How to Build Companies That are a Force for Good in Society

Photo by Volkan Olmez on Unsplash

by Juho Makkonen, Medium:  https://medium.com/bettersharing/how-to-build-companies-that-are-a-force-for-good-in-society-33163843033e

Most technology startups say they’re “making the world a better” place as anyone who watches the TV show Silicon Valley knows. Reality is, of course, murkier.

In some cases, it can pretty objectively be argued that a company is really making something the world needs; if they’re innovating on renewable energy or a cure for a terminal illness, for instance.

In most situations, assessing whether the company has a net positive impact on society is nonetheless difficult. Some devout defenders of entrepreneurship might argue that any company that creates jobs is already making the world better by default, even if the impact of the company’s products is neutral. This view can, however, be challenged, especially if the employees of the company consist mostly of “scarce resources” like programmers or designers, who are high in demand. Opportunity cost needs to be taken into account.

The Upright Project, a company that measures the net impact of companies, argues that if a company mainly employs people from this group of “scarce resources”, its impact is, by default, negative: if this particular company wouldn’t exist, these people would immediately find jobs elsewhere in companies that might produce something more valuable. In other words: if a company is taking these scarce resources off the job market, it better do something useful with them.

Companies that reach profitability are, of course, providing value to certain stakeholders: their customers, employees and shareholders — and to society in the form of taxes. However, if this value is created by burning fossil fuels or convincing people to smoke cigarettes or buy more things they don’t need, it can be argued that the net value is negative.

I’ve been a tech entrepreneur for almost 7 years. What drives me to startups and for-profit entrepreneurship is the scalability of my impact. If I was a doctor or a teacher, my work would certainly have a high positive impact, but it would only benefit a small group of people. If I build a company that manages to develop a cure for a common disease or create educational technology that helps millions of kids in developing countries learn to read, the impact of my work touches a vastly larger group of people even though the amount of hours I put in is the same. That’s powerful.

During all these years, I’ve struggled when trying to figure out how to make sure that our business — or any business — is truly serving society, not taking more than it’s giving. I’ve come to the conclusion that the answer lies in how the company is structured, and what kinds of incentives it offers its management.

Why being “mission-driven” is not enough

Many modern technology companies are created by teams of young, idealistic founders who truly want to make the world a better place. Their business ideas are often born from a genuine desire to fix a certain societal problem. In an ideal scenario, they can align their purpose and their profits: every dollar they make also advances their cause. Think of a company that produces solar panels or makes an app to buy food that would otherwise go to waste. On the surface, this sounds like a perfect equation: as the company’s business scales, so does its positive impact.

Unfortunately, this genuine willingness to be mission-driven is not enough. The world is complicated. What sounds like a business model that generates a purely positive impact can have surprising negative side effects. As the company grows bigger, it might need to venture into business areas that are no longer aligned with its original mission in order to sustain growth.

If a company is structured in a traditional way, it still needs to ultimately listen to the demands of its stockholders. If the stockholders are primarily interested in maximizing their profits — and this is often the case for any company that is public or has sold more than 50% of its equity to venture capitalists — the company’s management is incentivized to put its social mission on the backburner and focus on profits and growth instead.

Let’s take a few examples to illustrate this problem. My work is in the field of the sharing economy and peer-to-peer marketplaces, so I’m choosing my examples from this industry. I’m picking three companies that seem to have genuinely mission-driven founders who have always heavily emphasized the social impact side of their business: Airbnb, Lyft, and Etsy.

Airbnb

Airbnb is a pioneer of the so-called sharing economy. Their claim has been that we have lots of underutilized space that should be put to better use. If people use the extra space in their homes to turn them into hotels, we will need less new hotels, and the space for hotels can be used for something else.

It sounds great on paper. Unfortunately, reality isn’t quite so straightforward. The hotel industry is seeing more profits than ever. My theory is that instead of decreasing the demand for hotels, Airbnb has simply expanded tourism — because of more affordable places to stay, more people choose to travel. This also means a lot more flights, and with them a lot more emissions. And Airbnb doesn’t even want to disrupt hotels anymore; it just announced that it is now offering its platform to hotels as well, helping them find more guests.

But doesn’t it still mean that Airbnb increases the utilization of existing spaces? Not necessarily. According to some studies, 40% of Airbnb’s revenues come from professional landlords. They have turned the apartments they own, formerly available for permanent rental, into vacation rental homes. This means there are fewer apartments available for people living in a city, all the while vacation rental apartments are empty half of the time during the off-season. Because of this, rental prices have gone up in some cities, pushing less well-off people into the suburbs.

This is, of course, not what the founders originally intended; it’s simply a side effect of their business model — something economists call an “externality”. But there’s no denying that it’s an important factor when considering whether Airbnb’s impact on society is net positive.

Lyft

For a long time, the Lyft founders have been working towards a noble goal: reducing congestion and car ownership. On the surface, it sounds that Lyft’s business model is doing just that. Who wants to own a car in a city when I can summon a personal driver in a matter of minutes, for a relatively affordable cost? Lyft’s main competitor, Uber, has the same effect, but it’s been Lyft that has made its claim to fame by focusing on this positive aspect of its business model.

However, like Airbnb, Lyft is also causing externalities it probably didn’t expect. Several recent studies show that Uber and Lyft actually increase congestion in cities. Because of their affordability and convenience, they often convert people from biking, walking and public transport. Meanwhile, between rides, Uber and Lyft drivers spend on average 50% of their time alone in their cars, adding to the problem of congestion.

Etsy

Etsy was born as a statement against the world of mass-produced goods, best represented by Amazon. Etsy wanted to get more people to buy hand-crafted goods while providing an income to micro-entrepreneur crafters.

Etsy went further than Airbnb and Lyft to emphasize its position as a company that puts its mission before its profits. It acquired a B Corp certificate, which obliged it to submit annual proof that it meets rigorous standards of social and environmental performance, accountability, and transparency. In a speech to his employees, Etsy CEO Chad Dickerson read the Milton Friedman quote about profit maximization as a sole responsibility of a business, and said: “You’re all free to hiss”. Then he hissed himself, showing his distaste for Friedman’s thinking.

