Creating good: the rise of the social entrepreneur
I find out what the world needs, then I proceed to invent it. –Thomas Edison
The leaders of large global corporations, like those mentioned in the previous chapter, are only one part of the story behind the overall move to social responsibility and sustainability. Alongside powerful business leaders reassessing their role in society and acting for the greater good are scores of people, many of them young, who have decided financial profit is not everything and are starting brand new ventures. And there are also those at the heart of the developments in technology and social media itself. I would define them all as social entrepreneurs. And the world of big business has many lessons to learn from them.
But I do believe that the leaders of large international companies not only can but should be included in the definition of social entrepreneurs as well. The Oxford Dictionary defines an entrepreneur as ‘a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so’. I would argue that to take some of the biggest companies in the world and lead them down a socially responsible path, when the financial case and return for shareholders is as yet unproven, is as entrepreneurial as anything that you will see in the business world. Entrepreneurship is also not tied to small-scale business; some of the most successful entrepreneurs created the world’s biggest businesses – people like the late Steve Jobs and Sir Richard Branson, along with many others.
Big business leaders have a critical role to play and they must be encouraged to be social entrepreneurs within their own companies, because the key to making social responsibility mainstream is ensuring it is a sustainable and potentially profitable proposition.
In this chapter we look at four main types of social entrepreneur:
–Those behind businesses that were founded in or around social media, with open business models. Jimmy Wales (Wikipedia), Craig Newmark (Craigslist), Andrew Mason (Groupon) and Mark Zuckerberg (Facebook) are all good examples.
–Those in established, often huge companies, who are driving their businesses to be much more socially responsible, either from the top, such as Unilever’s Paul Polman and Walmart’s Mike Duke, or from within, working to convince the wider organisation.
–Those running businesses that put social responsibility at their core when created. John Replogle, former CEO of Burt’s Bees, Yvon Chouinard, founder of Patagonia, Bono and Bobby Shriver, who created RED, and Anita Roddick’s Body Shop all fit in this category.
–Those playing at the intersection of social media and social responsibility. This group includes initiatives such as One, Pants to Poverty and newer entrants like Facebook founder Chris Hughes’ new business Jumo, which has recently merged with GOOD and aims to connect people with causes. This group is where I believe we will see more and more examples being created over the next decade and from where I believe the next Facebook or Google may come.
Together, these four types of social entrepreneur are transforming modern business and driving social responsibility to a new level.
Social Media Entrepreneurs
Mark Zuckerberg, one of the richest entrepreneurs in the world, wasn’t motivated by monetising Facebook. But the history books, read on whatever version of Kindle is around in 100 years, will portray him as one of the most important entrepreneurs in the revolution we are living through and Facebook as a major driver of societal change. Although, as Doug Richard amusingly commented, little did Zuckerberg know, that in his desire to get a date, he would change the world.
The industrial entrepreneurs of the second half of the twentieth century were (generally speaking) focused on financial gain; in the new world the social entrepreneurs of the twenty-first century are focused on social change. If you compare today’s entrepreneurs with those from even just the previous generation, there are massive differences. People like Zuckerberg and his peers Jimmy Wales, Pierre Omidyar, (eBay), Andrew Mason and Craig Newmark place openness, sharing and collaboration at the centre of what they do, whereas their predecessors made ownership and closed business models their foundation.
Zuckerberg, for example, simply gave Facebook to everybody who wanted to join. And I would argue that if he had charged for access, Facebook would more than likely have remained a small niche network shared across some privileged Ivy League colleges. But he didn’t – his is a free distribution model (for users, at least) and that is what he and his peers have in common. They scale their businesses by allowing easy, free access.
Zuckerberg is also probably the best example of the dramatic change in the importance and power of young people in today’s world. Imagine explaining to people a mere decade ago that Time magazine’s person of the year 2011 and star of the 2011 G8 meeting would be a 27-year-old – who actually only attended the G8 on the basis that he was granted a one-on-one meeting with each of the leaders of the G8 countries – and that this 27-year-old had become the youngest billionaire on the planet at the age of 24 on the back of a business he had launched when he was just 20 years old.
