Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems

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Forewords

Executive Summary

1 Introduction

2 Survey Findings

3 The Business Case

4 Deeper Dive: Health

5 Deeper Dive: Energy

6 Conclusions & Next Steps

Annexes

1 Survey Instrument

2 Participants

Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems First Edition 2007

ISBN 1-903168-17-1

PublisherSustainAbility Ltd

DesignerRupert Bassett

PrinterPensord Press

PaperRobert Horne Revive 50:50 silk

Copyright 2007 SustainAbilityand The Skoll Foundation. All Rights Reserved. No part of this publication may bereproduced, stored in a retrievalsystem or transmitted in anyform or by any means,electronic, electrostatic,magnetic tape, photocopying,recording or otherwise, withoutpermission in writing from thecopyright holders.

Acknowledgements

This project has been a collectiveeffort — and an opportunity to grow in various dimensions.First and foremost, we areprofoundly grateful to Jeff Skoll,Sally Osberg and their colleaguesat The Skoll Foundation, withoutwhose financial support andwider inputs this program ofwork would not be possible. We also are enormously gratefulfor the support of our corporatesponsors, Allianz (where wethank Paul Achleitner, KayMüller, and Nicolai Tewes) andDuPont (where we thank LindaFisher and Dawn Rittenhouse).

Our warm thanks go to theProject Advisory Board, whosemembers were: Jeroo Billimoriaof Child Savings International;Debra Dunn, AssociateConsulting Professor, StanfordUniversity Institute of Designand Board member of The Skoll Foundation; Jed Emersonof Generation InvestmentManagement; David Grayson of Business in the Community;Pamela Hartigan of The SchwabFoundation; Jane Nelson of theCorporate Social ResponsibilityInitiative, Kennedy School ofGovernment, Harvard University;Professor David Wheeler ofDalhousie University; and Jan-Olaf Willums of InSpireInvest and TH!NK.

The Project Team fromSustainAbility comprisedMaggie Brenneke, JohnElkington and Sophia Tickell,with invaluable help fromMeghan Chapple-Brown, YasminCrowther, Kelly Cruickshank, Jeff Erikson, Sam Lakha, MarkLee, Michael Sadowski, JodieThorpe and Peter Zollinger. The survey instrument (seeAnnex 1) was designed with the help of John Thomas ofLaunchBox, whose input toevery phase of the surveyingand analysis was indispensable.

To the 130 social entrepreneurswho offered their time andperspectives, a heartfelt thankyou for your candor, courageand inspiration. And, our bestwishes for your success. A list of social entrepreneurs whoparticipated in our research is provided in Annex 2. We have omitted, however, thoseorganizations who asked forconfidentiality in theirresponses.

In addition, we would like to thank others who madehelpful — in some casesusefully provocative — inputs:Gib Bulloch of Accenture; BillDrayton of Ashoka; José ManuelEntrecanales of Acciona; TimFreundlich of the Calvert SocialInvestment Foundation andGood Capital; Jonathon Hanksof University of CambridgeProgramme for Industry; GaryHirshberg of Stonyfield Farm,Inc.; Kurt Hoffman of The ShellFoundation; Jean Horstman of InnerCity Entrepreneurs;Oliver Karius of VantagePointGlobal; Colin Le Duc ofGeneration InvestmentManagement; Martin Newmanof The Company Agency;Jacqueline Novogratz ofAcumen; Eric Rassman of UCLA;Linda Rottenberg of EndeavorGlobal; Samer Salty of zoukventures; Björn Stigson, WorldBusiness Council for SustainableDevelopment; Tom Vander Ark of The X Prize Foundation;and, from the SustainAbilityFaculty, Sir Geoffrey Chandler,Francesca van Dijk, Bob Massieand Andrea Spencer-Cooke.

We hope that those who tookpart recognize most of theircontributions in what follows.We gratefully acknowledge theuse of the ’10 Routes to Money’framework, taken from ThePower of Unreasonable People:How Entrepreneurs CreateMarkets to Change the World, by John Elkington and PamelaHartigan, to be published byHarvard Business School Pressin February 2008. Finally, ourgratitude to Rupert Bassett forhis design. As ever, all errors of omission or commission areours alone.

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1Growing Opportunity

Skoll Foundation foreword

Fast forward: it’s 2020, and the worldhas changed. With perfect hindsight wetake stock of what we did, or didn’t, tobring about what’s different — good,bad and negligible. It’s a good bet thatwe will be saying that 2007 marked aturning point, and that John Elkington,SustainAbility, and a relatively newphenomenon called social entrepreneur-ship can take the credit for changing the way we think about business,investment and social progress.

For two decades, SustainAbility has tunedits radar to pick up signals of what thefuture might hold, and then used thisintelligence to advise mainstreamcorporations on how to re-tool for long-term competitive advantage — with thatadvantage encompassing what founderJohn Elkington has termed the ‘triplebottom line’ of economic, social, andenvironmental performance. So when John began tracking signals from socialentrepreneurs and considering theirrelevance to corporations doing business in a globalized world, we at the SkollFoundation took note.

This report is the first product of the SkollFoundation-SustainAbility partnership, andwe hope our fellow travelers in the worldsof business and social entrepreneurship find it informative, useful, and provocative.

On one level, the report probes familiarthemes: social entrepreneurs feelhamstrung by their lack of access to capital, concerned for the visibility anddifferentiation of their solutions in acompetitive landscape, and worried abouttheir ability to attract the talent andcommitment needed to expand theirimpact. No surprises here, but humbling,even sobering reminders for those of uscommitted to investing in these folks, their models and their ventures. Seriouschallenges persist, challenges that constrainwhat social entrepreneurs will be able toachieve even as their ranks increase andtheir champions multiply.

The report becomes more intriguing in the soundings it takes of the healthcare and energy sectors. Here the increasinglycomplex environments — geographic,economic, socio-political — in whichbusiness must operate today seem to cry out for what social entrepreneurs have to offer: innovative, highly adaptivemodels that directly and indirectly servemainstream business’s larger interests.

Social entrepreneurs who are changing the landscapes of these industries,SustainAbility suggests, have a distinctiveway of ‘reperceiving’ many of the enormousand urgent challenges before us — climatechange, access to and delivery of healthcarefor developing world populations, andoverwhelming poverty — as opportunities‘to leverage the power of markets andbusiness to have transformative, system-wide impacts.’ The report dubs thisemergent, integrated approach ‘Mindset3.0,’ differentiating the advance frompredecessor 1.0 compliance-focused and2.0 ‘cause related’ stakeholder-involvedmodes still dominant even at progressivecorporations.

Mindset 3.0, of course, is fundamentallyentrepreneurial; in ‘reperceiving’ well-entrenched but unsatisfactory systems as opportunities, Mindset 3.0 cracks thecode of resistance inherent in any well-established equilibrium — from fossil fueldependence to health care delivery to over-consumption. That social entrepreneursshould excel at 3.0 thinking comes as no surprise. After all, social entrepreneursare entrepreneurs first and foremost; it’sjust that their value propositions targetneglected, disadvantaged or sufferingsegments of society. Underlying Mindset3.0, I’d suggest, is the realization that thissegment of society matters, that it is nolonger possible to ignore two-thirds of theplanet’s population or fail to account forthe consequences of industrialization in the developing world. Our very survival as a species and as a planet is at stake.

Yes, mainstream business absolutely needswhat social entrepreneurs know and do.And social entrepreneurs need much ofwhat corporations have and take forgranted. Ultimately, this first SustainAbilityreport suggests that a better future — for business, society, and the planet — may very well depend on how well bothlearn and work together.

Onward!

Sally OsbergPresident and CEO

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2Growing OpportunityForewords

SustainAbility foreword

The entrepreneurs we surveyed areexperiencing growing pains, but theircapacity to see new market opportunitiesand experiment with novel businessmodels and leadership styles makes them an amazing source of insights for mainstream business.

A growing array of apparently insolublesocio-economic, environmental, andgovernance challenges presses in ondecision-makers — including climatechange, the risk of global pandemics, thegrowing threat to natural resources likewater and fisheries, and the ever-presentissues of poverty and hunger. GrowingOpportunity — the first in an annual seriesof surveys conducted by SustainAbility inpartnership with The Skoll Foundation 1 —explores the potential for more entre-preneurial solutions to such challenges. The key messages: At a time when suchchallenges seem to narrow our horizons,they are creating a wealth of newopportunities, but to enjoy them longerterm we must ensure real opportunity for a very much greater proportion of the global population.

This first survey has been financiallysupported by Allianz and DuPont, as notedin our Acknowledgements. We are proud towork alongside these partners and, overtime, we believe that a growing number ofmainstream business and financialinstitutions will follow their lead inrecognizing the extraordinary potentialvalue of what social and environmentalentrepreneurs are doing. That said, it isclear that many people in mainstreambusiness still struggle to understand what is going on in this space and itsrelevance for them.

More positively, a number of recentdevelopments have helped ensure thatgrowing numbers of business people do at least invest the effort to learn.2 Indeed,these are extraordinary times, with socialand environmental entrepreneurs alike on a roll. Muhammad Yunus — probably theworld’s best-known social entrepreneur —won the 2006 Nobel Peace Prize,3 followingin the steps of Wangari Maathai in 2004. The work of social entrepreneurs is alsoincreasingly spotlighted at events like theWorld Economic Forum in Davos, by theClinton Global Initiative and at summitmeetings organized by Acumen, Ashoka,Endeavor Global, the Schwab Foundation,and the Skoll Foundation. The efforts ofsocial entrepreneurs are extensively covered in the media — in the pages ofTime, Newsweek, Fast Company, and theFinancial Times.

New initiatives network them in novelways, among them xigi 4 and i-genius.5

And a growing wave of money chases for-profit cleantech investments and marketsfor healthy living, such as organic food.

Growing numbers of mainstreamcorporations are switching on to the area —and trying to work out what the businesscase might be for investment, partnership,or other forms of engagement. Take DHL, with its new initiative, the YoungEntrepreneurs for Sustainability (YES)Awards, initially launched in five Asiancountries and designed to support youngentrepreneurs working to help meet the UN Millennium Development Goals.6

Or take the case of Groupe Danone, theFrench dairy company, which is leading the new trend with its breakthroughpartnership with the Grameen Group inBangladesh. The aim: to supply fortifiedyoghurt products to the nutritionallydeprived.

Coincidentally, the launch of GrowingOpportunity at the Skoll World Forum will mark the 20th anniversary ofSustainAbility’s founding. The report is a companion piece to an ongoing study of the future of globalization, due to be published in mid-2007. Through its evolving Skoll Program, SustainAbility plans to develop and communicate a deeper understanding of the links betweensocial entrepreneurship and the six sectorson which we now focus: Capital Markets & Finance, Chemicals; Energy; Food &Beverage; Healthcare; and the KnowledgeEconomy.7 Our overarching aim: to helpbuild bridges between the mainstreamcorporations and financial institutions,which make up most of our client andpartner base on the one hand, and — on the other — the extraordinaryentrepreneurs and enterprises described in the following pages.

Maggie BrennekeDirector and Skoll Fellow

John ElkingtonFounder and Chief Entrepreneur

Sophia TickellChair

Maggie Brenneke

John Elkington

Sophia Tickell

1 www.skollfoundation.org 2 www.sustainability.com/

downloads_public/skoll_reports/business_primer.pdf

3 http://nobelprize.org/nobel_prizes/peace/laureates/2006/

4 www.xigi.net5 www.i-genius.org/home/ 6 www.dhl.com/yesawards 7 www.sustainability.com/sa-services/

sectors.asp

3Growing OpportunityForewords

Allianz foreword

As a leading financial services andinsurance company, Allianz is acutely aware of how global trends such as aging populations, climate change and the globalization of supply chains areaffecting our customers and ourcommunities. The sorts of questions we address on a daily basis include: How can people ensure that their lovedones and assets are protected from the full spectrum of risks, including ever-increasing manmade and natural disasters?Do people have access to affordable andreliable health care — and, if not, what can be done to meet their needs?And where will the processes ofglobalization take our customers, ourindustry and our company?

We see it as our responsibility to empowerour customers to prepare for and respond tothese and other challenges. But we cannotdo this alone. While we bring significantexperience, knowledge and passion to bear,we also seek inspiration from partners whocan help us to think outside the box and actas catalysts for innovation.

Social entrepreneurs are one potentialwellspring of insight and inspiration.Individuals from Bonn to Bangalore areseizing the chance to turn challenge intoopportunity, in the process identifying andpioneering new markets. Microfinance, as an example, is now a $9 billion marketthat is increasingly empowering citizens to realize their full potential in society. Our hope is that collaborating with creativethinkers will help our people to realize theirfull potential — and to better serve theneeds of present and future customers.

We are delighted to work alongside TheSkoll Foundation and SustainAbility. Thisproject has helped us to take a first look at what collaboration between mainstreambusiness and social entrepreneurs mightlook like. While this is new territory for us,it is exactly the sort of opportunity spacethat our business needs to explore. We lookforward to ongoing conversation on waysto develop and deploy new generations ofsustainability solutions.

Paul M. AchleitnerMember of the Board of Management

DuPont foreword

The need for truly sustainable options for 21st century life remains one of themost critical challenges facing the globalcommunity. The work of the social andenvironmental entrepreneurs profiled inGrowing Opportunity is truly inspirational.

As a science company, DuPont has aninterest in being part of the solutions byputting our science to work in ways thatcan design in — at the early stages ofproduct development — attributes that help protect or enhance human health,safety, and the environment. Through our science, we will design products andprocesses that pass rigorous criteria for theuse of renewable resources, energy, water,and materials. We believe this is a directroute to a successful, profitable businessthat adds value to our customers, theircustomers, consumers, and the planet.

DuPont has broadened its sustainabilitycommitments beyond internal footprintreduction to include market-driven targets for both revenue and research and development investment. The goals are tied directly to business growth,specifically to the development of safer and environmentally improved newproducts for key global markets, includingproducts based on non-depletableresources.

And we are investing to ensure that DuPont moves towards sustainable growth.By 2015, we have committed to:

— Double our research and development investment in environmentally smartmarket opportunities;

— Double revenues to $8 billion 8 from non-depletable resources;

— Grow annual revenues $2 billion or more from products that create energy-efficiency and/or reduce greenhouse gas emissions for its customers; and

— Introduce at least 1,000 new safety products or services.

Linda FisherChief Sustainability Officer

8 Note: unless otherwise stated, all $ references are to US$.

Paul M. Achleitner

Linda Fisher


A growing array of socio-economic,environmental and governance challenges presses in on decision-makers— including climate change, the risk of global pandemics, the growing threatto natural resources like water andfisheries, and the ever-present issues ofpoverty and hunger. Growing Opportunity— the first in an annual series of surveys conducted by SustainAbility in partnership with The Skoll Foundation— explores the potential for moreentrepreneurial solutions to suchchallenges.

The key messages: at a time when suchchallenges seem to narrow our horizons,they are creating a wealth of newopportunities, but to enjoy them longerterm we must ensure real opportunity for avery much greater proportion of the globalpopulation. The report attempts to assessthe current state of social entrepreneurship— the possibilities presented by newmindsets, the challenges entrepreneurs facein scaling their organizations and theopportunities for greater collaboration withcorporations and others.

The survey findings are discussed in Chapter2 (pages 11–22) and the — increasinglypersuasive — business case for mainstreamcorporations and financial institutions toget involved is explored in Chapter 3 (pages23–29). We look at three different mindsetsthat have characterized business thinking in relation to the relevant issues. If 1.0 was about compliance and 2.0 aboutcitizenship, 3.0 is about creative destructionand creative reconstruction.9 Chapters 4and 5 then probe a little deeper into twokey sectors, health and energy.

Our main conclusions are that:

1 Social entrepreneurship is on a roll.Social entrepreneurship is emerging as a powerful catalyst of the sort of changethat governments and business areincreasingly committed to — but rarelyknow how to deliver.

2 The potential for breakthrough solutions is considerable — andgrowing. Among the routes tobreakthrough solutions and scalingdiscussed by our respondents, thefollowing surfaced repeatedly: (1) grow individual social enterprises; (2) establish multiple enterprises;(3) get big organizations — whethercompanies, public agencies or NGOs — to adopt the relevant models andapproaches; and (4) spur public policylegislation designed to fix marketfailures.

3 The field is growing, but still relativelysmall. To put rough numbers on the three areas of social enterprise, cleantechand philanthropy, we estimate that lessthan $200 million is going into socialenterprise worldwide from dedicatedfoundations each year, compared withover $2 billion into cleantech in the USAand EU and well over $200 billion intophilanthropy in the USA alone.

4 Money remains the main headache.Accessing capital is the No.1 challengefor the entrepreneurs we surveyed, with almost three-quarters (72%)putting this at the top of their prioritylist. Foundations are still the favoritesource of funding for social entre-preneurs (mentioned by 74% ofrespondents), but there is a widerecognition of the need to diversifyfunding sources.

5 Financial self-sufficiency is seen as a real prospect within five years.The proportion of respondents expectingto be funding their own operations, with little or no dependence on grants,jumped from 8% to 28%.

6 There is a real appetite to partner with business. Social and cleantechentrepreneurs are equally interested in developing partnerships with business— but with different expectations. Social entrepreneurs, in particular, are acutely aware that they often lack the experience and skills needed. A constant refrain was the growing needfor brokering between the entrepreneursand potential business partners.

7 Beware blind spots. There is a risk that we may become overly focused on narrow definitions of social andenvironmental entrepreneurship. Forexample, it’s easy to get excited aboutsmall start-ups in the renewable energyfield, but we should remember the hugecontributions already being made bymuch larger companies like Acciona inSpain, Vestas based in Denmark or GEbased in the USA. And there is also aneed to focus on ways of supportingsocial intrapreneurs, change agentsworking inside major corporations andfinancial institutions. The potentialleverage at their disposal is huge.

8 For real system change, we must focus on government and public policy.Governments need to do more to shapepublic sector targets, tax incentives andpricing signals to ensure that marketsdrive change — and that the sort ofventures covered in Growing Opportunityreach their full potential.

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9 We adopted the 1.0– 3.0 terminology during an Australian tour early in 2006.Fast Company also talk of Business 3.0 intheir 'Fast 50' survey report, Fast Company,March 2007. The terms label differentaspects of the same phenomenon.

At a time when suchchallenges seem to narrowour horizons, they arecreating a wealth of newopportunities, but to enjoythem longer term we mustensure real opportunity for a very much greaterproportion of the globalpopulation.

How do you grow economic, social,educational, and political opportunity to the degree required to ensure that the 21st century is significantly lessturbulent and violent than the 20th?Part of the answer will be to invest inentrepreneurial solutions to the world’spressing problems, and to build thesystem conditions in which solutions are encouraged to replicate and scale. In this sense, the social and environ-mental entrepreneurs discussed inGrowing Opportunity are models of how to push towards a more sustainablefuture.

But that’s not always how they are seen.10

Business people encountering the world ofsocial entrepreneurship for the first timeoften emerge confused, at least to beginwith. The sort of questions they raiseinclude: Why all the excitement? How arethese people different from NGOs? Isn’tentrepreneurship what business alreadydoes? How can you expect the world’spoorest to represent any sort of market?And how can ventures operating at thisrelatively small scale ever hope to changethe world, as they proclaim their ambitionto be. All great questions, but before westart looking for answers, it is worthremembering the critics at the time couldeasily have expressed — indeed often did —the same skepticism about the likes ofPasteur, the Wright Brothers or, in morerecent times, Steve Jobs and Steve Wozniak,who not only founded Apple but alsocatalyzed the early growth of the personalcomputer industry.