Similarly to Airbnb and Lyft, Etsy decided to raise lots of venture capital to accelerate its growth. Eventually, this meant that Etsy needed to offer investors a way to liquidate their investments, which meant going public in 2015.

In 2017, a hedge fund called Black-and-White Capital saw an opportunity to make profit. It started buying Etsy stock, after which it launched an activist campaign, accusing the company of careless spending and demanding that Dickerson be ousted as a CEO. The company’s board proceeded to fire Dickerson, along with 8% of the company’s staff.

Friedman 1 — Dickerson 0.

Etsy used to have a “Values-Aligned Business” team, which oversaw the company’s social and environmental efforts. The new CEO Josh Silverman dismantled this team. Etsy also gave up its B Corp certificate. Even before going public, it had started allowing the sales of manufactured goods on its platform.

These moves have been applauded by Etsy stockholders: it has tripled its share price within the past year. But Etsy is no longer the same company it used to be.

The ultimate solution: remove the incentive to maximize profits

An attentive reader might have noticed a pattern in the three stories above. All three companies had a clear way to tackle the negative externalities caused by their business models. Airbnb could ban professional landlords and only allow people to rent out the places they themselves live in and their second homes. Lyft could make its services less attractive during peak hours by volunteering to pay a congestion tax that would increase its prices. Etsy could reinstate the B Corp certificate, ban manufactured goods, and monitor the origin of goods sold through its platform more carefully.

In reality, these companies are not in a position to do so because of their company structure. They can’t escape Friedman. The main incentive for their management is to grow the business and maximize shareholder profit. All the proposed solutions are in conflict with this goal as they could have a significant negative impact on revenue and growth for these companies. And that’s why we most likely won’t see them happen.

Their structure. Their incentives. Perhaps therein lies the answer to the original challenge: how to build companies that are a force for good in society.

One can’t argue with Friedman since he is simply stating the facts: this is how companies are structured, and this is what their duty is. But what if we change the structure and duty?

In her excellent 2017 book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, economist Kate Raworth explains that we need to build an economy that lifts people out of poverty and brings them well-being while respecting the natural ceiling for growth caused by the limited resources of our planet. She believes that in order to achieve this, we need to make fundamental changes to our society and to our organizations. She writes:

“The most profound act of corporate responsibility for any company today is to rewrite its corporate bylaws or articles of association in order to redefine itself with a living purpose rooted in regenerative and distributive design and then to live and work by it.”

The key insight here is that we don’t need to create companies that maximize profits at all costs. In their articles of association, we can write that their profits are only a means to pursue their social mission, not an end goal in themselves. In some cases, this means that the company might make decisions that deliberately decrease its profits or slow its growth if its management feels that it is the right to do, all things considered.

Such company structures can be created without changing our current legislation, and some pioneering tech startups are already adopting these structures. Kickstarter, the world’s largest crowdfunding platform, paved the way in 2015 by reincorporating as a public benefit corporation, and stating it will never sell or go public. By remaining independent from the control of outside stockholders, it can be sure that its management is forever incentivised to put its mission first.

Putting our money where our mouth is

Our company, Sharetribe, helps entrepreneurs and organizations create their own peer-to-peer marketplace platforms. With our technology, you can essentially create something like Airbnb, Lyft, or Etsy. Like these three companies, we also have a social mission. In our case, it is to democratize the sharing economy by making platform technology accessible to anyone. We truly admire these three companies and the tremendous technological and cultural innovations they’ve made. However, we’re also worried about the negative consequences of their pursuit of even higher growth. Our thinking is that if we make their innovations available to local platforms operated by small businesses, social enterprises, co-operatives, non-profits or even cities, we can reap the benefits of the sharing economy without causing many of the downsides.

When our founders travelled the world telling people about this mission, many asked whether there was a risk that we would become another profit-maximizing platform giant ourselves. What if we started generating unintended negative externalities as well, and our shareholders wouldn’t allow us to do anything about them? At the time, we didn’t have a good answer. After all, we’ve had a traditional startup structure, and we’ve recognized that if we raised any more money with that structure, the final decision would no longer be in our hands. Even if we decided not to raise money, there was no way for us to make a binding commitment to our stakeholders that we wouldn’t do so in the future.

This made us worried and frustrated.

Finally, we decided to do something about it. A few weeks ago, the Finnish Trade Registry approved our new articles of association that officially transition our company into a structure called steward-ownership. We are the first company in Finland and one of the first tech startups in the world to do so. Steward-ownership is a company structure designed to ensure that our company’s profits are purely a means to pursue its mission, and forever removes any personal financial incentive of profit maximization from the company’s management. Unlike B Corp certificates, the steward-ownership structure is protected with a foundation structure and can never be dismantled once introduced.

From now on, it’s in the best interest of our management to put our social mission first, even if that means slowing down our growth. Everyone working in the company is incentivized, first and foremost, to make decisions that benefit not just the owners of the company, but all other stakeholders, the environment, and society at large. After this change, we can finally — confidently — say that our company will always be a force for good in society.

How does our steward-ownership model work in practice? That is the topic of another post.

The Open Source School Redefines Education in Italy

by Alessia Clusini, Translation by Nicole Stojanovska, Shareable: http://www.shareable.net/blog/the-open-source-school-redefines-education-in-italy

Threading elements of the great educational experiments of Bauhaus and Roycroft Community models together with Pierre Levy’s modern definition of “collective intelligence,” La Scuola Open Source (The Open Source School) embodies the principles of the sharing movement.

Its success hinges on cooperative work, co-design, shared skills, and an open source culture. The school's 13 co-founders believe in the power of people's collaborative qualities. Their unusual constitution is testimony to this.

I believe La Scuola Open Source has the capacity to extend from its origin in Puglia on the southern heel of Italy and inspire the acquisition of knowledge and educational development on a global scale.

Recently, I talked with two of its co-founders - Lucilla Fiorentino and Alessandro Tartaglia - how digital artisans, creators, artists, designers, programmers, pirates, dreamers, and innovators are collaborating to create Italy's most important service for social innovation and community development: education. Fiorentino and Tartaglia answered my questions in tandem. 

What is La Scuola Open Source and what’s the idea behind it?

In the early part of the last century, as a result of the social and economic changes produced by the industrial revolution, an architect named Walter Gropius conceived a school in Germany aimed at creating new professionals to provide an answer to the demand of innovation generated by the changes in time.

