Why social change is good for business

Posted on February 20, 2012

In her book SuperCorp, Harvard Business School Professor Rosabeth Moss Kanter provides many more examples of the benefits companies derive from addressing social issues. These include “market entry (public goodwill and relationships before commercial transactions), learning and capability building for new or different markets, and innovation – creative approaches or technology that gets embedded in successful commercial products.”

Of all the things I can think of this kind of practical orientation towards investing in social change for for-profits organizations is a good thing. Not sure about corporate responsibility.

Is Impact Investing financial returns or non-financial returns quantified?

Posted on February 17, 2012

From Huffington Post (HT: @AcumenFund):

Investors in these companies will look for a commensurate financial return, as well as measurable social impact on the ground. While some prefer the terms venture philanthropy or social investment, impact investing represents a distinct style of responsible capitalism which has become particularly popular among foundations, endowments and high net worth individual investors.

Industry pioneers, such as the $3 billion Rockefeller Foundation in New York, see impact investing as a way to find solutions to poverty reduction and other social problems; but more importantly to access the private sector capital markets that ultimately hold the wealth required to scale up these solutions globally. While charitable donations by high net worth individuals were down 35 per cent in 2010, according to Bank of America Merrill Lynch and Indiana University, the impact investing sector is expecting steady growth.

In 2010, JP Morgan forecast potential impact investment capital of $400 billion to $1 trillion globally over the next ten years. Much recent activity in impact investing has been effectively direct investing, with the typical venture capital approach sometimes supplemented by grants and capacity building. The Omidyar Network, for example, launched in 2004 by eBay founder Pierre Omidyar, "has invested $450 million in equity and grants to promote microfinance, entrepreneurship, technology and government transparency, mostly in developing countries."

Investment managers such as the Acumen Fund and the Capricorn Investment Group, which manages the Skoll Foundation’s multi-billion dollar portfolio, are active in emerging markets across Asia, Africa and Latin America.

Impact investing does present significant challenges to investors. It can be difficult to obtain basic investment information in emerging markets, and equally hard to monitor and track the performance of small companies and projects. This is compounded by the complexity of trying to quantify the non-financial "impact" of investments: it is not that simple to compare the social benefits of investing in, for example, vaccinations in Ghana versus cleaner burning cooking stoves in India.To help donors and investors tackle this issue, the Global Impact Investing Network (GIIN), a non-profit company supported by the Rockefeller Foundation, has worked with B Lab to develop industry infrastructure aimed at improving information flow and creating a more efficient marketplace.

For me a clear definition is still lacking. Is impact investing expecting financial returns from the investment or will accept non-financial returns expressed in financial terms. I cannot imagine pension funds (reponsible to support employees when retired through pension) investing in areas where they will not get a financial return. What happens to the pensioner?

This is a troubling development like "social innovation". It’s ok if social innovation is confused but "impact investing" will effect real dollars and can put projects on the wrong path.

Recently, I looked at a grant from a prominent foundation in Australia and their definition of social enterprise was any for-profit that does good or a not for profit which has a percentage of its revenues coming from sale or business. Is this the best definition that will filter the right organisations to be funded?

Building a theory of change or an organisation that creates change

Posted on February 9, 2012

From HuffPost by Sean Stannard-Stockton

The "theory of change" concept draws on the practices of scientific discovery. Social systems, however, are relatively resistant to scientific analysis. As philanthropy attempts to affect dynamic, human-influenced systems, I wonder if we might need to give up the search for the perfect theory of change and instead embrace what might be called Capital Market Philanthropy by focusing our philanthropic efforts on building great organizations.

This is quite interesting. A lot of funding dollars in the social sector is around the "theory of change" which is the idea that for a program (like Family by Family); a specific theory of change occurs for individuals through the program. This is quite an important aspect to evaluate programs and provide funding.

The question is whether that is enough?

What Stannard-Stockton asks here is due to the dynamic nature of social change it cannot be compared to a scientific study with specific questions, hypothesis and answers. The dynamic nature means that what works now will not work tomorrow and needs to be adapted. So, do we support a specific program or the organisation that has created this program and will adapt it to the future.