Groupon’s founder Andrew Mason began his journey as a social entrepreneur by founding The Point, which united people around collective action and fundraising. The idea was that people should do well or do good, but only when it matters. As its website explains: ‘Whether you’re asking people to do something or give money, people only contribute if they think it makes a difference. On The Point, all campaigns have a “tipping point” – people pledge to give money or do something, but no one does a thing until the conditions are met to make contributions worthwhile. That way, you can gather all the resources needed to be successful before anyone is asked to take action’, and so only when sufficient numbers of people had signed up for a cause of fundraising donation did any action occur.
From production-led to consumption-led
The Point was intended to help people congregate around issues they cared about, but it didn’t take Mason long to realise that he could deploy the collective power of the group to commercial aims to get discounts from local businesses. This formed the basis of Groupon: collective bargain hunting. The potential for Groupon and similar businesses is enormous. Whether it is uniting the power of massive groups of people to drive huge cost-savings for consumers or taking advantage of location-based technology for hyper-local deals, it has the potential to change the dynamic of producer– consumer relations. And if the Industrial Revolution was a production-led revolution, then the social revolution will be a consumption-led one.
It’s perhaps also not surprising as we talk about the need to do well and to do good in today’s world that the inspiration for Groupon, the fastest business in history to reach $1 billion in revenue, came from a business that was designed entirely around doing good. In the twentieth century businesses set out to do well and then sometimes later focused their attention on doing good. Here is a business leader who has done well because he set out to do good.
While the main business of companies such as Facebook, Twitter, Craigslist, Groupon and Wikipedia may not be focused on providing aid to those in need or in alleviating poverty, like some of the businesses we look at later, these businesses are inherently social because their core is all about bringing people together, and in many cases it is also their interaction and connectivity that is giving a voice to millions and helping to drive positive change.
We can see the impact social platforms had in the revolutions and protests that swept the Arab world in spring 2011, where the combination of technology, youth and offline protest caused previously unshakeable regimes to topple – and it was a real sign of this new era that a key figure in Egypt was 30-year-old Wael Ghonim, a Google employee leveraging Facebook to help spark the revolution with the ‘We are all Khaled Said’ page. In recognition of the group’s importance in the Arab Spring uprising, Ghonim was named in Time magazine’s ‘Time 100’ list of the 100 most influential people of 2011.
The role of social media was critically important in showing people that they were not alone, in organising them, in uniting large groups behind the movement – and also in helping it cascade, like digital dominoes, from one country to the next.
Businesses such as Facebook and Twitter are social businesses in the sense that the social media platforms they have created and made available to all have empowered millions in all kinds of ways, and their collaborative mindset is at the heart of the social revolution.
They are creating social change at an unprecedented rate and this will only continue to accelerate.
Social entrepreneurs from big business
Not all global businesses are headed by forward-thinking leaders like Unilever’s Paul Polman or Marks & Spencer’s Sir Stuart Rose, who are themselves social entrepreneurs given the entrepreneurial changes they are driving through their companies. But within large corporations there are often senior executives who understand that a move towards social responsibility and sustainability is the way forward. At the Global Social Business Summit in Germany in 2010, delegates were predominately from the non-profit sector, but there were also a number of people from major corporations looking for ways to adopt social business initiatives and apply them to their own businesses.
A senior executive from one of the world’s top consumer goods companies said that he was looking for ideas about sustainable ways of creating social benefit. He shared that the global company he works for had shrunk its corporate social responsibility budget during the downturn and that it was now restricted to straightforward philanthropy in the form of charitable donations, disaster relief and the like. He said his biggest issue, as an individual working in a huge organisation, was how to move socially beneficial activities from being part of a siloed CSR operation to being part of the wider business, how to do that in a way that was sustainable, and – most difficult of all – how to convince the wider organisation that it was not only possible but also desirable.
It is one thing when the chief executive of a big company is sold on the premise of socially beneficial business, but there are some companies where those leading the decision-making process are not completely convinced. This makes it incredibly challenging for an executive in that company to get a green light even to experiment.
Clearly, not every business in the world is going to come on board. If executives are frustrated by the lack of willingness within their organisation, then there is another option: if you can’t change the company, then change company. Nevertheless, I have personally seen a number of executives who have, over time and through dogged persistence, eventually convinced the rest of the company to come round to their way of thinking. And as the world heads increasingly in this direction, it will become easier to win the battle.