That school was Bauhaus - a place that would become a legend. It was born from the union of an art academy, a technical college and a faculty of architecture. Within a few years, combining skills and working on real projects with the help of many internationally renowned experts, a pedagogical experiment of historic proportions was born.

We believe that, today, we live in a somewhat similar condition produced by the acceleration of technology and by the sudden economic slowdown. We’re in a crisis and struggle to see the light at the end of the tunnel. The reason for this, in our opinion, is that the path to be taken is not linear.

Not only should we know how to move forward and how to progress, we must also develop the ability to play on more dimensions with a cognitive agility. We also believe that the digital presence in our lives is changing more and more in our culture. All organizations are becoming cultural organizations and every product today is also product of culture.

This mutation makes the vision of the future a central issue to address and is the reason La Scuola Open Source was born. We believe that in the future there must be new kinds of professionals, new spaces for social gatherings, and new ways of learning and transmitting knowledge. 

How do you apply your “educate to emancipate" motto?

​We believe that greater knowledge implies greater awareness which is exactly what we need to free ourselves and be able to look at things from different points of views. We embarked on this path because we believe in people - in what they can do together and the surplus value that is created when knowledge is shared and exchanged.


Lucilla Fiorentino, La Scuola Open Source co-founder

What is the teaching methodology?

We work co-operatively on real projects. Teachers bring knowledge and drive the process and tutors facilitate the work by organizing it; they put the process into practice. Participants work together with teachers and tutors to realize tangible projects, whether they’re robotic, IT-based, crafted, artistic, or theoretical.

In this way, by attracting teachers from around the county (and, in some cases, also from abroad), we develop skills in our territory and simultaneously bring people together. Over time, this process will allow us to rely on new skills formed in Italy due to the influence it will have on graduates.

The teaching process is connected to this research and one produces resources for the other. Teaching modules can be parameterized depending on the number of teachers, tutors, participants, duration, number of hours, field of interest and the operating mode. 

How do you use Bauhaus and Roycroft Community models?

A model is something that inspires you and something you think of when envisioning all the possibilities. It is a kind of canvas on which to build your own personal history - a scheme for your reasoning, an image buried in your memory that you tend to complete through the process of interpretation. 

How much has the XYLAB experience affected La Scuola Open Source?

I think being able to prototype our idea twice (X in 2013 and XY in 2014) through Laboratori dal Basso (Bottom up Labs, a regional funding program) has been a great fortune. We identified and tried even the most problematic mechanisms with a view to improve the process. We engaged with people who taught us a lot and met new people who opened our eyes to worlds we had previously ignored.

This has all been crucial and allowed us to weave a large network of relationships and strengthen the outside perception of our work over time. At the same time, it's allowed us to focus more and more on our idea, all the way to the proposal document we presented to the Che Fare application (one of Italy’s most prestigious social innovation grants) a year ago and won. 

How can digital artisans, creators, artists, designers, programmers, pirates, dreamers, and innovators complete each other with a common vision?

In the institutional paradigm, many of these figures do not talk and do not relate, as it’s difficult for them to do that. According to our idea, though, they can share a dialogue, exchange pieces of knowledge, cooperate, engage with real challenges, and get their hands dirty together. This creates a fruitful opportunity where it’s possible through contamination to generate new professional figures, new ideas for products or services, and even new adequate technologies for this shifting global scenario.


Alessandro Tartaglia, La Scuola Open Source co-founder

How important is sharing in the Open Source School project?

Sharing is the foundation of contamination and the engine of everything. It is a delicate process, often regulated by empathy between individuals. Some days ago while talking with a friend we came up with the concept, "The project is the recipe, the people are the ingredients, we'll be the oil." 

What are the commons at La Scuola Open Source?

The commons are what we share, together and with each other. In sociology, we’d speak of “collective intelligence.” According to the French philosopher Pierre Levy, the spread of communication techniques for digital media has led to the emergence of new ways of social bonding based on gathering areas of common interests, open processes of cooperation and an exchange of knowledge. We keep saying, “Innovation is always social, otherwise it’s just profiting from people’s ignorance."

Sharing knowledge is the first and most essential common for us. It generates a real process of emancipation and civilization since it enables any person to serve their community. Simultaneously, it allows each individual to freely express and enhance their uniqueness, while giving them the opportunity to appeal to all the intellectual and human qualities of the community itself.

That's what we'll focus on, experimenting and developing the best practices, starting from the co-design of the school itself with the triple workshop XYZ. Of the commons, this is a very important field of research for the future of humanity, and we’ll play our part. 

How could you make the project sustainable and what is the economic/organizational structure?

Each module or teaching activity activated will have its own financial provision system (funding mix) such as fundraising, crowdfunding, access fees, sponsorships, project financing, etc. Research projects will be funded through agreements with companies, public administration and government agencies, as well as through EU-grant applications or any potential sponsorship.

The co-living and utilization of the space will be controlled by a membership system which will allow us to cover the running costs of the space, the consumables and maintenance. Besides this, the school will secure consultancy contracts in the field of social and technological innovation with any kind of interested subject. 

Describe the co-design process of La Scuola Open Source and how to participate in a project.

For 12 days during July, 24 internationally renowned teachers and tutors together with 60 participants (selected from 199 requests from Italy and abroad) took to the Old Town of Bari to work at the triple co-design workshop XYZ from morning to evening.

It was an event that drafted the three building blocks of the school (identity, tools, and processes) in preparation for the launch of its activities this October. A total immersion with a multidisciplinary approach based on cooperation and skills osmosis was the result of the direct creation of the school by its own open community.

As the school's key concept is one of trying to aggregate and prototype new open research, teaching, mentoring, and co-living models (the four axes of the school), this will occur in relation to the patterns emerged during XYZ.

XYZ began with the identity lab - X - which has produced the iconographic stock, the creation of an ad hoc font, a website, and a publishing system. Following this, the tools workshop - Y - targeted management software, hardware (such as Arduino and Raspberry) to manage and monitor a 24/7 access to school, and open data management. Finally, the processes’ lab - Z - focused on teaching modules and policies, research projects frameworks, and the use of space and equipment depending on whether the target is public administration, a company, or an individual category of users. We identified how to integrate with territory, stakeholders and partners. All the outputs are free and available on the slidesharechannel.