No doubt a great deal of debate went intowhat a germ was, into what sort of futureaircraft might have or whether PCs wouldever challenge the computing power ofIBM’s ‘Big Iron.’ One thing that is likely to bewilder mainstream business brainsentering the world of social enterprise isthe near-fetish for discussing definitions.Huge effort has been invested — andcontinues to be invested — in definingsocial and environmental entrepreneurshipand in identifying and classifying therelevant entrepreneurs. Important work, no question, but you tend to know thesepeople when you meet them. The aircrackles with energy. They aim to turnapparently insoluble crises into tomorrow’spolitical, social, and market opportunities.

Some definitions can be found on page 7,but as Jed Emerson — one of the field’smost influential thought-leaders — warnedus, an over-emphasis on definitions can bedistracting. ‘We risk wasting the comingyears in endless discussions of how manyangels dance on the head of a pin,’ heargued, ‘as opposed to what wonderfulgarments we might collectively stitchtogether.’

The key point is that a range of social,environmental, and governance challengesincreasingly demand something more than corporate citizenship responses. They require innovative, entrepreneurial,and — often — disruptive strategies whichincumbent companies are often ill-preparedto develop or deliver.

This isn’t an either social entrepreneurshipor big business agenda, but will involveboth together. Looking at the worlds of our three sponsoring organizations, theevidence is clear. A company like the USchemical giant DuPont, with its long-standing ‘sustainable growth’ strategy, has the capacity to bring new solutions toscale. To take just two of DuPont’s 2015goals: it aims to grow annual revenues fromproducts that create energy efficiency orcut greenhouse gas emissions by $2 billion,and to nearly double revenues from non-depletable resources to at least $8 billion.The involvement of German financialservices group, Allianz, underscores thegrowing role of the financial sector insupporting entrepreneurial solutions to thebroad spectrum of sustainability challenges.And Jeff Skoll’s background as a co-founderof eBay spotlights the emergence of verydifferent thinking on how business modelscan be designed to replicate and scale —even, if the X Prize Foundation has its way(page 29), in such demanding areas aspoverty alleviation.


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nOne thing that is likely to bewilder mainstreambusiness brains entering the world of social enter-prise is the near-fetish for discussing definitions. Huge effort has beeninvested — and continues to be invested — in definingsocial and environmentalentrepreneurship and inidentifying and classifyingthe relevant entrepreneurs

10 www.sustainability.com/downloads_public/skoll_reports/business_primer.pdf

So why are a growing number of businessleaders suddenly so interested in the linked worlds of social and environmentalentrepreneurship? And, with intensifyinginvestor interest and lively media coverage, what is the current state of the key sectors now busily developingentrepreneurial solutions to the world’slooming sustainability challenges? Theseare questions SustainAbility is exploring in its three-year Skoll Program (2006-2009).11 Growing Opportunity is the first ina planned survey of studies into key aspectsof this increasingly important field.

Why should business be interested in all of this? We asked Björn Stigson,President of the World Business Councilfor Sustainable Development (WBCSD). He replied: ‘At its core, the corporatepursuit of sustainable development is not just about “doing good.” It makescompanies more entrepreneurial, nimbleand competitive. One of our largestmanufacturing members has taken theconcept of eco-efficiency so seriously thatit began focusing on selling less materialproduct and more knowledge, with greatsuccess. A Latin American memberunderstood base-of-the-pyramid businessas a theory, but then found by experiencethat it makes good bottom-line businesssense. Coping with sustainability challengesbuilds stronger companies.’

In 2001, SustainAbility concluded that theearly decades of the 21st century would see a series of interlinked economic, tech-nological, social, political, and managerialtransitions that would transform the globaleconomy, in very much the same way as therapacious caterpillar is transformed inside achrysalis. We are now embarked on a periodof profound economic metamorphosis, ofwhat the economist Schumpeter dubbed‘creative destruction.’ Think of theentrepreneurs profiled in the followingpages as the global economy’s equivalent of the ‘imaginal buds’ that drive the processthat converts a caterpillar into a butterflyinside the chrysalis.12

In preparing this study, we interviewed 20 entrepreneurs in depth — and over 100more completed an online survey (page 48).It is clear that they are as determined asever to drive change, but it is also clear thatmany of their enterprises are experiencingsignificant growing pains along the way.

Key drivers

Focusing down on today’s world, at leastfour factors seem to be central in drivingthe growing mainstream interest in socialand environmental entrepreneurship:

— First, 20 years after the Brundtland Commission first put sustainabledevelopment onto the political agenda,13

a number of major challenges once seen to be (and often dismissed as) the preserve of activist NGOs and widercivil society have pushed forcefully intothe political and business mainstream —a process often reinforced by thewithdrawal or weakening of governmentactivity. Successive summit meetings ofthe World Economic Forum, forexample, have focused on an increasinglyinterconnected agenda linking suchissues as poverty, hunger, pandemic risks,terrorism, human rights, energy security,and the growing threat of climatedestabilization.

— Second, despite the huge progress achieved in corporate citizenship andcorporate social responsibility over thepast 10–15 years, there is a growingconcern that we may be reaching the‘limits of CSR.’ The Harvard BusinessReview 14 neatly captured this mood witha twinned pair of articles by MichaelPorter and Mark Kramer (‘Strategy andSociety: The Link Between CompetitiveAdvantage and Corporate SocialResponsibility’) and Clayton Christensen(‘Disruptive Innovation for SocialChange’). The conclusion: too manycompanies have seen the new,interconnected agenda as remote fromtheir core business interests. The realityis that these complex issues poseincreasingly strategic choices that needto be addressed in suitably radical andhigher leverage ways — something thatmost corporate citizenship departmentsseem ill-equipped to do.

6Growing OpportunityIntroduction

‘At its core, the corporate pursuit of sustainabledevelopment is not justabout “doing good.”It makes companies moreentrepreneurial, nimble and competitive.’Björn Stigson, WBCSD

11 www.sustainability.com/insight/skoll.asp 12 John Elkington, The Chrysalis Economy:

How Citizen CEOs and Corporations Can Fuse Vales and Value Creation,Capstone/John Wiley & Sons, 2001.

13 Our Common Future, Report of the World Commission on Environment andDevelopment (‘Brundtland Commission’),Oxford University Press, 1987.

14 See Harvard Business Review, December 2006.


Panel 1.1Definitions

Entrepreneurs are people who, throughthe practical exploitation of new ideas,establish new ventures to deliver goodsand services currently not supplied byexisting markets. That said, people likeGreg Dees (Adjunct Professor of SocialEntrepreneurship and Nonprofit Manage-ment, Fuqua School of Business, DukeUniversity) argue that there is a spectrumof enterprise, from the purely charitablethrough to the purely commercial.15 Ourversion of that spectrum — or landscape —can be seen in Figure 1.1.

On the purely charitable side, ‘customers’pay little or nothing, capital comes in the form of donations and grants, theworkforce is largely made up of volunteers,and suppliers make in-kind donations. At the purely commercial end, all thesetransactions are at market rates. Most of the really interesting experiments,however, are now happening in the middleground, where hybrid organizations pursue‘blended value’ and where less-well-offcustomers are subsidized by better-offcustomers.

Social entrepreneurs are entrepreneurswhose new ventures (social enterprises)prioritize social returns on investment, i.e.improving quality of life for marginalizedpopulations by addressing issues such ashealth, poverty, and education. One keyreason why mainstream business needs topay attention is that these people aim toachieve higher leverage than conventionalphilanthropy and NGOs, often aiming totransform the systems whose dysfunctionshelp create or aggravate major socio-economic, environmental, and politicalproblems.

Ashoka16 defines social entrepreneurs as,‘individuals with innovative solutions tosociety’s most pressing social problems.They are ambitious and persistent, tacklingmajor social issues and offering new ideasfor wide-scale change. Rather than leavingsocietal needs to the government orbusiness sectors, social entrepreneurs findwhat is not working and solve the problemby changing the system, spreading thesolution, and persuading entire societies to take new leaps.’

The Skoll Foundation puts it this way:‘Social entrepreneurs share a commitmentto pioneering innovations that reshapesociety and benefit humanity. Whetherthey are working on a local or inter-national scale, they are solution-mindedpragmatists who are not afraid to tackle — and successfully resolve — some of theworld’s biggest problems.’ 17

Environmental entrepreneurs may beinterested in social objectives, but theirmain focus is environmental. Manyconsider environmental entrepreneurshipto be a subset of social entrepreneurship,but they are distinct. A major rebrandingof the sector began in 2002, as the‘cleantech’ sector. The Cleantech VentureNetwork (CVN) defines cleantech asembracing ‘a diverse range of products,services, and processes that are inherentlydesigned to provide superior performanceat lower costs, greatly reduce or eliminateenvironmental impacts and, in doing so,improve the quality of life. CVN includesthe following sectors: energy generation;energy storage; energy infrastructure;energy efficiency; transportation &logistics; water purification & manage-ment; air quality; materials & nano-technology; manufacturing/industrial;agriculture & nutrition; materials recoveryand recycling; environmental IT andenabling technologies.’

One key reason whymainstream business needsto pay attention is thatthese people aim to achievehigher leverage thanconventional philanthropyand NGOs, often aiming to transform the systemswhose dysfunctions helpcreate or aggravate majorsocio-economic, environ-mental, and politicalproblems.

15 J. Gregory Dees and Beth Battle Anderson, ‘Framing a Theory of Social Entrepreneurship: Building on Two Schools of Practice and Thought,’ in Rachel Moser-Williams (Editor),Research on Social Entrepreneurship,ARNOVA occasional paper series, Vol. 1, No. 3, The Aspen Institute,Washington DC, 2006.

16 www.ashoka.com17 www.skollfoundation.org/

aboutsocialentrepreneurship/whatis.asp

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Figure 1.1The opportunity landscape

It’s remarkable how much of the financialworld’s vocabulary relates to water and tohydraulic imagery. We have liquid assetsand liquidations, we manage cash flowsand solvency, we float companies andexchange rates, there is sunk capital andthere are investments below water, moneygoes down the drain, we try to deflatebubbles, and we — or at least some people— launder money.

In this spirit, Figure 1.1 plots five zones of the opportunity landscape for entre-preneurs. On the vertical axis, we plot‘Impact’ (think leverage, blended valuecreation,18 and system change), from Lowto High, and on the horizontal axis weplot the degree to which the ‘Drivers’ of action are ‘purely’ Moral or ‘purely’Financial. Clearly, entrepreneurs ofdifferent types will spot opportunity right across this landscape.

— Zone 1 (The Drain) is where money drains from the system, because of poor management — or because of thebribery and corruption that blights somany economies and new ventures.Enron operated in this space, as do thefraudulent ‘briefcase NGOs’ that blightcountries like India.

— Zone 2 (The Well) is where communities under stress — or thosethat help them — dip into capitalreserves and the benevolence ofordinary citizens, although (like wells)public benevolence can be over-pumped to the point of exhaustion or ‘donor fatigue.’ Médecins sansFrontières and the Red Cross areleading players here.

— Zone 3 (The Siphon) is the area of corporate philanthropy, wherebusinesses create shareholder returns,but channel off a percentage, partly to ensure their continuing license to operate. Think of the DanoneCommunities Fund, Shell Foundation, or Google.org.

— Zone 4 (The Pump) is where predominantly non-profit or hybridnon-profit/for-profit ventures leverageresources to create blended value —and, through lobbying, promote widersystemic change. Organizations likeGrameen Bank, OneWorld Health, and PATH create change here.

— Zone 5 (The Geyser) is where deep-seated seismic forces (thinkdemography, economic development,technology trends, and eco-pressureslike climate change) build a head of pressure that powerfully, if un-predictably, erupts in showers of new wealth — laying down deposits ofvalue and helping irrigate the entirecatchment area. Powerful players hereinclude Acciona, GE, Vestas, and muchof the cleantech sector.


— Third, a number of major corporations have begun to rebundle existingactivities, and in some cases launch newones, designed to meet sustainability-related needs. A case in point has beenGE, with its ‘ecomagination’ initiative.19

To illustrate the scale at which suchcompanies can drive change, if minded todo so: when GE released its 2005ecomagination report, it revealed thatrevenues from the sale of energyefficient and environmentally advancedproducts and services had hit $10.1billion in 2005, up from $6.2 billion in2004 — with orders nearly doubling to$17 billion.

— Fourth, we have seen the emergence of two separate movements that havehelped push entrepreneurial solutionsfurther into the spotlight. (1) The socialenterprise sector has been building fordecades, but has been given a majorboost by the work of Ashoka andinitiatives launched by The SchwabFoundation, The Skoll Foundation,Acumen, Endeavor, and Fast Company(particularly its Social Capitalist Awards).

(2) The ‘cleantech’ sector, in part arebranding of environmental and energy-related enterprise, has seen rapid growththanks to growing concerns aroundenergy security and climate change —and the recent ‘greening’ of US state andmayoral politics.20

Closer than you think?

At the 2007 World Economic Forum summitin Davos a key question asked was: Whatcould be done to spur entrepreneurialsolutions to global sustainabilitychallenges? The business media picked upon the theme. ‘Imagine a world,’ the frontcover of BusinessWeek encouraged readersin its Davos issue, ‘in which sociallyresponsible and eco-friendly practicesactually boost a company’s bottom line. It’scloser than you think.’ This trend alignsclosely with the emerging ‘Fourth Wave’agenda SustainAbility has been tracking.

Just as a series of waves run through thecaterpillar to uncover the chrysalis, so theglobal economy has been powerfully shapedby a series of societal pressure waves — atleast in the OECD region (Figure 1.2).21

Figure 1.2Upwaves and downwavesWorld populationBillions

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18 For more on blended value, see www.blendedvalue.org

19 http://ge.ecomagination.com/@v=022120072196@/site/index.html

20 One of the most notable actors in this sector is the Cleantech Venture Network.www.cleantech.com

21 The five-yearly summary of events is illustrative only, to give a sense of whatelse was going on at the time.

Given that 2007 marks the year when thehuman population becomes predominantlyurban for the first time, the three blue linesmap the trends in the rural, urban, andglobal populations. By our analysis, thewaves have run as follows:

— Wave 1 (peaking 1969–72) focused on new policies, rules and regulations,largely in the environmental, safety, and health areas. During this period,there was much counter-culturalentrepreneurship, particularly in areaslike whole foods and ‘alternative’ or‘intermediate’ technology. Thecompliance agenda continues to evolveglobally.

— Wave 2 (peaking 1988–91) drove voluntary market initiatives in such areas as reporting and certification,including the evolution of standards such as ISO14001 and the GlobalReporting Initiative. Here, much of the entrepreneurship focused onenvironmental and sustainability-related services and socially responsibleinvestment.

— Wave 3 (peaking 1999–2001, before being knocked back sharply by 9/11)drove concerns around globalization andboth global and corporate governance.This period saw a dramatic increase inthe number of networks linking socialand environmental entrepreneurs.

— Wave 4 (which is just getting into its stride) appears to be reboundingenergetically, with a growing focus oninnovation and entrepreneurial solutionsto sustainability challenges.22 The promiseis that mainstream players now getinvolved, potentially overwhelming oroutflanking smaller players. Equally,however, the prospect of alliances,partnerships, mergers, and acquisitionswill also likely grow.

2007 survey and report

This report attempts to assess the currentstate of social entrepreneurship — thepossibilities presented by new mindsets, the challenges entrepreneurs face in scalingtheir organizations and the opportunitiesfor greater collaboration with corporationsand others. To explore these themes, we:

— E-mailed a quantitative survey instrument to 400 entrepreneurs,selected from the networks of the The Skoll Foundation, The SchwabFoundation,23 The Hub,24 ColumbiaUniversity’s RISE project,25 and FastCompany.26 Over 100 completed the full survey, representing a 27% responserate. The survey instrument can be found in Annex 1;

— Undertook extensive desk research, including ‘Deeper Dives’ into the healthand energy sectors, and took part in anumber of major events in the field; and

— Interviewed 20 entrepreneurs in depth,either face-to-face or by telephone.

We rounded out this research with feedbackfrom our growing network. From Acumen to zouk ventures, we invited perspectivesabout the main challenges and oppor-tunities facing social and environmentalentrepreneurs today. The survey findingsfollow in Chapter 2.


This report attempts toassess the current state ofsocial entrepreneurship.

22 Four scenarios based on SustainAbility’s pressure waves analysis will feature inanother report part-funded by The SkollFoundation, focusing on the future ofglobalization. Due out in June 2007.

23 www.schwabfound.org24 www.the-hub.net 25 www.riseproject.org26 www.fastcompany.com/social


To our surprise, the entrepreneurs interviewed and surveyed weresignificantly more interested inresponding than we had imagined — and the thrust of our questions wasparticularly appreciated. Indeed, it soon became clear that even the bestentrepreneurs are experiencing realgrowing pains, mainly in the field offunding — but also in a number of otherareas. For the sake of simplicity, let’s boil down the questions to three mainareas of interest:

1 Who are these people, what are they trying to do, how do they view theprospects for scaling what they do, and how optimistic/pessimistic are they currently?

2 What are the critical challenges they face in replicating and scaling successfulsolutions to sustainability challenges?

3 And how do they think of mainstream business in all of this — whether as aroute to funding, a source of potentialpartnerships, or as a roadblock toprogress?

We cover the first two areas in Chapter 2,the third in Chapter 3.

1 Meet the entrepreneurs

Who are these people?

For non-experts who know something of the field, Muhammad Yunus of theGrameen Bank is probably the first personwho comes to mind. But Dr Yunus is not atypical social entrepreneur, however muchmany entrepreneurs may see him as theirmodel. Not only does he now have a NobelPrize, but he has been working in the areafor over 30 years, his institution is large,successful and globally known, and alreadypartnering with a number of majorcorporations — including Danone andTelenor.27 By contrast, perhaps the best way to get a sense of the more typicalhigh-performance social entrepreneur is to take a look at Ashoka’s website.28

Or, to focus on people who have gonethrough further hoops, visit the websites of Acumen Fund, Endeavor Global, FastCompany, The Schwab Foundation, andThe Skoll Foundation.29

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sPanel 2.1Organizational mission

Each organization was asked to identifyits ‘primary area of focus.’ Social equity,selected by most respondents, includesorganizations addressing poverty,economic development, and empower-ment of marginalized citizens. Notsurprisingly, a significant number ofrespondents selected ‘something else’ —an illustration of how social entrepreneurssee these challenges as interrelated andtheir solutions as out-of-the-box. Mostused the ‘something else’ response tosignal ‘several of the above.’ The resultsare shown in Figure 2.1.

27 www.grameenphone.com/index.php?id=64

28 www.ashoka.org29 www.acumenfund.org

www.fastcompany.com/socialwwwschwabfound.org;www.skollfoundation.org

12

As far as the respondents to ourquantitative survey is are concerned, their missions and geographic focus aresummarized in Figures 2.1 and 2.2.

How do they think of — or label —themselves?

Many respondents and interviewees clearlyconsidered themselves to be ‘social’ or‘environmental’ entrepreneurs, while othersthought of themselves as entrepreneurs,innovators or even campaigners. Here arereplies from four US respondents thatunderscore the diversity of perspectiveseven among entrepreneurs of the samenationality:

— Rick Surpin, ICSHealth Care, New York, NY‘I consider myself a social entrepreneur,but that is an approach to the work; it's not my vocation and no one wouldgive us money, except Skoll possibly, onthis basis. If people ask me what I do — I work on transforming the health careand social service system for low incomeadults with disabilities and create decentjobs for low income people at the sametime. This is how I see myself and what I think is interesting and challenging andgenerally what makes other peopleinterested as well.’

