markets to Change the World,
of this publication may be every phase of the surveying by John Elkington and Pamela
reproduced, stored in a retrieval and analysis was indispensable. Hartigan, to be published by
system or transmitted in any Harvard Business School Press
form or by any means, in February 2008. Finally, our
electronic, electrostatic, gratitude to Rupert Bassett for
magnetic tape, photocopying, his design. As ever, all errors
recording or otherwise, without of omission or commission are
permission in writing from the ours alone.
copyright holders.
Growing Opportunity 1

Skoll Foundation foreword Social entrepreneurs who are changing


the landscapes of these industries,
Fast forward: its 2020, and the world SustainAbility suggests, have a distinctive
has changed. With perfect hindsight we way of reperceiving many of the enormous
take stock of what we did, or didnt, to and urgent challenges before us climate
bring about whats different good, change, access to and delivery of healthcare
bad and negligible. Its a good bet that for developing world populations, and
we will be saying that 2007 marked a overwhelming poverty as opportunities
turning point, and that John Elkington, to leverage the power of markets and
SustainAbility, and a relatively new business to have transformative, system-
phenomenon called social entrepreneur- wide impacts. The report dubs this
ship can take the credit for changing emergent, integrated approach Mindset
the way we think about business, 3.0, differentiating the advance from
investment and social progress. predecessor 1.0 compliance-focused and
2.0 cause related stakeholder-involved
Sally Osberg For two decades, SustainAbility has tuned modes still dominant even at progressive
its radar to pick up signals of what the corporations.
future might hold, and then used this
intelligence to advise mainstream Mindset 3.0, of course, is fundamentally
corporations on how to re-tool for long- entrepreneurial; in reperceiving well-
term competitive advantage with that entrenched but unsatisfactory systems
advantage encompassing what founder as opportunities, Mindset 3.0 cracks the
John Elkington has termed the triple code of resistance inherent in any well-
bottom line of economic, social, and established equilibrium from fossil fuel
environmental performance. So when dependence to health care delivery to over-
John began tracking signals from social consumption. That social entrepreneurs
entrepreneurs and considering their should excel at 3.0 thinking comes as
relevance to corporations doing business no surprise. After all, social entrepreneurs
in a globalized world, we at the Skoll are entrepreneurs first and foremost; its
Foundation took note. just that their value propositions target
neglected, disadvantaged or suffering
This report is the first product of the Skoll segments of society. Underlying Mindset
Foundation-SustainAbility partnership, and 3.0, Id suggest, is the realization that this
we hope our fellow travelers in the worlds segment of society matters, that it is no
of business and social entrepreneurship longer possible to ignore two-thirds of the
find it informative, useful, and provocative. planets population or fail to account for
the consequences of industrialization in
On one level, the report probes familiar the developing world. Our very survival
themes: social entrepreneurs feel as a species and as a planet is at stake.
hamstrung by their lack of access to
capital, concerned for the visibility and Yes, mainstream business absolutely needs
differentiation of their solutions in a what social entrepreneurs know and do.
competitive landscape, and worried about And social entrepreneurs need much of
their ability to attract the talent and what corporations have and take for
commitment needed to expand their granted. Ultimately, this first SustainAbility
impact. No surprises here, but humbling, report suggests that a better future
even sobering reminders for those of us for business, society, and the planet
committed to investing in these folks, may very well depend on how well both
their models and their ventures. Serious learn and work together.
challenges persist, challenges that constrain
what social entrepreneurs will be able to Onward!
achieve even as their ranks increase and
Forewords

their champions multiply. Sally Osberg


President and CEO
The report becomes more intriguing in
the soundings it takes of the healthcare
and energy sectors. Here the increasingly
complex environments geographic,
economic, socio-political in which
business must operate today seem to
cry out for what social entrepreneurs
have to offer: innovative, highly adaptive
models that directly and indirectly serve
mainstream businesss larger interests.
Growing Opportunity 2
Forewords

SustainAbility foreword New initiatives network them in novel


ways, among them xigi 4 and i-genius.5
The entrepreneurs we surveyed are And a growing wave of money chases for-
experiencing growing pains, but their profit cleantech investments and markets
capacity to see new market opportunities for healthy living, such as organic food.
and experiment with novel business
models and leadership styles makes Growing numbers of mainstream
them an amazing source of insights corporations are switching on to the area
for mainstream business. and trying to work out what the business
case might be for investment, partnership,
A growing array of apparently insoluble or other forms of engagement. Take
socio-economic, environmental, and DHL, with its new initiative, the Young
governance challenges presses in on Entrepreneurs for Sustainability (YES)
decision-makers including climate Awards, initially launched in five Asian
change, the risk of global pandemics, the countries and designed to support young
Maggie Brenneke growing threat to natural resources like entrepreneurs working to help meet the
water and fisheries, and the ever-present UN Millennium Development Goals.6
issues of poverty and hunger. Growing Or take the case of Groupe Danone, the
Opportunity the first in an annual series French dairy company, which is leading
of surveys conducted by SustainAbility in the new trend with its breakthrough
partnership with The Skoll Foundation 1 partnership with the Grameen Group in
explores the potential for more entre- Bangladesh. The aim: to supply fortified
preneurial solutions to such challenges. yoghurt products to the nutritionally
The key messages: At a time when such deprived.
challenges seem to narrow our horizons,
they are creating a wealth of new Coincidentally, the launch of Growing
opportunities, but to enjoy them longer Opportunity at the Skoll World Forum
term we must ensure real opportunity will mark the 20th anniversary of
for a very much greater proportion of SustainAbilitys founding. The report is
the global population. a companion piece to an ongoing study
of the future of globalization, due to
This first survey has been financially be published in mid-2007. Through its
John Elkington supported by Allianz and DuPont, as noted evolving Skoll Program, SustainAbility
in our Acknowledgements. We are proud to plans to develop and communicate a
work alongside these partners and, over deeper understanding of the links between
time, we believe that a growing number of social entrepreneurship and the six sectors
mainstream business and financial on which we now focus: Capital Markets
institutions will follow their lead in & Finance, Chemicals; Energy; Food &
recognizing the extraordinary potential Beverage; Healthcare; and the Knowledge
value of what social and environmental Economy.7 Our overarching aim: to help
entrepreneurs are doing. That said, it is build bridges between the mainstream
clear that many people in mainstream corporations and financial institutions,
business still struggle to understand which make up most of our client and
what is going on in this space and its partner base on the one hand, and
relevance for them. on the other the extraordinary
entrepreneurs and enterprises described
More positively, a number of recent in the following pages.
developments have helped ensure that
growing numbers of business people do Maggie Brenneke
Sophia Tickell at least invest the effort to learn.2 Indeed, Director and Skoll Fellow
these are extraordinary times, with social
1
www.skollfoundation.org and environmental entrepreneurs alike on John Elkington
2
www.sustainability.com/ a roll. Muhammad Yunus probably the Founder and Chief Entrepreneur
downloads_public/skoll_reports/ worlds best-known social entrepreneur
business_primer.pdf won the 2006 Nobel Peace Prize,3 following Sophia Tickell
3
http://nobelprize.org/nobel_prizes/ in the steps of Wangari Maathai in 2004. Chair
peace/laureates/2006/ The work of social entrepreneurs is also
4
www.xigi.net increasingly spotlighted at events like the
5
www.i-genius.org/home/ World Economic Forum in Davos, by the
6
www.dhl.com/yesawards Clinton Global Initiative and at summit
7
www.sustainability.com/sa-services/ meetings organized by Acumen, Ashoka,
sectors.asp Endeavor Global, the Schwab Foundation,
and the Skoll Foundation. The efforts of
social entrepreneurs are extensively
covered in the media in the pages of
Time, Newsweek, Fast Company, and the
Financial Times.
Growing Opportunity 3
Forewords

Allianz foreword DuPont foreword

As a leading financial services and The need for truly sustainable options
insurance company, Allianz is acutely for 21st century life remains one of the
aware of how global trends such as most critical challenges facing the global
aging populations, climate change and community. The work of the social and
the globalization of supply chains are environmental entrepreneurs profiled in
affecting our customers and our Growing Opportunity is truly inspirational.
communities. The sorts of questions
we address on a daily basis include: As a science company, DuPont has an
How can people ensure that their loved interest in being part of the solutions by
ones and assets are protected from the putting our science to work in ways that
full spectrum of risks, including ever- can design in at the early stages of
increasing manmade and natural disasters? product development attributes that
Do people have access to affordable and help protect or enhance human health,
Paul M. Achleitner reliable health care and, if not, what safety, and the environment. Through
can be done to meet their needs? our science, we will design products and
And where will the processes of processes that pass rigorous criteria for the
globalization take our customers, our use of renewable resources, energy, water,
industry and our company? and materials. We believe this is a direct
route to a successful, profitable business
We see it as our responsibility to empower that adds value to our customers, their
our customers to prepare for and respond to customers, consumers, and the planet.
these and other challenges. But we cannot
do this alone. While we bring significant DuPont has broadened its sustainability
experience, knowledge and passion to bear, commitments beyond internal footprint
we also seek inspiration from partners who reduction to include market-driven
can help us to think outside the box and act targets for both revenue and research
as catalysts for innovation. and development investment. The goals
are tied directly to business growth,
Social entrepreneurs are one potential specifically to the development of safer
wellspring of insight and inspiration. and environmentally improved new
Linda Fisher Individuals from Bonn to Bangalore are products for key global markets, including
seizing the chance to turn challenge into products based on non-depletable
8
Note: unless otherwise stated, opportunity, in the process identifying and resources.
all $ references are to US$. pioneering new markets. Microfinance,
as an example, is now a $9 billion market And we are investing to ensure that
that is increasingly empowering citizens DuPont moves towards sustainable growth.
to realize their full potential in society. By 2015, we have committed to:
Our hope is that collaborating with creative
thinkers will help our people to realize their Double our research and development
full potential and to better serve the investment in environmentally smart
needs of present and future customers. market opportunities;

We are delighted to work alongside The Double revenues to $8 billion 8 from


Skoll Foundation and SustainAbility. This non-depletable resources;
project has helped us to take a first look
at what collaboration between mainstream Grow annual revenues $2 billion or
business and social entrepreneurs might more from products that create energy-
look like. While this is new territory for us, efficiency and/or reduce greenhouse
it is exactly the sort of opportunity space gas emissions for its customers; and
that our business needs to explore. We look
forward to ongoing conversation on ways Introduce at least 1,000 new safety
to develop and deploy new generations of products or services.
sustainability solutions.
Linda Fisher
Paul M. Achleitner Chief Sustainability Officer
Member of the Board of Management
Growing Opportunity 4

A growing array of socio-economic, 3 The field is growing, but still relatively


At a time when such environmental and governance small. To put rough numbers on the
challenges seem to narrow challenges presses in on decision-makers three areas of social enterprise, cleantech
including climate change, the risk and philanthropy, we estimate that less
our horizons, they are of global pandemics, the growing threat than $200 million is going into social
creating a wealth of new to natural resources like water and enterprise worldwide from dedicated
fisheries, and the ever-present issues of foundations each year, compared with
opportunities, but to enjoy poverty and hunger. Growing Opportunity over $2 billion into cleantech in the USA
them longer term we must the first in an annual series of and EU and well over $200 billion into
surveys conducted by SustainAbility philanthropy in the USA alone.
ensure real opportunity in partnership with The Skoll Foundation
for a very much greater explores the potential for more 4 Money remains the main headache.
entrepreneurial solutions to such Accessing capital is the No.1 challenge
proportion of the global challenges. for the entrepreneurs we surveyed,
population. with almost three-quarters (72%)
The key messages: at a time when such putting this at the top of their priority
challenges seem to narrow our horizons, list. Foundations are still the favorite
they are creating a wealth of new source of funding for social entre-
opportunities, but to enjoy them longer preneurs (mentioned by 74% of
term we must ensure real opportunity for a respondents), but there is a wide
very much greater proportion of the global recognition of the need to diversify
population. The report attempts to assess funding sources.
the current state of social entrepreneurship
the possibilities presented by new 5 Financial self-sufficiency is seen as a
mindsets, the challenges entrepreneurs face real prospect within five years.
9
We adopted the 1.0 3.0 terminology in scaling their organizations and the The proportion of respondents expecting
during an Australian tour early in 2006. opportunities for greater collaboration with to be funding their own operations,
Fast Company also talk of Business 3.0 in corporations and others. with little or no dependence on grants,
their 'Fast 50' survey report, Fast Company, jumped from 8% to 28%.
March 2007. The terms label different The survey findings are discussed in Chapter
aspects of the same phenomenon. 2 (pages 1122) and the increasingly 6 There is a real appetite to partner
persuasive business case for mainstream with business. Social and cleantech
corporations and financial institutions to entrepreneurs are equally interested
get involved is explored in Chapter 3 (pages in developing partnerships with business
2329). We look at three different mindsets but with different expectations.
that have characterized business thinking Social entrepreneurs, in particular,
in relation to the relevant issues. If 1.0 are acutely aware that they often
was about compliance and 2.0 about lack the experience and skills needed.
citizenship, 3.0 is about creative destruction A constant refrain was the growing need
Executive Summary

and creative reconstruction.9 Chapters 4 for brokering between the entrepreneurs


and 5 then probe a little deeper into two and potential business partners.
key sectors, health and energy.
7 Beware blind spots. There is a risk
Our main conclusions are that: that we may become overly focused
on narrow definitions of social and
1 Social entrepreneurship is on a roll. environmental entrepreneurship. For
Social entrepreneurship is emerging as example, its easy to get excited about
a powerful catalyst of the sort of change small start-ups in the renewable energy
that governments and business are field, but we should remember the huge
increasingly committed to but rarely contributions already being made by
know how to deliver. much larger companies like Acciona in
Spain, Vestas based in Denmark or GE
2 The potential for breakthrough based in the USA. And there is also a
solutions is considerable and need to focus on ways of supporting
growing. Among the routes to social intrapreneurs, change agents
breakthrough solutions and scaling working inside major corporations and
discussed by our respondents, the financial institutions. The potential
following surfaced repeatedly: (1) leverage at their disposal is huge.
grow individual social enterprises;
(2) establish multiple enterprises; 8 For real system change, we must
(3) get big organizations whether focus on government and public policy.
companies, public agencies or NGOs Governments need to do more to shape
to adopt the relevant models and public sector targets, tax incentives and
approaches; and (4) spur public policy pricing signals to ensure that markets
legislation designed to fix market drive change and that the sort of
failures. ventures covered in Growing Opportunity
reach their full potential.
Growing Opportunity 5

How do you grow economic, social, Some definitions can be found on page 7,
One thing that is likely educational, and political opportunity but as Jed Emerson one of the fields
to bewilder mainstream to the degree required to ensure that most influential thought-leaders warned
the 21st century is significantly less us, an over-emphasis on definitions can be
business brains entering turbulent and violent than the 20th? distracting. We risk wasting the coming
the world of social enter- Part of the answer will be to invest in years in endless discussions of how many
entrepreneurial solutions to the worlds angels dance on the head of a pin, he
prise is the near-fetish pressing problems, and to build the argued, as opposed to what wonderful
for discussing definitions. system conditions in which solutions garments we might collectively stitch
are encouraged to replicate and scale. together.
Huge effort has been In this sense, the social and environ-
invested and continues mental entrepreneurs discussed in The key point is that a range of social,
Growing Opportunity are models of how environmental, and governance challenges
to be invested in defining to push towards a more sustainable increasingly demand something more
social and environmental future. than corporate citizenship responses.
They require innovative, entrepreneurial,
entrepreneurship and in But thats not always how they are seen.10 and often disruptive strategies which
identifying and classifying Business people encountering the world of incumbent companies are often ill-prepared
social entrepreneurship for the first time to develop or deliver.
the relevant entrepreneurs often emerge confused, at least to begin
with. The sort of questions they raise This isnt an either social entrepreneurship
include: Why all the excitement? How are or big business agenda, but will involve
these people different from NGOs? Isnt both together. Looking at the worlds of
entrepreneurship what business already our three sponsoring organizations, the
does? How can you expect the worlds evidence is clear. A company like the US
10
www.sustainability.com/ poorest to represent any sort of market? chemical giant DuPont, with its long-
downloads_public/skoll_reports/ And how can ventures operating at this standing sustainable growth strategy,
business_primer.pdf relatively small scale ever hope to change has the capacity to bring new solutions to
the world, as they proclaim their ambition scale. To take just two of DuPonts 2015
to be. All great questions, but before we goals: it aims to grow annual revenues from
start looking for answers, it is worth products that create energy efficiency or
remembering the critics at the time could cut greenhouse gas emissions by $2 billion,
easily have expressed indeed often did and to nearly double revenues from non-
the same skepticism about the likes of depletable resources to at least $8 billion.
Pasteur, the Wright Brothers or, in more The involvement of German financial
recent times, Steve Jobs and Steve Wozniak, services group, Allianz, underscores the
who not only founded Apple but also growing role of the financial sector in
catalyzed the early growth of the personal supporting entrepreneurial solutions to the
computer industry. broad spectrum of sustainability challenges.
And Jeff Skolls background as a co-founder
No doubt a great deal of debate went into of eBay spotlights the emergence of very
what a germ was, into what sort of future different thinking on how business models
Introduction

aircraft might have or whether PCs would can be designed to replicate and scale
ever challenge the computing power of even, if the X Prize Foundation has its way
IBMs Big Iron. One thing that is likely (page 29), in such demanding areas as
to bewilder mainstream business brains poverty alleviation.
entering the world of social enterprise is
the near-fetish for discussing definitions.
Huge effort has been invested and
continues to be invested in defining
social and environmental entrepreneurship
and in identifying and classifying the
relevant entrepreneurs. Important work,
no question, but you tend to know these
people when you meet them. The air
crackles with energy. They aim to turn
apparently insoluble crises into tomorrows
political, social, and market opportunities.
1
Growing Opportunity 6
Introduction

So why are a growing number of business In preparing this study, we interviewed


At its core, the corporate leaders suddenly so interested in the 20 entrepreneurs in depth and over 100
pursuit of sustainable linked worlds of social and environmental more completed an online survey (page 48).
entrepreneurship? And, with intensifying It is clear that they are as determined as
development is not just investor interest and lively media ever to drive change, but it is also clear that
about doing good. coverage, what is the current state of many of their enterprises are experiencing
the key sectors now busily developing significant growing pains along the way.
It makes companies more entrepreneurial solutions to the worlds
entrepreneurial, nimble looming sustainability challenges? These
are questions SustainAbility is exploring Key drivers
and competitive. in its three-year Skoll Program (2006-
Bjrn Stigson, WBCSD 2009).11 Growing Opportunity is the first in Focusing down on todays world, at least
a planned survey of studies into key aspects four factors seem to be central in driving
of this increasingly important field. the growing mainstream interest in social
and environmental entrepreneurship:
Why should business be interested in
all of this? We asked Bjrn Stigson, First, 20 years after the Brundtland
11
www.sustainability.com/insight/skoll.asp President of the World Business Council Commission first put sustainable
12
John Elkington, The Chrysalis Economy: for Sustainable Development (WBCSD). development onto the political agenda,13
How Citizen CEOs and Corporations He replied: At its core, the corporate a number of major challenges once
Can Fuse Vales and Value Creation, pursuit of sustainable development is seen to be (and often dismissed as)
Capstone/John Wiley & Sons, 2001. not just about doing good. It makes the preserve of activist NGOs and wider
13
Our Common Future, Report of the companies more entrepreneurial, nimble civil society have pushed forcefully into
World Commission on Environment and and competitive. One of our largest the political and business mainstream
Development (Brundtland Commission), manufacturing members has taken the a process often reinforced by the
Oxford University Press, 1987. concept of eco-efficiency so seriously that withdrawal or weakening of government
14
See Harvard Business Review, it began focusing on selling less material activity. Successive summit meetings of
December 2006. product and more knowledge, with great the World Economic Forum, for
success. A Latin American member example, have focused on an increasingly
understood base-of-the-pyramid business interconnected agenda linking such
as a theory, but then found by experience issues as poverty, hunger, pandemic risks,
that it makes good bottom-line business terrorism, human rights, energy security,
sense. Coping with sustainability challenges and the growing threat of climate
builds stronger companies. destabilization.