The remaining summer month following XYZ will be dedicated to developing and implementing the solutions to result from the workshops.

Still, the essence is that there will never be a final result, but only a continuous flow and a constant work-in-progress that will feed itself with mutations and implementations. We, therefore, envision to host periodical XYZ labs according to an iterative and evolutionary logic.

Alessandro Balena, La Scuola Open Source program director

How important are the making and hacking philosophies for La Scuola value creation?

In a way, from the time we are born, we are all hackers. We start our lives in a world we haven’t created and we learn to modify it over time with our actions. But there is a huge semantic battle around the very word “hacker.” Some would paint hackers as IT pirates who steal sensitive data, but there are those who wish to spread values of openness, freedom, and trust.

For us, the hacker ethic (as opposed to the protestant work ethic) is a key issue. In addition to the “open source” element which in its incremental logic (fork, versioning, etc.) represents the blueprint of a cultural system of new values by being collaborative, adaptive, and recursive, we should use this approach in all fields of knowledge in order to ensure new possibilities for everyone. The methodology and the goals of this project are themselves the subject of a reflection on social innovation which aim to "hack the educational system." 

How can openness and diversity be inextricably linked with the concepts of the Mediterranean and the south of Italy?

Being at the center of the Mediterranean, we are necessarily placed amidst profound issues such as the relationship with others, connection between worlds, contamination, social inclusion, and social innovation. We’d like to keep the Mediterranean ‘biodiversity’: a melting pot of people, cultures, food and nature. It's particularly crucial in a time like this when thousands and thousands of refugees land on our shores - each with their own story, skills, and desire to feel at home.

It is essential to be open, particularly to that which is different from us because there is a potential that would remain unexpressed in the event of closure. We, therefore, deeply believe in sharing and openness and are aware of the social and cultural role we could have. We must be open - open-hearted and open-minded. 

Who is your target? Who will benefit from La Scuola Open Source?

We’ll work with children, seniors, unemployed people, professionals, students, and researchers. For each category, we’ll elaborate teaching modules and research projects. We’ll try to mix multiple categories and different generations in order to foster mutual contamination. The school is primarily aimed at three main categories of users:

• Those who have something to learn - individuals and those connected to the school through a membership relationship.
• Those who require research/innovation - organizations and institutions connected to the school through counseling or research relationships.
• The whole society - that in the long haul will be the end recipient of our activities by openly accessing the outputs generated in the school and be able to take part in our activities as members. 

How was it to involve partners of social innovation such as Ex Fadda and Rural Hub, scientific projects such as Societing and Nefula, as well as sharing economy players like OuiShare and public institutions?

Ours is an artisanal weaving work. In the words of Italo Calvino, "We seek whom or what is not hell amongst the hell we live in every day by trying to defend and give them space." 

How can people be involved and participate to La Scuola Open Source?

By applying to XYZ via the online form, becoming part of our community, and through a membership system which will allow access to a range of activities as soon as la Scuola is ready to commence. Activities will go from basic making and hacking courses to recycle workshops, vertical thematic formats (singularity), lectures, access to technologies and networks, to XYLAB research and co-planning labs as well as humanistic activities related to different disciplines.

More channels:

FB: http://facebook.com/scuolaopensource
TW: http://twitter.com/LascuolaOS
YT: https://www.youtube.com/channel/UCgyAMMIo39md4_dJ0DWKZRg
Slideshare: http://slideshare.net/lascuolaopensource

10 Reasons Co-ops Rock

The Co-operative, Balloon St., Manchester (Pic Steveo1000)

by Kelly McCartney, Shareable: http://www.shareable.net/blog/10-reasons-co-ops-rock

If you're a Shareable reader, then you probably already know that co-ops are celebrated on a regular basis around these parts.

But, since October is officially Co-op Month, we thought we should point out why co-ops are so celebrated ... with a little help from TESA's "10 Reasons Co-ops Rock" poster.

The fact that co-ops are democratically owned and operated is widely understood, but that model brings with it a wealth of empowering benefits, such as:

• Co-ops' jobs and revenues, by nature, stay within their local communities.
• Co-ops are more resilient during economic downturns.
• Co-ops generally bake social and environmental needs and solutions into their missions.

Further still, cooperatives don't exist in some foreign socialist utopia of the future (or past). They are organizations that operate in neighborhoods all over the world right now run by over 800 million members. Support one, join one, or start one today!

What is a Social Enterprise? Defining Social Enterprise and Social Business

by Clare Jones, Clearly So: https://www.clearlyso.com/what-is-a-social-enterprise-2/

Over the past few years, as ClearlySo has grown and changed, the most common questions we have been asked are: “What is a social enterprise?” and “What is a social business?”.

We used to have a definition for each of these different phrases. We knew underneath both simply meant an organisation that seeks to be financially successful while creating social and/or environmental impact. It has commercial goals and it has impact goals - it is really not that complicated.

With famous examples of these kinds of businesses - Green and Blacks, Divine Chocolate or Ben and Jerry’s - people can understand what it means to consider social impact alongside financial return. But sometimes it has felt pretty complicated. We’ve all made diagrams - like this one:

We argued in 2010 that “The Time for Social Enterprise is Now”:

Many people who approach us ask how social enterprises make their money, or how a social enterprise is different from a business (or indeed how it is different from a charity). Because there is such a range of high-impact organisations operating in such a myriad of ways, these questions are impossible to answer precisely - except that, simply put, these businesses have impact and financial success at their core.

Sometimes it is useful to consider some organisations as “impact first”, like charities, and some as “purely for profit”. This spectrum of organisation types shows the range of organisations working to create change - and there are many. It’s also very limiting. Considering the landscape as “charity vs. company” or “social enterprise vs. social business” obscures the wider movement that sees business and finance as a force for good.

It means considering the majority of businesses (that do not exist with positive social impact as a core metric for business success) against then a small niche for charities, social enterprises, social businesses, co-operatives, mutuals, BCorps, community interest companies … (that list just keeps getting longer).

It means disregarding the idea that all businesses have an impact. Some have overwhelmingly positive impacts, some have overwhelmingly negative impacts, and many fall somewhere between the two.