The executive at the summit said he was considering various options but that he didn’t really want to operate a distinct ‘pilot scheme’ set to one side of the business. He wanted to understand how to make what he called the ‘jump’ from sidelined CSR to incorporating social value into the mainstream business. ‘I need to know how to create social benefits in the markets that I am already in and with the products I am already selling,’ he said.
While an understandable reaction, a pilot scheme is one way of experimenting to get proof of success: Adidas and Danone are both operating social business schemes, set up as discrete business units. The Danone scheme began after a meeting between Professor Yunus, founder of the Grameen Bank, and Franck Riboud, chairman and chief executive of Groupe Danone, which resulted in the former convincing the latter to invest in a social business. The business provides fortified yogurt to malnourished Bangladeshi children.
One of the benefits of entering the Bangladeshi market and South Asia, where Danone previously had no presence, is that the company can learn more about the market and then apply those learnings to the broader business. So while the social business itself is thought to still be making a loss and has attracted a number of critics, there are other benefits to Groupe Danone. It can also provide valuable learnings, as we have seen from the case of Groupon and its predecessor The Point.
In another example Adidas has also embarked on a joint venture with Grameen, which sells shoes to poor people in Bangladesh for less than one euro a pair. The mission of the Grameen–Adidas company is to make sure that no one, child or adult, goes without shoes.
French water company Veolia has launched a joint social business with Grameen to serve poor people with nutrition and safe drinking water. Germany’s BASF SE and Intel of the USA have entered joint venture social businesses to produce chemically treated mosquito nets and provide information and communication technology for poor people, respectively.
These schemes are not without their critics, and commentators often query the ‘purity’ of motivation behind some initiatives that involve big business. Some dismiss them as ‘tactical’ and are sceptical that big business is fundamentally committed. It is easy to criticise a big brand attempting to do good on the grounds that there is something ‘in it’ for the brand. I would say, firstly, who cares what the motivation is, or whether there might be some benefit to the brand, if the end result is good and creates positive change in the world? Secondly, the whole point is actually that there must be some positive benefit to the business or brand. If we truly want business to change, then socially beneficial business must add value to the company, otherwise it will be impossible to convince the more reluctant companies, shareholders and board members that it is a viable route.
One senior executive working on Adidas’s footwear project in Bangladesh described difficulties with NGOs, financial institutions and consumers in developed markets who question how committed big business really is to being part of changing the world. I want to restate my concern about the potential danger that as business genuinely tries to be more responsible, rather than embracing and encouraging that, NGOs and other parties actually distance themselves and criticise the attempts, thereby acting as a major dampener to the movement. Obviously, business needs to be genuine about it. But if it is, then its efforts should be welcomed. I am not suggesting that there should be no scrutiny or accountability, far from it, but if real people who are in need are getting real help in a transparent way, then this has to be a good thing.
My view is that these early drivers of a change of focus within the corporate sector and change for social good should be encouraged at every step.
Yes, there will be failures. No, not everyone’s intentions will be as good as they should be. But only the inclusion of the corporate sector in the development of social business will ensure that social business, as a concept, will become truly mainstream and really can help effect positive change in the world.
Social responsibility at the core from the start
Some businesses were created with socially responsible values at their core, and in some cases as their entire raison d’être. Outdoor clothing company Patagonia, launched more than 40 years ago, was founded with an ethical and sustainable approach, which at that time was almost unheard of. Its founder Yvon Chouinard insisted on sustainability, proper employee care and products that were designed so that they would not need replacing. The company donates 1% of sales revenue to local environmental groups and in many ways is a model ethical business.
Other businesses, such as Whole Foods and Burt’s Bees are good examples in this category of businesses created on a platform of social responsibility. Burt’s Bees was founded as a company making home-spun natural products. Now owned by chemical giant Clorox, Burt’s Bees was, until recently, led by CEO John Replogle, who joined in 2006 and drove the business to an even greater level of social responsibility, proving it is possible to incorporate socially beneficial activity in a profit-making business.
He led a business that acts transparently, producing natural products in an environmentally sensitive way, and is an active member of the local community of which it is a part. The company has worked with local initiatives to help build homes and a playground for an affordable green housing community in North Carolina, where its headquarters are based. It recently achieved zero waste to landfill status and intends to be a totally zero-waste business by 2020 – a pretty remarkable achievement if they manage it.