In 2001, SustainAbility concluded that the Second, despite the huge progress
early decades of the 21st century would achieved in corporate citizenship and
see a series of interlinked economic, tech- corporate social responsibility over the
nological, social, political, and managerial past 1015 years, there is a growing
transitions that would transform the global concern that we may be reaching the
economy, in very much the same way as the limits of CSR. The Harvard Business
rapacious caterpillar is transformed inside a Review 14 neatly captured this mood with
chrysalis. We are now embarked on a period a twinned pair of articles by Michael
of profound economic metamorphosis, of Porter and Mark Kramer (Strategy and
what the economist Schumpeter dubbed Society: The Link Between Competitive
creative destruction. Think of the Advantage and Corporate Social
entrepreneurs profiled in the following Responsibility) and Clayton Christensen
pages as the global economys equivalent (Disruptive Innovation for Social
of the imaginal buds that drive the process Change). The conclusion: too many
that converts a caterpillar into a butterfly companies have seen the new,
inside the chrysalis.12 interconnected agenda as remote from
their core business interests. The reality
is that these complex issues pose
increasingly strategic choices that need
to be addressed in suitably radical and
higher leverage ways something that
most corporate citizenship departments
seem ill-equipped to do.
Growing Opportunity 7
Introduction

Panel 1.1 Ashoka16 defines social entrepreneurs as,


One key reason why Definitions individuals with innovative solutions to
mainstream business needs societys most pressing social problems.
Entrepreneurs are people who, through They are ambitious and persistent, tackling
to pay attention is that the practical exploitation of new ideas, major social issues and offering new ideas
these people aim to achieve establish new ventures to deliver goods for wide-scale change. Rather than leaving
and services currently not supplied by societal needs to the government or
higher leverage than existing markets. That said, people like business sectors, social entrepreneurs find
conventional philanthropy Greg Dees (Adjunct Professor of Social what is not working and solve the problem
Entrepreneurship and Nonprofit Manage- by changing the system, spreading the
and NGOs, often aiming ment, Fuqua School of Business, Duke solution, and persuading entire societies
to transform the systems University) argue that there is a spectrum to take new leaps.
of enterprise, from the purely charitable
whose dysfunctions help through to the purely commercial.15 Our The Skoll Foundation puts it this way:
create or aggravate major version of that spectrum or landscape Social entrepreneurs share a commitment
can be seen in Figure 1.1. to pioneering innovations that reshape
socio-economic, environ- society and benefit humanity. Whether
mental, and political On the purely charitable side, customers they are working on a local or inter-
pay little or nothing, capital comes in national scale, they are solution-minded
problems. the form of donations and grants, the pragmatists who are not afraid to tackle
workforce is largely made up of volunteers, and successfully resolve some of the
and suppliers make in-kind donations. worlds biggest problems. 17
At the purely commercial end, all these
transactions are at market rates. Most Environmental entrepreneurs may be
of the really interesting experiments, interested in social objectives, but their
however, are now happening in the middle main focus is environmental. Many
ground, where hybrid organizations pursue consider environmental entrepreneurship
blended value and where less-well-off to be a subset of social entrepreneurship,
customers are subsidized by better-off but they are distinct. A major rebranding
customers. of the sector began in 2002, as the
cleantech sector. The Cleantech Venture
Social entrepreneurs are entrepreneurs Network (CVN) defines cleantech as
whose new ventures (social enterprises) embracing a diverse range of products,
prioritize social returns on investment, i.e. services, and processes that are inherently
15
J. Gregory Dees and Beth Battle improving quality of life for marginalized designed to provide superior performance
Anderson, Framing a Theory of populations by addressing issues such as at lower costs, greatly reduce or eliminate
Social Entrepreneurship: Building on health, poverty, and education. One key environmental impacts and, in doing so,
Two Schools of Practice and Thought, reason why mainstream business needs to improve the quality of life. CVN includes
in Rachel Moser-Williams (Editor), pay attention is that these people aim to the following sectors: energy generation;
Research on Social Entrepreneurship, achieve higher leverage than conventional energy storage; energy infrastructure;
ARNOVA occasional paper series, philanthropy and NGOs, often aiming to energy efficiency; transportation &
Vol. 1, No. 3, The Aspen Institute, transform the systems whose dysfunctions logistics; water purification & manage-
Washington DC, 2006. help create or aggravate major socio- ment; air quality; materials & nano-
16
www.ashoka.com economic, environmental, and political technology; manufacturing/industrial;
17
www.skollfoundation.org/ problems. agriculture & nutrition; materials recovery
aboutsocialentrepreneurship/whatis.asp and recycling; environmental IT and
enabling technologies.
Growing Opportunity 8
Introduction

Figure 1.1 Zone 1 (The Drain) is where money Zone 4 (The Pump) is where
The opportunity landscape drains from the system, because of predominantly non-profit or hybrid
poor management or because of the non-profit/for-profit ventures leverage
Its remarkable how much of the financial bribery and corruption that blights so resources to create blended value
worlds vocabulary relates to water and to many economies and new ventures. and, through lobbying, promote wider
hydraulic imagery. We have liquid assets Enron operated in this space, as do the systemic change. Organizations like
and liquidations, we manage cash flows fraudulent briefcase NGOs that blight Grameen Bank, OneWorld Health,
and solvency, we float companies and countries like India. and PATH create change here.
exchange rates, there is sunk capital and
there are investments below water, money Zone 2 (The Well) is where Zone 5 (The Geyser) is where
goes down the drain, we try to deflate communities under stress or those deep-seated seismic forces (think
bubbles, and we or at least some people that help them dip into capital demography, economic development,
launder money. reserves and the benevolence of technology trends, and eco-pressures
ordinary citizens, although (like wells) like climate change) build a head
In this spirit, Figure 1.1 plots five zones public benevolence can be over- of pressure that powerfully, if un-
of the opportunity landscape for entre- pumped to the point of exhaustion predictably, erupts in showers of
preneurs. On the vertical axis, we plot or donor fatigue. Mdecins sans new wealth laying down deposits of
Impact (think leverage, blended value Frontires and the Red Cross are value and helping irrigate the entire
creation,18 and system change), from Low leading players here. catchment area. Powerful players here
to High, and on the horizontal axis we include Acciona, GE, Vestas, and much
plot the degree to which the Drivers Zone 3 (The Siphon) is the area of of the cleantech sector.
of action are purely Moral or purely corporate philanthropy, where
Financial. Clearly, entrepreneurs of businesses create shareholder returns,
different types will spot opportunity but channel off a percentage, partly
right across this landscape. to ensure their continuing license
to operate. Think of the Danone
Communities Fund, Shell Foundation,
or Google.org.

Zone 5 High

Zone 4 Geyser

Zone 3

Zone 2
Pump
Zone 1

Impact
Well

Siphon

Drain
Drain
Drain
Low

Conscience Drivers Capitalism


Growing Opportunity 9
Introduction
18
For more on blended value, see Third, a number of major corporations (2) The cleantech sector, in part a
www.blendedvalue.org have begun to rebundle existing rebranding of environmental and energy-
19
http://ge.ecomagination.com/ activities, and in some cases launch new related enterprise, has seen rapid growth
@v=022120072196@/site/index.html ones, designed to meet sustainability- thanks to growing concerns around
20
One of the most notable actors in this related needs. A case in point has been energy security and climate change
sector is the Cleantech Venture Network. GE, with its ecomagination initiative.19 and the recent greening of US state and
www.cleantech.com To illustrate the scale at which such mayoral politics.20
21
The five-yearly summary of events is companies can drive change, if minded to
illustrative only, to give a sense of what do so: when GE released its 2005
else was going on at the time. ecomagination report, it revealed that Closer than you think?
revenues from the sale of energy
efficient and environmentally advanced At the 2007 World Economic Forum summit
products and services had hit $10.1 in Davos a key question asked was: What
billion in 2005, up from $6.2 billion in could be done to spur entrepreneurial
2004 with orders nearly doubling to solutions to global sustainability
$17 billion. challenges? The business media picked up
on the theme. Imagine a world, the front
Fourth, we have seen the emergence cover of BusinessWeek encouraged readers
of two separate movements that have in its Davos issue, in which socially
helped push entrepreneurial solutions responsible and eco-friendly practices
further into the spotlight. (1) The social actually boost a companys bottom line. Its
enterprise sector has been building for closer than you think. This trend aligns
decades, but has been given a major closely with the emerging Fourth Wave
boost by the work of Ashoka and agenda SustainAbility has been tracking.
initiatives launched by The Schwab
Foundation, The Skoll Foundation, Just as a series of waves run through the
Acumen, Endeavor, and Fast Company caterpillar to uncover the chrysalis, so the
(particularly its Social Capitalist Awards). global economy has been powerfully shaped
by a series of societal pressure waves at
least in the OECD region (Figure 1.2).21

Figure 1.2
Upwaves and downwaves Waves record
US Supreme Court opts for Bush / CSR + SD on WEF agenda
Nelson Mandela freed / East and West Germany reunite

World population Waves (average) projection


Saigon falls / Oil begins to flow from North Sea / Angolan civil war

Billions Population record


Earth Day / US passes Clean Air Act / Tidal wave kills 150,000

Robert Mugabe elected President, Zimbabwe / Solidarity, Poland

Population projection
Mikhail Gorbachev becomes Soviet leader / LiveAid
JFKs New Frontier / Sharpeville massacre, South Africa / U2 crisis

Oklahoma City bombing / Netscape goes public

7-7 attacks, UK / Hurricane Katrina, US

10
Total
9
US troops go into battle in Vietnam

6 Urban

4 Rural
3

0
1960

1965

1975

1980

1985

1990

1995

2000

2005

2030

2035

2040

2045

2050
2020

2025
1970

2015
2010
Growing Opportunity 10
Introduction

Given that 2007 marks the year when the 2007 survey and report
This report attempts to human population becomes predominantly
assess the current state of urban for the first time, the three blue lines This report attempts to assess the current
map the trends in the rural, urban, and state of social entrepreneurship the
social entrepreneurship. global populations. By our analysis, the possibilities presented by new mindsets,
waves have run as follows: the challenges entrepreneurs face in scaling
their organizations and the opportunities
Wave 1 (peaking 196972) focused for greater collaboration with corporations
on new policies, rules and regulations, and others. To explore these themes, we:
largely in the environmental, safety,
and health areas. During this period, E-mailed a quantitative survey
there was much counter-cultural instrument to 400 entrepreneurs,
entrepreneurship, particularly in areas selected from the networks of the
like whole foods and alternative or The Skoll Foundation, The Schwab
intermediate technology. The Foundation,23 The Hub,24 Columbia
compliance agenda continues to evolve Universitys RISE project,25 and Fast
globally. Company.26 Over 100 completed the
22
Four scenarios based on SustainAbilitys full survey, representing a 27% response
pressure waves analysis will feature in Wave 2 (peaking 198891) drove rate. The survey instrument can be
another report part-funded by The Skoll voluntary market initiatives in such found in Annex 1;
Foundation, focusing on the future of areas as reporting and certification,
globalization. Due out in June 2007. including the evolution of standards Undertook extensive desk research,
23
www.schwabfound.org such as ISO14001 and the Global including Deeper Dives into the health
24
www.the-hub.net Reporting Initiative. Here, much of and energy sectors, and took part in a
25
www.riseproject.org the entrepreneurship focused on number of major events in the field; and
26
www.fastcompany.com/social environmental and sustainability-
related services and socially responsible Interviewed 20 entrepreneurs in depth,
investment. either face-to-face or by telephone.

Wave 3 (peaking 19992001, before We rounded out this research with feedback
being knocked back sharply by 9/11) from our growing network. From Acumen
drove concerns around globalization and to zouk ventures, we invited perspectives
both global and corporate governance. about the main challenges and oppor-
This period saw a dramatic increase in tunities facing social and environmental
the number of networks linking social entrepreneurs today. The survey findings
and environmental entrepreneurs. follow in Chapter 2.

Wave 4 (which is just getting into


its stride) appears to be rebounding
energetically, with a growing focus on
innovation and entrepreneurial solutions
to sustainability challenges.22 The promise
is that mainstream players now get
involved, potentially overwhelming or
outflanking smaller players. Equally,
however, the prospect of alliances,
partnerships, mergers, and acquisitions
will also likely grow.
Growing Opportunity 11

27
www.grameenphone.com/ To our surprise, the entrepreneurs Panel 2.1
index.php?id=64 interviewed and surveyed were Organizational mission
28
www.ashoka.org significantly more interested in
29
www.acumenfund.org responding than we had imagined Each organization was asked to identify
www.fastcompany.com/social and the thrust of our questions was its primary area of focus. Social equity,
wwwschwabfound.org; particularly appreciated. Indeed, it selected by most respondents, includes
www.skollfoundation.org soon became clear that even the best organizations addressing poverty,
entrepreneurs are experiencing real economic development, and empower-
growing pains, mainly in the field of ment of marginalized citizens. Not
funding but also in a number of other surprisingly, a significant number of
areas. For the sake of simplicity, lets respondents selected something else
boil down the questions to three main an illustration of how social entrepreneurs
areas of interest: see these challenges as interrelated and
their solutions as out-of-the-box. Most
1 Who are these people, what are they used the something else response to
trying to do, how do they view the signal several of the above. The results
prospects for scaling what they do, are shown in Figure 2.1.
and how optimistic/pessimistic are
they currently?

2 What are the critical challenges they


face in replicating and scaling successful
solutions to sustainability challenges?

3 And how do they think of mainstream


business in all of this whether as a
route to funding, a source of potential
partnerships, or as a roadblock to
progress?

We cover the first two areas in Chapter 2,


the third in Chapter 3.

1 Meet the entrepreneurs


Survey Findings

Who are these people?

For non-experts who know something


of the field, Muhammad Yunus of the
Grameen Bank is probably the first person
who comes to mind. But Dr Yunus is not a
typical social entrepreneur, however much
many entrepreneurs may see him as their
model. Not only does he now have a Nobel
Prize, but he has been working in the area
for over 30 years, his institution is large,
successful and globally known, and already
partnering with a number of major
corporations including Danone and
Telenor.27 By contrast, perhaps the best
way to get a sense of the more typical
high-performance social entrepreneur
is to take a look at Ashokas website.28
Or, to focus on people who have gone
through further hoops, visit the websites
of Acumen Fund, Endeavor Global, Fast
Company, The Schwab Foundation, and
The Skoll Foundation.29
2
Growing Opportunity 12
Survey Findings

Figure 2.1 As far as the respondents to our Laura Peterson,


Primary mission of quantitative survey is are concerned, Hands to Hearts International
organizations surveyed their missions and geographic focus are Health Care, Portland, OR
N=109 summarized in Figures 2.1 and 2.2. Right now there is a ton of hype around
% social entrepreneurs. There are pros and
cons to this, but the reality is that very
How do they think of or label few social entrepreneurs will ever get off
100 themselves? the ground. I am a therapist, a supervisor,
and an administrator. Now people call
90 Many respondents and interviewees clearly me a social entrepreneur, but I'm not
considered themselves to be social or entirely comfortable with that. This title
environmental entrepreneurs, while others seems to come with super-human
80 thought of themselves as entrepreneurs, expectations that go beyond talent,
innovators or even campaigners. Here are innovation, and integrity and into
70 replies from four US respondents that unrealistic extremes of personal self-
underscore the diversity of perspectives sacrifice.
even among entrepreneurs of the same
60 nationality: Josh Tosteson, HydroGen LLC
Cleantech, Cleveland, OH
50 Rick Surpin, ICS We are a commercial business in the
Health Care, New York, NY clean energy industry. So, we manu-
I consider myself a social entrepreneur, facture fuel cell systems for industrial
40 but that is an approach to the work; applications, and as such, I wouldnt
it's not my vocation and no one would characterize our business strictly as a
30 give us money, except Skoll possibly, on social entrepreneurial venture. It has
this basis. If people ask me what I do clear social benefits that motivate and
I work on transforming the health care animate some of the reasons why I and
20 and social service system for low income some of my colleagues are involved with
adults with disabilities and create decent it in the first place. On the other hand,
10 jobs for low income people at the same we are casting this as a straight up
time. This is how I see myself and what commercial venture subject to all of
I think is interesting and challenging and the challenges and opportunities
Institutional responsibility
Social equity
Something else

Tolerance / Human rights

Peace / Security
Education
Environment / Energy

Health

Housing

generally what makes other people inherent in that kind of a corporate


interested as well. enterprise. Even though we pay attention
at a certain level to the social outcomes
Chris Elias, PATH of the work we do, and focus intently
Health Care, Seattle, WA on how we operate as an ethical
We are a relatively new entrant into enterprise both in internal and external
this discourse and community of social dealings, as an investor-backed, public
entrepreneurs. It is clear that there are company we need to retain a first-order
two groups. There are the organizations focus on business metrics that reflect
that were basically built around an our principal obligations to shareholders
individual social entrepreneur who had and investors.
a strong vision and charisma and created
an organization to meet that vision.
Then there are groups like PATH and
Technoserve, that may have started
that way, but are now big organizations
whose directors are certainly entre-
preneurial . . . but it no longer makes
sense to talk of PATH as the product of
any one person. We have 550 staff
worldwide with variable degrees of
entrepreneurship. If I were to I ask,
probably 100 or more of them would
raise their hand and say Yes, Im an
entrepreneur.
Growing Opportunity 13
Survey Findings

Figure 2.2 Where are they on the Panel 2.2


Primary regions of operation optimismpessimism spectrum? Regions
N=109
% Successful entrepreneurs, by their very We asked where each respondents
nature, tend to be optimists highly organization primarily operated, which
pragmatic optimists. No surprise, then, allowed for multiple answers in terms of
to find that, despite the challenges, the geographies. North America came top
100 entrepreneurs we interviewed were (54%), with the South Pacific perhaps
overwhelmingly optimistic. Most cited not surprisingly bottom. The low
90 what some might see as extremely positioning of Europe is notable.
aggressive growth plans, such as doubling
their operations in the next three to five
80 years, and taking local programs national
or, if already operating at the national
70 scale, international. Our survey results
reflect this optimism 32% believe they
will move away from foundation funding
60 to more sustainable source of funding in
the next five years.30 That said, several
50 including PATH expect to scale
significantly mainly on the basis of
foundation funding.
40
Reading between the lines, however, we
30 did detect a difference in tone from those
addressing poverty issues as compared
with the rest of the social enterprise
20 community. We often heard a more
frustrated (sometimes even desperate)
10 tone, a sense that the challenges are much
greater than currently acknowledged, and
that because this is an area of intense
North America
Asia
South America
Africa
Europe
Middle East
South Pacific

market failure social entrepreneurs have


to compete for limited foundation funding.
Typical comments noted the need to live
a hand-to-mouth existence, and another
spoke of the challenge of, Gaining
recognition in a very crowded non-profit
marketplace. More fundamentally still,
another respondent argued that, There
needs to be a paradigm shift in order to
reduce world hunger and poverty.