Although these labels can be extremely useful (think about the Cabinet Office using “legally defined social enterprise” to determine who is eligible for social investment tax relief), and many of our clients are examples of those who define themselves as social businesses or social enterprises, we work with all kinds of high-impact businesses.

Charities like the London Early Years Foundation are run as businesses; they run sustainable models that support their growth and their impact aims. Yes, they may reinvest their profits: this does not mean that they themselves are ‘non-profit’ while traditional companies are ‘for-profit’. Profit, as June Sullivan, their CEO, explains, is not a dirty word.

Justgiving is an online donation platform that has revolutionised how we give to charity - and it is a business.

Businesses can be early-stage ventures or they can be long-established companies that consider every aspect of their social and environmental impact, like HCT. It doesn’t matter to us whether a company is structured as a charity, a company limited by shares, or a community interest company: what matters to us is what they do, how they plan to grow their business, and how they create social or environmental change.

For these businesses, the financial bottom line matters, and so does the social or environmental impact. We have over 5,000 of these businesses in our network, many of which are growing rapidly. We believe that these businesses can be both high-return and high-impact; we do not see an “impact see-saw” where investors and businesses trade off financial returns in order to achieve social impact.

In any industry, different types of businesses have different risk and return profiles. We are simply adding impact to the equation. All businesses have an impact, we just believe they should be accountable for it - and we want to help those businesses that create positive impacts to thrive. We envision a future where if you don’t care about your social impact, you won’t have a sustainable business.

Where great business is founded upon great principles, it is possible to do good while doing well - where enterprise and investment are powerful forces for good.

Image: Aduna, whose superfruits create sustainable livelihoods in sub-Saharan Africa.

The ‘What’ and the ‘Why’ of Social Enterprise

Photo: The Nation

by Khizr Imran Tajammul, The Nation: http://nation.com.pk/columns/15-May-2015/the-what-and-the-why-of-social-enterprise

Pakistan is in dire need of channeling talent towards social enterprise development.

Unfortunately, few people understand what the sector entails. This is not surprising since we do not even recognize the space between a ‘for-profit’ and a ‘not-for-profit’ organization.

It is in this space that a social enterprise exists; where societal gain provides a healthy and necessary counterweight to financial gain and where businesses spawn to accrue and prioritize public goodwill over wealth.

To illustrate further, a social enterprise will meet the need for potable water, or energy, through a sustainable revenue generation model that does not fixate on profit maximization. It is a concept that was born many years ago but has only managed to gain currency in recent years, especially after the 2007-2008 financial crisis that forced the world to rethink business.

One notable pioneer of social enterprise development is Nobel Laureate, Professor Muhammad Yunus, the founder of Grameen Bank. Working in rural Bangladesh, Yunus understood that the only obstacle between an enterprising but poor talent and a bank loan was the absence of collateral.

So Yunus replaced that collateral with a ‘peer-group-pre-requisite’, which essentially meant that any single borrower would get clubbed with four other borrowers who would collectively act as a support network and enhance the sense of accountability amongst the borrowers.

Also, if any member of the peer group defaulted, Grameen Bank would not take the borrower to court nor would it hold the group liable for default. The loan would simply be written off.

You are probably wondering like many others before you: How can such a forgiving loan policy even work? What’s the catch? Did we miss something in the fine print? Sadly, the only thing we missed, or perhaps underestimated, was the power of human behavior and the role it can play in the success of a social enterprise.

The Grameen microfinance model thrives on the relationships borrowers develop in their peer groups. Nobody wants to be seen or known as a failure in his or her community.

Furthermore, when people assume collective responsibility of a certain debt, they have a stake in the performance of other peer members; and that is when competition turns to collaboration. Suddenly, the need for collateral evaporates into thin air. A leap of faith Yunus was able to take because of his ‘faith’ in human behavior.

To date, Grameen Bank has catered to more than 7 million borrowers and 97% of the borrowers are women. Since its inception, Grameen has disbursed loans worth USD$625 billion across 78,101 villages, out of which USD$5.58 billion have been recovered, with a loan recovery rate of 98.28%. The numbers say everything.

So where do social entrepreneurs like Muhammad Yunus come from? Do they fall from the sky when you and I are asleep at night? Or do they blossom only once in a blue moon? I like to think there is a social entrepreneur in each one of us.

A social entrepreneur is deeply affected by the inadequacies of the state and chooses to bridge the gap with the resources that are available to him or her. A social entrepreneur can identify and harness the potential of an untapped social asset, just like Muhammad Yunus harnessed the potential of human behavior.

Above all, a social entrepreneur invests profit back in to the enterprise, and is not motivated by the accumulation of personal wealth. Again, Grameen Bank, 94% of which is owned by its borrowers, works as a prime example of this.

Like Bangladesh, we face a plethora of unaddressed social needs and luckily an equally large number of social assets we can use to meet those needs. Indeed, we have not been able to produce a social entrepreneur like Muhammad Yunus but that does not mean we lack the potential to do so.

Half of Pakistan’s population is still under the age of 25, and the bulk of their opportunities lie in the days ahead of them. Our youth and its potential is probably our greatest social asset - if we choose to channel it in the right direction - and our greatest liability if we fail to do so.

The other reason why social entrepreneurship can flourish in Pakistan is because the next best alternative of joining the civil service is now a dead option.

There was a time when the civil service absorbed Pakistan’s brightest talent. Young men and women who wanted to help with the affairs of the state competed for a select few, highly coveted positions in government each year.

But over the years, the growing strength of the executive threatened the prowess of the legislature and thus the role of the executive gradually languished against the hostility of successive regimes.

Today, our bright talent is lining up outside the corporate sector, competing for a position to sell detergent, biscuits, chewing gum, fizzy drinks, mobile phones, LCD screens, cars, motorbikes, credit cards and water to a sea of hapless consumers.

Either that or they are carefully considering the possibility of expatriation - the life of a second-class citizen in another nation. Very few, if any, are seriously considering entrepreneurship, let alone social entrepreneurship.