— Chris Elias, PATHHealth Care, Seattle, WA‘We are a relatively new entrant into this discourse and community of socialentrepreneurs. It is clear that there aretwo groups. There are the organizationsthat were basically built around anindividual social entrepreneur who had a strong vision and charisma and createdan organization to meet that vision. Then there are groups like PATH andTechnoserve, that may have started that way, but are now big organizationswhose directors are certainly entre-preneurial . . . but it no longer makessense to talk of PATH as the product ofany one person. We have 550 staffworldwide with variable degrees ofentrepreneurship. If I were to I ask,probably 100 or more of them wouldraise their hand and say “Yes, I’m anentrepreneur.” ’

— Laura Peterson,Hands to Hearts InternationalHealth Care, Portland, OR‘Right now there is a ton of hype aroundsocial entrepreneurs. There are pros andcons to this, but the reality is that veryfew social entrepreneurs will ever get offthe ground. I am a therapist, a supervisor,and an administrator. Now people callme a “social entrepreneur,” but I'm notentirely comfortable with that. This titleseems to come with super-humanexpectations that go beyond talent,innovation, and integrity and intounrealistic extremes of personal self-sacrifice.’

— Josh Tosteson, HydroGen LLCCleantech, Cleveland, OH‘We are a commercial business in theclean energy industry. So, we manu-facture fuel cell systems for industrialapplications, and as such, I wouldn’tcharacterize our business strictly as a“social entrepreneurial” venture. It hasclear social benefits that motivate andanimate some of the reasons why I andsome of my colleagues are involved withit in the first place. On the other hand,we are casting this as a straight upcommercial venture subject to all of the challenges and opportunitiesinherent in that kind of a corporateenterprise. Even though we pay attentionat a certain level to the social outcomesof the work we do, and focus intently on how we operate as an ethicalenterprise both in internal and externaldealings, as an investor-backed, publiccompany we need to retain a first-orderfocus on business metrics that reflect our principal obligations to shareholdersand investors.’

Figure 2.1Primary mission oforganizations surveyedN=109%

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Growing OpportunitySurvey Findings

13Growing OpportunitySurvey Findings

Where are they on theoptimism–pessimism spectrum?

Successful entrepreneurs, by their verynature, tend to be optimists — highlypragmatic optimists. No surprise, then, to find that, despite the challenges, theentrepreneurs we interviewed wereoverwhelmingly optimistic. Most cited what some might see as extremelyaggressive growth plans, such as doublingtheir operations in the next three to fiveyears, and taking local programs nationalor, if already operating at the nationalscale, international. Our survey resultsreflect this optimism — 32% believe theywill move away from foundation funding to more sustainable source of funding inthe next five years.30 That said, several —including PATH — expect to scalesignificantly mainly on the basis offoundation funding.

Reading between the lines, however, we did detect a difference in tone from thoseaddressing poverty issues as compared with the rest of the social enterprisecommunity. We often heard a morefrustrated (sometimes even desperate) tone, a sense that the challenges are muchgreater than currently acknowledged, andthat — because this is an area of intensemarket failure — social entrepreneurs haveto compete for limited foundation funding.Typical comments noted the need to live a ‘hand-to-mouth existence,’ and anotherspoke of the challenge of, ‘Gainingrecognition in a very crowded non-profitmarketplace.’ More fundamentally still,another respondent argued that, ‘Thereneeds to be a paradigm shift in order toreduce world hunger and poverty.’

More positively, the emergence and growth of the base-of-the-pyramidmovement is seen as an optimistic trend, an attempt to reframe the issues in termsof the potential commercial opportunities.It will be fascinating to see how The XPrize Foundation,31 which stimulated ahuge wave of private enterprise in relationto space travel and is now working in suchfields as genomics and automobility, appliesthe same approach with its planned prizefor poverty alleviation (page 29). One key is to set the targets in ways designed toswitch on the entrepreneurial juices of a wider group of innovators.

Panel 2.2Regions

We asked where each respondent’sorganization ‘primarily’ operated, whichallowed for multiple answers in terms ofgeographies. North America came top(54%), with the South Pacific — perhapsnot surprisingly — bottom. The lowpositioning of Europe is notable.

Figure 2.2Primary regions of operationN=109%

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30 Note: there may be a risk of survey bias, on the basis that those responding couldbe more optimistic about their ventures,although there could equally be a reverseeffect.

31 www.xprize.org

14

How do they view the prospects forreplication and scaling?

For the new breed of funders, the capacityof social or environmental entrepreneurs to replicate and scale is fundamental. For many, scalability — of beneficialimpacts, business models, and enterprises —is the Holy Grail. And that also creates asense of frustration with the current order.Some respondents see the nature of muchcurrent funding as part of the problem —encouraging a sense of dependency. A related comment came from KeertiPradhan of Aravind Eye Hospitals, inrelation to the state of other NGOs,particularly in India: ‘NGOs get hooked on a sense of getting when they rely onfoundation or non-sustainable fundingsources. As a result, people don’t apply their brains to different ways to break that barrier of dependency on foundations.The question is: whose responsibility is it to help NGOs with this? NGOs have huge potential, but huge knowledge gapsexist about how to access market-ratefunding sources that could help supportnon-profit work.’

Perhaps not surprisingly, most intervieweesand respondents are enthusiastic about the ability of their model to replicate andscale. This trend seems to be independentof geography. Only one entrepreneursuggested that their model is too complexto scale at the pace that the Skoll andSchwab Foundations, and others, arepushing for — and clearly felt a great deal of pressure to do this beyond theorganization’s ability.

The drive to scale is seen to raise its own very particular challenges. In addition to the financing, marketing, and maturation/development challengeshighlighted in the next section, socialentrepreneurs underscore issues such as: ‘finding the right partners’ for jointventures and franchising; maintaining the quality of service, particularly whenworking with third parties; and the question of pace of growth — ‘How fast can I grow,continue to deliver and not compromise my mission?’ Anyone working withmainstream entrepreneurs will recognizethe thrust of the questions.

Finally, a significant minority of theentrepreneurs stressed the need forgovernment to play a more effective rolein making scaling possible. In particular,entrepreneurs suggest that government:

— Needs to provide an enabling environment, through policies thatcreate, as a minimum, a level playingfield for solutions and, at best, thatstrongly incentives the development and deployment of new solutions; partly by developing incentives thatallow the most cost-effective solutionsto compete, for example by removingperverse incentives. In many countries,more fundamentally still, governmentsalso need to provide basic infrastructure,such as sewers, roads, and schools.

— Must make social and environmental issues a political priority. A number of respondents expressed concern thattheir issues were not top priorities forpoliticians in their country.

— Should explore alternatives. Sylvia Aruffo of Careguide Systems in thehealthcare sector said, ‘It’s very difficultfor any entrepreneur when you have a breakthrough idea and the structure is already set up for another way to solve that problem. What do you dowhen your solution is better, but it justdoesn't fit?’

— Has a role to play in setting minimum standards for provision, and in scalingsolutions, not just as service providers,but as policy makers, procurers ofservices, landlords, experts, and so on.

— Can be a major stumbling block in some countries, particularly where there is widespread corruption. Somegovernments, we were told, don’t wantsocial entrepreneurs to succeed, becauseit would make them look bad andaccentuate their failures.


‘If I had twice as much money, I’d make at least four times as much impact.’ Jim Fruchterman,Benetech

15

2 Critical challenges

The central thesis of Growing Opportunityis that the undoubted progress of the social enterprise sector is often beingbought at the expense of growing human,organizational, and opportunity costs. This is inevitable, given that the same could be said of all entrepreneurialventures, but the conclusion calls for athoughtful, coordinated set of responsesfrom those who fund and otherwise supportthese people. The pains, as Panel 2.3suggests, come in various areas: funding,promotion and organizational development.The majority of respondents operate in thenot-for-profit sector, which intensifies thechallenges of raising funding and recruitingand retaining talent.

A number of challenges raised by not-for-profit enterprises are clearly much less ofan issue for their for-profit counterparts,particularly in terms of the ability to attract and hold talent. But for-profit social enterprises have their ownchallenges. Since a number of for-profits(both independent and owned by others)were included in our interviews and survey,it is worth focusing on one case whichseems to provide a benchmark for qualityscaling. Our interviewee: Gary Hirshberg,President and self-styled ‘CE-YO’ atStonyfield Farm, Inc.,32 now part of theFrench food and beverage group Danone.33

We asked what he had had to give up whenStonyfield was acquired by Danone.

‘First,’ he said, ‘I don’t feel that I gave upvery much in doing this deal. They boughtout all of my non-employee shareholders,which was something that I needed to do in any case. But even though they weregoing to own 80% (it is now 85% as I havesold some shares to them) of the company,they left me with majority control bygranting me the right to vote three of thefive board seats for as long as I remainactive as Chairman and/or CEO. In fact, the only veto rights that I did give themwere that they had to approve (a) anycapital improvements over $1 million and(b) any acquisitions of other companies.’

Panel 2.3Critical challenges, 2007

1 Raising capitalOverwhelmingly, social entrepreneurscited access to capital as one of their two primary challenges (72%),because capital is what enables theentrepreneurs to hire talent, market,rent space, pursue pilot projects, andcarry out other activities related togrowing their organizations.

2 Promotion and marketingPromoting or marketing theirorganizations and offerings was thesecond most frequently mentionedchallenge (41%). The focus: makingconsumers, businesses, funders, andother relevant stakeholders aware ofthe good work that the organization is doing. Like mainstream entre-preneurs, however, social andenvironmental entrepreneurs areusually ahead of the curve and it takestime for the rest of the world to catchup, including funders, governmentpolicy makers, and potentialmainstream business partners.

3 Developing organizationsKey issues here include: recruiting,developing and retaining talent; and balancing professionalism withentrepreneurialism and passion for the mission. Attracting talent was citedby most entrepreneurs as a prioritychallenge, but more specifically, socialenterprises are challenged to find theright kind of talent for their ventures — a blend of entrepreneurship and pro-fessionalism, coupled with an ability to: (1) work as effectively with the communities served by the enterprise(often very poor and marginalized) aswith corporate management/boards; (2) bring leading edge technical capabilities to bear; (3) have businessknow-how; and (4) buy into theenterprise’s mission and vision. A tall order, especially withoutcompetitive salaries.

Figure 2.3Challenges facing social entrepreneursRespondents select the top two challengesthey face in growing their organizationsN=109%

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32 www.stonyfield.com 33 www.danone.com


‘Otherwise, things today are pretty muchthe way they’ve always been, except thatwe now have access to a global network of resources and talents, and of course we are engaged with that network to create organic enterprises in many othercountries. Parenthetically, I have proposedthree investments/acquisitions since thepartnership began and they have approvedall three.’

Danone has stuck to the spirit — not justthe letter — of the bargain. ‘Danone has not wavered at all from the original deal,even though there have been plenty ofopportunities for them to do so,’ Hirshbergcommented. ‘For instance, we have requiredfar more Cap-Ex [capital expenditure] thananyone ever dreamt back in 2001, and theyhave fully funded our requirements withoutseeking any additional advantage or trade-off on my part. Reciprocally, we have grownfaster than they or we expected and wehave certainly delivered excellent results forthem, so everybody has won something.’

‘Additionally, I expect to see many moreorganic/bio launches in many othercountries, and each one will be adapted not only to the local market conditions, but to the various Danone organizationalstructures. I also expect to continue to havea big influence on Danone’s climate andorganic policies around the world.’

This sounds like a virtual Nirvana, not only for non-profits but also for most for-profits needing an exit strategy to ensure a financial return on early investment. A more typical response from our surveywas this: ‘We would like to be free from therat-race of fundraising and proposal-writing, and have our own private sourcesof income. They are the most stable andpredictable.’ Unfortunately, this is a distantdream for most of the entrepreneurs wespoke to — and likely to remain so, giventhe challenges they spotlight.

So what are the main financialchallenges?

Business people wanting to understand and engage these entrepreneurs need to understand the world in which thesepeople operate — and the challenges they face. ‘Attracting top management and, in particular, providing sufficientcompensation is a primary challenge,’ saidLinda Rottenberg, CEO of Endeavor Global.‘From NYC to Bangalore, people will makethe trade-off between making a differenceand making money at 2x earnings disparity,but not at 5x or 10x.’ Time after time,research has shown that it is easy to start a non-profit or social enterprise, but verymuch harder to bring it to scale.

It was clear that raising money was the single greatest challenge that mostentrepreneurs face — see Figure 2.3, where ‘access to capital’ ranks top at 72%. And there were no easy answers. ‘All sources of money come with their ownchallenges,’ was the way one entrepreneurput it. Four key issues surfaced in the survey and interviews:

1 Square pegs: social entrepreneurs don’t fit the existing systemThere is a widely held sense that theunique approaches of social entre-preneurs are hard to fit into existinginvestor models and criteria, althoughthe same point probably could be madeabout all forms of entrepreneurship.Foundations and governments are seenas siloed and conservative, with theresult that they struggle to take ongrantees that don’t fit their narrowersense of solution options. More, thesegroups typically do not lend to for-profitorganizations, which leaves out asignificant segment of social entre-preneurs. Traditional debt instrumentsare sometimes used, but can presentmajor challenges in terms of entre-preneurs’ ability to service the debt.Current equity investments are seen asshorter term than what is needed — andare often too expensive for entrepreneurswith a social mission.

‘We must find the rightleaders for the next phaseof growth. We needentrepreneurs who have the business skills, socialdedication, and sense ofhumor that are essential to success.’ Education Sector


2 Lack of consistent, flexible, and long-term financingNearly every entrepreneur interviewednoted the importance of time horizons.In particular, the work they are engagedin tends to have long time-frames (5–10 years to results was typical) and requires partnerships and fundingthat match these needs, i.e. is consistentand long-term. The need for flexibilitywas also a consistent theme: mostentrepreneurs are able to access specificproject financing, but have a harder timeaccessing funds that will support moregeneral infrastructure needs. Somecurrent funding sources that appear tobe meeting these needs include:

Innovation capitalThis term was used to refer tounrestricted donations from high net-worth individuals that enable theentrepreneur to take risks, enter newmarkets, hire ahead of the curve or dopilot projects, ultimately helping toleverage additional funding, whethergrants or loans. There is a sense thatinnovation capital only needs to be asmall percentage of total funding, but offers the opportunity for incrediblyhigh leverage.

Angel investorsFor profit-making enterprises, Angels(individuals who make very early-stageinvestments in start-ups) were cited asparticularly helpful because they areoften patient investors, sharing thevision.

Funding from unusual foundationsCertain foundations, with Skoll ofteninstanced, appear to ‘get it,’ providinglonger term funding for entrepreneurs.Still, the maximum grant length is aboutthree years, which falls short of longerterm needs.

International aid organizationsThe Asian Development Bank, World Bankand IMF were cited as potential ‘patient’investors. A downside to these sources,however, is that they mainly fund non-profits, so entrepreneurs set up as for-profits may fall through the cracks.

Private investment fundsThe New York City Investment Fund wascited as a helpful source. Its investmentstypically range in size from $1 million to$3 million. The Fund provides equity ordebt, structured to meet the needs of the project. It will invest at any stage ofbusiness development, but seeks to exitin about five years. The particular focushere is on ventures that provide benefitsto NYC.

3 Lack of knowledge about — and access to — capital marketsLike their mainstream counterparts, atleast early on in their careers, most ofthe entrepreneurs we interviewed lackin-depth knowledge of capital marketsand the best ways to finance theirorganizations. They rely on trustedadvisors, mostly on their boards ofdirectors, for this information as well asfor access to investors. There is a strongsense, however, that social entrepreneurscould benefit from increased knowledgeabout the best financing options, as well as better access to open-mindedfinanciers.

4 Sustainable sources of financing bring their own challengesAs entrepreneurs move toward more self-financing models, whether for-profit ornon-profit, they encounter challenges.Companies considering ‘Robin Hood’business models — where revenues fromthose able to pay for services subsidizeprovision to those who can’t, or can’t pay the full cost — face challenges inensuring that as they provide services tocustomers with a higher willingness topay, they don’t lose sight of their mission.

Fees and service-based approachesto financial sustainability may appearpromising, but can also pose challengesfor some entrepreneurs. They run the riskof stretching too far afield from theircore competencies, with the result thatthe poorest people, whose needs werethe original spur to action, cannot accessthe service.

‘We are a small organization that is up against the over-head wall. To get and retainqualified staff we need topay more than we are ableto. To be able to pay more we have to raise more funds,but to raise more funds weneed more staff. A perfectvicious circle.’ Poverty Alleviation Sector

For-profit social enterprises facechallenges as both government andinvestors expect them to act like typical,for-profit companies, and so expectstandard income tax payments andmarket rates of return. Restrictions alsoapply, such as an inability to accessdonations from the general public, applyfor certain types of foundation/government funding, and pursue morecharitable elements of their businesses.

For some, the business case for support is easy to articulate, for others less so.Consider the Partnership for GlobalSecurity,34 which lobbies for more effectiveaction to control weapons of massdestruction. They noted that they are‘looking beyond foundations to jointventures with local/state government andcommercial entities that have a stake in our issues.’ They also want to raise fundsfrom the public and ‘venture capitalists’who ‘understand that preventing a WMDcatastrophe is essential for global economicgrowth — and that government structuresare currently insufficient for the task.’

Non-profits who have been able to clearlystate the benefits of their work have, as a result of clarity of message, donespectacularly well at fund-raising. As anexample, Room to Read, which aims tobring books and libraries to countries likeNepal and Vietnam, has gone ‘from zero to $12 million of annual revenue in sevenyears,’ according to its Founder and CEO,John Wood. Room to Read has raisedmoney through corporate relationships,high net worth individuals and over 200 public speeches per year.

There is, however, a potential fly in thisointment. Wood expressed concern that,‘some organizations tell us that we havegotten big, “so you no longer need us”. ’ This reaction, he noted, ‘is very differentfrom the private sector, where successattracts capital. Why should an NGO bepenalized for being successful, and whyshould any donor want an NGO they havefunded in its early years to remain small?’ 35

He went on to note, ‘Getting financing foryour NGO is a bit like trying to compose amosaic that is made up of thousands oftiles. Funder A wants to fund tiles #389 and #672, whereas Funder B wants to fundother tiles, but wants different reports ondifferent timelines than those required byFunder A. It eats up a lot of managementbandwidth to keep up with it all.’

Others were more positive, among them —in the same sector, but focused on the US rather than on developing countries —First Book, whose mission is to providedisadvantaged children with new books.36

‘We have already developed the necessarymechanisms and the enterprises are alreadysuccessful,’ said Kyle Zimmer, theorganization’s co-founder and President. ‘It is now a matter of scaling up.’ Theirbusiness model is worth a close look, as a leading edge example of a financiallysophisticated social enterprise, becausethey have worked out how to target anunmet need at a price point that works forall — and because they have developed abusiness model that fits in very well withthe interests of the publishing industry.

The ‘10 Routes to Money’ (below) aresequenced in the order that a compositeentrepreneur might try them out, but theactual ranking by frequency of reported usewas quite different, and is shown in Figure2.4. The question asked here was: ‘Thinkingabout financing your initiatives, whichsources of funding do you feel will be thebest avenues for you to pursue?’