More positively, the emergence and


growth of the base-of-the-pyramid
movement is seen as an optimistic trend,
an attempt to reframe the issues in terms
of the potential commercial opportunities.
It will be fascinating to see how The X
Prize Foundation,31 which stimulated a
huge wave of private enterprise in relation
30
Note: there may be a risk of survey bias, to space travel and is now working in such
on the basis that those responding could fields as genomics and automobility, applies
be more optimistic about their ventures, the same approach with its planned prize
although there could equally be a reverse for poverty alleviation (page 29). One key
effect. is to set the targets in ways designed to
31
www.xprize.org switch on the entrepreneurial juices of
a wider group of innovators.
Growing Opportunity 14
Survey Findings

How do they view the prospects for Finally, a significant minority of the
If I had twice as much replication and scaling? entrepreneurs stressed the need for
money, Id make at least government to play a more effective role
For the new breed of funders, the capacity in making scaling possible. In particular,
four times as much impact. of social or environmental entrepreneurs entrepreneurs suggest that government:
Jim Fruchterman, to replicate and scale is fundamental.
For many, scalability of beneficial Needs to provide an enabling
Benetech impacts, business models, and enterprises environment, through policies that
is the Holy Grail. And that also creates a create, as a minimum, a level playing
sense of frustration with the current order. field for solutions and, at best, that
Some respondents see the nature of much strongly incentives the development
current funding as part of the problem and deployment of new solutions;
encouraging a sense of dependency. partly by developing incentives that
A related comment came from Keerti allow the most cost-effective solutions
Pradhan of Aravind Eye Hospitals, in to compete, for example by removing
relation to the state of other NGOs, perverse incentives. In many countries,
particularly in India: NGOs get hooked more fundamentally still, governments
on a sense of getting when they rely on also need to provide basic infrastructure,
foundation or non-sustainable funding such as sewers, roads, and schools.
sources. As a result, people dont apply
their brains to different ways to break Must make social and environmental
that barrier of dependency on foundations. issues a political priority. A number
The question is: whose responsibility is of respondents expressed concern that
it to help NGOs with this? NGOs have their issues were not top priorities for
huge potential, but huge knowledge gaps politicians in their country.
exist about how to access market-rate
funding sources that could help support Should explore alternatives. Sylvia
non-profit work. Aruffo of Careguide Systems in the
healthcare sector said, Its very difficult
Perhaps not surprisingly, most interviewees for any entrepreneur when you have
and respondents are enthusiastic about a breakthrough idea and the structure
the ability of their model to replicate and is already set up for another way to
scale. This trend seems to be independent solve that problem. What do you do
of geography. Only one entrepreneur when your solution is better, but it just
suggested that their model is too complex doesn't fit?
to scale at the pace that the Skoll and
Schwab Foundations, and others, are Has a role to play in setting minimum
pushing for and clearly felt a great standards for provision, and in scaling
deal of pressure to do this beyond the solutions, not just as service providers,
organizations ability. but as policy makers, procurers of
services, landlords, experts, and so on.
The drive to scale is seen to raise its
own very particular challenges. In Can be a major stumbling block in
addition to the financing, marketing, some countries, particularly where
and maturation/development challenges there is widespread corruption. Some
highlighted in the next section, social governments, we were told, dont want
entrepreneurs underscore issues such social entrepreneurs to succeed, because
as: finding the right partners for joint it would make them look bad and
ventures and franchising; maintaining accentuate their failures.
the quality of service, particularly when
working with third parties; and the question
of pace of growth How fast can I grow,
continue to deliver and not compromise
my mission? Anyone working with
mainstream entrepreneurs will recognize
the thrust of the questions.
Growing Opportunity 15
Survey Findings

Figure 2.3 Panel 2.3


Challenges facing social entrepreneurs 2 Critical challenges Critical challenges, 2007
Respondents select the top two challenges
they face in growing their organizations The central thesis of Growing Opportunity 1 Raising capital
N=109 is that the undoubted progress of the Overwhelmingly, social entrepreneurs
% social enterprise sector is often being cited access to capital as one of
bought at the expense of growing human, their two primary challenges (72%),
100 organizational, and opportunity costs. because capital is what enables the
This is inevitable, given that the same entrepreneurs to hire talent, market,
90 could be said of all entrepreneurial rent space, pursue pilot projects, and
ventures, but the conclusion calls for a carry out other activities related to
thoughtful, coordinated set of responses growing their organizations.
80 from those who fund and otherwise support
these people. The pains, as Panel 2.3 2 Promotion and marketing
70 suggests, come in various areas: funding, Promoting or marketing their
promotion and organizational development. organizations and offerings was the
The majority of respondents operate in the second most frequently mentioned
60 not-for-profit sector, which intensifies the challenge (41%). The focus: making
challenges of raising funding and recruiting consumers, businesses, funders, and
50 and retaining talent. other relevant stakeholders aware of
the good work that the organization
A number of challenges raised by not-for- is doing. Like mainstream entre-
40 profit enterprises are clearly much less of preneurs, however, social and
an issue for their for-profit counterparts, environmental entrepreneurs are
30 particularly in terms of the ability to usually ahead of the curve and it takes
attract and hold talent. But for-profit time for the rest of the world to catch
social enterprises have their own up, including funders, government
20 challenges. Since a number of for-profits policy makers, and potential
(both independent and owned by others) mainstream business partners.
10 were included in our interviews and survey,
it is worth focusing on one case which 3 Developing organizations
seems to provide a benchmark for quality Key issues here include: recruiting,
Accessing capital
Promoting / Marketing
Maturing / Professionalizing
Recruiting talent
Adapting to landscape
Other

scaling. Our interviewee: Gary Hirshberg, developing and retaining talent;


President and self-styled CE-YO at and balancing professionalism with
Stonyfield Farm, Inc.,32 now part of the entrepreneurialism and passion for
French food and beverage group Danone.33 the mission. Attracting talent was cited
We asked what he had had to give up when by most entrepreneurs as a priority
Stonyfield was acquired by Danone. challenge, but more specifically, social
enterprises are challenged to find the
First, he said, I dont feel that I gave up right kind of talent for their ventures
very much in doing this deal. They bought a blend of entrepreneurship and pro-
out all of my non-employee shareholders, fessionalism, coupled with an ability
which was something that I needed to do to: (1) work as effectively with the
in any case. But even though they were communities served by the enterprise
going to own 80% (it is now 85% as I have (often very poor and marginalized) as
sold some shares to them) of the company, with corporate management/boards;
they left me with majority control by (2) bring leading edge technical
granting me the right to vote three of the capabilities to bear; (3) have business
five board seats for as long as I remain know-how; and (4) buy into the
active as Chairman and/or CEO. In fact, enterprises mission and vision.
the only veto rights that I did give them A tall order, especially without
32
www.stonyfield.com were that they had to approve (a) any competitive salaries.
33
www.danone.com capital improvements over $1 million and
(b) any acquisitions of other companies.
Growing Opportunity 16
Survey Findings

Otherwise, things today are pretty much So what are the main financial
We must find the right the way theyve always been, except that challenges?
leaders for the next phase we now have access to a global network
of resources and talents, and of course Business people wanting to understand
of growth. We need we are engaged with that network to and engage these entrepreneurs need
entrepreneurs who have create organic enterprises in many other to understand the world in which these
countries. Parenthetically, I have proposed people operate and the challenges
the business skills, social three investments/acquisitions since the they face. Attracting top management
dedication, and sense of partnership began and they have approved and, in particular, providing sufficient
all three. compensation is a primary challenge, said
humor that are essential Linda Rottenberg, CEO of Endeavor Global.
to success. Danone has stuck to the spirit not just From NYC to Bangalore, people will make
the letter of the bargain. Danone has the trade-off between making a difference
Education Sector not wavered at all from the original deal, and making money at 2x earnings disparity,
even though there have been plenty of but not at 5x or 10x. Time after time,
opportunities for them to do so, Hirshberg research has shown that it is easy to start
commented. For instance, we have required a non-profit or social enterprise, but very
far more Cap-Ex [capital expenditure] than much harder to bring it to scale.
anyone ever dreamt back in 2001, and they
have fully funded our requirements without It was clear that raising money was
seeking any additional advantage or trade- the single greatest challenge that most
off on my part. Reciprocally, we have grown entrepreneurs face see Figure 2.3,
faster than they or we expected and we where access to capital ranks top at
have certainly delivered excellent results for 72%. And there were no easy answers.
them, so everybody has won something. All sources of money come with their own
challenges, was the way one entrepreneur
Additionally, I expect to see many more put it. Four key issues surfaced in the
organic/bio launches in many other survey and interviews:
countries, and each one will be adapted
not only to the local market conditions, 1 Square pegs: social entrepreneurs
but to the various Danone organizational dont fit the existing system
structures. I also expect to continue to have There is a widely held sense that the
a big influence on Danones climate and unique approaches of social entre-
organic policies around the world. preneurs are hard to fit into existing
investor models and criteria, although
This sounds like a virtual Nirvana, not the same point probably could be made
only for non-profits but also for most for- about all forms of entrepreneurship.
profits needing an exit strategy to ensure Foundations and governments are seen
a financial return on early investment. as siloed and conservative, with the
A more typical response from our survey result that they struggle to take on
was this: We would like to be free from the grantees that dont fit their narrower
rat-race of fundraising and proposal- sense of solution options. More, these
writing, and have our own private sources groups typically do not lend to for-profit
of income. They are the most stable and organizations, which leaves out a
predictable. Unfortunately, this is a distant significant segment of social entre-
dream for most of the entrepreneurs we preneurs. Traditional debt instruments
spoke to and likely to remain so, given are sometimes used, but can present
the challenges they spotlight. major challenges in terms of entre-
preneurs ability to service the debt.
Current equity investments are seen as
shorter term than what is needed and
are often too expensive for entrepreneurs
with a social mission.
Growing Opportunity 17
Survey Findings

2 Lack of consistent, flexible, and Private investment funds


We are a small organization long-term financing The New York City Investment Fund was
that is up against the over- Nearly every entrepreneur interviewed cited as a helpful source. Its investments
noted the importance of time horizons. typically range in size from $1 million to
head wall. To get and retain In particular, the work they are engaged $3 million. The Fund provides equity or
qualified staff we need to in tends to have long time-frames debt, structured to meet the needs of
(510 years to results was typical) the project. It will invest at any stage of
pay more than we are able and requires partnerships and funding business development, but seeks to exit
to. To be able to pay more that match these needs, i.e. is consistent in about five years. The particular focus
and long-term. The need for flexibility here is on ventures that provide benefits
we have to raise more funds, was also a consistent theme: most to NYC.
but to raise more funds we entrepreneurs are able to access specific
project financing, but have a harder time 3 Lack of knowledge about and
need more staff. A perfect accessing funds that will support more access to capital markets
vicious circle. general infrastructure needs. Some Like their mainstream counterparts, at
current funding sources that appear to least early on in their careers, most of
Poverty Alleviation Sector be meeting these needs include: the entrepreneurs we interviewed lack
in-depth knowledge of capital markets
Innovation capital and the best ways to finance their
This term was used to refer to organizations. They rely on trusted
unrestricted donations from high advisors, mostly on their boards of
net-worth individuals that enable the directors, for this information as well as
entrepreneur to take risks, enter new for access to investors. There is a strong
markets, hire ahead of the curve or do sense, however, that social entrepreneurs
pilot projects, ultimately helping to could benefit from increased knowledge
leverage additional funding, whether about the best financing options, as
grants or loans. There is a sense that well as better access to open-minded
innovation capital only needs to be a financiers.
small percentage of total funding,
but offers the opportunity for incredibly 4 Sustainable sources of financing
high leverage. bring their own challenges
As entrepreneurs move toward more self-
Angel investors financing models, whether for-profit or
For profit-making enterprises, Angels non-profit, they encounter challenges.
(individuals who make very early-stage Companies considering Robin Hood
investments in start-ups) were cited as business models where revenues from
particularly helpful because they are those able to pay for services subsidize
often patient investors, sharing the provision to those who cant, or cant
vision. pay the full cost face challenges in
ensuring that as they provide services to
Funding from unusual foundations customers with a higher willingness to
Certain foundations, with Skoll often pay, they dont lose sight of their mission.
instanced, appear to get it, providing
longer term funding for entrepreneurs. Fees and service-based approaches
Still, the maximum grant length is about to financial sustainability may appear
three years, which falls short of longer promising, but can also pose challenges
term needs. for some entrepreneurs. They run the risk
of stretching too far afield from their
International aid organizations core competencies, with the result that
The Asian Development Bank, World Bank the poorest people, whose needs were
and IMF were cited as potential patient the original spur to action, cannot access
investors. A downside to these sources, the service.
however, is that they mainly fund non-
profits, so entrepreneurs set up as for-
profits may fall through the cracks.
Growing Opportunity 18
Survey Findings

Figure 2.4 For-profit social enterprises face There is, however, a potential fly in this
Preferred sources of financing challenges as both government and ointment. Wood expressed concern that,
N=109 investors expect them to act like typical, some organizations tell us that we have
% for-profit companies, and so expect gotten big, so you no longer need us.
standard income tax payments and This reaction, he noted, is very different
market rates of return. Restrictions also from the private sector, where success
apply, such as an inability to access attracts capital. Why should an NGO be
100 donations from the general public, apply penalized for being successful, and why
for certain types of foundation/ should any donor want an NGO they have
90 government funding, and pursue more funded in its early years to remain small? 35
charitable elements of their businesses.
He went on to note, Getting financing for
80 For some, the business case for support your NGO is a bit like trying to compose a
is easy to articulate, for others less so. mosaic that is made up of thousands of
70 Consider the Partnership for Global tiles. Funder A wants to fund tiles #389
Security,34 which lobbies for more effective and #672, whereas Funder B wants to fund
action to control weapons of mass other tiles, but wants different reports on
60 destruction. They noted that they are different timelines than those required by
looking beyond foundations to joint Funder A. It eats up a lot of management
50 ventures with local/state government and bandwidth to keep up with it all.
commercial entities that have a stake in
our issues. They also want to raise funds Others were more positive, among them
40 from the public and venture capitalists in the same sector, but focused on the
who understand that preventing a WMD US rather than on developing countries
30 catastrophe is essential for global economic First Book, whose mission is to provide
growth and that government structures disadvantaged children with new books.36
are currently insufficient for the task. We have already developed the necessary
20 mechanisms and the enterprises are already
Non-profits who have been able to clearly successful, said Kyle Zimmer, the
10 state the benefits of their work have, organizations co-founder and President.
as a result of clarity of message, done It is now a matter of scaling up. Their
spectacularly well at fund-raising. As an business model is worth a close look, as
Foundations
Sales / Fees
Fundraising
Government
Venture capital
Help-in-kind
Joint venturing
Other
Franchising
Own pockets
Going public

example, Room to Read, which aims to a leading edge example of a financially


bring books and libraries to countries like sophisticated social enterprise, because
Nepal and Vietnam, has gone from zero they have worked out how to target an
to $12 million of annual revenue in seven unmet need at a price point that works for
years, according to its Founder and CEO, all and because they have developed a
John Wood. Room to Read has raised business model that fits in very well with
money through corporate relationships, the interests of the publishing industry.
high net worth individuals and over
200 public speeches per year. The 10 Routes to Money (below) are
sequenced in the order that a composite
entrepreneur might try them out, but the
34
www.ransac.org actual ranking by frequency of reported use
35
As one of our interviewees noted in was quite different, and is shown in Figure
response to this point, Here is the elephant 2.4. The question asked here was: Thinking
in the room. Lets talk about the nature of about financing your initiatives, which
foundation boards. This question reflects the sources of funding do you feel will be the
thinking of foundation boards about their best avenues for you to pursue?
own personal clout and their attention
levels. When [a named] foundation took a
capacity building approach, the staff found
the biggest challenge was managing the
boards boredom level. It just wasnt very
exciting to see a list of performance
indicators making an incremental and
upward change. The board got bored. The
program officer developed a way to utilize
the board members as development
consultants with the grantees and this
helped to stem the boredom tide.
Understanding the motivation and
stimulation of foundation board members is
key to working on this one.
36
www.firstbook.org/site/
c.lwkyj8nvjvf/b.674095/k.cc09/home.htm
Growing Opportunity 19
Survey Findings

Panel 2.4 In-kind help


It is now beyond urgent 10 routes to money Perhaps surprisingly, this came in seventh,
that we create a new at 31%. That said, volunteering was a
Our survey listed 10 potential routes key resource for many. And some social
social financial services to money and other resources typically enterprises among them CDI 42 in Brazil
sector. pursued by social and environmental and the Furniture Resource Centre 43
entrepreneurs, plus an Other category, in the UK create revenues by taking in
Bill Drayton, Ashoka to ensure we did not miss anything.37 goods or equipment that others no longer
In any event, the 10 Routes seemed to have a use for, reconditioning them, and
cover pretty much all the bases. They are then making them available, or selling
listed here in the order that they are likely them on. But volunteer labor and the
to be addressed by the typical social donation of in-kind resources are not an
entrepreneur. automatic guarantee of successful
outcomes. Consider the problems Habitat
Funding from own pocket for Humanity 44 has faced in trying to
This is where many mainstream entre- rebuild homes in the wake of Hurricane
preneurs start out, tapping the resources of Katrina, among them government
37
The 10 routes are derived from their families and friends although only regulations and insurance costs.45
John Elkington and Pamela Hartigan, 8% ticked this box. Not surprisingly, given
The Power of Unreasonable People: How that few people have the money or Foundations and high net worth donors
Entrepreneurs Create Markets to Change inclination to finance a venture using their Foundations came in first place in terms
the World, due out in January 2008 from savings or credit card, this was the second of preferred funding sources (74%).
Harvard Business School Press. least preferred for the future. It was clear Despite some frustrations, those relying
38
www.acumenfund.org that those who had considered tapping on foundations in whole or in part
39
www.endeavor.org friends and family sources had concluded see them as a dependable funding source.
40
www.witness.org that it comes with intense personal One advantage in countries like the US was
41
www.phulki.org pressure, so tends to be avoided. articulated by Jim Fruchterman, President
42
www.cdi.org.br/portalcdi/indexeng.htm of Benetech: 46 There are the advantages
43
www.frcgroup.co.uk That said, we spoke to several entrepreneurs of size in the case of foundations and very
44
www.habitat.org who are developing hybrid enterprises rich people. An amount of effort is likely
45
www.nytimes.com/2007/02/22/us/ (part for-profit, part non-profit) during to land $250,000. A typical answer here
22habitat.html?ex=1172811600&en= the survey, and it was clear that this can was, Foundations will likely remain our
5be31f901a3b80e6&ei=5070&emc=eta1 be a pretty taxing route to funding. One mainstay. Where market failures are being
46
www.benetech.org entrepreneur noted that their latest round addressed, this obviously makes a good deal
47
www.summersearch.org of funders was asking for such demanding of sense. As Summer Search 47 put it, This
48
www.globalfundforwomen.org/cms personal guarantees that the family would is the landscape we know. Moreover, they
49
www.nyof.org probably end up selling our grandmothers noted, We feel that it is highly sustainable.
wedding rings if not our kidneys! More Others felt a growing need to learn more
positively, the handful of people who had about this sector. We need to deepen and
taken this route, for whatever reason, expand our understanding of philanthropy,
saw at least one key advantage: those said the Global Fund for Women.48
using their own money tended to practice
intense financial discipline. A small number of respondents mentioned
that they were trying to expand their
Public fundraising focus from foundations to high-net-worth
This (just) came in second, at 54%, with individuals, partly because they felt this
entrepreneurs underscoring the independ- was an untapped source, partly because
ence of action potentially derived from their expectation was that any funding
funding raised in this fashion. Fund- might come with fewer conditions.
raising events are more common in some It may take a good deal of effort, but
countries than others, with US groups successful cultivation of such relationships
particularly likely to go this route, among is seen as the bedrock on which other
them Acumen,38 Endeavor Global,39 fundraising can proceed. Over 16
and WITNESS 40 with celebrities often years, we have built up a donor base of
being used to draw in potential givers foundation and individual funders who
or investors. The general point about the are very loyal to our organization, and
desire for unrestricted funding was under- give year after year, said the Nepalese
scored by Phulki,41 based in Bangladesh, Youth Opportunity Foundation.49
which noted that, donor priorities change
almost every year, so our goals and
objectives will not always match with
those of the donors. To maintain our
own individuality, it is necessary to have
unrestricted sources of income.
Growing Opportunity 20
Survey Findings