Replogle talks about the impact this kind of activity has on employees. He believes that most people want to be good and do good things; all they need is to be given the chance. He says that he doubts whether many of Burt’s Bees staff could tell you the revenue figures in the company’s results, but every single one of them would be able to talk about the playground Burt’s Bees staff built in the local community. The result is that Burt’s Bees is a company whose staff feel passionate about working there and have become powerful supporters of the business. They spread the word without being asked to.
Overt consumerism meets social responsibility: looking good and doing good
RED is another interesting example in this space. Set up by Bono and Bobby Shriver, RED pioneered a new business model that created a continuing flow of money from the private sector to raise awareness about HIV and AIDS, by working with corporate partners to produce specific RED products. Apple, for example, created a RED iPod and Nike, Gap, Amex, Converse, Starbucks, Dell and many other brands have been involved, contributing up to 50% of all profits on RED products to the global fund. RED has been criticised by some for a lack of transparency and for too much money being spent on marketing, but it’s an interesting and pioneering example of putting overt consumerism alongside doing good. As its mission statement reads: ‘RED is a simple idea that transforms our incredible collective power as consumers into a financial force to help others in need.’
The progressive business model was perhaps ahead of its time when RED was launched in 2006, but conscientious consumption is absolutely what people are looking for today. We are now in a decade where if you don’t start to do this kind of thing, consumers will increasingly vote against you with the way they spend. I personally think RED’s best days are ahead of it: if they manage to retain momentum and keep people interested, they will have a more successful story in this decade than they did in the last one.
Irrespective of RED’s critics, the $175 million they have raised since launch cannot be sneered at.
The intersection of social responsibility and social media – the movement generation
The fourth group of social entrepreneurs is perhaps the most interesting and represents the future.
Some are founding enterprises based on principles of transparency and social responsibility; others are creating their own models where profits are shared across all stakeholders. These, often young, social entrepreneurs are driven by a desire to make a difference. It is very common for them to be able to pinpoint a pivotal moment that changed the way they viewed the world or provoked sufficient passion in them to transform a passing thought into concrete, tangible action. In many cases, this has been as a result of global travel, where they saw some of the bigger issues facing people in different parts of the world or simply found the time to get a different perspective on life. Opening themselves up to the world inspired them to create and innovate. My own trip as a 16-year-old around India opened my eyes to the lives some of the less fortunate people in the world have and was a major factor behind my albeit small efforts to do good.
Adam Braun founded Pencils of Promise, a charity that builds schools in conjunction with the local communities in locations where there is a great need for education. His moment of truth came on a backpacking holiday when he met a child begging on the streets of India. He asked the boy what he wanted most in the world. ‘A pencil,’ was the reply.
Braun recalls: ‘A smile erupted and his eyes brightened. And I saw then the profound power and promise brought through something as small as giving a pencil to just one child. Over the next five years I backpacked through more than 50 countries, handing out thousands of pens and pencils across six continents.’
Many of us, like Duncan Goose who founded One, have been drinking with friends and had a discussion where we put the world to rights. But so few of us translate that kind of conversation into action. The realisation that individual actions can really make a difference to other individuals seems to play an important role in allowing social entrepreneurs to really understand the possibilities. It had such an impact on Goose that he named the brand One to reflect the idea. This organisation works with communities in Africa to address pressing humanitarian needs. It does this by selling a variety of products, including its flagship line One Water. It also licenses the One brand and enters into corporate partnerships. The aim is to make as much profit as possible, which is then invested in social projects.
Goose says: ‘There was myself and some other friends who were drunk in a pub in Soho, about five years ago. One of them happened to mention that there were a billion people who didn’t have access to clean water. And as a bunch of marketers, why didn’t we launch a water brand and give all the profits away, to try and alleviate some of those problems? The reason the brand got called One is that if you’re trying to impact on a billion people, it’s an impossibility. But actually if you can change one life, one person, one day at a time, then that’s a success.’ Goose understood this vital concept from his own experience, when in the aftermath of Hurricane Mitch in Honduras he saw the huge impact something as small as a bottle of clean drinking water could have on an individual’s life. He says: ‘Actually, it doesn’t take very much to change somebody’s life.’