18

Figure 2.4Preferred sources of financingN=109%

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34 www.ransac.org35 As one of our interviewees noted in

response to this point, ‘Here is the elephantin the room. Let’s talk about the nature offoundation boards. This question reflects thethinking of foundation boards about theirown personal clout and their attentionlevels. When [a named] foundation took acapacity building approach, the staff foundthe biggest challenge was managing theboard’s boredom level. It just wasn’t veryexciting to see a list of performanceindicators making an incremental andupward change. The board got bored. Theprogram officer developed a way to utilizethe board members as developmentconsultants with the grantees and thishelped to stem the boredom tide.Understanding the motivation andstimulation of foundation board members iskey to working on this one.’

36 www.firstbook.org/site/c.lwkyj8nvjvf/b.674095/k.cc09/home.htm


Panel 2.410 routes to money

Our survey listed 10 potential routes to money and other resources typicallypursued by social and environmentalentrepreneurs, plus an ‘Other’ category, to ensure we did not miss anything.37

In any event, the 10 Routes seemed tocover pretty much all the bases. They arelisted here in the order that they are likelyto be addressed by the typical socialentrepreneur.

Funding from own pocketThis is where many mainstream entre-preneurs start out, tapping the resources oftheir families and friends — although only8% ticked this box. Not surprisingly, giventhat few people have the money orinclination to finance a venture using theirsavings or credit card, this was the secondleast preferred for the future. It was clearthat those who had considered tappingfriends and family sources had concludedthat it comes with intense personalpressure, so tends to be avoided.

That said, we spoke to several entrepreneurswho are developing hybrid enterprises (part for-profit, part non-profit) during the survey, and it was clear that this can be a pretty taxing route to funding. Oneentrepreneur noted that their latest roundof funders was asking for such demandingpersonal guarantees that the family would‘probably end up selling our grandmothers’wedding rings — if not our kidneys!’ Morepositively, the handful of people who hadtaken this route, for whatever reason, saw at least one key advantage: those using their own money tended to practiceintense financial discipline.

Public fundraisingThis (just) came in second, at 54%, withentrepreneurs underscoring the independ-ence of action potentially derived fromfunding raised in this fashion. Fund-raising events are more common in somecountries than others, with US groupsparticularly likely to go this route, amongthem Acumen,38 Endeavor Global,39

and WITNESS 40 — with celebrities oftenbeing used to draw in potential givers or investors. The general point about thedesire for unrestricted funding was under-scored by Phulki,41 based in Bangladesh,which noted that, ‘donor priorities changealmost every year, so our goals andobjectives will not always match with those of the donors. To maintain our own individuality, it is necessary to haveunrestricted sources of income.’

In-kind helpPerhaps surprisingly, this came in seventh,at 31%. That said, volunteering was a key resource for many. And some socialenterprises — among them CDI 42 in Braziland the Furniture Resource Centre 43

in the UK — create revenues by taking ingoods or equipment that others no longerhave a use for, reconditioning them, andthen making them available, or selling them on. But volunteer labor and thedonation of in-kind resources are not anautomatic guarantee of successfuloutcomes. Consider the problems Habitatfor Humanity 44 has faced in trying torebuild homes in the wake of HurricaneKatrina, among them governmentregulations and insurance costs.45

Foundations and high net worth donorsFoundations came in first place in terms of preferred funding sources (74%). Despite some frustrations, those relying on foundations — in whole or in part — see them as a dependable funding source.One advantage in countries like the US wasarticulated by Jim Fruchterman, Presidentof Benetech: 46 ‘There are the advantages of size in the case of foundations and veryrich people. An amount of effort is likely to land $250,000.’ A typical answer herewas, ‘Foundations will likely remain ourmainstay.’ Where market failures are beingaddressed, this obviously makes a good dealof sense. As Summer Search 47 put it, ‘Thisis the landscape we know.’ Moreover, theynoted, ‘We feel that it is highly sustainable.’Others felt a growing need to learn moreabout this sector. ‘We need to deepen andexpand our understanding of philanthropy,’said the Global Fund for Women.48

A small number of respondents mentionedthat they were trying to expand their focus from foundations to high-net-worthindividuals, partly because they felt thiswas an untapped source, partly becausetheir expectation was that any fundingmight come with fewer conditions. It may take a good deal of effort, butsuccessful cultivation of such relationshipsis seen as the bedrock on which otherfundraising can proceed. ‘Over 16 years, we have built up a donor base offoundation and individual funders who are very loyal to our organization, and give year after year,’ said the NepaleseYouth Opportunity Foundation.49

‘It is now beyond urgent that we create a newsocial financial servicessector.’ Bill Drayton, Ashoka

37 The 10 routes are derived from John Elkington and Pamela Hartigan, The Power of Unreasonable People: HowEntrepreneurs Create Markets to Changethe World, due out in January 2008 fromHarvard Business School Press.

38 www.acumenfund.org39 www.endeavor.org40 www.witness.org41 www.phulki.org42 www.cdi.org.br/portalcdi/indexeng.htm 43 www.frcgroup.co.uk44 www.habitat.org45 www.nytimes.com/2007/02/22/us/

22habitat.html?ex=1172811600&en=5be31f901a3b80e6&ei=5070&emc=eta1

46 www.benetech.org 47 www.summersearch.org 48 www.globalfundforwomen.org/cms49 www.nyof.org

20

Some social entrepreneurs have beensuccessful in winning one or more of thegrowing number of corporate foundationawards. Barefoot College, for example,won the 2006 $1 million Alcan Prize forSustainability.50 In addition to the annualPrize, nine shortlisted organizations for the2007 prize will be awarded a $15,000 Alcan grant to invest in capacity buildingtraining for the organization. Developed inpartnership with IBLF, the Prize is awardedto ‘any not-for-profit, civil society or non-governmental organization based anywherein the world that is demonstrating acomprehensive approach to addressing,achieving and further advancing economic,environmental and/or social sustainability.’

Not all corporate foundations are headinginto the social enterprise space, however. As Kurt Hoffman, Director of The ShellFoundation,51 told us, ‘Our main focus, as you know, is “enterprise solutions topoverty” in poor countries, where the lackof sufficient numbers of enterprises of allkinds is the major constraint on self-sustaining development emerging in thosecountries. Rich countries — and rich donorslike The Skoll Foundation — are best ableto afford to focus on promoting “social”entrepreneurs. Poor countries mainly needentrepreneurs. So we tend to avoid hookingup or into the social enterpreneuring sector,as worthwhile as it is.’

Governments and public sectorThis route was favored by a significantproportion of entrepreneurs, coming infourth place at 43%. Even for-profits sawpublic sector agencies as a key fundingsource. ‘They represent the shortest pathsto the level of funding we require,’ said one solar photovoltaics company, perhapssurprisingly. While some accessinggovernment funding noted upsides, such as collaboration with leading scientists atgovernment laboratories, public relationsbenefits, and access to governmentprocurement avenues, others felt frustratedby the significant constraints associatedwith government funding and by itsprescriptive nature. Not surprisingly givenits accountability to citizens, government is often much less able to offer flexiblefunding guidelines that would match theneeds of most social or environmentalentrepreneurs.

Sales and/or feesOver half (57%) of the respondents preferto draw at least some of their revenuesfrom this source, which came in third place.

Jim Fruchterman of Benetech noted that,‘Earned income is a mark of the value ofyour product — and provides feedback from your customers.’ Easier to do, clearly,where markets are working to some degree,than where there are clear market failures.Some saw their sector as less suited to thismodel. ‘Education is an area where there isa lower expectation of profitability,’ as theFascinating Learning Factory 52 put it.

A fair few respondents mentioned a tensionat the heart of social entrepreneurship: on the one hand, there is a desire to giveaway information for free, while on theother there is a need to earn revenue to be sustainable. ‘We’ve not yet worked out a way to earn income from selling ourknowledge,’ said EarthLink.53 ‘In the recentbook, The Spider and the Starfish, the role of an intermediary, or catalyst, wasdescribed. Such people have a difficult timeearning income from ideas they give awayto anyone who will listen. Our aim is tocreate a hybrid, where we draw people fromaround the world to our website becausethe causes we address are important toindividuals, foundations and people inindustry, and we earn income by the typesof services and tools we use to support thelearning and interaction of these people.’

FranchisingBoth in the qualitative, in-depth interviewsand in the quantitative survey, this optionseemed to be somewhat outside themainstream, coming in eighth place (15%).A rare example of a social enterprise that is considering some degree of franchising is Child Savings International, which has at least thought of franchising itsAflatoun brand to banks and other financialinstitutions. Founder and Chair, JerooBillimoria, is pursuing a dual franchisemodel: one level addressing non-profits and one for-profits. On the for-profit side,where the target is to partner with banks,she is setting up Aflatoun, Inc., which willown the brand and also, longer term, openup the option of raising money throughcapital markets.

On the non-profit side, Jean Horstman(CEO, InnerCity Entrepreneurs) reportsthat, ‘We are in the process of testing outlicensing as the way to scale our impactquickly while growing our organization at areasonable pace. We are exploring creatingbranches in the state of Massachusetts tolearn to scale at the state level, whilelicensing our curriculum and supportservices nationally.’

‘Earned income is a mark of the value of your product —and provides feedback fromyour customers.’Jim Fruchterman,Benetech

50 www.ethicalperformance.netalcan_barefootcollege.html

51 www.shellfoundation.org 52 www.fascinating.tv53 www.earthlink.net


21

On the for-profit side, Orb Energy is alsousing the franchising model to scale itsoperations in India, preferring this routerather than raising additional capital. The franchise model, based on setting upbranches, enables them to get closer tocustomers, while establishing a common‘look and feel’ and affording greatereconomies of scale. A key challenge in this approach, CEO Damian Miller notes, is to ensure that franchisees do notsacrifice quality for revenues.

Joint venturesAround a third (30%) of respondentsmentioned joint ventures as a form ofresourcing — and it was clear that a fairfew entrepreneurs plan to develop suchpartnerships, though a surprising numberexpressed anxiety about their ability toidentify suitable partners and strike abalanced deal. That said, they all felt theyhad significant value to add. And thosetaking this route saw many non-financialbenefits. Such partnerships, said LandminesBlow!,54 help both parties ‘leverage theirassets, such as their expertise and clientbase, with other advantages includingsharing knowledge, the cultivation of newrelationships, developing a continuum ofcare, working successfully in differentcultural settings, and [gaining] approvalfrom the United States Federal Governmentand the United Nations.’

Optimistically, perhaps, the vision is that, ‘In a new world of virtual integration, the walls between enterprises crumble.’ It is clear that those thinking about this option are concerned about theimplications. ‘We have had a significantincrease in companies wanting to sponsorus,’ said one, who asked to remainanonymous. ‘The challenge is to remainselective and not to sell out. To maintainthe purity of our program.’ The need to find out how to do such due diligence was an issue often raised.

Venture capitalOne respondent described his challenge as, ‘raising money for ideas that others have not accepted as workable.’ One way the mainstream economy deals with this challenge is via venture capital.Surprisingly, this came in fifth place, withmore than a third (39%) of respondentssaying they plan to draw to some extent on venture funding. If true, this is a strikingresult, though it may reflect the inclusionof a number of cleantech entrepreneurs in our sample and, possibly also, a mis-understanding on the part of at least somesocial entrepreneurs of what venturecapital funding entails.

One respondent even spoke of ‘venturecapital gifts.’

More typically, Drishtee 55 — which aims to empower entrepreneurs in India, village-by-village — spoke for many socialentrepreneurs in saying that they look, in all areas of funding, for ‘sources of fundsthat look for a commercial and social returnon investment (ROI), simultaneously.’ Theproblem with the venture capital field, asnormally understood, is that considerationsabout social ROI are likely to be even moresqueezed than in the financial mainstream.

IPOs and market listingsThis was very much bottom of the heap,coming in tenth place (2%) — and with a degree of unease about the implicationsand constraints expressed by a couple ofthe entrepreneurs we interviewed in depth.The relatively slow progress of initiativeslike the Global Exchange for SocialInvestment (GEXSI)56 hasn’t helped.

As John Wood, Founder and CEO of Roomto Read put it, ‘The capital markets forNGOs are blatantly inefficient. There is no mechanism that has the efficiency ofthe private sector (e.g. NYSE, NASDAQ,private placements, venture capital) when it comes to raising large amounts of capital— especially unrestricted funding. This, of course, is one reason why SASE (SkollAwards for Social Entrepreneurship)recipients are so grateful for the large,unrestricted, multi-year funding. The NGOworld needs to have every large foundationseriously study — and hopefully emulate —this model.’ And what is true for NGOs isalso true for most social enterprises.

‘Other’ sourcesThis category was selected by 17% ofrespondents. The main additional source of funding identified was corporatepartnerships or sponsorship, although that could potentially wrap in under ’Salesand Fees’ or ‘Joint Ventures’. Most suited to this option are enterprises that addressissues of interest to high-brand companies.Take Sports4Kids,57 which argued that,‘because of our emphasis on youth andsports, we are uniquely well-positioned toestablish significant corporate partnershipswith a range of industries, includingfootwear/apparel, food, and professionalsports.’ Another enterprise, ITNAmerica,58

which focuses on dignified transportationfor seniors,’ noted that corporatesponsorship ‘is our riskiest revenue stream— but we feel it has great promise, as werepresent a large and growing market.’

‘We have had a significant increase in companieswanting to sponsor us. The challenge is to remainselective and not to sell out.’Anonymous respondent

54 www.landminesblow.com 55 www.drishtee.com56 www.gexsi.org 57 www.sports4kids.org 58 www.itnamerica.org


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How will funding patterns change overthe next 5 years?

One of most striking findings was theremarkable collapse in the number ofentrepreneurs expecting to be relyingcompletely on grants in five years — from 27% to 8%. On the other side of theequation, there is an equivalent jump inthose expecting to be funding their ownoperations, with no reliance on grants — up from 8% to 28%. In the middle ground,we see a somewhat less dramatic fall in theproportion of respondents saying that theyexpect to be still relying on grants, but withsome income — 27% to 22% — and a morestriking growth in the proportion expectinga significant rebalancing in favor of earnedincome — from 38% to 50%.

What are the main organizationaldevelopment challenges?

‘Social entrepreneurship is still seen bysome as a “niche market”,’ said JacquelineNovogratz, CEO of Acumen Fund,59

‘comprised of a rather unique sort ofindividual who feels comfortable straddlingbusiness and social incentives. There arethus three main challenges around whetherand how it will move along the adoptioncurve and be accepted by a much largerclient base (translated into funders andfoundations). First, the circle of visiblesocial entrepreneurs needs to be expandedsignificantly so that experts are not alwayspointing to the same examples of success.Second, there need to be more socialenterprises demonstrating scale in termsboth of the number of people they reach as well as the number they impactindirectly — and this means better measuresto communicate quantitative as well asqualitative impact. Finally, there need to bemore enterprises moving toward financialsustainability — or at least having plansthat demonstrate they will be around in thelong-term. Associated with this is whetherfunders will be able to “exit” successfully,but this is more derivative of the last point.’

For our sample as a whole, theoverwhelming challenge flagged up inrelation to developing their organizationshad to do with people and talent. Specificpoints raised included the following:

Attracting talent when they can’t offercompetitive salaries was cited by manyorganizations as a key developmentchallenge. But, while the dominantsentiment, it wasn’t universal. Someorganizations cited high retention rateseven though they offered lower thanmarket salaries. They believe that this is dueto their ability to offer a work environmentthat is challenging (including professionalgrowth, learning opportunities), enablingtheir staff to focus on using their highestand best value skill sets (bringing in lowerskilled labor to do less fulfilling work), andproviding a culture that is mission-driven. A key advantage of the ability to retain and develop staff is that an organizationkeeps the tacit knowledge they have builtup of the field and players.

Balancing entrepreneurialism withprofessionalism and maintaining a focuson the mission and culture of theorganization. As social enterprises mature,they require more professional andbusiness-oriented talent. But this poseschallenges in at least two ways. First,existing staff may find it difficult to adaptto the changing environment, when theirgeneralist skills are no longer sufficient.Second, new staff that bring moreprofessional capabilities may not have the highest degree of sensitivity around the mission. Also, not everyone in anorganization can or should be entre-preneurial; social enterprises struggle to find the right balance between thosewho should be creative and entrepreneurialand those (think lawyers and accountants)who need to support the entrepreneurialculture with more professional andstructured approaches. Those entrepreneurswho appear to be getting it right are very focused on these elements during the recruiting process, foster a culture ofentrepreneurship through storytelling in the organization, and make quick decisionsabout letting people go who don’t fit thedesired culture.

Succession planning/leadershipdevelopment. Many entrepreneurs cited challenges around grooming theirsuccessors, in particular around findingtalent that shared their vision forgrowth/success of the organization. At the extreme, there were two fascinatingresponses from Afghanistan that touchedon this issue of drawing talent from a pool of people that have been beaten down by war for nearly 30 years.

Figure 2.5Manner of fundingCurrent N=92Expected in five years N=99%

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To have any chance of changing theworld, entrepreneurial solutions mustoffer relatively high leverage, be able toreplicate and scale, and — fundamentally— become part of the market main-stream. Pretty much without exception,the social entrepreneurs we interviewedwere supportive of the idea of partner-ships with corporations. They were alsointerested to further develop thosepartnerships they already had, and todevelop more.

But, why should business care?SustainAbility has covered the businesscase for corporate responsibility andsustainability elsewhere,60 so what followsis a headlines-only brief.

It’s time to think different

The first reason that business needs toengage is that the world is changing — andwith it markets. Social and environmentalentrepreneurs do not have all the answers,but they do see the world and marketsdifferently, and the more innovative areexperimenting with new business modelsthat could potentially break out of theirniches and help transform key elements of the global economy.

There is a real risk that many businesspeople will chalk this up as another fluffy, feel-good fad. There is every reasonto be skeptical of any new movement oragenda, clearly, but our industry analyses(summarized in Chapters 4 and 5)uncovered a variety of ways that socialentrepreneurs are doing things differently,realizing exciting sustainability outcomesand offering innovative opportunities forbusiness.

Just as software morphs through successivegenerations, 1.0, 2.0 and so on, weconclude that the time has come for what we call 3.0 thinking in relation tosustainability challenges. If 1.0 was drivenby regulators and promoted a compliancemindset in business, 2.0 has been moreabout corporate citizenship, based ontransparency, accountability and a growingarray of voluntary initiatives (Figure 3.1). By contrast, 3.0 thinking, strategy andventures is different in that it seekstransformative market and sustainabilityoutcomes. It is about creative destruction,as Joseph Schumpeter called it, and aboutcreative reconstruction.

In essence, Mindset 3.0 is about seeing —‘reperceiving’ 61 — immense challenges,such as the growing risk of abrupt climatechange, as potential opportunities toleverage the power of markets and businessto reboot entire economic and politicalsystems. This is exactly what is beginning to happen in the energy field. In some cases the time-scales involved may begenerational, but the transformation isunder way. While the cleantech landscapeis now largely populated with pure-playprofit seekers, the industry was pioneeredby individuals who saw the opportunity toleverage market drivers — such as energysecurity, stability, and cost — to realizesignificant environmental outcomes.

The situation is different in the developingcountry healthcare field, where pulling onmarket levers does not work in the sameway, largely due to weak end-markets. But the overwhelming unmet need forgood, well-funded, state-provided health-care systems has not prevented socialentrepreneurs from experimenting withcross-subsidized business models (richpatients’ fees covering the costs of thepoor, large companies’ assets and talentsbeing loaned for health outcomes). Though their efforts often expose the limitsof current market-based social enterpriseapproaches in areas like poverty, they are spotlighting potential new markets,experimenting with new business modelsand modeling new leadership approaches.