Some social entrepreneurs have been Jim Fruchterman of Benetech noted that,
Earned income is a mark of successful in winning one or more of the Earned income is a mark of the value of
the value of your product growing number of corporate foundation your product and provides feedback
awards. Barefoot College, for example, from your customers. Easier to do, clearly,
and provides feedback from won the 2006 $1 million Alcan Prize for where markets are working to some degree,
your customers. Sustainability.50 In addition to the annual than where there are clear market failures.
Prize, nine shortlisted organizations for the Some saw their sector as less suited to this
Jim Fruchterman, 2007 prize will be awarded a $15,000 model. Education is an area where there is
Benetech Alcan grant to invest in capacity building a lower expectation of profitability, as the
training for the organization. Developed in Fascinating Learning Factory 52 put it.
partnership with IBLF, the Prize is awarded
to any not-for-profit, civil society or non- A fair few respondents mentioned a tension
governmental organization based anywhere at the heart of social entrepreneurship:
in the world that is demonstrating a on the one hand, there is a desire to give
comprehensive approach to addressing, away information for free, while on the
achieving and further advancing economic, other there is a need to earn revenue to
environmental and/or social sustainability. be sustainable. Weve not yet worked out
50
www.ethicalperformance.net a way to earn income from selling our
alcan_barefootcollege.html Not all corporate foundations are heading knowledge, said EarthLink.53 In the recent
51
www.shellfoundation.org into the social enterprise space, however. book, The Spider and the Starfish, the role
52
www.fascinating.tv As Kurt Hoffman, Director of The Shell of an intermediary, or catalyst, was
53
www.earthlink.net Foundation,51 told us, Our main focus, described. Such people have a difficult time
as you know, is enterprise solutions to earning income from ideas they give away
poverty in poor countries, where the lack to anyone who will listen. Our aim is to
of sufficient numbers of enterprises of all create a hybrid, where we draw people from
kinds is the major constraint on self- around the world to our website because
sustaining development emerging in those the causes we address are important to
countries. Rich countries and rich donors individuals, foundations and people in
like The Skoll Foundation are best able industry, and we earn income by the types
to afford to focus on promoting social of services and tools we use to support the
entrepreneurs. Poor countries mainly need learning and interaction of these people.
entrepreneurs. So we tend to avoid hooking
up or into the social enterpreneuring sector, Franchising
as worthwhile as it is. Both in the qualitative, in-depth interviews
and in the quantitative survey, this option
Governments and public sector seemed to be somewhat outside the
This route was favored by a significant mainstream, coming in eighth place (15%).
proportion of entrepreneurs, coming in A rare example of a social enterprise that
fourth place at 43%. Even for-profits saw is considering some degree of franchising
public sector agencies as a key funding is Child Savings International, which
source. They represent the shortest paths has at least thought of franchising its
to the level of funding we require, said Aflatoun brand to banks and other financial
one solar photovoltaics company, perhaps institutions. Founder and Chair, Jeroo
surprisingly. While some accessing Billimoria, is pursuing a dual franchise
government funding noted upsides, such model: one level addressing non-profits
as collaboration with leading scientists at and one for-profits. On the for-profit side,
government laboratories, public relations where the target is to partner with banks,
benefits, and access to government she is setting up Aflatoun, Inc., which will
procurement avenues, others felt frustrated own the brand and also, longer term, open
by the significant constraints associated up the option of raising money through
with government funding and by its capital markets.
prescriptive nature. Not surprisingly given
its accountability to citizens, government On the non-profit side, Jean Horstman
is often much less able to offer flexible (CEO, InnerCity Entrepreneurs) reports
funding guidelines that would match the that, We are in the process of testing out
needs of most social or environmental licensing as the way to scale our impact
entrepreneurs. quickly while growing our organization at a
reasonable pace. We are exploring creating
Sales and/or fees branches in the state of Massachusetts to
Over half (57%) of the respondents prefer learn to scale at the state level, while
to draw at least some of their revenues licensing our curriculum and support
from this source, which came in third place. services nationally.
Growing Opportunity 21
Survey Findings

On the for-profit side, Orb Energy is also One respondent even spoke of venture
We have had a significant using the franchising model to scale its capital gifts.
increase in companies operations in India, preferring this route
rather than raising additional capital. More typically, Drishtee 55 which
wanting to sponsor us. The franchise model, based on setting up aims to empower entrepreneurs in India,
The challenge is to remain branches, enables them to get closer to village-by-village spoke for many social
customers, while establishing a common entrepreneurs in saying that they look, in
selective and not to sell out. look and feel and affording greater all areas of funding, for sources of funds
Anonymous respondent economies of scale. A key challenge in that look for a commercial and social return
this approach, CEO Damian Miller notes, on investment (ROI), simultaneously. The
is to ensure that franchisees do not problem with the venture capital field, as
sacrifice quality for revenues. normally understood, is that considerations
about social ROI are likely to be even more
Joint ventures squeezed than in the financial mainstream.
Around a third (30%) of respondents
mentioned joint ventures as a form of IPOs and market listings
resourcing and it was clear that a fair This was very much bottom of the heap,
54
www.landminesblow.com few entrepreneurs plan to develop such coming in tenth place (2%) and with
55
www.drishtee.com partnerships, though a surprising number a degree of unease about the implications
56
www.gexsi.org expressed anxiety about their ability to and constraints expressed by a couple of
57
www.sports4kids.org identify suitable partners and strike a the entrepreneurs we interviewed in depth.
58
www.itnamerica.org balanced deal. That said, they all felt they The relatively slow progress of initiatives
had significant value to add. And those like the Global Exchange for Social
taking this route saw many non-financial Investment (GEXSI)56 hasnt helped.
benefits. Such partnerships, said Landmines
Blow!,54 help both parties leverage their As John Wood, Founder and CEO of Room
assets, such as their expertise and client to Read put it, The capital markets for
base, with other advantages including NGOs are blatantly inefficient. There is
sharing knowledge, the cultivation of new no mechanism that has the efficiency of
relationships, developing a continuum of the private sector (e.g. NYSE, NASDAQ,
care, working successfully in different private placements, venture capital) when
cultural settings, and [gaining] approval it comes to raising large amounts of capital
from the United States Federal Government especially unrestricted funding. This,
and the United Nations. of course, is one reason why SASE (Skoll
Awards for Social Entrepreneurship)
Optimistically, perhaps, the vision is that, recipients are so grateful for the large,
In a new world of virtual integration, unrestricted, multi-year funding. The NGO
the walls between enterprises crumble. world needs to have every large foundation
It is clear that those thinking about seriously study and hopefully emulate
this option are concerned about the this model. And what is true for NGOs is
implications. We have had a significant also true for most social enterprises.
increase in companies wanting to sponsor
us, said one, who asked to remain Other sources
anonymous. The challenge is to remain This category was selected by 17% of
selective and not to sell out. To maintain respondents. The main additional source
the purity of our program. The need to of funding identified was corporate
find out how to do such due diligence partnerships or sponsorship, although
was an issue often raised. that could potentially wrap in under Sales
and Fees or Joint Ventures. Most suited
Venture capital to this option are enterprises that address
One respondent described his challenge issues of interest to high-brand companies.
as, raising money for ideas that others Take Sports4Kids,57 which argued that,
have not accepted as workable. One because of our emphasis on youth and
way the mainstream economy deals sports, we are uniquely well-positioned to
with this challenge is via venture capital. establish significant corporate partnerships
Surprisingly, this came in fifth place, with with a range of industries, including
more than a third (39%) of respondents footwear/apparel, food, and professional
saying they plan to draw to some extent sports. Another enterprise, ITNAmerica,58
on venture funding. If true, this is a striking which focuses on dignified transportation
result, though it may reflect the inclusion for seniors, noted that corporate
of a number of cleantech entrepreneurs sponsorship is our riskiest revenue stream
in our sample and, possibly also, a mis- but we feel it has great promise, as we
understanding on the part of at least some represent a large and growing market.
social entrepreneurs of what venture
capital funding entails.
Growing Opportunity 22
Survey Findings

Figure 2.5 How will funding patterns change over Attracting talent when they cant offer
Manner of funding the next 5 years? competitive salaries was cited by many
Current N=92 organizations as a key development
Expected in five years N=99 One of most striking findings was the challenge. But, while the dominant
% remarkable collapse in the number of sentiment, it wasnt universal. Some
entrepreneurs expecting to be relying organizations cited high retention rates
completely on grants in five years even though they offered lower than
100 from 27% to 8%. On the other side of the market salaries. They believe that this is due
equation, there is an equivalent jump in to their ability to offer a work environment
90 those expecting to be funding their own that is challenging (including professional
operations, with no reliance on grants growth, learning opportunities), enabling
up from 8% to 28%. In the middle ground, their staff to focus on using their highest
80 we see a somewhat less dramatic fall in the and best value skill sets (bringing in lower
proportion of respondents saying that they skilled labor to do less fulfilling work), and
70 expect to be still relying on grants, but with providing a culture that is mission-driven.
some income 27% to 22% and a more A key advantage of the ability to retain
striking growth in the proportion expecting and develop staff is that an organization
60 a significant rebalancing in favor of earned keeps the tacit knowledge they have built
income from 38% to 50%. up of the field and players.
50
Balancing entrepreneurialism with
What are the main organizational professionalism and maintaining a focus
40 development challenges? on the mission and culture of the
organization. As social enterprises mature,
30 Social entrepreneurship is still seen by they require more professional and
some as a niche market, said Jacqueline business-oriented talent. But this poses
Novogratz, CEO of Acumen Fund,59 challenges in at least two ways. First,
20 comprised of a rather unique sort of existing staff may find it difficult to adapt
individual who feels comfortable straddling to the changing environment, when their
10 business and social incentives. There are generalist skills are no longer sufficient.
thus three main challenges around whether Second, new staff that bring more
and how it will move along the adoption professional capabilities may not have
No grants / Completely other income

Some grants / Primarily other income

Primarily grants / Some other income

Completely grants / No other income

curve and be accepted by a much larger the highest degree of sensitivity around
client base (translated into funders and the mission. Also, not everyone in an
foundations). First, the circle of visible organization can or should be entre-
social entrepreneurs needs to be expanded preneurial; social enterprises struggle
significantly so that experts are not always to find the right balance between those
pointing to the same examples of success. who should be creative and entrepreneurial
Second, there need to be more social and those (think lawyers and accountants)
enterprises demonstrating scale in terms who need to support the entrepreneurial
both of the number of people they reach culture with more professional and
as well as the number they impact structured approaches. Those entrepreneurs
indirectly and this means better measures who appear to be getting it right are
to communicate quantitative as well as very focused on these elements during
qualitative impact. Finally, there need to be the recruiting process, foster a culture of
more enterprises moving toward financial entrepreneurship through storytelling in
sustainability or at least having plans the organization, and make quick decisions
that demonstrate they will be around in the about letting people go who dont fit the
long-term. Associated with this is whether desired culture.
funders will be able to exit successfully,
but this is more derivative of the last point. Succession planning/leadership
59
www.acumenfund.org development. Many entrepreneurs
For our sample as a whole, the cited challenges around grooming their
overwhelming challenge flagged up in successors, in particular around finding
relation to developing their organizations talent that shared their vision for
had to do with people and talent. Specific growth/success of the organization.
points raised included the following: At the extreme, there were two fascinating
responses from Afghanistan that touched
on this issue of drawing talent from a
pool of people that have been beaten
down by war for nearly 30 years.
Growing Opportunity 23

60
See Buried Treasure: Uncovering To have any chance of changing the Just as software morphs through successive
the Business Case for Corporate world, entrepreneurial solutions must generations, 1.0, 2.0 and so on, we
Sustainability, SustainAbility and UNEP, offer relatively high leverage, be able to conclude that the time has come for
2001; and Developing Value: The Business replicate and scale, and fundamentally what we call 3.0 thinking in relation to
Case for Sustainability in Emerging become part of the market main- sustainability challenges. If 1.0 was driven
Markets, SustainAbility, the International stream. Pretty much without exception, by regulators and promoted a compliance
Finance Corporation (IFC) and Instituto the social entrepreneurs we interviewed mindset in business, 2.0 has been more
Ethos, 2002. A Developing Value 2 project were supportive of the idea of partner- about corporate citizenship, based on
is now under way. ships with corporations. They were also transparency, accountability and a growing
61
For more, see the work of scenario interested to further develop those array of voluntary initiatives (Figure 3.1).
planners Pierre Wack and Peter Schwartz. partnerships they already had, and to By contrast, 3.0 thinking, strategy and
develop more. ventures is different in that it seeks
transformative market and sustainability
But, why should business care? outcomes. It is about creative destruction,
SustainAbility has covered the business as Joseph Schumpeter called it, and about
case for corporate responsibility and creative reconstruction.
sustainability elsewhere,60 so what follows
is a headlines-only brief. In essence, Mindset 3.0 is about seeing
reperceiving 61 immense challenges,
such as the growing risk of abrupt climate
Its time to think different change, as potential opportunities to
leverage the power of markets and business
The first reason that business needs to to reboot entire economic and political
engage is that the world is changing and systems. This is exactly what is beginning
with it markets. Social and environmental to happen in the energy field. In some
entrepreneurs do not have all the answers, cases the time-scales involved may be
but they do see the world and markets generational, but the transformation is
differently, and the more innovative are under way. While the cleantech landscape
experimenting with new business models is now largely populated with pure-play
that could potentially break out of their profit seekers, the industry was pioneered
niches and help transform key elements by individuals who saw the opportunity to
of the global economy. leverage market drivers such as energy
security, stability, and cost to realize
There is a real risk that many business significant environmental outcomes.
The Business Case

people will chalk this up as another


fluffy, feel-good fad. There is every reason The situation is different in the developing
to be skeptical of any new movement or country healthcare field, where pulling on
agenda, clearly, but our industry analyses market levers does not work in the same
(summarized in Chapters 4 and 5) way, largely due to weak end-markets.
uncovered a variety of ways that social But the overwhelming unmet need for
entrepreneurs are doing things differently, good, well-funded, state-provided health-
realizing exciting sustainability outcomes care systems has not prevented social
and offering innovative opportunities for entrepreneurs from experimenting with
business. cross-subsidized business models (rich
patients fees covering the costs of the
poor, large companies assets and talents
being loaned for health outcomes).
Though their efforts often expose the limits
of current market-based social enterprise
approaches in areas like poverty, they
are spotlighting potential new markets,
experimenting with new business models
and modeling new leadership approaches.
3
Growing Opportunity 24
The Business Case

Five building blocks 3 Business models


Significantly, social entre- Much talked about during the New
preneurs are experimenting If you stand back, Mindset 3.0 thinking Economy era, an understanding of
and practice seems to have five main business models is now central to the
not only with business components: debate about how to create tomorrows
models but also with how value. Significantly, social entrepreneurs
1 Systems thinking and design are experimenting not only with business
value is defined and created. Leading social and environmental models but also with how value is
entrepreneurs are fabled for taking a defined and created. Many are pioneers
systems approach to major challenges in the social return on investment (SROI)
and related design issues. Like Michael space.64 They are also maximizing reach
Braungart and Bill McDonough of with Robin Hood business models that
MBDC,62 they pursue cradle-to-cradle enable services and products for poor
solutions. Such systems thinkers ask deep citizens to be subsidized by those with
questions with the customer in mind, a greater ability to pay. Examples here
e.g. how do I provide transportation include the Aravind Eye Hospitals,65
services to my customer rather than Narayana Hrudayalaya Hospitals,66
62
www.mbdc.com how do I sell more oil? and Freeplay Energy.67
63
shop.easybeinggreen.com.au/
categories.asp?cid=71&fromhome=true 2 Consumer engagement 4 360 accountability
64
www.redf.org/results-sroi.htm and Market solutions depend on consumers Any business mainstream, SME, or
www.svtconsulting.com/pdfs/ but social entrepreneurs have a rather social enterprise increasingly needs
sroi_analysis_1%5b1%5d.0.pdf and different take on customers. They work to work out how to be transparent and
http://sroi.london.edu/ with potential customers and consumers accountable to a growing range of real
65
www.aravind.org to co-create new markets and new and self-elected stakeholders. Think of
66
www.narayanahospitals.com product or service categories. In the the work of such entrepreneurial organ-
67
www.freeplayenergy.com health field, they champion the rights izations as Transparency International 68
68
www.transparency.org of consumers to hold service providers and the Global Reporting Initiative 69
69
www.globalreporting.org to account, even if they are not paying to increase corporate accountability
70
www.danone.com/wps/portal/jump/ for the service. Villagereach, for and transparency.
danonecorporateintl.press.commun2004 example, makes explicit its aim to
pressreleases?ref=cms.danonecorporate mobilize communities to take greater 5 Emerging economies
intl.press.2006pressreleases.trimestre1. ownership of health systems to promote At a time when there is growing
cp_160306 a social atmosphere of higher mainstream interest in base-of-the
expectations and greater accountability. pyramid markets, these people are in
They understand that most people, most the thick of the BoP action. They aim to
of the time, want to do the right thing. evolve new strategies to harness a wider
But things need to be made easier for range of resources to the task, while
them. Take a look at what Easy Being simultaneously experimenting with new
Green 63 is doing in Australia. It was ways of meeting the myriad needs of
founded to help people actively tackle poor people. Their hands-on knowledge
climate change. A crucial key to success of such markets and of the political
here is understanding the power of a and regulatory environments potentially
million small actions to add up to truly offers hugely valuable market intelli-
significant outcomes. gence to mainstream business. Consider
the strategic alliance between Danone
and the Grameen Bank 70 to bring
valuable products and services to
poor communities.