Other social entrepreneurs have had their own moments of clarity. Ben Ramsden of Pants to Poverty talks of a life-changing trip where he saw the impact of poverty at first hand. Dr Carsten Rübsaamen, who founded Bookbridge, a sustainable business that provides books and education in the developing world, says a visit to rural Mongolia made him reflect on his own good fortune in comparison to what he found there: ‘It made me think about the value of education in my own life,’ he says. He was inspired to help people without access to education by way of a sustainable social business. Bookbridge helps to set up education centres that are locally owned and operated. Free services are complemented by paid services to local companies and institutions such as language courses and translation services. Bookbridge is an interesting operation as its projects become sustainable within a year.
This is one of the most critical things for social businesses: they must be actual businesses that are able to sustain themselves over the long term. Otherwise, although many projects are clearly worthy endeavours, if they are not sustainable, then they are not businesses in the most fundamental sense and their life expectancy is clearly limited.
Ben Ramsden has a business that is set up to make as much profit as possible, and this profit will be shared across all the stakeholders. Working with thousands of farmers and factory workers in India, Pants to Poverty is creating a way for consumers to buy totally ethically produced cotton clothing. Ben explains: ‘The goal of the business is to maximise profits to benefit all of the shareholders in the business.’
Like his peers and much of the Millennial generation, Ramsden has redefined what profit means to them today; it’s no longer just financial but also social and environmental, and Ramsden thinks each should be generated equally. And the younger generation is also redefining the notion of ‘shareholders’, going beyond financial to represent all the stakeholders in the business – farmers, factory workers, retailers, consumers, staff, investors – encompassing the entire value chain community. Ramsden says: ‘Therefore, the more profit the business makes, the more positive impact it can create for everyone involved.’
All these businesses have one other key component in common – they are all driven by social media. Some, like Pencils of Promise, use movements of supporters mobilised to raise funds; others, like One, use social media networks to create support and momentum behind their brand to build credibility and consumer demand. Duncan Goose, founder of One, says: ‘We believe that social media is fundamentally the way that we are going to enable the world to change by connecting people. We’re trying to join up our thinking, join up the world, and join up consumer groups who can, through whatever means they choose, effect change in the world.’
Some challenges for socially responsible startups
Lots of people want to start businesses that are intended to have a social benefit but good intentions are not enough – it is vital for any social initiative to be underpinned by sound business sense and practices. Before he founded Pencils of Promise, Adam Braun spent almost four years learning how to run a successful business and studying how the world of NGOs works.
One of the issues in my view that has faced the not-for-profit sector in the past is that although their intentions were usually exemplary, their execution was not. It is critical for the businesses and operations to be run just as professionally as in the for-profit sector; not only will this help them achieve so much more, but it will also help them avoid one of the biggest criticisms aimed at NGOs – that of waste and not enough of the funds and activities actually reaching those who need them.
Often, at the beginning, an organisation is reliant on volunteers. Adam Braun offers an interesting lesson on how to work with volunteers effectively. He says: ‘I think it’s a big mistake for a non-profit to assume that someone who is volunteering for you doesn’t owe you something as well,’ he says. He adds: ‘The reality is that they’re still occupying your time and your energy and you need to treat them like staff and employees, even if they are volunteers. That is something that it took me probably a year and a half to get to because I was just so thankful that people believed in it early on.’
New socially oriented businesses should be very careful about how the company is registered and set up in the first place. There are myriad schemes and government policies, specific to the country of registration, for social businesses that should be explored early on to avoid problems later.
Have idea, need money
The number-one question for people hoping to create a social business is how to fund it until it becomes sustainable. There are more questions than answers in this context. While lots of aspiring social entrepreneurs have great plans for their business once it is off the ground, few seem able to describe clearly how they are actually going to fund it until such time that it funds itself.
Duncan Goose from One agrees that seeking funding for a not-for-profit business is very difficult, but he sees an alternative: ‘Private equity people ask: “What’s my return? If I’m going to sink a few million into this, what do I get back?” … Or you go to a philanthropist or big charity donor and say, “Give us your money and we’ll effect change.”’ Goose believes there is scope for something in between. He says: ‘If you could get people to make a side step, that’s really where you’ll affect the future.’
In September 2010 the Italian business Vita Non Profit Content Company became the first European joint stock company that (by statute) reinvests all its dividends back into the company, to be listed on the stock market. The stock market in question is the Alternative Investment Market (AIM), London, an international market for small to medium-sized companies.