For Philanthropy I think this is a great question, especially for successful businessman who understand what it takes to build a business. Can Philanthropy help in supporting an organisation to create change?

John Wood and Room to Read

Posted on February 9, 2012

From Knowledge@Wharton:

Wood devotes much of his book to explaining how he has modeled Room to Read on key features of Microsoft’s corporate culture. Noting that most nonprofits lack a hardline approach to managing costs and leveraging outcomes, Wood offers Room to Read as an example of how a well-run NGO should raise money, market its work and maximize results.

He is especially intent on data-driven accountability. For Wood, a successful nonprofit must answer to donors, who deserve to know where their money goes. He is careful to publicize Room to Read’s results continuously: Even his email signature file documents how many schools have been built, how many libraries have been established, how many books have been donated, and how many girls have received long-term scholarships to allow them to stay in school.

Moreover, for Wood, accountability doesn’t just satisfy existing donors — it creates new ones. An iconoclast when it comes to development, Wood doesn’t bother with direct mail campaigns or other standard trappings of non-profit fundraising. Instead, he relies on the human touch, travelling to fundraising parties organized by regional volunteers and convincing prospects, through an irresistable combination of personal charisma and a compelling business model, that their money will go places if they give it to him. This approach works with both individual donors — he once raised $150,000 in less than two minutes at a fundraising party when donors began matching one another’s gifts — and with foundations. One of Room to Read’s most generous and consistent funders is the Draper Richards Foundation, an offshoot of a firm run by renowned venture capitalists Bill Draper and Robin Richards Donohoe. Impressed by how Wood’s strong business sense had informed his non-profit mission, DRF finances Room to the Read to the tune of six figures a year.

Wood’s insight is simple, but transformative: Corporate savvy is not opposed to humanitarian aims, but may be used to assist them. Just because a charitable organization does not seek to make a profit, that doesn’t mean it shouldn’t bring in as much money as it can, and manage that money well. To do any less is to shortchange the organization’s mission. There is also a crucial correlative here for Wood: While donors deserve to know where their money goes, the organization should not accept money from sources that could try to dictate organization policy. For that reason, Wood told The New York Times, "We don’t seek government funding here in the U.S. We don’t want to get into a fight with the U.S. government over whether we are allowed to teach kids about condoms or AIDS."

Corporate Citizenship?

Posted on February 7, 2012

From Fast CoExist:

There are, according to the study, 25 companies that have the magic mix of corporate citizenship and superior marketplace performance: Adidas, Apple, Avon, Bosch, Canon, Coca-Cola, Danone, Electrolux, Ford, Google, Heinz, Honda, Lego, McDonald’s, Microsoft, Nestle, Nike, Nokia, Philips, Puma, Sharp, Sony, Toshiba, Visa, and Volkswagen.

As the comments confirm, it is very subjective and in most cases you can actually connect what they are doing with regulations, market demand, consumer expectation and perception (marketing) and pure economics. The title actually misleads by connecting good deeds as it calls with making money as if there is a causation.

Drucker on the social challenges in a knowledge society

Quote

Posted on November 14, 2011

From Managing in a Time of Great Change:

The real answer to the question “Who takes care of the social challenges of the knowledge society?” is neither “the government” no “the employing organisation”. It is a separate and new social sector. Government has proved incompetent in solving social problems. The nonprofits spend far less for results the governments spend on failures.

Instead of using the federal tax system to encourage donations to non profits, we have the IRS making one move after the other to curtail donations to nonprofits. Each of these moves is presented as “closing a tax loophole”. The real motivation for such action is the bureaucracy’s hostility to markets and private enterprise in the former Communist countries. The success of the nonprofits undermines the bureaucracy’s power and denies its ideology. Worse, the bureaucracy cannot admit that the nonprofits succeed where governments fail. What is needed therefore is a public policy that establishes the nonprofits as the country’s first line of attack on its social problems.

How the Top 50 Non profits in the US use Social Media

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From HuffPost

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