Transformational
Figure 3.1
Towards Mindset 3.0 3.0
Sustainability impacts
against market drivers

2.0
Impacts

1.0
Incremental

Risk Drivers Opportunity


Growing Opportunity 25
The Business Case

Paths to partnership The first, sketched in Figure 3.2, is


We already are seeing a where the company makes investments
changing zeitgeist among When we asked Acumen Fund CEO in social entrepreneurs who are focused
Jacqueline Novogratz how she saw the on sustainability areas of interest to the
many employees of big interface developing between business company, such as climate change, poverty,
corporations. and social entrepreneurs, she replied, or health care. The company provides
In many ways. First, we will see more financial resources to the social
Jacqueline Novogratz, corporations reaching out to social entrepreneur, as well as talent and access
Acumen Fund enterprises and traditional NGOs to to the companys networks. In turn, the
facilitate the strengthening, expansion, company potentially achieves enhanced
and deepening of their own supply chains. sustainability outcomes and has the
Corporations are designing and developing opportunity to boost its brand through
affordable, useful products for the poor the promotion of its support for the social
but they lack the real understanding of entrepreneur. Employees of the company
how poor communities work and, in some who work with the social enterprise are
cases, lack the flexible distribution systems often inspired by the experience and bring
(and trust) to reach those communities this morale boost and creative thinking
71
www.ksg.harvard.edu/m-rcbg/CSRI/ effectively. NGOs and many social back to the company.
publications/workingpaper_20_ entrepreneurs, on the other hand, can have
nelson_jenkins.pdf a deep knowledge around markets serving Given the lack of capital and other critical
the poor but may lack the infrastructure, business resources available to social
resources, or management depth to bring entrepreneurs, this enhanced philanthropy
needed products to them. A marriage role is an important one for companies to
or at least negotiated relationship between consider. As an example, the John Deere
business and social enterprises can bring Foundation recently provided $3 million to
significant synergies with benefits to both KickStart, an innovative social enterprise
parties objectives. Second, we already are that creates and markets tools to help end
seeing a changing zeitgeist among many poverty in developing countries.
employees of big corporations, so we will
likely see more activity from employees Despite the undoubted attractions of
at all levels of a MNC that are focused on the Enhanced Corporate Responsibility
serving social enterprises and the poor approach, however, a second partnership
directly. NGOs also see that their funding approach the Hybrid Value Chain
is increasingly dependent on concrete (Figures 3.3 and 3.4) is emerging as
reliable results, and so we will see potentially even more promising. Anecdotal
increasing activity on that front as well. evidence suggests that greater strategic
engagement with social entrepreneurs
Still, the paths to meaningful engagement offers the potential for greater returns
and partnership are far from clear. The to both parties.
best work we have found to date on
partnerships in this area comes out of
Harvard University, and was produced
by Jane Nelson and Beth Jenkins.71 Below,
we briefly look at two different types of
partnership currently being tested: (1)
Enhanced Corporate Responsibility and
(2) an approach that Ashoka calls Hybrid
Value Chains.

Figure 3.2
Benefits of enhanced corporate responsibility

Employee inspiration Financial contribution


MNC Brand/reputation boost Management know-how SE
Enhanced sustainability outcomes Network access

Multinational Social
corporation entrepreneur
Growing Opportunity 26
The Business Case

With continuing globalization, the potential Access to information, markets, and


Unexpected lessons from for social and environmental entrepreneurs networks: Many social entrepreneurs
emerging markets can be to help multinational and more local are working with populations and in
companies is growing all the time. Ashokas communities unfamiliar to large
applied in more traditional program aims to develop a framework for corporations. Collaboration offers
markets. sustainable commercial partnerships where companies access to information about
business and social organizations join potential consumers and partners and in
forces to make critical products and many cases, lends additional credibility.
services available to low-income citizens In addition, many entrepreneurs have
around the world without being limited by an interest in helping build markets for
the artificial divide between both sectors. affordable and accessible mainstream
Each partner creates economic and social products. They can provide marketing
value by leveraging each others core support for the company. The partner-
competencies. Differing from traditional ship between CEMEX, a cement
corporate social responsibility relationships, manufacturer, and SISEX, a sexual
Hybrid Value Chains are commercial in education organization, to create
nature with each partner receiving affordable housing solutions for low-
72
www.ashoka.org/hvc economic benefit according to their role income Mexican women is indicative
and transaction in the partnership. Ashokas of the unique approaches being devised
goal for the approach is to tip the system between entrepreneurs and corporations.
and to create a mind-shift among business
leaders and social entrepreneurs. 72 Interestingly, unexpected lessons from
emerging markets can be applied in
As sketched in Figure 3.4, potential benefits more traditional markets. Pre-pay mobile
to the company partner include: phone payment structures applied first
in developing countries due to the lack
Outsourcing risk: By outsourcing of bank accounts proved imminently
research into sensitive or unfamiliar transferable to the youth market in the
areas, such as pharmaceuticals for industrialized world. A knowledge and
emerging markets, new energy alter- understanding of developing country
natives, or enhanced foods, companies markets has the potential to yield lessons
can minimize potential brand risks, yet for the development of new business
ensure that they stay close to emerging models, based on the interconnected
trends. They also may be able to bypass world, such as health tourism or the use
strict internal controls around return on of technologies in healthcare compliance
investment criteria that would prevent or market data for internet sales.
the company investing internally in high
risk, entrepreneurial ventures. PATH and Inspiration: Collaboration with social
GSK Bio and their joint development entrepreneurs can help companies to
of a malarial vaccine is just one example tap or recharge their entrepreneurial
of how a corporation can benefit from and creative spirits, resulting in
collaboration on research and innovative new product development
development. (e.g. microinsurance, green products).
Consumer goods companies, such as
Nike and Marks & Spencer, are looking
to social entrepreneurs as a source of
innovation and competitive advantage
in developing new products.

Figure 3.3
Ashokas Hybrid Value Chain TM

Business Citizen sector


organization

Product Production Distribution / Sales and Financing Low-income


development Logistics marketing markets
Growing Opportunity 27
The Business Case

Employees can also be remotivated when A number echoed the advice of


The potential for cross- working on inspiring projects. Many people more traditional NGOs,75 noting that
fertilization between social within companies (in particular the partnerships work best when there is a
technical experts, engineers, doctors, clear set of principles and expectations
enterprise and mainstream scientists, etc.) want to feel they are guiding the partnership (e.g. we only
corporations is huge its contributing to wider social needs, and work on projects related to our mission,
support for or engagement with social we respect commercial confidentiality,
utterly revolutionary. entrepreneurs can be a way of permitting we understand our business partners
Sara Olsen, Social Venture them time to do so. Through partnerships, need to pursue ventures that allow
employees at big companies get infected them to make a profit).
Technology Group with a mindset and energy. Some
companies are already aware of this They also stressed that the entrepreneur
witness GSKs commitment of staff to a and partner must have comparable
number of developing country initiatives, levels of interest in the partnership.
or Shell lending engineers to work on Where there is an imbalance of power or
hydrogen-powered mobility with pioneers interest in the partnership, all-too-likely
at Formula Zero.73 given the relative scales of the partners,
73
www.formulazero.nl the partnership is very unlikely to achieve
74
The results of a study by Sara Olsen and Those who have worked in this field for intended outcomes.
Paul Herman on the environmental and some time are excited by the pace of
social performance of 21 mainstream developments at the interface between Longer term partnerships are typically
corporations are due to be published in business and social enterprise. The sleeping preferred, with social entrepreneurs
Fast Company, April 2007. giant is awakening, says Sara Olsen of seeing their organizations and the
75
See, for example, The 21st Century NGO: Social Venture Technology Group. The environments in which they operate
In the Market for Change, SustainAbility, potential for cross fertilization between as complex, requiring time for an
The UN Global Compact and United social enterprise and mainstream outsider to learn. Cleantech companies,
Nations Environment Programme, 2003. corporations is huge its utterly in particular, want to bring in corporate
revolutionary. 74 partners early to ensure later options for
potential acquisition, what they describe
as a locked-in exit strategy.
Rules of engagement
The role of internal champions in
While our survey revealed willingness on partner companies is cited as essential
the part of social entrepreneurs to engage to building good partnerships. For
corporations, it also highlighted concerns Gary Hirshberg of Stonyfield Farm, this
about the potential for mission creep, brand has been Danone CEO Franck Riboud.
erosion and power imbalances. Feedback Clearly, however, this approach poses
from more seasoned entrepreneurs in our real dangers when the individual moves
sample offered insights into what would or leaves. Even with engagements that
make corporate partnerships most likely occur at the senior management /
to work. corporate level, there are concerns about
partners pulling out, indicating a need
for entrepreneurs to be adaptable, have
a Plan B, and avoid relying too heavily
on any one individual or department
for support.

Figure 3.4
Benefits of the Hybrid Value Chain

Credibility Financial investment


MNC Access to networks Management know-how SE
Reduced risks Network access
Market insights
New products
Multinational New services Social
corporation New business models entrepreneur
Growing Opportunity 28
The Business Case

Next, deeper dives As background to our analysis of the worlds


New faces, new energy of social and environmental entrepreneur-
ventures, are beginning Whatever the sector, global challenges ship, we talked to Colin Le Duc, Head
mean that its time to s-t-r-e-t-c-h (see of Research at Generation Investment
to dominate the debate coverage of X Prize Foundation, Panel 3.1). Management,76 and itself a form of social
and leaving the incumbent To get a better sense of how all this is enterprise, about the differences between
playing out, Chapters 4 and 5 take a closer the energy and healthcare sectors. He
big energy companies in look at two key sectors: healthcare and noted that they see a huge amount of
their wake on the issue energy. Our twin aim is to deepen the dives innovation in both sectors, from the full
in these sectors in the future and to range of companies large public to
of innovation around expand the approach to look at more small cap to private. And globally, too.
sustainable energy. sectors.
On healthcare, he stressed that, biotech is
Colin Le Duc, Generation There are striking contrasts between where all the innovation is. We see a huge
Investment Management the two sectors. As Acumen Fund CEO, amount of interest in DNA and genomics
Jacqueline Novogratz, put it, Health generally. Plus, we see a major trend around
tends to be a more distorted market when the cross-over between health, food, and
76
www.generationim.com speaking of the poor. It is highly subsidized energy. The trade offs in biofuels i.e.
and largely government-driven. There land for food or land for energy are well
are huge opportunities to create social documented, but we also see innovation
enterprises in this sector given the around nutraceuticals and new genetic
significant resources available, but it materials. In addition, we track companies
takes harnessing large government like CIPLA in India, who are innovating
contracts, measuring output effectively around new HIV drug delivery systems.
and navigating often tricky political terrain. And Novo Nordisks work around diabetes
Energy, on the other hand, often overlooks continues to be stunning, too. This view
the poor entirely and so markets for the from the emerging mainstream illustrates
poor are often not distorted, but instead the difficulty faced by social entrepreneurs
are simply out of reach for poor people. in the field, because their ventures and
Look at solar energy as an example where predicted returns (where they exist) fall
many effective technologies exist but very far below the radar of even the most
few, if any, are truly viable at household progressive of investors.
level. At the same time, there seems to
be a tremendous surge of resources into On the energy front, he noted that,
alternative energy, including for the poor. The cleantech boom of recent years
These resources still seem to be coming is manifesting in various ways: large
more from private sources and so this corporates are buying an unprecedented
differentiating characteristic where number of private cleantech companies.
funds come from is still the critical For example, in 2005 alone Danaher
differentiator. bought 78 cleantech companies. I believe
the same dynamic that has happened
Most social enterprises tackling health- in the Big Pharma sector - where all
care continue to operate as charities the innovation is coming from biotech
(i.e. foundation-funded non-profits). companies and Big Pharma gets ever
While highly outcome-oriented, these less return on its R&D spending is also
organizations with a few notable now happening in Energy. New faces,
exceptions struggle to secure more new energy ventures, are beginning to
sustainable modes of financing. Energy dominate the debate and leaving the
start-ups, at least in the developed world, incumbent big energy companies in their
tend to have the benefit of robust capital wake on the issue of innovation around
and consumer markets for their products sustainable energy.
and services. That said, exceptions remain,
in large part among entrepreneurs focused
on bringing energy to the worlds poorest.
Here, too, however, promising examples
are emerging, such as Orb Energy,
a venture-capital-backed enterprise
selling inexpensive solar systems to
Indian customers, ranging from farmers
to technology companies. Interestingly,
much of the business was previously
part of Shell Indias renewables business,
but was spun out.
Growing Opportunity 29
The Business Case

Panel 3.1 There are at least five reasons, they say.


Revolution Through Time to s-t-r-e-t-c-h First, because 40% of world oil output
Competition fuels the automotive industry and, in
A significant proportion of those we the US, 65% of oil consumption is in the
X Prize Foundation spoke to outside the fields of social and transportation sector. Second, because
environmental entrepreneurship see a key automotive emissions contribute
impact of all this effort as being a useful significantly to global climate change.
spotlighting of the need for all parts of Third, because there are no mainstream
business to be more innovative and consumer choices for clean, super-efficient
entrepreneurial in meeting social, vehicles that meet market needs for
environmental and governance challenges. price, size, capability, image, safety, and
But for a real stretch, try the X Prize performance. Fourth, because the
Foundation, which really encourages automotive industry is stalled legislation,
innovators and entrepreneurs to think regulation, labor issues, manufacturing
outside the box.77 They create and manage costs, legacy costs, franchise laws, obsolete
prizes that encourage innovators to solve technology, consumer attitudes, and many
some of the greatest challenges facing the other factors have combined to block
77
www.xprize.org world today. Their motto: Revolution breakthroughs. Fifth, because increases in
Through Competition. Now the Foundation engine efficiency have been spent on
is moving beyond aerospace (its original increased vehicle power, acceleration, and
area of focus) to tackle some of the weight, rather than on increased fuel
challenges that social and environmental economy. And sixth, and fundamentally,
entrepreneurs are concerned about. because we believe there is great
opportunity for technological change.
We asked Tom Vander Ark, the Foundations
President, what lay behind this shift. The obvious next question: is it any harder
First, how did the decision to move beyond to pick suitable targets for social and
aerospace happen? Larry Page, Google co- environmental challenges? Setting goals
founder, believes in the power of prizes and and writing rules is hard in all cases
joined after we awarded the Ansari X Prize its the secret to a great prize, Vander
for space, Vander Ark recalled. He then Ark answered. The difference between
encouraged the board to consider a broader innovation and revolution is large scale
mission. And how are the next generation adoption. We attempt to create goals,
priorities being selected? Were attempting rules, competitions, and public campaigns
to identify the worlds biggest problems, that result in revolutionary change, not
particularly those susceptible to innovation just awards for good ideas.
through competition, where its possible
to set a difficult but achievable objective, Any guesses as to where all this is going
and where its likely that we can secure a to take the Foundation? By next year, he
prize purse. said, we will have launched prizes in four
areas (space, genomics/medicine,
Evolving at the moment is the Automotive transportation/energy, and education/
X Prize, which will encourage car designers poverty reduction), will have full prize
worldwide to design, build and sell super- teams, and well-developed shared services.
efficient cars that crucially people By 2009, we will have developed several
want to buy. Why? revenue engines that will make it a
sustainable world class prize platform.
Watch this space.
Growing Opportunity 30

Few things are as important as our Good health is an important goal in


Good health is an health and the health of our families. itself a key human right and, equally
important goal in itself A hundred and fifty years ago life important, a pre-requisite to allowing
expectancy at birth in the rapidly individuals, families, communities, and
a key human right. industrializing and urbanizing countries nations to achieve the economic
of Europe was just 40 years. Since development that permits access to better
then, income growth, better nutrition nutrition, housing, sanitation, and
and housing, medical advances, and healthcare.
overwhelmingly access to clean
water and effective sanitation, have That said the provision and delivery of
revolutionized public health so that healthcare services in all their many guises
life expectancy has risen to between is immensely complex. Critically important
75 and 80 years in the industrialized are preventive measures such as health
world. In contrast, for an unacceptably education, good nutrition, and access to
long list of developing countries, clean water and sanitation services;
including Afghanistan, Angola, Botswana, research and development into medicines,
Lesotho, Liberia, Malawi, Somalia, diagnostics, vaccines, and other healthcare
and Zambia, the needle still wavers products designed to diagnose, prevent,
stubbornly around the 40-year mark. and treat illness and other conditions;
healthcare delivery the complex interplay
Three diseases, HIV/AIDS, TB, and Malaria, between community and hospital care,
disproportionately impact mortality and patients and medics, supply and demand,
morbidity rates, though many developing governments and markets, expectations and
countries have seen a rapid rise in the realities. It generates strongly held and
incidence of so-called western diseases, hotly defended views about the role of
including diabetes, cardiovascular disease, public bodies in setting standards, a strong
cancer, and hypertension. Figure 4.1 regulatory environment, safety, and above
illustrates the incredible gap that remains all equitable access to healthcare.
between critical health needs and the
current offering.
Deeper Dive: Health

Figure 4.1
The treatment gap
Total current
Total needed

HIV/AIDS
Antiretroviral treatments
384,000
40,000,000
Tuberculosis
DOTs treatments
1,000,000
2,000,000,000
Malaria
Pesticide-treated bednets
7,700,000
500,000,000
4

Source: Global Health Fund and WHO


Growing Opportunity 31
Deeper Dive: Health

The kaleidoscopic nature of these tasks and The result is an enduring belief in medicine
For good or ill, there is a the immediacy and importance of the end as an entitlement, coupled with a resistance
widespread and deeply goal has attracted hundreds of social to arguments about commercial realities
entrepreneurs into the health space where such as profit maximization. However real
held public unease at the they have applied ingenuity, determination, such considerations are for companies
role of private enterprise and creativity to the huge challenges of delivering healthcare in poor markets, they
meeting healthcare needs of the some of are all too readily interpreted by critics as
at the heart of healthcare the poorest people in the world. Figure 4.2 profiteering from sick, poor people in the
delivery. highlights some of the challenges facing case of drug companies or, in the case of
the healthcare sector. water utilities, putting profits ahead of a
basic human right.

Relevance to business Although this attitude may provide a


mighty disincentive for companies to
Even to frame the relevance to mainstream engage in these markets, paradoxically
business of what social entrepreneurs and heres the rub demand for their
are doing in the health arena in terms active engagement as a partner in solving
of a business case can be fraught with some of the more intractable health-related
difficulties. For good or ill, there is a problems in the developing world continues
widespread and deeply held public unease unabated and is likely to grow.
at the role of private enterprise at the heart
of healthcare delivery, and any high profile In a globalized economy, emerging markets
reminder of commercial drivers can lead are increasingly critical to mainstream firms
to an outpouring of moral outrage about as a source of growth opportunities, cost
distorted priorities. One key reason: since efficiencies and political risks. Forecasts
the Greek philosopher and Father of for drug and overall health expenditure
Medicine, Hippocrates, launched his increases in China and India between 2007
Hippocratic Oath in around 350 BC, and 2009, for example, are predicted to rise
medical ethics have sought to put the from $30 to 40 billion and $132 to 163
best interests of the patient above all billion, respectively.
other considerations.