VITA non-profit magazine is dedicated to informing the third sector and was founded in 1994 on the back of an investigation into some of the world’s best-known charities. Some might see a paradox in a company that doesn’t share its profits with its shareholders competing in a market in which success is measured by shareholder return. But founder and president of the company, Riccardo Bonacina, says there are no inherent legal, economic or even social contradictions to the decision to be listed on the stock market. ‘We see our firm identity – made firmer still by our statute – as an asset and we hope to be an example to companies everywhere,’ he says.
Many social entrepreneurs think that there should be a completely separate stock market for non-profit businesses. There is no doubt room for a whole range of solutions in this space, and people who are motivated to take part in socially beneficial business activity in any context, within any framework, should be encouraged to do so. Small organisations that begin helping only a few people can have ambitions to multiply and scale their operations. Those in large corporations can introduce sustainable ways that do good and, over time, may see the philosophy behind a pilot scheme extend across the whole of the business.
That said, I think the best way to encourage socially responsible business to become a mainstream movement is to combine positive social change with positive shareholder returns, to prove that not only can you do good and do well but that actually doing good leads to you doing well.
The road ahead
We are at the start of a journey. But there is a new breed of entrepreneur – with its four different types that I outlined earlier – who is accelerating the speed of this journey and leading us down an exciting new path for business. When this new generation of social entrepreneurs are compared with their elders such as Bill Gates, Warren Buffett and Ted Turner, we see some key differences:
First, the younger entrepreneurs base their businesses on openness, free distribution and collaboration. Gates, Buffett and Turner and many of the stand-out businessmen of their generation made their fortunes with a closed protected model.
Second, these twentieth-century entrepreneurs made their money first and then decided to give back. The new generation creates their businesses with a view to giving back from day one.
Now, we should not undermine the significance of what the older entrepreneurs are doing – and with the creation of the Giving Pledge they have founded a potentially world-changing mission, which urges super-wealthy business leaders across America to pledge at least half their fortunes to charity. Buffett and Bill and Melinda Gates have put their money where their mouths are. Buffett has pledged to give away 99% of his current $45 billion fortune, and the Gates’ have pledged to donate the ‘vast majority’ of their $54 billion net worth.
But the older generation sees ‘giving it away’ and doing good as their end point, whereas the new generation sees that as their start point. The new generation of social entrepreneurs understands that in the old world you had to be successful in business, and then invariably leave your job, in order to do good as Bill Gates and his super-rich peers have done. (As an aside, I watched a deft response at Davos two years ago from the impressive Gates when he was questioned as to whether the only reason he could do good was that he was ‘now free from the clutches of the evil Microsoft’. His reply, ‘I am as good or as bad as I have always been’, was both smart and true.) This new generation believes it is because of their jobs in business that they can do good. And, as I stated earlier, it isn’t just the small business entrepreneurs who believe this: we are at a turning point where many of the heads of the biggest businesses believe it too.
I believe this shift in the sense of responsibility that prevails not only through young entrepreneurs but also in the Millennial generation in general will provide the commitment and impetus that the world needs to make really significant changes for the better.
Today’s best social entrepreneurs differ from conventional entrepreneurs in that they want to create social value and financial value – and it is clear that the new entrepreneurs and big business can learn something from each other.
all elements – the young, the old, big business and_ new enterprises – need to be able to do good and make money at the same time – because without this, the business of social change will remain a niche activity
The new generation needs to bring the professionalism of the business sector into the social-change and not-for-profit sectors, and big business can learn how to operate in the cause-related field with authenticity, creating movements on social media as they do so. For me, the most important point within all this is that all elements – the young, the old, big business and new enterprises – need to be able to do good and make money at the same time – because without this, the business of social change will remain a niche activity.
The revolutionary shifts in social media and social responsibility are driving massive entrepreneurial change. This is true in the corporate world as well, with individuals in organisations adapting and reinventing themselves for the new landscape. I believe that the biggest area of growth will be where social media intersects with social responsibility, and I think we will see new players here that will come to dominate in the future. They will create a new kind of social responsibility, where everyone in the chain contributes and everyone benefits – as Duncan Niederauer, CEO of the New York Stock Exchange calls it, a ‘collaborative social responsibility’.