A reality that shines a dim light on our collective mindset, which follows: one, we see more people as more liabilities and not more assets; two, we are averse to the uncertainty of entrepreneurial life and perhaps ill-equipped to balance its highs and lows with an unsupportive government, spouse, family and community at large; three, we feel abundant natural resources like wind, water and sunlight are best left to large businesses and the government to harness; four, we do not have enough faith in our own ability to help ourselves; and five, we lack the courage to fail, the courage to gather ourselves from the wreckage of our failure, and to start all over again.

Muhammad Yunus has shown us how one minor social innovation can influence millions of lives. He has convinced us that social entrepreneurs can solve problems where unwieldy bureaucracies fail.

Now it is our job to recognize and reward the right talent from amongst our own lot - no-one can do this better because no one understands us like we understand ourselves.

INTERVIEW: Nicole Peterman: Founder of "Help Me With It"

Social enterprise association (Wikipedia)

by Ideas Hoist: http://ideashoist.com.au/nicole-peterman-founder-of-help-me-with-it/

Nicole is a social entrepreneur who is focused on recapturing the essential element of traditional communities - people lending a hand whenever it is needed.

Nicole’s long-term involvement in education and community has motivated her to ensure that everyone who asks for help will find it.

With postgraduate studies in business management and entrepreneurship - she is motivated to create a new way to increase connections between people who need help with those who can help.

Nicole established Help Me With It - a national social enterprise and registered charity with headquarters in Brisbane. Nicole was one of three national winners of Macquarie Bank’s 2014 Kick Starter grant - an award for innovative enterprises addressing social and community needs. 

Can you tell us a little bit about your idea and what made you decide to take the plunge and make it happen?

The mission of Help Me With It is to connect individuals who need help to do one-off tasks, with people who can volunteer their time to fix, clean, care, shop, transport, garden, sort, teach and more.

The service will directly connect thousands of people who need help with people who can help. It also addresses issues associated with traditional volunteering including the fact volunteers want more choice in what they do, and more flexibility around when they volunteer and for how long.

Community organisations and volunteering centres recruit people to volunteer their time on a regular basis. This excludes the majority of would-be volunteers in this country. The issue for many volunteers is that they have specific skills and knowledge they want to use when volunteering, and they also want flexibility in when they volunteer (i.e. not always weekly). This model therefore doesn’t require funding to be allocated to extensive training for volunteers as they can use their own skills and experience.

This service is a digital disruption in the volunteering and social service sectors. There is no organisation like it in the not-for-profit sector, although numerous for-profit organisations have similarities to Help Me With It. However there is no other not-for-profit that offers the same service that Help Me With It will offer.

I have been thinking about this idea for a few years, so the recent “plunge” was overdue in one aspect, but also timely given the focus on digital disruptions and also the way social enterprises can provide solutions to major societal issues.

Please explain your business model.

Help Me With It is a national charity and a social enterprise. We are in start-up phase now, raising seed funding. Eventually though, our profits will be reinvested so more people can use the service.

People who need help with day-to-day tasks will use the Help Me With It platform to be connected to people willing to help them. These users join for free and can post tasks for free. They will pay a single-digit fee to be connected to a volunteer.

Volunteers will help by using their skills, knowledge and time to be connected to people who need help. We’ll ask our volunteers to pay a once a year single-digit membership fee. This small fee will allow us to provide the service and cover insurance.

Volunteering centres and community organisations will refer some of their clients who are seeking help, or those who want to volunteer to Help Me With It. More information about ‘How it works’ is on the Help Me With It website, including a pictorial Business Model Canvas.

What are you working on right now and what are you most excited about in the next year?

The Help Me With It Directors are focused on raising seed funding to pilot the service on a live platform for six months. We’re also forming national corporate partnerships.

Establishing a new national charity is a big project! There is significant interest and investment for commercial digital disruptions like Uber and Airbnb. I think it is harder to seek funding for a not-for-profit enterprise that is similarly disrupting traditional services without the offer of equity. There is however more opportunities to impact social change and support people in our community who need help the most with organisations like Help Me With It.

The demand for our service is clear from extensive research and consultation … we need to find suitable funders to support this new way for people to get help and to help out. It’s still early days for Help Me With It.

Could Help Me With It be a service people can use after a natural disaster?

Yes. Usage of this service will swell after a natural disaster. It will enable emergency relief and mean support for people who need help is sustained beyond the very short term. 

How do you make ideas happen?


I’ve committed to a year with no pay, as well as committing my own finances to this project to make it happen. I’m focused, thorough and optimistic, but a realist too! Ideas are easy. Making it happen and executing an idea is the hard part.

What does your typical day look like?


I’ve consulted widely in my home town (Brisbane) and interstate over the last six months, so there are many meetings, plus of course time spent applying for grants. I also spend time buried in forecast financial statements and technical specifications!



What challenges have you faced when starting or growing a business/organisation in Australia? 

A founder of a new organisation needs to be across everything … and think through everything, simultaneously! The task of identifying agencies to work with is challenging - sometimes it’s hard to determine what they specialise in and what elements of the project would ‘fit’ best with which agency. For example, design verses development, and traditional media verses social media.

What people/companies/organisations do you think are doing really cool stuff in your industry, in Australia at the moment?


Help Me With It doesn’t fit well into one ‘industry’. It’s a tech startup and a national charity in the not-for-profit sector. I’m continually inspired by entrepreneurs in many industries. I’m envious of their ability to seek equity investment which isn’t possible for a charity.

Corporates who are supporting innovation such as NRMA and Telstra are impressive - keeping an eye on what they are doing, along with other community minded organisations such as Australia Post, is worthwhile too. 

Speaking of affecting social change, we’ve teamed up with Shout for Good to encourage readers to ‘shout a coffee’ to charity by clicking the button below. Is there a particular charity you’d like to support?

Secondbite

Name 3 websites you would recommend to our readers.

TuShare
Shelter BOX Australia
Vinomofo

Are there opportunities for people to get involved with your idea (e.g. are you looking for funding, interns, marketing help)? 

The Help Me With It Directors would appreciate introductions to people - philanthropists or corporate executives who may be interested in talking about collaborating to support us.

We’re aiming to build a community of Australian idea makers helping each other. If you could have one question answered about startups, marketing, social media, accounting, monetization, product development etc. What would it be?

I’m intrigued - what is in the water in Victoria? I take my hat off to Victorian philanthropists and bureaucratic organisations. There is considerable support for social enterprise and innovative projects in Victoria. More so than other states and territories it seems.