Figure 4.2
Challenges

Prevention

Low levels of health education


Lack of clean water
Low vaccination rates
R&D

High cost of medicine


Drug development focused
on profitable markets
Delivery

Poor transportation infrastructure


Insufficient numbers of health workers
Inadequate government infrastructure
Growing Opportunity 32
Deeper Dive: Health

How healthcare firms respond to the need PATH, a not-for-profit organization


In Africa, men, women, to balance market realities with access specializing in global health, is taking
and children are dying of issues is likely to have an impact on their a systems approach to addressing these
license to operate in all markets; to have challenges. Identifying critical gaps in
easily preventable diseases, a bearing on the attraction and retention healthcare systems, PATH establishes
simply because they cannot of talented staff; to offer opportunities unique partnerships and leverages tech-
to develop the critical skill of partnering; nology to develop resilient and enduring
be reached. and may even come to be seen as a proxy solutions. Examples include the adaptation
for competencies relating to the of food industry technologies to develop
management of that core value driver of a means of telling health workers whether
many industries: innovation. the polio vaccine they plan to use has
gone bad on its long journey from Europe
to Africa. The vaccine vial monitors
Health sector milestones and (HEATmarker), developed with TEMPTIME
entrepreneurial solutions Corporation and the WHO, are printed
directly on vaccine vial labels and darken
Below, we highlight just a few of the with exposure to heat over time. This
remarkable examples of how Mindset 3.0 simple technology means no more
entrepreneurs are breaking log-jams and uncertainty, no more waste.
advancing healthcare provision. While none
of the models unsurprisingly delivers The organizations vaccines work also
direct returns to shareholders comparable involves partnership based initiatives
with operating in mainstream markets, they dedicated to helping vaccines from the
do provide examples of how out-of-the-box laboratory into clinical development
thinking can turn at least some challenges efficiently and quickly, both to combat
into opportunities. malaria and the deadly Streptococcus
pneumoniae, or pneumococcus, which
causes the deaths of up to one million
children under age five each year.
Systems thinking and design:
PATH to global health Elsewhere systems thinkers are considering
a key missing link in relation to healthcare
As already noted, healthcare delivery is delivery: transportation. In Africa, men,
a highly complex system of prevention, women, and children are dying of easily
research and development and delivery. preventable diseases, simply because they
When one element of this system breaks cannot be reached. Riders for Health
down, it can have devastating born out of the world of motorcycle racing
consequences. tackles the problem by putting in place
reliable, preventative maintenance systems
Take vaccination for example. In developed for two and four wheeled vehicles used
countries where vaccinations are in- in healthcare delivery. This innovative work
expensive and accessible, diseases such is managed by wholly African teams, and
as polio and measles have been all but means that healthcare in these areas is
eradicated. Not so in poor countries. very much less likely to be undermined by
Roughly one child in four does not receive vehicles failing, no matter how harsh the
the vaccines s/he needs despite the fact conditions.
that it only costs $30 to immunize a child
against the greatest childhood threats. Villagereach is another social enterprise
The value of vaccination preventing attempting to go the last mile in
disease before it takes root and protecting healthcare delivery, according to founder
children at their most vulnerable and Blaise Judja-Sato. Its business is focused on
the advances in technologies has led to the the logistical challenges and infrastructure
development of large scale immunization gaps facing those who want to take
programs such as GAVI and IAVI, and has affordable, safe, and effective healthcare
made possible national immunization delivery into very poor environments
programs which the World Health be they transportation, issues of cold
Organization (WHO) estimates averts storage, quality control, or staffing.
around 2 million deaths a year. Yet, despite
these advances, issues such as poor
transportation infrastructure, inadequate
delivery vehicles, and lack of funding
still keep vaccines out of reach for most
poor children.
Growing Opportunity 33
Deeper Dive: Health

Like many of the social entrepreneurs And, how do they ensure that they provide
Sadly, the health field featured here, Villagereach dedicates sufficient quality given customers inability
still seems dreadfully considerable time and effort to developing to pay premium prices. The most successful
strategic partnerships and mobilizing entrepreneurs in the field are those who
stuck. Structurally, it has communities to take greater ownership have developed a hybrid model appropriate
incentives for innovation of health systems to promote a social to the market in which they are operating.
atmosphere of higher expectations and
in a few limited areas greater accountability. Critical to its work Mainstream firms have found it impossible
(certain pharmaceuticals is a desire to promote local economic to meet these needs and meet required
development as a means of developing margins. Those same firms, however,
and medical appliances) but sustainable healthcare delivery and the in partnership with social entrepreneurs
virtually nowhere else in the support of weak government health and with some financial support from
systems. government, have developed means to
system. In fact, the human bring services to people, at profit margins,
delivery dimension of health appropriate to the market environment.
Critically, this means that the service
care is an appalling mess. Empowering consumers: teaming up expands to meet the needs of more people,
The current high-tech-led at prices they can afford. The initiatives
Despite its ethical tradition, the health highlighted here are illustrative of how
focus on the technical care sector struggles with the concept of entrepreneurial thinkers are taking on
elements of health delivery consumer (patient) focus. As one US-based this challenge:
social entrepreneur put it health care
for a few diseases in a few companies dont develop products and Challenges around secondary care
places continues this services with consumer needs in mind India is a market that offers impressive
and often financial incentives run counter opportunities, alongside considerable
unhelpful imbalance. to the notion that patient health is challenges. With annual growth rates
Bill Drayton, Ashoka paramount. Health education is one way of 8%, the growing middle class is now
that social entrepreneurs are helping to made up of 150 million Indians. A further
empower consumers to demand decent 300 million people live on less than a
healthcare. From Afghanistan to America, dollar a day and 50% of all Indian
entrepreneurs are emerging in this space children are malnourished. The majority
with myriad creative and cost-effective of healthcare services are provided by
solutions. the private sector. Government coverage
despite the abject poverty of so many
EduSport, which runs programs like people only accounted for 25% of
Go Sisters and Kicking AIDS out!, is a total health spend in 2003. Out-of-
community-driven NGO based in Lusaka, pocket health expenditure as opposed
Zambia. It uses sport to tackle issues like to social security or private insurance
HIV/AIDS, poverty alleviation and child accounted for 97% of total expenditure
rights in underprivileged communities in in the same year. The net result is that
Zambia. Sport is becoming a powerful tool secondary care treatment in hospitals
for change as entrepreneurial thinkers have is way beyond the reach of millions
realized activities like soccer are also of Indians.
vehicles for communication and youth
empowerment. More interestingly, this In response to this exceptionally grim
unique approach is recruiting highly picture, Dr. G. Venkataswamy (Dr. V)
influential players onto the field. created Aravind. What started in 1976
In particular, Nike is teaming up with as an 11-bed eye clinic in an old temple-
GlobalGiving.com an internet donation city has grown into the largest and most
site to raise awareness and money for, productive eye care facility in the world.
social entrepreneurs who take a sport for Unlike many social enterprises, it is
social change approach. completely self-sustaining and now
treats over 1.7 million patients each year,
two-thirds of them, for free. From its
beginning it developed a Robin Hood
Business models: an Indian Robin Hood business model of borrowing from richer
eye patients to fund operations of the
Creating a market-based solution to bring poor. The business model is stated up
essential services such as water and front and built into discussions about
healthcare to poor citizens is a sensitive fees. It has proved entirely socially
proposition. How does a company balance acceptable to those who pay.
the rights to basic services with the need
to make money to sustain the enterprise?
Growing Opportunity 34
Deeper Dive: Health

Likewise, Narayana Hrudayalaya In an innovative attempt to address


A companys license to Hospitals are using a similar model these lessons, WSUP (Water and
operate may come to to provide cardiac surgery and other Sanitation for the Urban Poor) brings
health care services to patients in India. together companies (RWE, Thames Water,
depend on managing such The company has also worked with the Halcrow Group, & Unilever) with NGOs
expectations by supple- government to adapt this model for (CARE, WaterAid, WWF) and government
health insurance provision. to develop commercial projects that:
menting its business model deliver a return (at around 7% to 10%
with creative, non-market Clean water and sanitation services designed to guarantee sustainability,
The strong link between improved human not maximize profits) to commercial
or partial market-driven health and access to clean water and participants; promote community health;
responses. effective sanitation is now incontro- have a positive environmental impact;
vertible and explains why halving the and are sustainable over the long-term.
proportion of the world population
without access to safe drinking water
and basic sanitation is a target of the
Millennium Development Goals (Goal 7, 360-degree accountability: open kimono
target 10). Despite this, 1.1 billion people
still lack adequate access to clean water, For any company with global aspirations
2.6 billion have no basic sanitation and wherever it may be domiciled the
government action to meet these needs challenges of doing business in markets
falls far short of what is needed to get of great wealth disparity and weak state
even close to the 2015 target. regulation are considerable. In many
sectors, countries at the upper end of
The privatization of many public the development scale offer important
utilities in the 1990s, followed by the prospects for future growth. At the same
enthusiastic expansion of western-based time, the needs of poor people for products
water utilities into developing countries, and services especially those with a
did not deliver promised results either strong social component, such as water
to the companies themselves or to or health, and where state provision is
water consumers. The complexities of inadequate will likely translate into
increasing poor peoples access to water direct demands of companies. A companys
in highly fragmented markets (where license to operate may come to depend
they face a bewildering array of service on managing such expectations by
providers including public utilities, supplementing its business model with
private stand-pipe operators, water creative, non-market or partial market-
trucks, vendors in kiosks and agents) driven responses.
proved insurmountable to some. Profit
margin predictions, based on increased Even in developed markets, the sky-
use following expansion of the service to rocketing costs of healthcare are
more consumers, proved wrong as the challenging companies traditional
price meant people consumed less water. blockbuster approach to profits.
One World Health (OWH) and its open
Faced with political opposition to kimono approach to drug development
privatization irrespective of the poor is one to watch in this space.
standard of much public service provision Pharmaceutical chemist, Victoria Hale
and the difficulties of establishing now an icon of the social entrepreneur
a license to operate, many companies movement used her skills and expertise
concluded that the provision of water to to create the worlds first not-for-profit
poor people under the existing business pharmaceutical company. OWH is
model was not going to work. Some firms dedicated to the development of safe,
have withdrawn altogether. Others, have effective, and affordable medicines for
absorbed the somewhat bruising lessons people with infectious diseases in the
from the experience and, drawing on developing world.
the complementary skills of a range of
partners to deliver water and sanitation
services, have tried to shift to a model
that focuses on delivering returns at the
same time as fulfilling a social contract
and sustainability.
Growing Opportunity 35
Deeper Dive: Health

OWH takes dormant intellectual property, Consider the work of Vera Cordeiro in
As companies consider owned by academia or companies in Brazil, who understands that the success
these markets, they have the pharmaceutical and biotechnology of patient care is undermined by the
industries, and develops it into medicines severe poverty in her country. Children
much to learn from social to treat infectious disease in developing often leave the hospital and return to
entrepreneurs who have countries. Its flagship project has inadequate housing, poor nutrition, and
successfully taken paromomycin through other conditions that prevent them from
developed successful cross- clinical trials as a treatment for Visceral healing. Her organization, Association
subsidized business models Leishmaniasis. Partnering with the Indian Sade Criana Renascer, is addressing this
government has secured OWH a distribution problem by providing post-hospitalization
that serve those who agreement to guarantee the treatments assistance to the families of poor children
can and cannot pay availability for those who need it most recently discharged from the hospital.
Indias rural poor. The companys The work of its network of volunteers
simultaneously. transparent and collaborative approach to means that at Hospital da Lagoa a large
drug development provides an intriguing public hospital in Rio de Janeiro, where
model for traditional pharmaceutical the flagship Renascer is based paediatric
companies and their stakeholders to re-admissions have dropped by 60%.
78
www.ssireview.org/site/printer/ consider. Interestingly, following interest The Renascer model has proved easily
victoria_hale from investors, the company is considering transferable and ideal for locations in which
the potential of a for-profit approach.78 disease is exacerbated by socio-economic
factors. It has spread to an additional 17
hospitals in Brazil and served more than
26,000 people to date.
Emerging economies: smart solutions
Or take Laura Peterson, Executive Director
Until now, the priorities for the global of Hands to Hearts International (HHI),
health community have been infectious a nascent operation in India that promotes
diseases, and in particular, HIV/AIDS, early childhood development. HHI combines
malaria, and TB. Public-private partnerships, economic development/empowerment for
and much of the work of social entre- disadvantaged women with desperately
preneurs, have focused on these infectious needed health services for orphaned
diseases. However, disease profiles in children. Their simple model is yielding
developing countries are changing as a impressive results. Further, HHI is learning
result of urbanization, a more sedentary important lessons about how to work
lifestyle, less physically demanding work, effectively in India. HHI goes beyond simply
changing diets and an increase in smoking. improving the conditions for the children
Even among poorer communities, so-called in orphanages HHI takes aim at the root
diseases of the affluent diabetes, cardio- causes, forwarding womens access to
vascular disease, cancer, and hypertension education and economic empowerment.
are increasing at alarming rates. The world has come to recognize that the
health of our worlds children is inextricably
Many pharmaceutical and healthcare tied to the empowerment of our world's
companies see the emerging markets women, says Peterson. Smart solutions
as important sources of future growth. need to address societal factors to reach
For example, in 2006 cardiovascular core causes. By looking at issues in a
drugs already sold more than any other holistic context, entire communities reap
therapeutic category in the Asia-Pacific long-term benefits and unpredictable and
market. But the complex interplay of profound health outcomes follow.
medical need and capacity to pay pose
significant challenges. As companies
consider these markets, they have much
to learn from social entrepreneurs who
have developed successful cross-subsidized
business models that serve those who can
and cannot pay simultaneously. In addition,
they can gain significant insight into
cultural and socio-economic factors that
contribute to successful operations in
these markets.
Growing Opportunity 36

79
www.un.org/millenniumgoals Surprisingly, and unlike health, energy Taken together, these three factors could
is not mentioned explicitly in the top well aggravate the energy picture, driving
level of the UN Millennium Development many forms of fuel out of the reach of the
Goals.79 Yet its availability, its pricing and worlds disadvantaged communities and
the environmental sustainability of its populations.
production, supply and use are absolutely
intrinsic to meeting all the other Goals. As with the previous Deeper Dive into
Meanwhile, even if activists see access to health, the purpose here is to investigate
clean, affordable energy as increasingly the potential contribution of social and
akin to a basic human right, the environmental entrepreneurs in relation
prospects for providing a predicted global to a critical area of need, from several
population of 9-10 billion people by different angles. The first thing to say about
mid-century with adequate, sustainable the potential of such entrepreneurship is
energy to meet their needs let alone that this is still very much a micro-David
their wants and desires seems remote. and macro-Goliath situation, with any one
of the major energy groups among them
That said, there are some grounds for hope the worlds great petrochemical companies
in the recent coincidence and convergence doing more in a single day to meet
of three megatrends: oil price rises, growing human energy needs than all social and
concerns about energy security in the environmental entrepreneurs do in a year,
context of a political uncertainties around although the vast majority of these energy
several major oil production regions, and flows are based on carbon-intensive gas
the profound longer-term threat of climate and oil that is consumed in rich markets.
destabilization. But the key point is that much of the
potential of social entrepreneurship flows
from a new mindset that these people
model.
Deeper Dive: Energy

Figure 5.1 Sources for figures 5.15.5


World marketed energy: History: Energy Information Administration
consumption 19802030 (EIA) International Energy Annual 2003
Quadrillion BTUs MayJuly 2005.
History Projection Projection: EIA System for the Analysis
of Global Energy Markets, 2006.
www.eia.doe.gov/iea
1000

900

800

700

600

500

400

300

200

100
5

1980
1985
1990
1995
2003
2010
2015
2020
2025
2030
Growing Opportunity 37
Deeper Dive: Energy

As suggested in Figure 3.1, the way The business case


The biggest challenge? mainstream business frames sustainability
Educating potential issues is moving from an early focus on So what is the mainstream business case
compliance (involving a largely defensive for looking at social entrepreneurship in the
customers regarding the business positioning), through a period energy sector? Clearly it has varied as the
need for, and advantages of corporate citizenship (with a growing agenda for the energy sector has moved
degree of engagement and beyond- beyond the basic compliance stage through
of, sustainable solutions. compliance, voluntary effort) to a now- various forms of citizenship to a new
Essentially, making the emerging phase, involving a fundamental generation of sustainability-focused
shift to competitive strategies built around competitive strategies.
business case for our innovative technologies, entrepreneurial
services. solutions and potentially disruptive But the critical mass of the energy sector
business models. is still mired in unsustainability. Even the
Environment Sector best energy sector companies are largely
Interestingly, energy is under-represented operating versions 1.0 and 2.0 (see Figure
in current memberships of leading social 3.1) of the business case. In SustainAbilitys
entrepreneurship networks. By our analysis, 2006 Global Reporters survey of inter-
80
The Global Reporters 2006 was an early only eight Ashoka Fellows (out of over national best practice in sustainability
stepping stone in SustainAbilitys evolving 1,800) are operating in this sector, with report, a number of energy companies
Skoll Program. two Schwab Foundation network members made it into our Top 50, including BP, Enel,
and no Skoll Foundation entrepreneurs, to Shell, Statoil, and Suez.80 The sort of issues
date. By contrast, the Cleantech Venture such companies are currently focusing on
Network has a major focus on clean energy include: environmental and social footprints
and 1,300 affiliate investor members. (BP); provision of micro-loans to help
One venture capital fund told us it now has businesses develop cleaner indoor cooking
over 2,000 cleantech firms on its database. stoves (Shell) and microfinance (BP);
access to new forms of energy (Statoil);
and the pursuit of sustainable development
through better integration of different
service offerings, including energy, waste
management, and water (Suez).

Figure 5.2 Figure 5.3


World marketed energy: World marketed energy:
OECD and non-OECD consumption consumption by fuel type
19802030 19802030
Quadrillion BTUs Quadrillion BTUs
History Projection History Projection

500 500

Non-OECD

400 400

OECD

300 300
Oil

Coal
200 200
Natural Gas

100 100
Renewables

Nuclear
1980

1990

2000
2003

2010

2020

2030
1980

1990

2000
2003

2010

2020

2030
Growing Opportunity 38
Deeper Dive: Energy

Overall, it is clear that even leading The current consensus is that markets for
Our biggest challenges? companies and BP is a leader despite products designed with energy efficiency,
First, managing the quality its recent catastrophic slip-ups still renewable energy and/or clean energy
have a long way to go in addressing the in mind are set to explode, but the
of our programs while sort of issues that are second nature for projections in Figure 5.3 suggest that
scaling them. Second, hiring most leading social and environmental renewables will still meet a relatively
entrepreneurs. To achieve anything like small proportion of world marketed
private sector talent on the 3.0 version of the business case for energy demand in 2030. In the
a not-for-profit budget. sustainable development in the energy meantime, while renewable businesses
sector, such companies would need to and other cleantech ventures scale up,
Environment Sector address three key areas that are central there will be a continuing, growing
to the work of such entrepreneurs: demand for affordable, clean fossil fuels.

Access Security
For many social entrepreneurs, the issue With continuing uncertainty around the
of access to energy is crucial. Billions future of a number of key oil producing
of people still lack access to reliable regions, energy security considerations
81
These figures are taken from the supplies of affordable, clean, and are very much in the ascendant. Among
International Energy Outlook 2006, sustainable energy. And this is also an other things, this has been a critical
prepared by the US Energy Information issue for mainstream businesses. To factor driving the growing interest in
Administration. grow, markets need energy: no energy, biofuels and other forms of cleantech.
www.eia.doe.gov/oiaf/ieo/world.html no growth. Figure 5.1 underscores the The access-to-energy agenda is closely
predicted significant continued growth linked. At the extreme, picture an oil
in energy demand worldwide,81 with non- company operating in West Africa, the
OECD demand overtaking OECD demand complexs lights blazing in the night
within the next decade (Figure 5.2), even while all around there is a world in which
given the uncoupling of energy demand reliable, affordable electricity remains a
from GNP growth (Figure 5.4). distant dream. This could be a metaphor
for the developed world sailing on in an
ocean of energy-poverty, a reality that
raises many longer term security issues.