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60 See Buried Treasure: Uncovering the Business Case for CorporateSustainability, SustainAbility and UNEP,2001; and Developing Value: The BusinessCase for Sustainability in EmergingMarkets, SustainAbility, the InternationalFinance Corporation (IFC) and InstitutoEthos, 2002. A ‘Developing Value 2’ projectis now under way.

61 For more, see the work of scenario planners Pierre Wack and Peter Schwartz.

Growing Opportunity

Figure 3.1Towards Mindset 3.0Sustainability impactsagainst market drivers

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24Growing OpportunityThe Business Case

Five building blocks

If you stand back, Mindset 3.0 thinking and practice seems to have five maincomponents:

1 Systems thinking and designLeading social and environmentalentrepreneurs are fabled for taking asystems approach to major challengesand related design issues. Like MichaelBraungart and Bill McDonough ofMBDC,62 they pursue ‘cradle-to-cradle’solutions. Such systems thinkers ask deepquestions with the customer in mind, e.g. how do I provide transportationservices to my customer rather than how do I sell more oil?

2 Consumer engagementMarket solutions depend on consumers —but social entrepreneurs have a ratherdifferent take on customers. They workwith potential customers and consumersto co-create new markets and newproduct or service categories. In thehealth field, they champion the rights of consumers to hold service providers to account, even if they are not payingfor the service. Villagereach, forexample, makes explicit its aim tomobilize communities to take greaterownership of health systems to promotea social atmosphere of higherexpectations and greater accountability.They understand that most people, mostof the time, want to do the right thing.But things need to be made easier forthem. Take a look at what Easy BeingGreen 63 is doing in Australia. It wasfounded to help people actively tackleclimate change. A crucial key to successhere is understanding the power of amillion small actions to add up to trulysignificant outcomes.

3 Business modelsMuch talked about during the NewEconomy era, an understanding ofbusiness models is now central to thedebate about how to create tomorrow’svalue. Significantly, social entrepreneursare experimenting not only with businessmodels but also with how value isdefined and created. Many are pioneersin the social return on investment (SROI)space.64 They are also maximizing reachwith ‘Robin Hood’ business models thatenable services and products for poorcitizens to be subsidized by those with a greater ability to pay. Examples hereinclude the Aravind Eye Hospitals,65

Narayana Hrudayalaya Hospitals,66

and Freeplay Energy.67

4 360° accountabilityAny business — mainstream, SME, orsocial enterprise — increasingly needs to work out how to be transparent andaccountable to a growing range of realand self-elected stakeholders. Think ofthe work of such entrepreneurial organ-izations as Transparency International 68

and the Global Reporting Initiative 69

to increase corporate accountability and transparency.

5 Emerging economiesAt a time when there is growingmainstream interest in base-of-thepyramid markets, these people are in the thick of the BoP action. They aim toevolve new strategies to harness a widerrange of resources to the task, whilesimultaneously experimenting with newways of meeting the myriad needs ofpoor people. Their hands-on knowledgeof such markets and of the political and regulatory environments potentiallyoffers hugely valuable market intelli-gence to mainstream business. Considerthe strategic alliance between Danoneand the Grameen Bank 70 to bringvaluable products and services to poor communities.

Significantly, social entre-preneurs are experimentingnot only with businessmodels but also with howvalue is defined and created.

62 www.mbdc.com63 shop.easybeinggreen.com.au/

categories.asp?cid=71&fromhome=true 64 www.redf.org/results-sroi.htm and

www.svtconsulting.com/pdfs/sroi_analysis_1%5b1%5d.0.pdf andhttp://sroi.london.edu/

65 www.aravind.org66 www.narayanahospitals.com67 www.freeplayenergy.com 68 www.transparency.org69 www.globalreporting.org 70 www.danone.com/wps/portal/jump/

danonecorporateintl.press.commun2004pressreleases?ref=cms.danonecorporateintl.press.2006pressreleases.trimestre1.cp_160306

Paths to partnership

When we asked Acumen Fund CEOJacqueline Novogratz how she saw theinterface developing between business and social entrepreneurs, she replied, ‘In many ways. First, we will see morecorporations reaching out to socialenterprises and traditional NGOs tofacilitate the strengthening, expansion, and deepening of their own supply chains.Corporations are designing and developingaffordable, useful products for the poor but they lack the real understanding of how poor communities work and, in somecases, lack the flexible distribution systems(and trust) to reach those communitieseffectively. NGOs and many socialentrepreneurs, on the other hand, can havea deep knowledge around markets servingthe poor but may lack the infrastructure,resources, or management depth to bringneeded products to them. A marriage — or at least negotiated relationship betweenbusiness and social enterprises can bringsignificant synergies with benefits to bothparties’ objectives. Second, we already areseeing a changing zeitgeist among manyemployees of big corporations, so we willlikely see more activity from employees at all levels of a MNC that are focused onserving social enterprises and the poordirectly. NGOs also see that their funding is increasingly dependent on concrete —reliable — results, and so we will seeincreasing activity on that front as well.’

Still, the paths to meaningful engagementand partnership are far from clear. The best work we have found to date onpartnerships in this area comes out ofHarvard University, and was produced by Jane Nelson and Beth Jenkins.71 Below,we briefly look at two different types ofpartnership currently being tested: (1)‘Enhanced Corporate Responsibility’ and (2) an approach that Ashoka calls ‘HybridValue Chains.’

The first, sketched in Figure 3.2, is where the company makes investments in social entrepreneurs who are focused on sustainability areas of interest to thecompany, such as climate change, poverty,or health care. The company providesfinancial resources to the socialentrepreneur, as well as talent and accessto the company’s networks. In turn, thecompany potentially achieves enhancedsustainability outcomes and has theopportunity to boost its brand through the promotion of its support for the socialentrepreneur. Employees of the companywho work with the social enterprise areoften inspired by the experience and bringthis morale boost and creative thinkingback to the company.

Given the lack of capital and other criticalbusiness resources available to socialentrepreneurs, this enhanced philanthropyrole is an important one for companies toconsider. As an example, the John DeereFoundation recently provided $3 million toKickStart, an innovative social enterprisethat creates and markets tools to help endpoverty in developing countries.

Despite the undoubted attractions of the Enhanced Corporate Responsibilityapproach, however, a second partnershipapproach — the Hybrid Value Chain™(Figures 3.3 and 3.4) — is emerging aspotentially even more promising. Anecdotalevidence suggests that greater strategicengagement with social entrepreneursoffers the potential for greater returns to both parties.

25Growing OpportunityThe Business Case

Figure 3.2Benefits of enhanced corporate responsibility

Multinationalcorporation

Financial contributionManagement know-how

Network access

Employee inspirationBrand/reputation boostEnhanced sustainability outcomes

MNC SE

Socialentrepreneur

‘We already are seeing a changing zeitgeist amongmany employees of bigcorporations.’Jacqueline Novogratz,Acumen Fund

71 www.ksg.harvard.edu/m-rcbg/CSRI/publications/workingpaper_20_nelson_jenkins.pdf

With continuing globalization, the potentialfor social and environmental entrepreneursto help multinational and more localcompanies is growing all the time. Ashoka’sprogram aims ‘to develop a framework forsustainable commercial partnerships wherebusiness and social organizations joinforces to make critical products andservices available to low-income citizensaround the world without being limited bythe artificial divide between both sectors.Each partner creates economic and socialvalue by leveraging each other’s corecompetencies. Differing from traditionalcorporate social responsibility relationships,Hybrid Value Chains™ are commercial innature with each partner receivingeconomic benefit according to their roleand transaction in the partnership.’ Ashoka’sgoal for the approach is to ‘tip the system’and to ‘create a mind-shift among businessleaders and social entrepreneurs.’ 72

As sketched in Figure 3.4, potential benefitsto the company partner include:

— Outsourcing risk: By outsourcing research into sensitive or unfamiliarareas, such as pharmaceuticals foremerging markets, new energy alter-natives, or enhanced foods, companiescan minimize potential brand risks, yetensure that they stay close to emergingtrends. They also may be able to bypassstrict internal controls around return oninvestment criteria that would preventthe company investing internally in highrisk, entrepreneurial ventures. PATH andGSK Bio and their joint development of a malarial vaccine is just one exampleof how a corporation can benefit fromcollaboration on research anddevelopment.

— Access to information, markets, and networks: Many social entrepreneurs are working with populations and incommunities unfamiliar to largecorporations. Collaboration offerscompanies access to information aboutpotential consumers and partners and inmany cases, lends additional credibility.In addition, many entrepreneurs have an interest in helping build markets foraffordable and accessible mainstreamproducts. They can provide marketingsupport for the company. The partner-ship between CEMEX, a cementmanufacturer, and SISEX, a sexualeducation organization, to createaffordable housing solutions for low-income Mexican women is indicative of the unique approaches being devisedbetween entrepreneurs and corporations.

Interestingly, unexpected lessons fromemerging markets can be applied in more traditional markets. Pre-pay mobilephone payment structures applied first in developing countries due to the lack of bank accounts proved imminentlytransferable to the youth market in theindustrialized world. A knowledge andunderstanding of developing countrymarkets has the potential to yield lessonsfor the development of new businessmodels, based on the interconnectedworld, such as health tourism or the useof technologies in healthcare complianceor market data for internet sales.

— Inspiration: Collaboration with social entrepreneurs can help companies to tap — or recharge — their entrepreneurialand creative spirits, resulting ininnovative new product development(e.g. microinsurance, ‘green’ products).Consumer goods companies, such asNike and Marks & Spencer, are lookingto social entrepreneurs as a source ofinnovation and competitive advantage in developing new products.

26

Figure 3.3Ashoka’s Hybrid Value Chain

TM

Productdevelopment

Production Distribution /Logistics

Sales andmarketing

Financing Low-incomemarkets

Business Citizen sectororganization

Unexpected lessons fromemerging markets can beapplied in more traditionalmarkets.

72 www.ashoka.org/hvc

Growing OpportunityThe Business Case

Employees can also be remotivated whenworking on inspiring projects. Many peoplewithin companies (in particular thetechnical experts, engineers, doctors,scientists, etc.) want to feel they arecontributing to wider social needs, andsupport for or engagement with socialentrepreneurs can be a way of permittingthem time to do so. Through partnerships,employees at big companies get ‘infected’with a mindset and energy. Somecompanies are already aware of this —witness GSK’s commitment of staff to anumber of developing country initiatives, or Shell lending engineers to work onhydrogen-powered mobility with pioneersat Formula Zero.73

Those who have worked in this field forsome time are excited by the pace ofdevelopments at the interface betweenbusiness and social enterprise. ‘The sleepinggiant is awakening,’ says Sara Olsen ofSocial Venture Technology Group. ‘Thepotential for cross fertilization betweensocial enterprise and mainstreamcorporations is huge — it’s utterlyrevolutionary.’ 74

Rules of engagement

While our survey revealed willingness onthe part of social entrepreneurs to engagecorporations, it also highlighted concernsabout the potential for mission creep, branderosion and power imbalances. Feedbackfrom more seasoned entrepreneurs in oursample offered insights into what wouldmake corporate partnerships most likely to work.

— A number echoed the advice of more traditional NGOs,75 noting thatpartnerships work best when there is aclear set of principles and expectationsguiding the partnership (e.g. we onlywork on projects related to our mission,we respect commercial confidentiality,we understand our business partner’sneed to pursue ventures that allow them to make a profit).

— They also stressed that the entrepreneur and partner must have comparablelevels of interest in the partnership.Where there is an imbalance of power orinterest in the partnership, all-too-likelygiven the relative scales of the partners,the partnership is very unlikely to achieveintended outcomes.

— Longer term partnerships are typically preferred, with social entrepreneursseeing their organizations — and theenvironments in which they operate — as complex, requiring time for anoutsider to learn. Cleantech companies,in particular, want to bring in corporatepartners early to ensure later options forpotential acquisition, what they describeas a ‘locked-in exit strategy.’

— The role of internal champions in partner companies is cited as essential to building good partnerships. For Gary Hirshberg of Stonyfield Farm, thishas been Danone CEO Franck Riboud.Clearly, however, this approach poses real dangers when the individual movesor leaves. Even with engagements thatoccur at the senior management /corporate level, there are concerns aboutpartners pulling out, indicating a needfor entrepreneurs to be adaptable, have a Plan B, and avoid relying too heavily on any one individual or department for support.

27

Multinationalcorporation

MNC SE

Socialentrepreneur

Figure 3.4Benefits of the Hybrid Value Chain

Financial investmentManagement know-how

Network access

CredibilityAccess to networksReduced risksMarket insightsNew productsNew servicesNew business models

‘The potential for cross-fertilization between socialenterprise and mainstreamcorporations is huge — it’sutterly revolutionary.’ Sara Olsen, Social Venture Technology Group

73 www.formulazero.nl 74 The results of a study by Sara Olsen and

Paul Herman on the environmental andsocial performance of 21 mainstreamcorporations are due to be published inFast Company, April 2007.

75 See, for example, The 21st Century NGO: In the Market for Change, SustainAbility,The UN Global Compact and UnitedNations Environment Programme, 2003.


28

Next, deeper dives

Whatever the sector, global challengesmean that it’s time to s-t-r-e-t-c-h (seecoverage of X Prize Foundation, Panel 3.1).To get a better sense of how all this isplaying out, Chapters 4 and 5 take a closerlook at two key sectors: healthcare andenergy. Our twin aim is to deepen the divesin these sectors in the future — and toexpand the approach to look at moresectors.

There are striking contrasts between the two sectors. As Acumen Fund CEO,Jacqueline Novogratz, put it, ‘Health tends to be a more distorted market whenspeaking of the poor. It is highly subsidizedand largely government-driven. There are huge opportunities to create socialenterprises in this sector given thesignificant resources available, but it takes harnessing large governmentcontracts, measuring output effectively and navigating often tricky political terrain.Energy, on the other hand, often overlooksthe poor entirely and so markets for thepoor are often not distorted, but instead are simply out of reach for poor people.Look at solar energy as an example wheremany effective technologies exist but veryfew, if any, are truly viable at householdlevel. At the same time, there seems to be a tremendous surge of resources intoalternative energy, including for the poor.These resources still seem to be comingmore from private sources and so thisdifferentiating characteristic — where funds come from — is still the criticaldifferentiator.’

Most social enterprises tackling health-care continue to operate as charities (i.e. foundation-funded non-profits). While highly outcome-oriented, theseorganizations — with a few notableexceptions — struggle to secure moresustainable modes of financing. Energystart-ups, at least in the developed world,tend to have the benefit of robust capitaland consumer markets for their productsand services. That said, exceptions remain,in large part among entrepreneurs focusedon bringing energy to the world’s poorest.Here, too, however, promising examples are emerging, such as Orb Energy, a venture-capital-backed enterprise selling inexpensive solar systems to Indian customers, ranging from farmers to technology companies. Interestingly, much of the business was previously part of Shell India’s renewables business,but was spun out.

As background to our analysis of the worldsof social and environmental entrepreneur-ship, we talked to Colin Le Duc, Head of Research at Generation InvestmentManagement,76 and itself a form of socialenterprise, about the differences betweenthe energy and healthcare sectors. He noted that they ‘see a huge amount ofinnovation in both sectors, from the fullrange of companies — large public to small cap to private. And globally, too.’

On healthcare, he stressed that, ‘biotech iswhere all the innovation is. We see a hugeamount of interest in DNA and genomicsgenerally. Plus, we see a major trend aroundthe cross-over between health, food, andenergy. The trade offs in biofuels — i.e. land for food or land for energy — are welldocumented, but we also see innovationaround nutraceuticals and new geneticmaterials. In addition, we track companieslike CIPLA in India, who are innovatingaround new HIV drug delivery systems. And Novo Nordisk’s work around diabetescontinues to be stunning, too.’ This viewfrom the emerging mainstream illustratesthe difficulty faced by social entrepreneursin the field, because their ventures andpredicted returns (where they exist) fall far below the radar of even the mostprogressive of investors.

On the energy front, he noted that, ‘The cleantech boom of recent years is manifesting in various ways: largecorporates are buying an unprecedentednumber of private cleantech companies. For example, in 2005 alone Danaherbought 78 cleantech companies. I believethe same dynamic that has happened in the Big Pharma sector - where all the innovation is coming from biotechcompanies and Big Pharma gets ever less return on its R&D spending — is alsonow happening in Energy. New faces, new energy ventures, are beginning todominate the debate — and leaving theincumbent big energy companies in theirwake on the issue of innovation aroundsustainable energy.’

‘New faces, new energy ventures, are beginning to dominate the debate —and leaving the incumbentbig energy companies intheir wake on the issue of innovation aroundsustainable energy.’Colin Le Duc, GenerationInvestment Management

76 www.generationim.com


29

Panel 3.1Time to s-t-r-e-t-c-h

A significant proportion of those we spoke to outside the fields of social andenvironmental entrepreneurship see a keyimpact of all this effort as being a usefulspotlighting of the need for all parts ofbusiness to be more innovative andentrepreneurial in meeting social,environmental and governance challenges.But for a real stretch, try the X PrizeFoundation, which really encouragesinnovators and entrepreneurs to thinkoutside the box.77 They create and manageprizes that encourage innovators to solvesome of the greatest challenges facing theworld today. Their motto: ‘RevolutionThrough Competition.’ Now the Foundationis moving beyond aerospace (its originalarea of focus) to tackle some of thechallenges that social and environmentalentrepreneurs are concerned about.

We asked Tom Vander Ark, the Foundation’sPresident, what lay behind this shift. First, how did the decision to move beyondaerospace happen? ‘Larry Page, Google co-founder, believes in the power of prizes andjoined after we awarded the Ansari X Prizefor space,’ Vander Ark recalled. ‘He thenencouraged the board to consider a broadermission.’ And how are the next generationpriorities being selected? ‘We’re attemptingto identify the world’s biggest problems,particularly those susceptible to innovationthrough competition, where it’s possible to set a difficult but achievable objective,and where it’s likely that we can secure aprize purse.’

Evolving at the moment is the AutomotiveX Prize, which will encourage car designersworldwide to design, build and sell super-efficient cars that — crucially — peoplewant to buy. Why?

There are at least five reasons, they say.First, ‘because 40% of world oil outputfuels the automotive industry — and, in the US, 65% of oil consumption is in thetransportation sector.’ Second, because‘automotive emissions contributesignificantly to global climate change.’Third, because ‘there are no mainstreamconsumer choices for clean, super-efficientvehicles that meet market needs for price, size, capability, image, safety, andperformance.’ Fourth, because theautomotive industry is stalled — legislation,regulation, labor issues, manufacturingcosts, legacy costs, franchise laws, obsoletetechnology, consumer attitudes, and manyother factors have combined to blockbreakthroughs. Fifth, because ‘increases inengine efficiency have been “spent” onincreased vehicle power, acceleration, andweight, rather than on increased fueleconomy.’ And sixth, and fundamentally,‘because we believe there is greatopportunity for technological change.’

The obvious next question: is it any harderto pick suitable targets for social andenvironmental challenges? ‘Setting goalsand writing rules is hard in all cases — it’s the secret to a great prize,’ Vander Ark answered. ‘The difference betweeninnovation and revolution is large scaleadoption. We attempt to create goals, rules, competitions, and public campaignsthat result in revolutionary change, not just awards for good ideas.’