What’s your favourite bar/café/restaurant?

Any restaurant on the water!

The Social Enterprise: A Model for Shared Value

by David LePage, Network for Business Sustainability: http://nbs.net/the-social-enterprise-a-model-for-shared-value/

 

In competitive business, a “race to the bottom” can appear unavoidable. Oftentimes, businesses do not know how to get around the race to offer products or services at the lowest possible price. 

 

But this model can have negative effects. Prioritizing merely low prices as a supplier or purchaser has been known to contradict ethical and sustainable business practices.

So how can businesses be motivated to abandon a lowest cost model?

For some firms, understanding sustainability as integral to financial success has come about organically. Thirty years ago, the Brundtland Report helped trigger a shift in business thinking. It demonstrated that development decisions weren’t sufficiently considering environmental resources and limits.

Environmental issues became the foundation of the early sustainability movement across business sectors. An entire set of environmentally aware consumers and businesses came into being.

A variety of influences, or even a push from consumers, will lead some firms to add a social consideration to their sustainability efforts. The now famous consumer boycotts of NIKE, for example, pushed the company to review its social responsibility and transparency. Today, companies and researchers consider NIKE to be a prime case study and a sustainability leader.

Whatever the motivation, the harsh dichotomy between social or financial goals is disappearing. New models of shared value that create financial and social value are emerging. And, an often smaller, more humble type of business is proving to be particularly exemplary in applying this model: the social enterprise.

A Valuable Contribution

Michael Porter and Mark Kramer of Harvard Business School made a major contribution to this effort by introducing shared value about ten years ago. Shared value, as a management principle, “focuses on identifying and expanding the connections between societal and economic progress.”

Opportunities to contribute to social value through a business supply chain can include buying from local businesses, considering living wages of employees and incorporating Fair Trade products.

Sharing is Caring: Social Enterprises and Shared Value

Social enterprises put shared value into their core. These community-based businesses sell goods or services in the marketplace to achieve a social, cultural or environmental purpose; they reinvest their profits to maximize their “social mission.”

Social enterprises strive to achieve a shared value return on investment of both social impact and financial sustainability. The defining aspect of a social enterprise is not its specific corporate form, but rather the practice of prioritizing community benefits and social impact in favour of private profit or shareholder returns.

Models of incorporation for social enterprises can include non-profits (with or without charitable status), community service co-operatives, hybrid corporations with caps on dividend and asset distribution and for-profits owned by non-profits.

Specific ways that social enterprises prioritize community contributions can take many forms. For Mosaic, a non-profit that supports the integration and inclusion of new Canadians, that way is operating a translation and interpretation business service. In Vancouver, commercial janitorial services, The Cleaning Solution, provides employment for persons with mental health issues.

Whether the social enterprise is creating employment for youth and persons with barriers or championing cultural diversity, ultimately the business sees the shared value in responding to social needs.

Decisions made by social enterprises are creating positive ripples within the environment and communities. If enough firms begin to adopt the practices of social enterprises or include them in their value chain then it can move us from a marketplace merely about the economics of business transactions and into a marketplace that is pivotal in transforming and building healthy communities. 

About the Author

David LePage is a Founding Member & Chair of the Social Enterprise Council of Canada. He is also a Principal with Accelerating Social Impact (ASI), one of Canada’s first Community Contribution Corporations, a for-profit business with an entrenched social mission and a legal limit on dividend distribution. He is a partner in the recent launch of Buy Social Canada.

With more than 35 years of experience in non-profit and social enterprise sectors, David has led efforts to expand development and training for such enterprises across Canada.

For more information visit buysocialcanada.ca and socialenterprisecanada.ca.

The Promise of “Open Co-operativism”

Photo credit: The Co-operative / Foter / CC BY

by David Bollier, Article cross-posted from Bollier.org, Shareable: http://www.shareable.net/blog/the-promise-of-“open-co-operativism”

Is it possible to imagine a new sort of synthesis or synergy between the emerging peer production and commons movement on the one hand, and growing, innovative elements of the co-operative and solidarity economy movements on the other?

That was the animating question behind a two-day workshop, “Toward an Open Co-operativism,” held in August, 2014 and now chronicled in a new report by UK co-operative expert Pat Conaty and me (Pat is a Fellow of the New Economics Foundation and a Research Associate of Co-operatives UK, and attended the workshop).

The workshop was convened because the commons movement and peer production share a great deal with co-operatives ... but they also differ in profound ways. Both share a deep commitment to social cooperation as a constructive social and economic force. Yet both draw upon very different histories, cultures, identities and aspirations in formulating their visions of the future.

There is great promise in the two movements growing more closely together, but also significant barriers to that occurring.

The workshop explored this topic, as captured by the subtitle of the report: “A New Social Economy Based on Open Platforms, Co-operative Models and the Commons,” hosted by the Commons Strategies Group in Berlin, Germany, on August 27 and 28, 2014.

The workshop was supported by the Heinrich Böll Foundation, with assistance with the Charles Léopold Mayer Foundation of France.

Below, the Introduction to the report followed by the Contents page. You can download a pdf of the full report (28 pages) here. The entire report is licensed under a Creative Commons Attribution-ShareAlike (BY-SA) 3.0 license, so feel free to re-post it.

From the Introduction

For people who participate in commons, peer production, or co-operatives, the emerging economy presents a frustrating paradox in the enormous mismatch between cooperative culture on the one hand and the organizational forms, on the other hand, that can sustain it and advance the general well-being of society.

New forms of peer production are creating common pools of knowledge, code and design and entirely new socio-economic-technical sectors of production and governance. This sprawling, eclectic realm based on free software, open knowledge, open design and open hardware relies upon social collaboration and sharing, and aspires to become a sector of self-sustaining and autonomous commons.

Unfortunately, because its economic forms are generally embedded in capitalist economies - dependent on closed intellectual property, venture capital funding, for-profit corporate structures, and so forth - the new “open models” are generally subordinated to hyper-competitive markets with capitalist dynamics.

Notwithstanding brash claims for the liberating potential of the “sharing economy,” peer production on open platforms may simply replace the more classic forms of proprietary capitalism with a commons/corporate hybrid that commandeers various commons to serve the interests of capital.