Figure 5.4 Figure 5.5


World marketed energy: Growth in energy use and
consumption in three economic scenarios GDP in non-OECD countries
19802030 19802030
Quadrillion BTUs Index: 1980 = 1
History Projection History Projection

1000 20

900 18
High growth

800 16
Reference

700 14
Low growth

600 12 GDP

500 10

400 8
Energy use

300 6

200 4

100 2
1980

1990

2000
2003

2010

2020

2030
1980

1990

2000
2003

2010

2020

2030
Growing Opportunity 39
Deeper Dive: Energy

Climate and environment The cleantech surge


We have tracked more than The skies over China have darkened in
$10.6 billion invested in the past five decades, thanks to a nine- Given the sheer scale of the challenges
fold increase in fossil-fuel emissions.82 we face in the energy realm, it is important
cleantech ventures since Around 80% of China's electricity comes to maintain a sense of relative scale when
1999 in North America from coal, and there are plans for well thinking about the potential contributions
over 500 new coal-fired power stations of social and environmental entrepreneurs.
and $2.6 billion invested to meet an apparently insatiable demand The sort of social and environmental
in Europe since 2003. for energy. The country is expected to entrepreneurs who are pioneering new
overtake the US in terms of greenhouse approaches include Fabio Rosa of IDEAAS,84
Cleantech Venture Network gas emissions in 2009, yet the surge of Brazil, Nic Frances of Easy Being Green,85
investment in heavy industry is under- Australia, and Maqsood Sinha and Iftekhar
mining Chinas ability to achieve its Enayetullah of Waste Concern,86
energy efficiency targets.83 Even without Bangladesh. But however successful such
growing concerns about the implications people may be in scaling up what they do,
of energy consumption trends for the and however much they may now deserve
stability of our climate, the likely to be properly funded, we should note that
82
earthobservatory.nasa.gov/ increase in many forms of pollution they have a very long way to go in order
naturalhazards/shownh.php3?img_ linked to energy in the emerging to make a significant impression on
id=13333 economies can only increase the squeeze tomorrows energy challenges. Still, as
83
Richard McGregor, China set to on energy producers worldwide. IDEAAS and Waste Concern demonstrate,
miss target for energy efficiency, Once seen as a softer set of drivers, the best among them are having major
Financial Times, 17 February, 2007. environmental factors are now seen to impacts at the national or regional level,
84
www.ideaas.org.br/id_equipe_eng.htm be of crucial importance. and there are ambitions to go international
85
http://shop.easybeinggreen.com.au/ in some cases, as with Easy Being Green.
categories.asp?cID=71&fromhome=true
86
www.wasteconcern.org

Figure 5.6
Challenges

Access

Rising prices
Limited infrastructure
Ineffective government regulation
Security

Geopolitical considerations
Growing divide between rich and poor
Resource curse
Environment

Climate change
Unbanization
Population growth
Growing Opportunity 40
Deeper Dive: Energy

The truth is that most of the significant Meanwhile, however, many mainstream
The energy sector shows developments to date have been happening energy groups remain relatively cool on
signs of real systemic elsewhere, for example in the cleantech renewables. Some, like Exxon, pretty much
space. Indeed, this is where definitions ignore the field altogether. Others are
breakout. A host of new begin to blur. If social entrepreneurship investing significant sums such as BPs
technologies are marching covers environmental entrepreneurs, for half-billion-dollar investment in a new
example, does that mean it also covers biofuel research center that will link the
their way up their learning cleantech enterprises? And given that University of California at Berkeley with
and down their cost curves most cleantech entrepreneurs are for-profit, the University of Illinois and the Lawrence
very much in it for the money, does this Berkeley National Laboratory.88 BP says that,
responding to a dramatic rule them out in terms of social entre- in addition to the new Energy Biosciences
social risk and pretty clear preneurship status? In the end, it probably Institute at Berkeley, it plans to spend $8
doesnt matter much though we see billion over 10 years on its own alternative
price signals. them all as part of a broad entrepreneurial energy efforts, which include building solar
Bill Drayton, Ashoka landscape (see Figure 1.1). The really cells and wind farms. The company also has
important question is where the truly a major biofuels partnership with DuPont.89
breakthrough technologies and business But for the big oil companies that have
87
Crossing the Divide? The Future of models are now evolving. For the moment been reaping record profits from high oil
Renewables and Clean Energy, see that would largely appear to be in prices, such research typically remains a
www.cera.com/aspx/cda/client/ what, since 2002, has been dubbed the small component of their overall R&D
knowledgearea/servicedescription. cleantech space. portfolios. Donald Paul, who oversees
aspx?kid=199#39251 alternative energy programs at Chevron,
88
David R. Baker, Big Oil cautious about It is clear that, as energy analysts CERA explains that the infrastructure needed to
clean-energy spending, San Francisco put it, The race is on to invest in mass produce and distribute any type of
Chronicle, February 9, 2007. renewables and clean energy technologies, fuel takes years to develop, and millions, if
89
www2.dupont.com/Biofuels/en_US yet the outcome is far from clear. not billions, of dollars to build. And, longer
90
www.opendemocracy.net/ Considerable uncertainties exist over the term, it is inevitable that such biofuel
globalizationclimate_change_debate/ policy context, the technologies themselves, investment will generate second-order
fixes_4311.jsp and the broader energy competitive social and environmental impacts.90
landscape. Who will be the winners and
losers, and what will the implications be When we asked Samer Salty of London-
for company strategies and the competitive based venture capitalists zouk ventures,
landscape? CERA is running a multiclient whether he expected the clean energy
study focusing on the role of clean sector to follow the trajectory of the New
technologies in the future. The process Economy, he agreed that there were
will involve building scenarios out to 2030, similarities but stressed that, whereas
the date already mentioned in relation Internet companies typically took relatively
to International Energy Outlook. little capital to establish and could be sold
for high multiples at the peak of the boom,
energy technologies and infrastructures
typically require massive investments.
That doesnt remove the risk of a bubble
developing, he argued, but it does lessen
the likelihood somewhat.
Growing Opportunity 41
Deeper Dive: Energy

Mindset 3.0 Converting North Americas 200,000


Not only are billions of taxis to hybrids, he explains, would have
people denied reasonable In carrying out this Deeper Dive, we spoke tremendous financial, economic, health,
to a range of companies and organizations, and environmental benefits. Hybrid cars
energy services, but the from big petrochemical companies through reduce smog emissions by more than 70%.
planet is running a fever to early stage start-ups like Innovalight.91 Taxis drive 10 times the distance of average
This is a fascinating Silicon Valley start up vehicles every year. Changing 200,000
simply by meeting the which is using nanotechnology and silicon taxis to hybrids would have the same
needs of those who are inks to create ultra-low-cost solar impact as converting 2,000,000 cars!
photovoltaic modules. It has developed a
currently served. silicon nanocrystalline ink that could cut The uncoupling of GDP from energy
the cost of flexible solar panels to a tenth consumption shown in Figure 5.5
of current solar cell solutions using a is by no means a foregone conclusion: it
solvent-based silicon process that lends has to be fought for every step of the way.
itself to low-cost production and high- Thats what makes the work of people like
throughput manufacturing. Just one more Amory Lovins (of the Rocky Mountain
example of the cleantech surge now Institute 92) and Bill McDonough (of MBDC
91
www.innovalight.com/index.html building. But in what follows, we will draw 93
and William McDonough + Partners 94)
92
www.rmi.org on the experience of the full spectrum of so important. Whether or not particular
93
www.mbdc.com non-profit to for-profit organizations, from designs like Lovins hypercar 95 (designed to
94
www.mcdonoughpartners.com foundation-funded social enterprises to achieve a three- to five-fold improvement
95
www.hypercar.com market-driven cleantech ventures. in fuel efficiency) actually get built any
time soon, the spotlight has been placed
Standing back, what these entrepreneurs squarely on the need to drive out energy
have to teach the wider world has less to from our economies, value chains and
do with how to develop a given technology businesses.
or how to put together a particular product,
than with how they think, act and lead.
So, for anyone wondering where the
Mindset 3.0 agenda (Figure 3.1, page 24) 2 Emerging economies:
might take us, here are five points which use bigger BRICs
struck us in looking over the shoulders of
different types of entrepreneur working in Given the scale of the energy demand of
the energy field. the BRIC economies (Brazil, Russia, India,
China) and other emerging markets, the
world needs to focus its attention here
and as soon as possible. Bill McDonough
1 Systems thinking and design: has already been working on a number of
inefficiency is the enemy planned eco-cities there, an opportunity
space that has also attracted EcoCities.96
One striking thing about leading social and Ask the organizations Chairman, Lawrence
environmental entrepreneurs is that they Bloom, why he is focusing on China, and he
are dedicated to changing the system, not is very clear on the point. Fundamentally,
just to making marginal improvements. the first EcoCities project is under way in
Whether or not they succeed in such China (in Dongtan, near Shanghai) because
ambitious aims is quite another matter, the first opportunity was created there.
but there is no question that the global
energy system is dysfunctional: not only He explains, China has both the stick and
are billions of people denied reasonable carrot in large measure to drive her from
energy services, but the planet is running her present polluting paradigm to cleaner
a fever simply by meeting the needs of and more secure solutions. Currently, one
those who are currently served. dirty coal power station comes on stream
every eight days to fuel Chinas continuing
Take a taxi example. Jim Harris, Managing economic growth. When I was last in
Partner with the evolving Cleantech Beijing, we took off from Beijing Capital
Innovation Institute, is working out how International airport on a cloudless day,
to get those who influence choices on what but could not see the sun until the plane
sort of vehicles qualify as taxis the auto- was at 12,500 feet. The pollution is nearly
makers, taxi companies, leasing companies, two-and-a-half miles high and is currently
regulatory agencies, insurers and others considered to be costing the country 8%
to focus on changing Torontos (and then of GDP in asthmatic and bronchial
Canadas and then North Americas) taxis conditions and lost working days. With
to hybrid propulsion systems. 400 million people expected to migrate
from the countryside to the cities in the
next 30 years, that is a very big stick.
Growing Opportunity 42
Deeper Dive: Energy

But, he notes, the carrots are also profound A parallel initiative in the climate change
While it is easy to over- China could be a future world-leader field is the Carbon Disclosure Project
estimate the readiness of and major global player in green (CDP),107 which provides a secretariat for
industries and services so from solar- the world's largest institutional investor
consumers to take big steps panel manufacture and consequent collaboration on the business implications
to save the planet or help intellectual property streams to carbon of climate change. CDP represents
trading markets, her opportunities are an efficient process whereby many
other people, it can also awesome. Part of the EcoCities plan is to institutional investors collectively sign
be precariously easy to create the EcoCities Foundation, sharing a single global request for disclosure of
all the information we obtain on feedback information on Greenhouse Gas Emissions.
underestimate their willing- loops from our developments, and we More than 1,000 large corporations report
ness to take smaller steps. anticipate that it will become the centre on their emissions through this website.
of a major resource offering sustainability- The CDP 5 information request was signed
advice to individuals, corporations and by more than 280 institutional investors
NGOs. with assets of more than $41 trillion and
sent out on February 1, 2007 to 2,400
Not everyone is building cities and other companies. The responses will be made
96
www.ecocities.com infrastructure on the scale or in the available in September 2007.
97
www.wasteconcern.org semi-orchestrated way that China is.
98
www.barefootcollege.org Elsewhere in the emerging economy and
99
www.devalt.org developing country worlds, social and
100
www.kickstart.org environmental entrepreneurs are having 4 Consumer engagement:
101
www.transparency.org to wrestle with multiple forms of chaos lower the entry ramps
102
www.publishwhatyoupay.org/english brought on by over-rapid, ill-planned
103
www.globalreporting.org urbanization. Among them are organ- While it is easy to over-estimate the
104
www.ceres.org izations like Waste Concern 97 in Dhaka, readiness of consumers to take big steps to
105
www.accountability21.net Bangladesh. In rural regions, meanwhile, save the planet or help other people, it can
106
www.sustainability.com/insight/ energy needs are being developed by also be precariously easy to underestimate
research-article.asp?id=865 pioneers operating in Indias Gandhian their willingness to take smaller steps
107
www.cdproject.net tradition like Bunker Roy of Barefoot that collectively can add up to some form
108
www.solarcentury.com College, 98 who train barefoot solar of revolution. One man who has taken the
109
www.newenergies.ch/index_ei.html engineers, and his countryman Ashok step of moving out from the campaigning
Khosla with his Development world to engage consumers head-on
Alternatives.99 Similarly, in Kenya, is Jeremy Leggett, once a Greenpeace
Martin Fisher and Nick Moon of KickStart campaigner, and more recently CEO of
now remarkably, directly or indirectly Solar Century.108 He is also a director of
account for 0.6% of the countrys GDP, with the world's first private equity renewable
their appropriate technology solutions.100 energy fund, Bank Sarasin's New Energies
Invest AG.109

Solar Centurys vision is immodest:


3 360 accountability: Our aim, they say, is to revolutionize the
let the sun shine in global energy market. The sun bathes the
earth in an incredible amount of energy
Given the extent to which bribery and in a day, enough arrives to power the whole
corruption distort energy production and world for several years. Humanity can now
supply systems, against the backdrop of effectively harness the power of the sun.
the so-called Curse of Oil that so often The 21st century must be the solar century.
turns a natural resource treasure into We envisage solar systems on the roof of
a socio-economic tragedy, the role of every building, backed up by a family of
transparency and accountability cannot other micro renewables, supplying clean
be exaggerated. Thats what makes the power and achieving deep cuts in
related work of organizations like emissions. As the global market for
Transparency International,101 Publish renewable energy grows, thousands
What You Pay,102 the Global Reporting of jobs will be created in research,
Initiative,103 Ceres,104 AccountAbility,105 installation, and manufacturing.
and, yes, SustainAbility106 so important.
Growing Opportunity 43
Deeper Dive: Energy

Another venture that aims to make Whether from the basic needs angle
It was difficult for us sustainable energy choices more accessible or because of systemic challenges like
to negotiate with large to ordinary people is Easy Being Green, climate change, energy is central to the
founded in Australia by Nic Frances and sustainable development agenda. The UK
corporations to begin with. Paul Gilding, but with plans to go Stern Review, which described climate
They have more lawyers and international.110 In 2004, they set a goal change as effectively the biggest market
for 70% of Australian homes to be 30% failure of all time, calculated that the
a different style. I would like more energy and water efficient within dangers of unabated climate change
access to training to speak 10 years. Since then they have implemented would be equivalent to at least 5% of
programs that have provided almost half GDP each year.114 Overall, it estimated that
their language and access a million homes with Climate Saver Packs; the dangers could be equivalent to 20% of
to board-level contacts. reduced 620,000 tonnes of CO2 pollution GDP or more. In contrast, it argued that the
per year, equivalent to taking 150,000 costs of action to reduce greenhouse gas
Energy Sector cars off the road; saved 5.8 gigaliters of emissions to avoid the worst impacts of
water, equivalent to 2,500 Olympic-sized climate change could be limited to around
swimming pools; and saved households 1% of global GDP each year. People would
A$32.3 million on their energy bills. pay a little more for carbon-intensive
110
http://shop.easybeinggreen.com.au/ goods, but our economies would continue
categories.asp?cID=71&fromhome=true to grow strongly. According to one measure,
111
www.chicagoclimatex.com the benefits over time of actions to shift
112
www.climatechangecapital.com 5 Business models: the world onto a low-carbon path could
113
www.freeplayenergy.com take climate into account be in the order of $2.5 trillion each year.
114
www.hm-treasury.gov.uk/ Markets for low-carbon technologies will
independent_reviews/stern_review_ Disclosing greenhouse emissions is one be worth at least $500 billion, and perhaps
economics_climate_change/sternreview_in thing, putting a price and a value much more, by 2050 if the world acts on
dex.cfm on them is quite another. Two organizations the scale required.
115
www.ceres.org have been working in this area: Richard
Sandors Chicago Climate Exchange The potential impact of social and
(CCX)111 is the worlds first, and North environmental entrepreneurs in this area
Americas only voluntary, legally binding was dramatically illustrated by the success
rules-based greenhouse gas emission of Ceres,115 led by its President Mindy
reduction and trading system; and James Lubber, in helping stall plans by TXU to
Camerons Climate Change Capital (CCC)112 build 11 coal-fired power stations in the
is a leading investment banking group that USA. Even though 150 coal-fired power
specializes in the commercial opportunities plants are currently proposed in the
created by a low carbon economy. CCC country, TXUs $10 billion coal expansion
advises and invests in companies that plan drew intense criticism in terms of the
recognize combating global warming is likely climate impacts. When the plans were
both a necessity and an economic announced, Ceres convened some of TXUs
opportunity. Its activities include invest- largest shareholders, including CalPERS,
ment management and financing emission CalSTRS, and the New York City
reductions, and its aim is to make the Comptrollers Office, to bring pressure to
world's environment cleaner while bear. Some time later, it was announced
delivering attractive financial returns. that two private equity firms Kohlberg
Longer term, it will be interesting to see Kravis Roberts & Co and the Texas Pacific
what happens to such players when the would buy TXU for $45 billion, and would
Chinese get serious about greenhouse drop eight of the proposed power stations.
emission trading. Strikingly, the private equity firms consulted
Ceres and other critics ahead of the deal
Then there are the Robin Hood models. being signed. We expect a lot more of this
Whether or not such a figure ever stole sort of power politics.
from the rich to give to the poor, different
people certainly place a different value
and are prepared to pay very different
prices for anything from their health to
clean fuels. In the energy sector, the most
outstanding example of this is probably
Freeplay Energy,113 which started out
offering wind-up radios and expanded to
a wide range of other human-powered
products.
Growing Opportunity 44

116
www.calvertfoundation.org/ We are entering a new era in which
117
www.goodcap.net todays apparently insoluble problems Conclusions
spawn tomorrows transformative
solutions. The new breed of social and Social entrepreneurship is on a roll
environmental entrepreneur is part of
a new global order that is dedicated to Social entrepreneurs are part of a much
new levels of equity, quality of life and wider spectrum, or continuum, of entre-
sustainability. Far from accidentally, preneurial effort dedicated, directly or
there is a buzz around innovation for indirectly, to addressing key sustainability
example, it was chosen as the theme of challenges.
the 2007 Skoll World Forum in Oxford.
Indeed, the growing appeal of social Social entrepreneurship is emerging as
entrepreneurship was illustrated by the a potential catalyst and powerful lever of
turn-out in 2006: nearly 700 delegates the sort of change that governments and
from more than 40 countries. And the business are increasingly committed to
2007 event sold out well in advance. but rarely know how to deliver.