Any guesses as to where all this is going to take the Foundation? ‘By next year,’ hesaid, ‘we will have launched prizes in fourareas (space, genomics/medicine,transportation/energy, and education/poverty reduction), will have full prizeteams, and well-developed shared services.By 2009, we will have developed severalrevenue engines that will make it asustainable world class prize platform.’Watch this space.

‘Revolution Through Competition’X Prize Foundation

77 www.xprize.org



Few things are as important as ourhealth and the health of our families. A hundred and fifty years ago lifeexpectancy at birth in the rapidlyindustrializing and urbanizing countriesof Europe was just 40 years. Since then, income growth, better nutritionand housing, medical advances, and —overwhelmingly — access to clean water and effective sanitation, haverevolutionized public health so that life expectancy has risen to between 75 and 80 years in the industrializedworld. In contrast, for an unacceptablylong list of developing countries,including Afghanistan, Angola, Botswana,Lesotho, Liberia, Malawi, Somalia, and Zambia, the needle still waversstubbornly around the 40-year mark.

Three diseases, HIV/AIDS, TB, and Malaria,disproportionately impact mortality andmorbidity rates, though many developingcountries have seen a rapid rise in theincidence of so-called western diseases,including diabetes, cardiovascular disease,cancer, and hypertension. Figure 4.1illustrates the incredible gap that remainsbetween critical health needs and thecurrent offering.

Good health is an important goal in itself — a key human right — and, equallyimportant, a pre-requisite to allowingindividuals, families, communities, andnations to achieve the economicdevelopment that permits access to betternutrition, housing, sanitation, andhealthcare.

That said the provision and delivery ofhealthcare services in all their many guisesis immensely complex. Critically importantare preventive measures such as healtheducation, good nutrition, and access toclean water and sanitation services;research and development into medicines,diagnostics, vaccines, and other healthcareproducts designed to diagnose, prevent, and treat illness and other conditions;healthcare delivery — the complex interplaybetween community and hospital care,patients and medics, supply and demand,governments and markets, expectations andrealities. It generates strongly held andhotly defended views about the role ofpublic bodies in setting standards, a strongregulatory environment, safety, and aboveall equitable access to healthcare.

Good health is an important goal in itself — a key human right.

Figure 4.1The treatment gapTotal currentTotal needed

7,700,000

1,000,000

HIV/AIDSAntiretroviral treatments

MalariaPesticide-treated bednets

40,000,000384,000

TuberculosisDOTs treatments

2,000,000,000

500,000,000Source: Global Health Fund and WHO

4De

eper

Div

e: H

ealth

The kaleidoscopic nature of these tasks andthe immediacy and importance of the endgoal has attracted hundreds of socialentrepreneurs into the health space wherethey have applied ingenuity, determination,and creativity to the huge challenges ofmeeting healthcare needs of the some ofthe poorest people in the world. Figure 4.2highlights some of the challenges facingthe healthcare sector.

Relevance to business

Even to frame the relevance to mainstreambusiness of what social entrepreneurs are doing in the health arena in terms of a business case can be fraught withdifficulties. For good or ill, there is awidespread and deeply held public uneaseat the role of private enterprise at the heartof healthcare delivery, and any high profilereminder of commercial drivers can lead to an outpouring of moral outrage aboutdistorted priorities. One key reason: sincethe Greek philosopher and ‘Father ofMedicine’, Hippocrates, launched hisHippocratic Oath in around 350 BC, medical ethics have sought to put the best interests of the patient above all other considerations.

The result is an enduring belief in medicineas an entitlement, coupled with a resistanceto arguments about commercial realitiessuch as profit maximization. However realsuch considerations are for companiesdelivering healthcare in poor markets, theyare all too readily interpreted by critics as‘profiteering’ from sick, poor people in thecase of drug companies or, in the case ofwater utilities, putting profits ahead of abasic human right.

Although this attitude may provide amighty disincentive for companies toengage in these markets, paradoxically —and here’s the rub — demand for theiractive engagement as a partner in solvingsome of the more intractable health-relatedproblems in the developing world continuesunabated and is likely to grow.

In a globalized economy, emerging marketsare increasingly critical to mainstream firms— as a source of growth opportunities, costefficiencies and political risks. Forecasts for drug and overall health expenditureincreases in China and India between 2007and 2009, for example, are predicted to risefrom $30 to 40 billion and $132 to 163billion, respectively.

31Growing OpportunityDeeper Dive: Health

For good or ill, there is a widespread and deeplyheld public unease at therole of private enterpriseat the heart of healthcaredelivery.

Figure 4.2Challenges

Poor transportation infrastructure

High cost of medicine

Prevention

Delivery

Lack of clean waterLow levels of health education

R&D

Drug development focusedon ‘profitable’ markets

Insufficient numbers of health workersInadequate government infrastructure

Low vaccination rates

32

How healthcare firms respond to the needto balance market realities with accessissues is likely to have an impact on theirlicense to operate in all markets; to have a bearing on the attraction and retention of talented staff; to offer opportunities to develop the critical skill of partnering;and may even come to be seen as a proxyfor competencies relating to themanagement of that core value driver ofmany industries: innovation.

Health sector milestones andentrepreneurial solutions

Below, we highlight just a few of theremarkable examples of how Mindset 3.0entrepreneurs are breaking log-jams andadvancing healthcare provision. While noneof the models — unsurprisingly — deliversdirect returns to shareholders comparablewith operating in mainstream markets, theydo provide examples of how out-of-the-boxthinking can turn at least some challengesinto opportunities.

Systems thinking and design: PATH to global health

As already noted, healthcare delivery is a highly complex system of prevention,research and development and delivery.When one element of this system breaksdown, it can have devastatingconsequences.

Take vaccination for example. In developedcountries where vaccinations are in-expensive and accessible, diseases such as polio and measles have been all buteradicated. Not so in poor countries.Roughly one child in four does not receivethe vaccines s/he needs despite the factthat it only costs $30 to immunize a childagainst the greatest childhood threats. The value of vaccination — preventingdisease before it takes root and protectingchildren at their most vulnerable — and the advances in technologies has led to thedevelopment of large scale immunizationprograms such as GAVI and IAVI, and hasmade possible national immunizationprograms which the World HealthOrganization (WHO) estimates avertsaround 2 million deaths a year. Yet, despitethese advances, issues such as poortransportation infrastructure, inadequatedelivery vehicles, and lack of funding still keep vaccines out of reach for mostpoor children.

PATH, a not-for-profit organizationspecializing in global health, is taking a systems approach to addressing thesechallenges. Identifying critical gaps inhealthcare systems, PATH establishesunique partnerships and leverages tech-nology to develop ‘resilient and enduring’solutions. Examples include the adaptationof food industry technologies to develop a means of telling health workers whetherthe polio vaccine they plan to use has gone bad on its long journey from Europe to Africa. The vaccine vial monitors(HEATmarker™), developed with TEMPTIMECorporation and the WHO, are printeddirectly on vaccine vial labels and darkenwith exposure to heat over time. This simple technology means no moreuncertainty, no more waste.

The organization’s vaccines work alsoinvolves partnership based initiativesdedicated to helping vaccines from thelaboratory into clinical developmentefficiently and quickly, both to combatmalaria and the deadly Streptococcuspneumoniae, or ‘pneumococcus,’ whichcauses the deaths of up to one millionchildren under age five each year.

Elsewhere systems thinkers are consideringa key missing link in relation to healthcaredelivery: transportation. In Africa, men,women, and children are dying of easilypreventable diseases, simply because theycannot be reached. Riders for Health —born out of the world of motorcycle racing— tackles the problem by putting in placereliable, preventative maintenance systemsfor two and four wheeled vehicles used in healthcare delivery. This innovative workis managed by wholly African teams, andmeans that healthcare in these areas is very much less likely to be undermined byvehicles failing, no matter how harsh theconditions.

Villagereach is another social enterpriseattempting to ‘go the last mile’ inhealthcare delivery, according to founderBlaise Judja-Sato. Its business is focused onthe logistical challenges and infrastructuregaps facing those who want to takeaffordable, safe, and effective healthcaredelivery into very poor environments — be they transportation, issues of coldstorage, quality control, or staffing.

In Africa, men, women, and children are dying ofeasily preventable diseases,simply because they cannotbe reached.

Growing OpportunityDeeper Dive: Health

33

Like many of the social entrepreneursfeatured here, Villagereach dedicatesconsiderable time and effort to developingstrategic partnerships and mobilizingcommunities to take greater ownership of health systems to promote a socialatmosphere of higher expectations andgreater accountability. Critical to its work is a desire to promote local economicdevelopment as a means of developingsustainable healthcare delivery and thesupport of weak government healthsystems.

Empowering consumers: teaming up

Despite its ethical tradition, the health care sector struggles with the concept ofconsumer (patient) focus. As one US-basedsocial entrepreneur put it ‘health carecompanies don’t develop products andservices with consumer needs in mind and often financial incentives run counterto the notion that patient health isparamount.’ Health education is one waythat social entrepreneurs are helping toempower consumers to demand decenthealthcare. From Afghanistan to America,entrepreneurs are emerging in this spacewith myriad creative and cost-effectivesolutions.

EduSport, which runs programs like ‘Go Sisters’ and ‘Kicking AIDS out!,’ is acommunity-driven NGO based in Lusaka,Zambia. It uses sport to tackle issues likeHIV/AIDS, poverty alleviation and childrights in underprivileged communities inZambia. Sport is becoming a powerful toolfor change as entrepreneurial thinkers haverealized activities like soccer are alsovehicles for communication and youthempowerment. More interestingly, thisunique approach is recruiting highlyinfluential players onto the field. In particular, Nike is teaming up withGlobalGiving.com — an internet donationsite — to raise awareness and money for,social entrepreneurs who take a sport forsocial change approach.

Business models: an Indian Robin Hood

Creating a market-based solution to bringessential services such as water andhealthcare to poor citizens is a sensitiveproposition. How does a company balancethe rights to basic services with the need to make money to sustain the enterprise?

And, how do they ensure that they providesufficient quality given customers’ inabilityto pay premium prices. The most successfulentrepreneurs in the field are those whohave developed a hybrid model appropriateto the market in which they are operating.

Mainstream firms have found it impossibleto meet these needs and meet requiredmargins. Those same firms, however, in partnership with social entrepreneursand with some financial support fromgovernment, have developed means to bring services to people, at profit margins,appropriate to the market environment.Critically, this means that the serviceexpands to meet the needs of more people,at prices they can afford. The initiativeshighlighted here are illustrative of howentrepreneurial thinkers are taking on this challenge:

— Challenges around secondary careIndia is a market that offers impressiveopportunities, alongside considerablechallenges. With annual growth rates of 8%, the growing middle class is nowmade up of 150 million Indians. A further300 million people live on less than adollar a day and 50% of all Indianchildren are malnourished. The majorityof healthcare services are provided by the private sector. Government coverage— despite the abject poverty of so manypeople — only accounted for 25% oftotal health spend in 2003. Out-of-pocket health expenditure — as opposedto social security or private insurance —accounted for 97% of total expenditurein the same year. The net result is thatsecondary care — treatment in hospitals— is way beyond the reach of millions of Indians.

In response to this exceptionally grimpicture, Dr. G. Venkataswamy (Dr. V)created Aravind. What started in 1976 as an 11-bed eye clinic in an old temple-city has grown into the largest and mostproductive eye care facility in the world.Unlike many social enterprises, it iscompletely self-sustaining and nowtreats over 1.7 million patients each year,two-thirds of them, for free. From itsbeginning it developed a ‘Robin Hood’business model of ‘borrowing’ from richereye patients to fund operations of thepoor. The business model is stated upfront and built into discussions aboutfees. It has proved entirely sociallyacceptable to those who pay.

‘Sadly, the health field still seems dreadfully stuck. Structurally, it hasincentives for innovation in a few limited areas(certain pharmaceuticalsand medical appliances) butvirtually nowhere else in thesystem. In fact, the humandelivery dimension of healthcare is an appalling mess.The current high-tech-ledfocus on the technicalelements of health deliveryfor a few diseases in a fewplaces continues thisunhelpful imbalance.’Bill Drayton, Ashoka


34

Likewise, Narayana HrudayalayaHospitals are using a similar model to provide cardiac surgery and otherhealth care services to patients in India.The company has also worked with thegovernment to adapt this model forhealth insurance provision.

— Clean water and sanitation servicesThe strong link between improved humanhealth and access to clean water andeffective sanitation is now incontro-vertible and explains why halving theproportion of the world populationwithout access to safe drinking waterand basic sanitation is a target of theMillennium Development Goals (Goal 7,target 10). Despite this, 1.1 billion peoplestill lack adequate access to clean water,2.6 billion have no basic sanitation andgovernment action to meet these needsfalls far short of what is needed to geteven close to the 2015 target.

The privatization of many public utilities in the 1990s, followed by theenthusiastic expansion of western-basedwater utilities into developing countries,did not deliver promised results either to the companies themselves or to water consumers. The complexities ofincreasing poor people’s access to waterin highly fragmented markets (wherethey face a bewildering array of serviceproviders including public utilities,private stand-pipe operators, watertrucks, vendors in kiosks and agents)proved insurmountable to some. Profitmargin predictions, based on increaseduse following expansion of the service tomore consumers, proved wrong as theprice meant people consumed less water.

Faced with political opposition toprivatization — irrespective of the poorstandard of much public service provision— and the difficulties of establishing a license to operate, many companiesconcluded that the provision of water topoor people under the existing businessmodel was not going to work. Some firmshave withdrawn altogether. Others, haveabsorbed the somewhat bruising lessonsfrom the experience and, drawing on the complementary skills of a range ofpartners to deliver water and sanitationservices, have tried to shift to a modelthat focuses on delivering returns at thesame time as fulfilling a social contractand sustainability.

In an innovative attempt to address these lessons, WSUP (Water andSanitation for the Urban Poor) bringstogether companies (RWE, Thames Water,Halcrow Group, & Unilever) with NGOs(CARE, WaterAid, WWF) and governmentto develop commercial projects that:deliver a return (at around 7% to 10%designed to guarantee sustainability, not maximize profits) to commercialparticipants; promote community health;have a positive environmental impact;and are sustainable over the long-term.

360-degree accountability: open kimono

For any company with global aspirations —wherever it may be domiciled — thechallenges of doing business in markets of great wealth disparity and weak stateregulation are considerable. In manysectors, countries at the upper end of the development scale offer importantprospects for future growth. At the sametime, the needs of poor people for productsand services — especially those with astrong social component, such as water or health, and where state provision isinadequate — will likely translate intodirect demands of companies. A company’slicense to operate may come to depend on managing such expectations bysupplementing its business model withcreative, non-market or partial market-driven responses.

Even in developed markets, the sky-rocketing costs of healthcare arechallenging companies’ traditionalblockbuster approach to profits. One World Health (OWH) and its ‘openkimono’ approach to drug development is one to watch in this space.Pharmaceutical chemist, Victoria Hale —now an icon of the social entrepreneurmovement — used her skills and expertiseto create the world’s first not-for-profitpharmaceutical company. OWH is dedicated to the development of safe,effective, and affordable medicines forpeople with infectious diseases in thedeveloping world.

A company’s license tooperate may come todepend on managing suchexpectations by supple-menting its business modelwith creative, non-market or partial market-drivenresponses.


35

OWH takes dormant intellectual property,owned by academia or companies in the pharmaceutical and biotechnologyindustries, and develops it into medicines to treat infectious disease in developingcountries. Its flagship project hassuccessfully taken paromomycin throughclinical trials as a treatment for VisceralLeishmaniasis. Partnering with the Indiangovernment has secured OWH a distributionagreement to guarantee the treatment’savailability for those who need it most —India’s rural poor. The company’stransparent and collaborative approach todrug development provides an intriguingmodel for traditional pharmaceuticalcompanies and their stakeholders toconsider. Interestingly, following interestfrom investors, the company is consideringthe potential of a for-profit approach.78

Emerging economies: smart solutions

Until now, the priorities for the globalhealth community have been infectiousdiseases, and in particular, HIV/AIDS,malaria, and TB. Public-private partnerships,and much of the work of social entre-preneurs, have focused on these infectiousdiseases. However, disease profiles indeveloping countries are changing as aresult of urbanization, a more sedentarylifestyle, less physically demanding work,changing diets and an increase in smoking.Even among poorer communities, so-called‘diseases of the affluent’ — diabetes, cardio-vascular disease, cancer, and hypertension— are increasing at alarming rates.

Many pharmaceutical and healthcarecompanies see the emerging markets as important sources of future growth. For example, in 2006 cardiovascular drugs already sold more than any othertherapeutic category in the Asia-Pacificmarket. But the complex interplay ofmedical need and capacity to pay posesignificant challenges. As companiesconsider these markets, they have much to learn from social entrepreneurs whohave developed successful cross-subsidizedbusiness models that serve those who canand cannot pay simultaneously. In addition,they can gain significant insight intocultural and socio-economic factors thatcontribute to successful operations in these markets.

Consider the work of Vera Cordeiro inBrazil, who understands that the success of patient care is undermined by the severe poverty in her country. Childrenoften leave the hospital and return toinadequate housing, poor nutrition, andother conditions that prevent them fromhealing. Her organization, AssociationSaúde Criança Renascer, is addressing thisproblem by providing post-hospitalizationassistance to the families of poor childrenrecently discharged from the hospital. The work of its network of volunteersmeans that at Hospital da Lagoa — a largepublic hospital in Rio de Janeiro, where the flagship Renascer is based — paediatric re-admissions have dropped by 60%. The Renascer model has proved easilytransferable and ideal for locations in whichdisease is exacerbated by socio-economicfactors. It has spread to an additional 17hospitals in Brazil and served more than26,000 people to date.

Or take Laura Peterson, Executive Directorof Hands to Hearts International (HHI), a nascent operation in India that promotesearly childhood development. HHI combineseconomic development/empowerment fordisadvantaged women with desperatelyneeded health services for orphanedchildren. Their simple model is yieldingimpressive results. Further, HHI is learningimportant lessons about how to workeffectively in India. HHI goes beyond simplyimproving the conditions for the children in orphanages — HHI takes aim at the rootcauses, forwarding women’s access toeducation and economic empowerment.‘The world has come to recognize that thehealth of our world’s children is inextricablytied to the empowerment of our world'swomen,’ says Peterson. ‘Smart solutionsneed to address societal factors to reachcore causes. By looking at issues in aholistic context, entire communities reaplong-term benefits and unpredictable andprofound health outcomes follow.’

As companies consider these markets, they havemuch to learn from socialentrepreneurs who havedeveloped successful cross-subsidized business modelsthat serve those who can and cannot paysimultaneously.

78 www.ssireview.org/site/printer/victoria_hale


36

Surprisingly, and unlike health, energy is not mentioned explicitly in the toplevel of the UN Millennium DevelopmentGoals.79 Yet its availability, its pricing andthe environmental sustainability of itsproduction, supply and use are absolutelyintrinsic to meeting all the other Goals.Meanwhile, even if activists see access toclean, affordable energy as increasinglyakin to a basic human right, theprospects for providing a predicted globalpopulation of 9-10 billion people bymid-century with adequate, sustainableenergy to meet their needs — let alonetheir wants and desires — seems remote.

That said, there are some grounds for hopein the recent coincidence and convergenceof three megatrends: oil price rises, growingconcerns about energy security in thecontext of a political uncertainties aroundseveral major oil production regions, andthe profound longer-term threat of climatedestabilization.