Meanwhile, the co-operative movement in many parts of the world faces its own challenges in coming to terms with contemporary technologies and the political economy.

A number of large co-operatives now resemble global corporations in their market behaviors, organizational cultures and management styles. If they are not fending off threats of privatization, their managers and policies function at a distance from co-op members, who often no longer participate actively or take part in a shared culture.

As for smaller co-ops, many have been shunted to the margins of both the market and society by larger dominant forces. Thus without creative solutions they are unable to compete in large, concentrated markets or embrace networking technologies that might enhance their co-operative powers.

For these and other reasons, the co-operative movement, despite its illustrious history and impressive organizational and financial models, no longer inspires the popular social imagination or has the élan and dramatic impact that it did in, say, the 1890s, 1920s, or 1970s.

The power of global capital and markets, digital technologies and consumerist culture has operated perversely in ways that have reined in the ambitions of some parts of the co-operative movement.

In recent years, however, there has been a renewed sense of purpose and confidence across the international co-operative sector. The United Nations declared 2012 “International Year of Co-operatives,” and in the same year, a rejuvenated International Co-operative Alliance adopted an ambitious blueprint for a “co-operative decade” intended to establish the business and ecological leadership of the co-operative model, in which ownership rests with those most closely involved in the business.

There is also a growing receptivity to the idea of open co-operativism, as seen in Robin Murray’s book, Co-operation in the Age of Google - a theme that echoes the cardinal first principle of the co-operative movement, “open and inclusive membership.”

These are welcome developments because a decline of co-operatives diminishes the general welfare of society. The general public increasingly has few alternatives to large, predatory corporations whose anti-social behaviors are often sanctioned by captive legislators and state bureaucracies.

While the “social economy” is gaining ground in many parts of the world and some commercial sectors, its benefits are often killed in the cradle or kept within strict limits. The market/state duopoly, a partnership that divides responsibility for production and governance while pushing an agenda of relentless economic growth and neoliberal policies, continues largely unchecked.

All of this prompts the question: Is it possible to imagine a new sort of synthesis or synergy between the emerging peer production and commons movement on the one hand, and growing, innovative elements of the co-operative and solidarity economy movements on the other?

Both share a deep commitment to social cooperation as a constructive social and economic force. Yet both draw upon very different histories, cultures, identities and aspirations in formulating their visions of the future. There is both great promise in the two movements growing more closely together, but also significant barriers to that occurring.


Photo credit: Alexander Rabb / Foter / CC BY-NC-ND.

Exploring the Possibilities of an Open Co-operativism

A core question of the workshop was: How can social cooperation in contemporary life be structured to better serve the interests of the co-operators/commoners and society in general, in a techno/political economy that currently insists upon appropriating surplus value for private capital?

Commoners tend to approach this question from a different perspective, history and focus than many in the co-operative movement. That’s because commoners tend to occupy a space outside of markets, for example, while co-operatives are generally market entities themselves. Commoners tend to have few institutional resources or revenue streams, but instead rely upon powerful networks of collaboration based on open platforms.

By contrast, co-operatives today constitute a substantial segment of modern economies. There are more than one billion co-op members in 2.6 million co-operatives around the world, and they generate an estimated US $2.98 trillion in annual revenue. If this economy were a united country, it would be the fifth largest economy in the world, after Germany. Yet the transformative impact of this economic power is less than its size would suggest.

Where there is a strong co-operative presence, such as local banking in Germany, housing in Sweden or farming in India, co-ops can change market outcomes. But where they are a minority competitor, unless they are innovators, many co-ops have simply adapted to the competitive practices and ethic of the capitalist economy and politics, rather than struggling to re-invent “co-operative commonwealth” models for our time.

Their influence in national political life is no longer as progressive and innovative as it once was, nor as focused on improving the lot of ordinary citizens. There are many reasons: the scale of older co-operative enterprises, the distance between managers and beneficiary-members, the backward-looking terms of existing legislation for co-ops, and the cultural affinities between “new co-ops” and the social and solidarity economy movement.

The purpose of this workshop was to explore the opportunities for a convergence of efforts between commoners and cooperators, especially in the blending the institutional and financial know-how of co-operatives with the explosive power of digital technologies and open networks.

Can we find new ways to blend the innovative, participatory ethic of peer production with the historical experience and wisdom of the cooperative movement? What fruitful convergences between these two forms of social cooperation might we identify and cultivate? What are the possibilities for achieving new forms of “cooperative accumulation,” in which people’s contributions to shared commons would be coupled with value-added services that generate incomes and in-kind provisioning for cooperators/commoners?

A project of open co-operativism would address two important, unresolved issues: 1) the problem of livelihoods in a digital commons economy (how can the economy reproduce itself and inaugurate a different social and economic logic if everyone works without payment?); and 2) the challenge of co-operatives and solidarity economies in leveraging the enormous potential of the new information and communications technologies, and avoiding subordination to the logic and discipline of capital.

“Cooperative accumulation” could occupy a space between commons that have limited or no engagement with markets, and capitalist enterprises that seek to extract private profits and accumulate capital.

This intermediary form, open co-operativism, could constitute a new sector in which commoners might pool resources, allocate them fairly and sustainably, and earn livelihoods as members of cooperatives - more or less outside of conventional capitalist markets. What we envisage here is the creation and nurturing of new types of non-capitalist or post-capitalist markets that re-embeds them in social communities and accountability structures.

The key, of course, is how to conceptualize and implement this convergence. As we will see below, a number of promising ideas have been suggested, such as co-operative entrepreneurs co-producing commons; coalitions of ethical entrepreneurs using copyright-based licenses to create zones of production protected from capital and conventional markets; and new models of local, distributed production linked to globally shared knowledge networks.

Other ideas remain intriguing but underdeveloped, such as the potential role that co-operative governance might play in commons-based peer production and, conversely, the ways in which self-governance in digital sectors might be applied in the co-operative and social solidarity economy.

Since this report is an account of a workshop dialogue, there are many different perspectives represented, many suggestive but incomplete ideas - and no clear blueprint for how to move forward. It is our hope, however, that this report will stimulate useful inquiry, debate, innovation, and a new convergence of movements.

Please get the full report here.