But, in the midst of all of this excitement, While there may be elements of a boom
we should ask: Is there a danger that the in interest in social entrepreneurship, the
social entrepreneurship industry will end risk of an entrepreneurial bubble bursting
up intoxicated by virtue, to use a colorful appears low and the opportunity space
Americanism, of breathing its own can only grow.
exhaust? Overall, our conclusion is that
the optimism about these entrepreneurs
Conclusions & Next Steps

is well placed, but that that they are The potential for breakthrough solutions
experiencing a range of growing pains is considerable and growing
and there is an urgent need to steer
more capital and business resources The timing is more or less perfect, given
into this area. that systemic change is increasingly
needed. Sure, entrepreneurs need to
If this can be achieved, we very much be mavericks working outside the box,
agree with Tim Freundlich (Director, said SustainAbility Faculty member
Strategic Initiatives, Calvert Social Sir Geoffrey Chandler, but they have
Investment Foundation 116 and Founding an important voice which if it can be
Principal, Good Capital 117) that the outlook properly channeled could help break
is bright. I see the social enterprise open the box.
landscape rapidly prototyping strategies
that corporations will incorporate, replicate The fundamental challenge, said blended
or just plain steal. These entrepreneurs value champion Jed Emerson who works
act as fearless and fast actualizers, taking closely with Generation Investment
the uncertainty and lack of imagination out Management, is not so much to scale
of the equation for mainstream business. the enterprise as to scale the solution.
Global warming and poverty especially
are conspiring in an accelerating way to Among the routes to scale discussed by
sensitize society towards considering and our respondents, the following surfaced
experimenting with the integration of new repeatedly: (1) grow individual social
models of doing business, focusing on a enterprises; (2) establish multiple enter-
different and more nuanced sense of value prises; (3) get big organizations
call it double bottom line, triple bottom whether companies, public agencies or
line or blended value. NGOs to adopt the relevant models
and approaches; and (4) spur public
So here are our conclusions and a summary policy legislation designed to fix
of some of the next steps we propose. market failures.
6
Growing Opportunity 45
Conclusions & Next Steps

The field is growing, but is still Panel 6.1


Nothing changes relatively small Paradigm shifts dont come easy
without individuals,
As in any area of entrepreneurial activity, Various entrepreneurs talked in terms
but nothing remains the risks of actual or perceived over- of the need for a paradigm shift in their
without institutions. promising are real. The wider community field. But such shifts rarely come easy.
needs to find ways to monitor, measure, So what needs to be done? Some answers
evaluate, and report on progress in ways began to surface during the 2007 Schwab
that build understanding and support. Foundation Summit in Zurich, where the
focus was on the business case for social
Our analysis of the funding flows into entrepreneurship and for strategic
social entrepreneurship suggest that, business involvement with social
while the overall levels have increased entrepreneurs. One business leader told
significantly in recent years, the current the social entrepreneurs present that
funding total is a small fraction of within a decade everyone is going to
that currently devoted to cleantech fall over themselves in a race to get your
investments let alone wider business. But at least three things need to
philanthropy. change if we are to see a paradigm shift.

To put rough numbers on these three The first, according to Pamela Hartigan
areas, to give a sense of orders of of The Schwab Foundation, is that
magnitude, we estimate that less the infrastructure to support these
than $200 million is going into social ventures has to be put in place much
enterprise worldwide from dedicated more quickly than is occurring if they are
foundations each year, compared with to scale and live up to their potential
over $2 billion a year into cleantech in to achieve systemic economic and social
the USA and EU and well over $200 change. The creation of social ventures
billion into philanthropy in the USA is ramping up at breakneck speed as more
alone. and more talented, innovative, passionate,
and caring individuals come together
to address widening and ubiquitous
Money is the main headache inequities, but the financial, legal, and
political support is still crawling along
Accessing capital is the No.1 challenge by comparison, stuck in antiquated
for the entrepreneurs we surveyed, with institutional frameworks.
almost three-quarters (72%) putting
this at the top of their priority list. The second is that we need to expand
While this is also true of mainstream the spotlight to illuminate not just heroic
entrepreneurs, the pressures on social individuals but also the organizations
and environmental entrepreneurs to grow behind them. Too much rides on the
are resulting in significant growing pains. founder of the venture, Hartigan argues.
Much more has to be done to support
There is a lot of seed capital available, the founder and the leadership teams
angel-equivalent, for social entre- transition through their growth phases.
preneurs, said Linda Rottenberg of In the words of John Monet, Nothing
Endeavor Global. But there is not a lot changes without individuals, but nothing
of later-stage funding available series remains without institutions. We need to
B and C equivalent to take social focus on their No. 2, 3 and 4 colleagues.
entrepreneurs to scale. Theres a huge
gap in the social capital market thats Third, a need constantly flagged up by our
preventing many of the best models from respondents, there need to be better ways
replicating and fulfilling their potential. of linking the worlds of social enterprise
and mainstream business. The degree of
Foundations are still the favorite source interface will depend on a host of factors,
of funding for social entrepreneurs says Hartigan, namely: the power of the
(mentioned by 74% of respondents), business case argument for working
but there is a wide recognition of the together; the extent to which people on
need to diversify funding sources. both sides are committed to making the
relationship work and the nature of the
At least among our sample, there was social enterprise itself so, for example,
a striking trend in their projections about leveraged non-profits might work best
where their funding would come from with the philanthropic arm of a
in the future. The proportion expecting corporation, whereas hybrids could be
to be relying wholly on grants in five more in sync with the core business of
years was down to 8%, compared with the corporation.
27% today.
Growing Opportunity 46
Conclusions & Next Steps

On the other side of the coin, the We need to be brokering relationships


We need to be brokering proportion of those expecting to be now in the social enterprise/business
relationships now in the funding their own operations, with little interface, said one interviewee.
or no dependence on grants jumped from Currently much of this is done around
social enterprise/business 8% to 28%. Many still expect to rely on cause marketing, but we need more
interface. Currently much a mix of funding types, but a significant guides who can identify possible partners
proportion (up from 38% today to 50% and take entrepreneurs through the
of this is done around cause in five years) expect a substantial courtship needed to create real
marketing, but we need rebalancing in the coming years. partnerships of broad value. So many
industries have matchmakers where
more guides who can are they in this sector, beyond what has
identify possible partners Other growing pains been called the in-club of white male
social entrepreneurs?
and take entrepreneurs Linked to the funding challenges, many
through the courtship entrepreneurs noted the problems they There is a risk in all of this that we
face in offering competitive salaries to become overly focused on narrow
needed to create real staff with professional staff, in turn, definitions of social entrepreneurship.
partnerships of broad value. often a key to attracting sufficient For example, its easy to get excited
funding. about small start-ups in the renewable
Anonymous respondent energy field, but we should remember
As these social enterprises grow, they the huge contributions already being
increasingly face a tension between the made by much larger companies like
need for professionalism and efficiency Acciona 118 in Spain, Vestas 119 based
on the one hand and, on the other, the in Denmark, or GE based in the USA.
need to maintain a focus on the mission,
values and culture of the organization. Listen to Jos Manuel Entrecanales,
Accionas Chairman and a Spanish
Succession planning is another area businessman with big ambitions in
of difficulty. The entrepreneurs them- sustainable energy. We asked whether
selves are very aware that for their this ambition would require trade-offs?
organizations to succeed, they them- No, he replied. Mainstream businesses
selves need to change. This is true even must deliver shareholder value. But
of the most successful entrepreneurs. Acciona has significantly increased its
Bill Strickland of the Bidwell Training sustainability profile and investment in
118
www.acciona.es Center Inc. (BTC), a Pittsburgh-based areas like renewable energy in recent
119
www.vestas.com organization for urban change, once years, while recording substantial growth
said that the biggest barrier to his and exceptional shareholder value.
organization growing was him. For example, in 2005 our use of
renewable energy sources avoided the
Novelty is an enormous strength, but emission of 4.5 million tonnes of CO2.
like so many traits could also become I believe that there may be opportunities
a weakness. Many others have been for a forward-thinking energy player to
tackling the challenges social entre- create small-scale village-based
preneurs are dealing with, at other renewable energy provision which truly
times, in other places, in different breaks the mould.
ways. There is a danger that in their
enthusiasm to embrace and be Indeed I see interesting parallels
rewarded for developing radical new between the provision of energy to these
solutions that a number of new wheels areas and the situation in commercial
are unnecessarily invented. credit two decades ago which led Nobel
Prize winner Professor Yunus to set
up the Grameen micro-credit system.
Partnering with business The application of a decentralised,
bottom-up approach to providing
Social and cleantech entrepreneurs electricity to remote or impoverished
turn out to be equally interested in areas is one we have been long
developing partnerships with business, interested in at Acciona. It is one our
but with different expectations. team is currently exploring, knowing
Social entrepreneurs, in particular, well that there are situations and
are acutely aware that they often lack locations where the provision of
the experience and skills needed. clean and sustainable energy will not
be commercially viable. That is why we
A constant refrain in the interviews are currently fundraising for projects
was the growing need for brokering which may not prove profitable in the
between the entrepreneurs and those immediate future. We welcome dialogue
they need to persuade or recruit. with NGOs and others who share our
vision.
Growing Opportunity 47
Conclusions & Next Steps

Dont forget the social intrapreneur Panel 6.2


Over the last 25 years, Next steps
the citizen sector has Several interviewees also noted that
we need to recall the potential of social Among the next steps planned for
become as entrepreneurial intrapreneurship,120 with change agents SustainAbilitys Skoll program are the
structurally as business in working inside big organizations to drive following:
similar agendas. One example of a social
most of the world and, intrapreneur we interviewed was Gib Skoll World Forum 2007
as a result, it has been Bulloch, Programme Lead at Accenture We will present the results of this
Development Partnerships.121 He has first survey, and also test some of
closing the productivity been part of a team for nearly five years our conclusions for the health sector
gap with business very that has been working to switch this in a dedicated session.
major consulting firm on to the potential
rapidly. We now have the to help NGOs, social entrepreneurs, Feedback
opportunity to end the and major businesses to understand We will send the final report to all
and manage the worlds great social, those who took part, inviting their
accidental divorce of the environmental, and governance comment. This will be used to shape
last three centuries. Doing challenges. further projects.
so represents a gigantic Many people still see such efforts Roundtables and workshops
productivity opportunity as part of corporate citizenship. During 200708, we will organize
This, as Bulloch puts it, means that roundtables and workshops to
for business, for the citizen they think in terms of grooming debate, evolve, and communicate
sector, and for the ultimate donkeys, sponsoring the opera or, at the conclusions.
best, painting schools. Rather than,
customer and citizen. say, helping Oxfam to become a high Further deep/deeper dives
Bill Drayton, Ashoka performance organization. In the context We aim to conduct at least two further
of Accentures 145,000 employees explorations into our target sectors
worldwide, ADPs 70-going-on-100 may during the coming 12 months.
seem small beer, but the potential to
catalyze change both inside Accenture Explore potential for developing
and among its clients is considerable. Wiki-Manual
Given the interest in understanding
The key point, however, is that one how to develop partnerships with
120
www.iese.edu/research/pdfs/ way of achieving scale with entre- mainstream business and other
op-04-16-e.pdf preneurial solutions is to switch large partners, we will consider developing
121
www.accenture.com/global/ organizations onto the new challenges either a published Manual or even
about_accenture/company_overview/ and exploit their much greater leverage an online manual along the lines
corporate_citizenship/philanthropy/ to further evolve and deploy the of Wikipedia123 on related themes.
accenturepartnerships.htm solutions.
122
www.schwabfound.org/docs/web/ Brokering
linklaters_schwab_report.pdf Further develop our thinking, and over
123
www.wikipedia.org A growing need to focus on government 1218 months, our offerings in this
responsibilities and roles area.

Governments need to do more to shape Capital flows


public policy, public sector targets and Investigate ways to increase the capital
wider incentives for example, in flows into the social enterprise space.
relation to tax breaks for the funding of
social enterprise if the sort of ventures 2008 survey
covered above are to reach their full Test themes for the next survey.
potential. This is an area that has been
covered by people like Linklaters,122 but
where considerable further thinking
and action is needed.
Growing Opportunity 48

Annex 1
Survey Instrument

1 As a principal responsible 5 Five years from now, 7 Thinking about financing 10b Please tell us the region
for the future direction of which of the following your initiatives, which of the world where you
your organization, please statements best describes sources of funding do you primarily operate.
select two areas that how your organization feel will be the best Africa
present the greatest expects to fund itself? avenues for you to pursue? Antarctica
challenge: (Please select one) (Please select all that apply) Asia
Recruiting & retaining We will completely rely on Dipping into your own Europe
talent. grants, donations or other pockets. Middle East
Accessing capital. sponsorship. Raising funds from the North America
Developing a more mature/ We will primarily rely on public (fundraising). South America
professional organization. donor funding, but will have Attracting help-in-kind South Pacific
Adapting to a changing other sources of income. (donated time/products).
external market/landscape. We will have sources of Foundations (grants or
Promoting or marketing earned-income / fees, but program-related 10c Please select your
your organization. also will rely on grants and investment). organization's primary
Something else other funding. Tapping government area of focus.
(please specify). We will fund ourselves (grants, loans). Economic and social equity
Nothing else. through customer revenue Making sales/charging fees. (development and poverty
These issues are not and mainstream capital Franchising. alleviation).
my responsibility. markets and will not rely Joint venturing. Education.
on grants or donations. Venture capital (including Environment (including
Something else angel investments). energy and water).
2 Please briefly explain your (please explain). Going public. Health.
biggest challenge. Unsure. Something else Housing.
(please specify). Institutional responsibility
Unsure. and transparency.
3 Please briefly explain your 6a Are you attempting to Peace and security.
second most important track non-financial Tolerance and human rights.
challenge. performance for your 8 Why do you think these Something else
organization? sources are the best (please specify).
Yes. avenues for you?
4 Which of the following No.
statements best describes Unsure.
your organization? 9 In what ways do you think
(Please select one) large corporations could
We completely rely on 6b How are you tracking be better partners for
grants, donations or other this performance? you? (Please tell us about
sponsorship. What metrics have you experiences that have
We primarily rely on donor developed or what other worked well or poorly in this
funding, but have other approaches are you arena).
sources of income. taking?
We have sources of earned-
income/customer revenue, 10a Will you allow
but also rely on grants and 6c How are you finding SustainAbility to associate
other funding. this process? your name with your
We fund ourselves through (On as scale of 1 to 5) comments?
customer revenue and 1 This is not working at all No, I would like to keep my
mainstream capital markets 2 comments confidential.
and do not rely on grants 3 Yes, you may associate my
or donations. 4 responses with my name
Something else 5 This is working very well and organization.
(please explain). 6 Unsure
Unsure.
Growing Opportunity 49

Annex 2
Participants

Below are the names of individuals who took part in our research.
A number of survey participants requested that their responses be
kept confidential and, as such, have not been included in this list.

John Daniels ABT Insulpanel Limited Dave Pearce Miasol


Sakena Yacoobi Afghan Institute of Learning Dr Devi Shetty Narayana Hrudayalaya Hospitals
Trevor Cree Agmachine.com Ltd Mia Hanak Natural World Museum
Cyndi Rhoades AntiApathy of Environmental Art
Keerti Pradhan Aravind Anil Pansari Naveen Gram Agrotechnologies
Lisa Fitzhugh Arts Corps David Nuttle Needful Provision, Inc.
Kamal Bawa Ashoka Trust for Research in Olga Murray Nepalese Youth
Ecology and The Environment Opportunity Foundation
Barbara Hofmann Association for the Damian Miller Orb Energy
Children of Mozambique Dr Davida Coady OPTIONS Recovery Services, Inc.
Chris Underhill Basic Needs David Gordon Pacific Environment
Jim Fruchterman Benetech and Resources Center
Karl Mundorff BioReaction Industries Faisal Islam Padma
Daniel F Bassill Cabrini Connections Becky Crowe Hill Partners in Schools
Sylvia Aruffo Careguide Systems Kenneth Luongo Partnership for Global Security
Jim Rough Center for Wise Dr Chris Elias PATH
Democratic Processes Daniel Salcedo PEOPLink, Inc.
Thankiah Selva Ramkumar Centre for Social Reconstruction Suraiya Haque Phulki
Jeroo Billimoria Child Savings International Lynne Patterson Pro Mujer Inc.
Greg Ruebusch ColdBlast Scott Pearson Protonex
Art Lilley Community Power Corporation Peter McFarren Quipus Cultural Foundation
Satyan Mishra Drishtee Dot Com Ltd. Brett Jenks Rare
Christopher London Educate the Children Andrea Coleman Riders for Health
Bunnie Strassner Fascinating Learning Factory John Wood Room to Read
Kyle Zimmer First Book Heidi Khn Roots of Peace
Marv Baldwin Foods Resource Bank Dennis Sizemore Round River
Marcus Colchester Forest Peoples Programme Conservation Studies
Nick Salafsky Foundations of Success Dr Antonia Neubauer Rural Education
Rory Stear Freeplay Energy and Development, Inc.
Martin Burt Fundacin Paraguaya de Vera Cordeira Sade Criana Renascer
Cooperacin y Desarrollo Graham Macmillan Scojo Foundation
Daniel Taylor-Ide Future Generations John Marks Search for Common Ground
Richard Wong Gifts In Kind International Cyril R Raphael Shri Bhuvneshwari
Kavita Ramdas Global Fund for Women Mahila Ashram
Shashi Tyagi Gramin Vikas Vigyan Samiti Russell de Lucia Small-Scale
George Wagner Harvest Wind Sustainable Infrastructure
Nevzer Stacey HasNa Inc. Development Fund, Inc.
Gary Cohen Health Care Without Harm Ibrahim Natil Society Voice Foundation
Josh Tosteson Hydrogen LLC William H Conklin SolarAMP, LLC
Rick Surpin ICS Jill Vialet Sports4Kids
Leland Stewart Independent Energy Corporation Sharon Walden Stop Abusive
Karen Tse International Bridges to Justice Family Environments, Inc.
Randall Hayes International Forum Mark Borchers Sustainable Energy Africa
on Globalization Jay Jacobs Summer Search
Garry Neil International Network Ron Smith Verdant Power
for Cultural Diversity Charles Knowles Wildlife Conservation Network
Katherine Freund ITNAmerica Gerald Chertavian Year Up
John Tarvin Jumpstart Ali Raza YES Network Pakistan
Elana Rosen Just Think Foundation
Sharron Rush Knowbility, Inc.
Alison Bock Landmines Blow
Deborah Meehan Leadership Learning Community
Linda Hahner Literacy Center
Education Network
Talia Aharoni MAALA (Business for
Social Responsibility in Israel)
Paul Holthus Marine Aquarium Council
Growing Opportunity 50
Subheading

Allianz DuPont The Skoll Foundation SustainAbility


Founded in 1890 in Berlin, Founded in 1802, DuPont puts The Skoll Foundation was Established in 1987, and based
Allianz is now present in more science to work by creating created by Jeff Skoll in 1999 in London, Washington DC, and
than 70 countries with over sustainable solutions essential to pursue his vision of a world Zurich, SustainAbility combines
177,000 employees. Allianz to a better, safer, healthier life where all people, regardless consulting, research and public
Group provides its more than for people everywhere. of geography, background or interest activities.
60 million customers worldwide Operating in more than 70 economic status, enjoy and www.sustainability.com
with a comprehensive range of countries, DuPont offers a wide employ the full range of their
services in property and casualty range of innovative products talents and abilities. Skoll, who
insurance, life and health and services for markets was the first employee and first
insurance, and asset including agriculture, nutrition, President of eBay, believes that
management and banking. electronics, communications, strategic investments in the
www.allianz.com safety and protection, home and right people can lead to lasting
construction, transportation, social change. The Foundations
and apparel. mission is to advance systemic
www2.dupont.com change to benefit communities
around the world by investing
in, connecting and celebrating
social entrepreneurs.
www.skollfoundation.org