Taken together, these three factors couldwell aggravate the energy picture, drivingmany forms of fuel out of the reach of theworld’s disadvantaged communities andpopulations.

As with the previous Deeper Dive intohealth, the purpose here is to investigatethe potential contribution of social andenvironmental entrepreneurs in relation to a critical area of need, from severaldifferent angles. The first thing to say aboutthe potential of such entrepreneurship isthat this is still very much a micro-Davidand macro-Goliath situation, with any oneof the major energy groups — among themthe world’s great petrochemical companies— doing more in a single day to meethuman energy needs than all social andenvironmental entrepreneurs do in a year,although the vast majority of these energyflows are based on carbon-intensive gasand oil that is consumed in rich markets.But the key point is that much of thepotential of social entrepreneurship flowsfrom a new mindset that these peoplemodel.

Figure 5.1World marketed energy:consumption 1980–2030Quadrillion BTUsHistory Projection

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Growing Opportunity

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As suggested in Figure 3.1, the waymainstream business frames sustainabilityissues is moving from an early focus oncompliance (involving a largely defensivebusiness positioning), through a period of corporate citizenship (with a growingdegree of engagement and beyond-compliance, voluntary effort) to a now-emerging phase, involving a fundamentalshift to competitive strategies built aroundinnovative technologies, entrepreneurialsolutions and potentially disruptive business models.

Interestingly, energy is under-represented in current memberships of leading socialentrepreneurship networks. By our analysis,only eight Ashoka Fellows (out of over1,800) are operating in this sector, with two Schwab Foundation network membersand no Skoll Foundation entrepreneurs, todate. By contrast, the Cleantech VentureNetwork has a major focus on clean energyand 1,300 affiliate investor members. One venture capital fund told us it now hasover 2,000 cleantech firms on its database.

The business case

So what is the mainstream business casefor looking at social entrepreneurship in theenergy sector? Clearly it has varied as theagenda for the energy sector has movedbeyond the basic compliance stage throughvarious forms of citizenship to a newgeneration of sustainability-focusedcompetitive strategies.

But the critical mass of the energy sector is still mired in unsustainability. Even thebest energy sector companies are largelyoperating versions 1.0 and 2.0 (see Figure3.1) of the business case. In SustainAbility’s2006 Global Reporters survey of inter-national best practice in sustainabilityreport, a number of energy companies made it into our Top 50, including BP, Enel,Shell, Statoil, and Suez.80 The sort of issuessuch companies are currently focusing oninclude: environmental and social footprints(BP); provision of micro-loans to helpbusinesses develop cleaner indoor cookingstoves (Shell) and microfinance (BP); access to new forms of energy (Statoil); and the pursuit of sustainable developmentthrough better integration of differentservice offerings, including energy, wastemanagement, and water (Suez).

‘The biggest challenge? Educating potentialcustomers regarding theneed for, and advantages of, sustainable solutions.Essentially, making thebusiness case for ourservices.’ Environment Sector

Figure 5.2World marketed energy:OECD and non-OECD consumption1980–2030Quadrillion BTUsHistory Projection

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80 The Global Reporters 2006 was an early stepping stone in SustainAbility’s evolvingSkoll Program.

Growing OpportunityDeeper Dive: Energy

38

Overall, it is clear that even leadingcompanies — and BP is a leader despite its recent catastrophic slip-ups — still have a long way to go in addressing thesort of issues that are second nature formost leading social and environmentalentrepreneurs. To achieve anything like the 3.0 version of the business case forsustainable development in the energysector, such companies would need toaddress three key areas that are central to the work of such entrepreneurs:

— AccessFor many social entrepreneurs, the issueof access to energy is crucial. Billions of people still lack access to reliablesupplies of affordable, clean, andsustainable energy. And this is also anissue for mainstream businesses. To grow, markets need energy: no energy, no growth. Figure 5.1 underscores thepredicted significant continued growth in energy demand worldwide,81 with non-OECD demand overtaking OECD demandwithin the next decade (Figure 5.2), evengiven the uncoupling of energy demandfrom GNP growth (Figure 5.4).

The current consensus is that markets forproducts designed with energy efficiency,renewable energy and/or clean energy in mind are set to explode, but theprojections in Figure 5.3 suggest thatrenewables will still meet a relativelysmall proportion of world marketedenergy demand in 2030. In themeantime, while renewable businessesand other cleantech ventures scale up,there will be a continuing, growingdemand for affordable, clean fossil fuels.

— SecurityWith continuing uncertainty around thefuture of a number of key oil producingregions, energy security considerationsare very much in the ascendant. Amongother things, this has been a criticalfactor driving the growing interest inbiofuels and other forms of cleantech.The access-to-energy agenda is closelylinked. At the extreme, picture an oilcompany operating in West Africa, thecomplex’s lights blazing in the nightwhile all around there is a world in whichreliable, affordable electricity remains adistant dream. This could be a metaphorfor the developed world sailing on in an‘ocean’ of energy-poverty, a reality thatraises many longer term security issues.

‘Our biggest challenges? First, managing the qualityof our programs whilescaling them. Second, hiringprivate sector talent on a not-for-profit budget.’ Environment Sector

Figure 5.4World marketed energy:consumption in three economic scenarios1980–2030Quadrillion BTUsHistory Projection

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81 These figures are taken from the International Energy Outlook 2006,prepared by the US Energy InformationAdministration. www.eia.doe.gov/oiaf/ieo/world.html


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Figure 5.6Challenges

Climate change

Geopolitical considerations

Access

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Limited infrastructureRising prices

Security

Growing divide between rich and poor‘Resource curse’

UnbanizationPopulation growth

Ineffective government regulation

— Climate and environment The skies over China have darkened inthe past five decades, thanks to a nine-fold increase in fossil-fuel emissions.82

Around 80% of China's electricity comesfrom coal, and there are plans for wellover 500 new coal-fired power stationsto meet an apparently insatiable demandfor energy. The country is expected toovertake the US in terms of greenhousegas emissions in 2009, yet the surge ofinvestment in heavy industry is under-mining China’s ability to achieve itsenergy efficiency targets.83 Even withoutgrowing concerns about the implicationsof energy consumption trends for thestability of our climate, the likelyincrease in many forms of pollutionlinked to energy in the emergingeconomies can only increase the squeezeon energy producers worldwide. Once seen as a softer set of drivers,environmental factors are now seen to be of crucial importance.

The cleantech surge

Given the sheer scale of the challenges we face in the energy realm, it is importantto maintain a sense of relative scale whenthinking about the potential contributionsof social and environmental entrepreneurs.The sort of social and environmentalentrepreneurs who are pioneering newapproaches include Fabio Rosa of IDEAAS,84

Brazil, Nic Frances of Easy Being Green,85

Australia, and Maqsood Sinha and IftekharEnayetullah of Waste Concern,86

Bangladesh. But however successful suchpeople may be in scaling up what they do,and however much they may now deserveto be properly funded, we should note thatthey have a very long way to go in order to make a significant impression ontomorrow’s energy challenges. Still, asIDEAAS and Waste Concern demonstrate,the best among them are having majorimpacts at the national or regional level,and there are ambitions to go internationalin some cases, as with Easy Being Green.

‘We have tracked more than $10.6 billion invested incleantech ventures since1999 in North America and $2.6 billion invested in Europe since 2003.’ Cleantech Venture Network

82 earthobservatory.nasa.gov/naturalhazards/shownh.php3?img_id=13333

83 Richard McGregor, ‘China set to miss target for energy efficiency’, Financial Times, 17 February, 2007.

84 www.ideaas.org.br/id_equipe_eng.htm 85 http://shop.easybeinggreen.com.au/

categories.asp?cID=71&fromhome=true 86 www.wasteconcern.org


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The truth is that most of the significantdevelopments to date have been happeningelsewhere, for example in the cleantechspace. Indeed, this is where definitionsbegin to blur. If social entrepreneurshipcovers environmental entrepreneurs, forexample, does that mean it also coverscleantech enterprises? And given that most cleantech entrepreneurs are for-profit,very much in it for the money, does this rule them out in terms of social entre-preneurship status? In the end, it probablydoesn’t matter much — though we seethem all as part of a broad entrepreneuriallandscape (see Figure 1.1). The reallyimportant question is where the trulybreakthrough technologies and businessmodels are now evolving. For the momentthat would largely appear to be in what, since 2002, has been dubbed the‘cleantech’ space.

It is clear that, as energy analysts CERAput it, ‘The race is on to invest inrenewables and clean energy technologies,yet the outcome is far from clear.Considerable uncertainties exist over thepolicy context, the technologies themselves,and the broader energy competitivelandscape. Who will be the winners andlosers, and what will the implications be for company strategies and the competitivelandscape?’ CERA is running a multiclientstudy focusing on the role of cleantechnologies in the future. The process will involve building scenarios out to 2030,the date already mentioned in relation to International Energy Outlook.

Meanwhile, however, many mainstreamenergy groups remain relatively cool onrenewables. Some, like Exxon, pretty muchignore the field altogether. Others areinvesting significant sums — such as BP’shalf-billion-dollar investment in a newbiofuel research center that will link theUniversity of California at Berkeley with the University of Illinois and the LawrenceBerkeley National Laboratory.88 BP says that,in addition to the new Energy BiosciencesInstitute at Berkeley, it plans to spend $8billion over 10 years on its own alternativeenergy efforts, which include building solarcells and wind farms. The company also hasa major biofuels partnership with DuPont.89

But for the big oil companies that havebeen reaping record profits from high oilprices, such research typically remains asmall component of their overall R&Dportfolios. Donald Paul, who overseesalternative energy programs at Chevron,explains that the infrastructure needed tomass produce and distribute any type offuel takes years to develop, and millions, ifnot billions, of dollars to build. And, longerterm, it is inevitable that such biofuelinvestment will generate second-ordersocial and environmental impacts.90

When we asked Samer Salty of London-based venture capitalists zouk ventures,whether he expected the clean energysector to follow the trajectory of the NewEconomy, he agreed that there weresimilarities — but stressed that, whereasInternet companies typically took relativelylittle capital to establish and could be soldfor high multiples at the peak of the boom,energy technologies and infrastructurestypically require massive investments. That doesn’t remove the risk of a bubbledeveloping, he argued, but it does lessenthe likelihood somewhat.

‘The energy sector shows signs of real systemicbreakout. A host of newtechnologies are marchingtheir way up their learningand down their cost curves— responding to a dramaticsocial risk and pretty clearprice signals.’Bill Drayton, Ashoka

87 Crossing the Divide? The Future of Renewables and Clean Energy, seewww.cera.com/aspx/cda/client/knowledgearea/servicedescription.aspx?kid=199#39251

88 David R. Baker, ‘Big Oil cautious about clean-energy spending’, San FranciscoChronicle, February 9, 2007.

89 www2.dupont.com/Biofuels/en_US90 www.opendemocracy.net/

globalizationclimate_change_debate/fixes_4311.jsp


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Mindset 3.0

In carrying out this Deeper Dive, we spoketo a range of companies and organizations,from big petrochemical companies throughto early stage start-ups like Innovalight.91

This is a fascinating Silicon Valley start upwhich is using nanotechnology and siliconinks to create ultra-low-cost solarphotovoltaic modules. It has developed asilicon nanocrystalline ink that could cutthe cost of flexible solar panels to a tenthof current solar cell solutions — using asolvent-based silicon process that lendsitself to low-cost production and high-throughput manufacturing. Just one moreexample of the cleantech surge nowbuilding. But in what follows, we will drawon the experience of the full spectrum ofnon-profit to for-profit organizations, fromfoundation-funded social enterprises tomarket-driven cleantech ventures.

Standing back, what these entrepreneurshave to teach the wider world has less todo with how to develop a given technologyor how to put together a particular product,than with how they think, act and lead. So, for anyone wondering where theMindset 3.0 agenda (Figure 3.1, page 24)might take us, here are five points whichstruck us in looking over the shoulders ofdifferent types of entrepreneur working inthe energy field.

1 Systems thinking and design: inefficiency is the enemy

One striking thing about leading social andenvironmental entrepreneurs is that theyare dedicated to changing the system, notjust to making marginal improvements.Whether or not they succeed in suchambitious aims is quite another matter, but there is no question that the globalenergy system is dysfunctional: not only are billions of people denied reasonableenergy services, but the planet is running a fever simply by meeting the needs ofthose who are currently served.

Take a taxi example. Jim Harris, ManagingPartner with the evolving CleantechInnovation Institute, is working out how to get those who influence choices on whatsort of vehicles qualify as taxis — the auto-makers, taxi companies, leasing companies,regulatory agencies, insurers and others —to focus on changing Toronto’s (and thenCanada’s and then North America’s) taxis to hybrid propulsion systems.

‘Converting North America’s 200,000 taxis to hybrids,’ he explains, ‘would havetremendous financial, economic, health,and environmental benefits. Hybrid carsreduce smog emissions by more than 70%.Taxis drive 10 times the distance of averagevehicles every year. Changing 200,000 taxis to hybrids would have the sameimpact as converting 2,000,000 cars!’

The uncoupling of GDP from energyconsumption — shown in Figure 5.5 — is by no means a foregone conclusion: ithas to be fought for every step of the way.That’s what makes the work of people likeAmory Lovins (of the Rocky MountainInstitute 92) and Bill McDonough (of MBDC93 and William McDonough + Partners 94)so important. Whether or not particulardesigns like Lovins’ hypercar 95 (designed toachieve a three- to five-fold improvementin fuel efficiency) actually get built anytime soon, the spotlight has been placedsquarely on the need to drive out energyfrom our economies, value chains andbusinesses.

2 Emerging economies: use bigger BRICs

Given the scale of the energy demand ofthe BRIC economies (Brazil, Russia, India,China) and other emerging markets, theworld needs to focus its attention here —and as soon as possible. Bill McDonoughhas already been working on a number ofplanned eco-cities there, an opportunityspace that has also attracted EcoCities.96

Ask the organization’s Chairman, LawrenceBloom, why he is focusing on China, and heis very clear on the point. ‘Fundamentally,the first EcoCities project is under way inChina (in Dongtan, near Shanghai) becausethe first opportunity was created there.’

He explains, ‘China has both the “stick” and“carrot” in large measure to drive her fromher present polluting paradigm to cleanerand more secure solutions. Currently, onedirty coal power station comes on streamevery eight days to fuel China’s continuingeconomic growth. When I was last inBeijing, we took off from Beijing CapitalInternational airport on a cloudless day, but could not see the sun until the planewas at 12,500 feet. The pollution is nearlytwo-and-a-half miles high and is currentlyconsidered to be costing the country 8% of GDP in asthmatic and bronchialconditions and lost working days. With 400 million people expected to migratefrom the countryside to the cities in thenext 30 years, that is a very big stick.’

Not only are billions of people denied reasonableenergy services, but theplanet is running a feversimply by meeting the needs of those who arecurrently served.

91 www.innovalight.com/index.html 92 www.rmi.org93 www.mbdc.com94 www.mcdonoughpartners.com 95 www.hypercar.com


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But, he notes, ‘the carrots are also profound— China could be a future world-leader and major global player in “green”industries and services — so from solar-panel manufacture and consequentintellectual property streams to carbontrading markets, her opportunities areawesome.’ Part of the EcoCities plan is to‘create the EcoCities Foundation, sharing all the information we obtain on feedbackloops from our developments, and weanticipate that it will become the centre of a major resource offering sustainability-advice to individuals, corporations andNGOs.’

Not everyone is building cities and otherinfrastructure on the scale — or in thesemi-orchestrated way — that China is.Elsewhere in the emerging economy anddeveloping country worlds, social andenvironmental entrepreneurs are having to wrestle with multiple forms of chaosbrought on by over-rapid, ill-plannedurbanization. Among them are organ-izations like Waste Concern 97 in Dhaka,Bangladesh. In rural regions, meanwhile,energy needs are being developed bypioneers operating in India’s Gandhiantradition like Bunker Roy of BarefootCollege, 98 who train barefoot solarengineers, and his countryman AshokKhosla with his DevelopmentAlternatives.99 Similarly, in Kenya, Martin Fisher and Nick Moon of KickStartnow — remarkably, directly or indirectly —account for 0.6% of the country’s GDP, withtheir appropriate technology solutions.100

3 360° accountability:let the sun shine in

Given the extent to which bribery andcorruption distort energy production andsupply systems, against the backdrop of the so-called ‘Curse of Oil’ that so oftenturns a natural resource treasure into a socio-economic tragedy, the role oftransparency and accountability cannot be exaggerated. That’s what makes therelated work of organizations likeTransparency International,101 PublishWhat You Pay,102 the Global ReportingInitiative,103 Ceres,104 AccountAbility,105

and, yes, SustainAbility106 so important.

A parallel initiative in the climate changefield is the Carbon Disclosure Project(CDP),107 which provides a secretariat for the world's largest institutional investorcollaboration on the business implicationsof climate change. CDP represents an efficient process whereby manyinstitutional investors collectively sign a single global request for disclosure ofinformation on Greenhouse Gas Emissions.More than 1,000 large corporations reporton their emissions through this website. The CDP 5 information request was signedby more than 280 institutional investorswith assets of more than $41 trillion andsent out on February 1, 2007 to 2,400companies. The responses will be madeavailable in September 2007.

4 Consumer engagement: lower the entry ramps

While it is easy to over-estimate thereadiness of consumers to take big steps tosave the planet or help other people, it canalso be precariously easy to underestimatetheir willingness to take smaller steps —that collectively can add up to some formof revolution. One man who has taken thestep of moving out from the campaigningworld to engage consumers head-on is Jeremy Leggett, once a Greenpeacecampaigner, and more recently CEO ofSolar Century.108 He is also a director of the world's first private equity renewableenergy fund, Bank Sarasin's New EnergiesInvest AG.109

Solar Century’s vision is immodest: ‘Our aim,’ they say, ‘is to revolutionize theglobal energy market. The sun bathes theearth in an incredible amount of energy —in a day, enough arrives to power the wholeworld for several years. Humanity can noweffectively harness the power of the sun.The 21st century must be the solar century.We envisage solar systems on the roof ofevery building, backed up by a family ofother micro renewables, supplying cleanpower and achieving deep cuts inemissions. As the global market forrenewable energy grows, thousands of jobs will be created in research,installation, and manufacturing.’

While it is easy to over-estimate the readiness ofconsumers to take big steps to save the planet or helpother people, it can also be precariously easy tounderestimate their willing-ness to take smaller steps.

96 www.ecocities.com97 www.wasteconcern.org98 www.barefootcollege.org99 www.devalt.org100 www.kickstart.org101 www.transparency.org102 www.publishwhatyoupay.org/english103 www.globalreporting.org 104 www.ceres.org105 www.accountability21.net106 www.sustainability.com/insight/

research-article.asp?id=865 107 www.cdproject.net108 www.solarcentury.com109 www.newenergies.ch/index_ei.html


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Another venture that aims to makesustainable energy choices more accessibleto ordinary people is Easy Being Green,founded in Australia by Nic Frances andPaul Gilding, but with plans to gointernational.110 In 2004, they set a goal for 70% of Australian homes to be 30%more energy and water efficient within 10 years. Since then they have implementedprograms that have provided almost half a million homes with ‘Climate Saver Packs’;reduced 620,000 tonnes of CO2 pollutionper year, equivalent to taking 150,000 cars off the road; saved 5.8 gigaliters ofwater, equivalent to 2,500 Olympic-sizedswimming pools; and saved householdsA$32.3 million on their energy bills.

5 Business models: take climate into account

Disclosing greenhouse emissions is onething, putting a price — and a value — on them is quite another. Two organizationshave been working in this area: RichardSandor’s Chicago Climate Exchange(CCX)111 is the world’s first, and NorthAmerica’s only voluntary, legally bindingrules-based greenhouse gas emissionreduction and trading system; and JamesCameron’s Climate Change Capital (CCC)112

is a leading investment banking group thatspecializes in the commercial opportunitiescreated by a low carbon economy. CCCadvises and invests in companies thatrecognize combating global warming isboth a necessity and an economicopportunity. Its activities include invest-ment management and financing emissionreductions, and its aim is to make theworld's environment cleaner whiledelivering attractive financial returns.Longer term, it will be interesting to seewhat happens to such players when theChinese get serious about greenhouseemission trading.

Then there are the ‘Robin Hood’ models.Whether or not such a figure ever stolefrom the rich to give to the poor, differentpeople certainly place a different value —and are prepared to pay very differentprices — for anything from their health toclean fuels. In the energy sector, the mostoutstanding example of this is probablyFreeplay Energy,113 which started outoffering wind-up radios and expanded to a wide range of other human-poweredproducts.

Whether from the basic needs angle or because of systemic challenges likeclimate change, energy is central to thesustainable development agenda. The UKStern Review, which described climatechange as effectively the biggest marketfailure of all time, calculated that thedangers of unabated climate change would be equivalent to at least 5% of GDP each year.114 Overall, it estimated thatthe dangers could be equivalent to 20% ofGDP or more. In contrast, it argued that thecosts of action to reduce greenhouse gasemissions to avoid the worst impacts ofclimate change could be limited to around1% of global GDP each year. People wouldpay a little more for carbon-intensivegoods, but our economies would continueto grow strongly. According to one measure,the benefits over time of actions to shiftthe world onto a low-carbon path could be in the order of $2.5 trillion each year.Markets for low-carbon technologies willbe worth at least $500 billion, and perhapsmuch more, by 2050 if the world acts onthe scale required.

The potential impact of social andenvironmental entrepreneurs in this areawas dramatically illustrated by the successof Ceres,115 led by its President MindyLubber, in helping stall plans by TXU tobuild 11 coal-fired power stations in theUSA. Even though 150 coal-fired powerplants are currently proposed in thecountry, TXU’s $10 billion coal expansionplan drew intense criticism in terms of thelikely climate impacts. When the plans wereannounced, Ceres convened some of TXU’slargest shareholders, including CalPERS,CalSTRS, and the New York CityComptroller’s Office, to bring pressure tobear. Some time later, it was announcedthat two private equity firms — KohlbergKravis Roberts & Co and the Texas Pacific— would buy TXU for $45 billion, and woulddrop eight of the proposed power stations.Strikingly, the private equity firms consultedCeres and other critics ahead of the dealbeing signed. We expect a lot more of thissort of power politics.

‘It was difficult for us to negotiate with largecorporations to begin with.They have more lawyers anda different style. I would likeaccess to training to “speaktheir language” and accessto board-level contacts.’ Energy Sector

110 http://shop.easybeinggreen.com.au/categories.asp?cID=71&fromhome=true

111 www.chicagoclimatex.com 112 www.climatechangecapital.com 113 www.freeplayenergy.com114 www.hm-treasury.gov.uk/

independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm

115 www.ceres.org



We are entering a new era in whichtoday’s apparently insoluble problemsspawn tomorrow’s transformativesolutions. The new breed of social andenvironmental entrepreneur is part of a new global order that is dedicated tonew levels of equity, quality of life andsustainability. Far from accidentally,there is a buzz around innovation — forexample, it was chosen as the theme ofthe 2007 Skoll World Forum in Oxford.Indeed, the growing appeal of socialentrepreneurship was illustrated by theturn-out in 2006: nearly 700 delegatesfrom more than 40 countries. And the2007 event ‘sold out’ well in advance.

But, in the midst of all of this excitement,we should ask: Is there a danger that thesocial entrepreneurship industry will end up intoxicated by virtue, to use a colorfulAmericanism, of ‘breathing its ownexhaust’? Overall, our conclusion is that the optimism about these entrepreneurs is well placed, but that that they areexperiencing a range of growing pains —and there is an urgent need to steer more capital and business resources into this area.

If this can be achieved, we very much agree with Tim Freundlich (Director,Strategic Initiatives, Calvert SocialInvestment Foundation 116 and FoundingPrincipal, Good Capital 117) that the outlookis bright. ‘I see the social enterpriselandscape rapidly prototyping strategiesthat corporations will incorporate, replicate— or just plain steal. These entrepreneursact as fearless and fast actualizers, takingthe uncertainty and lack of imagination outof the equation for mainstream business.Global warming and poverty especially are conspiring in an accelerating way tosensitize society towards considering andexperimenting with the integration of newmodels of doing business, focusing on adifferent and more nuanced sense of value— call it double bottom line, triple bottomline or blended value.’

So here are our conclusions and a summaryof some of the next steps we propose.

Conclusions

Social entrepreneurship is on a roll

— Social entrepreneurs are part of a much wider spectrum, or continuum, of entre-preneurial effort dedicated, directly orindirectly, to addressing key sustainabilitychallenges.

— Social entrepreneurship is emerging as a potential catalyst and powerful lever ofthe sort of change that governments andbusiness are increasingly committed to —but rarely know how to deliver.

— While there may be elements of a boom in interest in social entrepreneurship, therisk of an entrepreneurial bubble burstingappears low — and the opportunity spacecan only grow.

The potential for breakthrough solutionsis considerable — and growing

— The timing is more or less perfect, given that systemic change is increasinglyneeded. ‘Sure, entrepreneurs need to be mavericks working outside the box,’said SustainAbility Faculty member Sir Geoffrey Chandler, ‘but they have an important voice which — if it can beproperly channeled — could help breakopen the box.’

— The fundamental challenge, said ‘blended value’ champion Jed Emerson who worksclosely with Generation InvestmentManagement, is not so much to scalethe enterprise as to ‘scale the solution.’

— Among the routes to scale discussed by our respondents, the following surfacedrepeatedly: (1) grow individual socialenterprises; (2) establish multiple enter-prises; (3) get big organizations —whether companies, public agencies orNGOs — to adopt the relevant modelsand approaches; and (4) spur publicpolicy legislation designed to fix market failures.

6Co

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116 www.calvertfoundation.org/ 117 www.goodcap.net

45Growing OpportunityConclusions & Next Steps

The field is growing, but is still relatively small

— As in any area of entrepreneurial activity, the risks of actual or perceived over-promising are real. The wider communityneeds to find ways to monitor, measure,evaluate, and report on progress in waysthat build understanding and support.

— Our analysis of the funding flows into social entrepreneurship suggest that,while the overall levels have increasedsignificantly in recent years, the currentfunding total is a small fraction of that currently devoted to cleantechinvestments — let alone widerphilanthropy.

— To put rough numbers on these three areas, to give a sense of orders ofmagnitude, we estimate that less than $200 million is going into socialenterprise worldwide from dedicatedfoundations each year, compared withover $2 billion a year into cleantech inthe USA and EU and well over $200billion into philanthropy in the USAalone.

Money is the main headache

— Accessing capital is the No.1 challenge for the entrepreneurs we surveyed, withalmost three-quarters (72%) putting this at the top of their priority list. While this is also true of mainstreamentrepreneurs, the pressures on socialand environmental entrepreneurs to groware resulting in significant growing pains.

— ‘There is a lot of seed capital available, angel-equivalent, for social entre-preneurs,’ said Linda Rottenberg ofEndeavor Global. ‘But there is not a lotof later-stage funding available — seriesB and C equivalent — to take socialentrepreneurs to scale. There’s a hugegap in the social capital market that’spreventing many of the best models fromreplicating and fulfilling their potential.’

— Foundations are still the favorite source of funding for social entrepreneurs(mentioned by 74% of respondents), but there is a wide recognition of theneed to diversify funding sources.

— At least among our sample, there was a striking trend in their projections aboutwhere their funding would come from in the future. The proportion expecting to be relying wholly on grants in fiveyears was down to 8%, compared with 27% today.

Nothing changes without individuals, but nothing remainswithout institutions.

Panel 6.1Paradigm shifts don’t come easy

Various entrepreneurs talked in terms of the need for a paradigm shift in theirfield. But such shifts rarely come easy. So what needs to be done? Some answersbegan to surface during the 2007 SchwabFoundation Summit in Zurich, where thefocus was on the business case for socialentrepreneurship — and for strategicbusiness involvement with socialentrepreneurs. One business leader toldthe social entrepreneurs present thatwithin a decade ‘everyone is going to fall over themselves in a race to get yourbusiness.’ But at least three things need tochange if we are to see a paradigm shift.

The first, according to Pamela Hartigan of The Schwab Foundation, is that ‘the infrastructure to support theseventures has to be put in place muchmore quickly than is occurring if they areto scale — and live up to their potential to achieve systemic economic and socialchange. The creation of social ventures is ramping up at breakneck speed as moreand more talented, innovative, passionate,and caring individuals come together to address widening and ubiquitousinequities, but the financial, legal, andpolitical support is still crawling along by comparison, stuck in antiquatedinstitutional frameworks.’

The second is that we need to expand the spotlight to illuminate not just heroicindividuals but also the organizationsbehind them. ‘Too much rides on thefounder of the venture,’ Hartigan argues.‘Much more has to be done to support the founder and the leadership team’stransition through their growth phases. In the words of John Monet, “Nothingchanges without individuals, but nothingremains without institutions.” ’ We need tofocus on their No. 2, 3 and 4 colleagues.

Third, a need constantly flagged up by ourrespondents, there need to be better waysof linking the worlds of social enterpriseand mainstream business. ‘The degree ofinterface will depend on a host of factors,’says Hartigan, ‘namely: the power of thebusiness case argument for workingtogether; the extent to which people onboth sides are committed to making therelationship work and the nature of thesocial enterprise itself — so, for example,leveraged non-profits might work bestwith the philanthropic arm of acorporation, whereas hybrids could bemore in sync with the core business of the corporation.’

46

— On the other side of the coin, the proportion of those expecting to befunding their own operations, with littleor no dependence on grants jumped from8% to 28%. Many still expect to rely ona mix of funding types, but a significantproportion (up from 38% today to 50%in five years) expect a substantialrebalancing in the coming years.

Other growing pains

— Linked to the funding challenges, many entrepreneurs noted the problems theyface in offering competitive salaries tostaff — with professional staff, in turn,often a key to attracting sufficientfunding.

— As these social enterprises grow, they increasingly face a tension between theneed for professionalism and efficiencyon the one hand and, on the other, theneed to maintain a focus on the mission,values and culture of the organization.

— Succession planning is another area of difficulty. The entrepreneurs them-selves are very aware that for theirorganizations to succeed, they them-selves need to change. This is true evenof the most successful entrepreneurs. Bill Strickland of the Bidwell TrainingCenter Inc. (BTC), a Pittsburgh-basedorganization for urban change, once said that the biggest barrier to hisorganization growing was him.

— Novelty is an enormous strength, but like so many traits could also become a weakness. Many others have beentackling the challenges social entre-preneurs are dealing with, at other times, in other places, in different ways. There is a danger that in theirenthusiasm to embrace — and berewarded for developing — radical newsolutions that a number of new wheelsare unnecessarily invented.

Partnering with business

— Social and cleantech entrepreneurs turn out to be equally interested indeveloping partnerships with business,but with different expectations. Social entrepreneurs, in particular, are acutely aware that they often lackthe experience and skills needed.

— A constant refrain in the interviews was the growing need for brokeringbetween the entrepreneurs and thosethey need to persuade or recruit.

— ‘We need to be brokering relationships now in the social enterprise/businessinterface,’ said one interviewee. ‘Currently much of this is done aroundcause marketing, but we need moreguides who can identify possible partnersand take entrepreneurs through thecourtship needed to create realpartnerships of broad value. So manyindustries have matchmakers — whereare they in this sector, beyond what hasbeen called the in-club of white malesocial entrepreneurs?’

— There is a risk in all of this that we become overly focused on narrowdefinitions of social entrepreneurship. For example, it’s easy to get excitedabout small start-ups in the renewableenergy field, but we should rememberthe huge contributions already beingmade by much larger companies likeAcciona 118 in Spain, Vestas 119 based in Denmark, or GE based in the USA.

— Listen to José Manuel Entrecanales, Acciona’s Chairman and a Spanishbusinessman with big ambitions insustainable energy. We asked whetherthis ambition would require trade-offs?‘No,’ he replied. ‘Mainstream businessesmust deliver shareholder value. ButAcciona has significantly increased itssustainability profile and investment inareas like renewable energy in recentyears, while recording substantial growthand exceptional shareholder value. For example, in 2005 our use ofrenewable energy sources avoided theemission of 4.5 million tonnes of CO2. I believe that there may be opportunitiesfor a forward-thinking energy player tocreate small-scale village-basedrenewable energy provision which trulybreaks the mould.’

‘Indeed I see interesting parallelsbetween the provision of energy to theseareas and the situation in commercialcredit two decades ago which led NobelPrize winner Professor Yunus to set up the Grameen micro-credit system. The application of a decentralised,bottom-up approach to providingelectricity to remote or impoverishedareas is one we have been longinterested in at Acciona. It is one ourteam is currently exploring, knowing well that there are situations andlocations where the provision of clean and sustainable energy will not be commercially viable. That is why weare currently fundraising for projectswhich may not prove profitable in theimmediate future. We welcome dialoguewith NGOs and others who share ourvision.’

Growing OpportunityConclusions & Next Steps

118 www.acciona.es 119 www.vestas.com

‘We need to be brokering relationships now in thesocial enterprise/businessinterface. Currently much of this is done around causemarketing, but we needmore guides who canidentify possible partnersand take entrepreneursthrough the courtshipneeded to create realpartnerships of broad value.’Anonymous respondent

47Growing OpportunityConclusions & Next Steps

Don’t forget the social intrapreneur

— Several interviewees also noted that we need to recall the potential of socialintrapreneurship,120 with change agentsworking inside big organizations to drivesimilar agendas. One example of a socialintrapreneur we interviewed was GibBulloch, Programme Lead at AccentureDevelopment Partnerships.121 He hasbeen part of a team for nearly five yearsthat has been working to switch thismajor consulting firm on to the potentialto help NGOs, social entrepreneurs, and major businesses to understand and manage the world’s great social,environmental, and governancechallenges.

— Many people still see such efforts as part of corporate citizenship. This, as Bulloch puts it, means that they think ‘in terms of grooming donkeys, sponsoring the opera or, at best, painting schools. Rather than, say, helping Oxfam to become a highperformance organization.’ In the contextof Accenture’s 145,000 employeesworldwide, ADP’s 70-going-on-100 mayseem small beer, but the potential tocatalyze change — both inside Accentureand among its clients — is considerable.

— The key point, however, is that oneway of achieving scale with entre-preneurial solutions is to switch largeorganizations onto the new challengesand exploit their much greater leverageto further evolve and deploy thesolutions.

A growing need to focus on governmentresponsibilities and roles

— Governments need to do more to shape public policy, public sector targets andwider incentives — for example, inrelation to tax breaks for the funding ofsocial enterprise — if the sort of venturescovered above are to reach their fullpotential. This is an area that has beencovered by people like Linklaters,122 butwhere considerable further thinking —and action — is needed.

Panel 6.2Next steps

Among the next steps planned forSustainAbility’s Skoll program are thefollowing:

— Skoll World Forum 2007We will present the results of this first survey, and also test some of our conclusions for the health sector in a dedicated session.

— FeedbackWe will send the final report to allthose who took part, inviting theircomment. This will be used to shapefurther projects.

— Roundtables and workshopsDuring 2007–08, we will organizeroundtables and workshops to debate, evolve, and communicate the conclusions.

— Further deep/deeper divesWe aim to conduct at least two furtherexplorations into our target sectorsduring the coming 12 months.

— Explore potential for developing ‘Wiki-Manual’Given the interest in understandinghow to develop partnerships withmainstream business and otherpartners, we will consider developingeither a published Manual or even an online manual along the lines of Wikipedia123 on related themes.

— BrokeringFurther develop our thinking, and over12–18 months, our offerings in thisarea.

— Capital flowsInvestigate ways to increase the capitalflows into the social enterprise space.

— 2008 surveyTest themes for the next survey.

‘Over the last 25 years, the citizen sector has become as entrepreneurialstructurally as business inmost of the world — and, as a result, it has beenclosing the productivity gap with business veryrapidly. We now have theopportunity to end theaccidental divorce of the last three centuries. Doing so represents a giganticproductivity opportunity for business, for the citizensector, and for the ultimatecustomer and citizen.’Bill Drayton, Ashoka

120 www.iese.edu/research/pdfs/op-04-16-e.pdf

121 www.accenture.com/global/about_accenture/company_overview/corporate_citizenship/philanthropy/accenturepartnerships.htm

122 www.schwabfound.org/docs/web/linklaters_schwab_report.pdf

123 www.wikipedia.org

1 As a principal responsible for the future direction of your organization, please select two areas that present the greatest challenge:

— Recruiting & retaining talent.

— Accessing capital.— Developing a more mature/

professional organization. — Adapting to a changing

external market/landscape.— Promoting or marketing

your organization.— Something else

(please specify). — Nothing else.— These issues are not

my responsibility.

2 Please briefly explain your biggest challenge.

3 Please briefly explain your second most important challenge.

4 Which of the following statements best describes your organization?(Please select one)

— We completely rely on grants, donations or other sponsorship.

— We primarily rely on donor funding, but have other sources of income.

— We have sources of earned-income/customer revenue, but also rely on grants and other funding.

— We fund ourselves through customer revenue and mainstream capital markets and do not rely on grants or donations.

— Something else (please explain).

— Unsure.

5 Five years from now, which of the following statements best describes how your organization expects to fund itself?(Please select one)

— We will completely rely on grants, donations or other sponsorship.

— We will primarily rely on donor funding, but will have other sources of income.

— We will have sources of earned-income / fees, but also will rely on grants and other funding.

— We will fund ourselves through customer revenue and mainstream capital markets and will not rely on grants or donations.

— Something else (please explain).

— Unsure.

6a Are you attempting to track non-financial performance for your organization?

— Yes.— No.— Unsure.

6b How are you tracking this performance? What metrics have you developed or what other approaches are you taking?

6c How are you finding this process?(On as scale of 1 to 5)

1 This is not working at all 2345 This is working very well 6 Unsure

7 Thinking about financing your initiatives, which sources of funding do you feel will be the best avenues for you to pursue?(Please select all that apply)

— Dipping into your own pockets.

— Raising funds from the public (fundraising).

— Attracting help-in-kind (donated time/products).

— Foundations (grants or program-related investment).

— Tapping government (grants, loans).

— Making sales/charging fees.— Franchising.— Joint venturing.— Venture capital (including

angel investments).— Going public.— Something else

(please specify). — Unsure.

8 Why do you think these sources are the best avenues for you?

9 In what ways do you thinklarge corporations could be better partners for you? (Please tell us aboutexperiences that have worked well or poorly in this arena).

10aWill you allow SustainAbility to associateyour name with your comments?

— No, I would like to keep my comments confidential.

— Yes, you may associate my responses with my name and organization.

10bPlease tell us the region of the world where you primarily operate.

— Africa— Antarctica— Asia— Europe— Middle East— North America— South America— South Pacific

10c Please select your organization's primary area of focus.

— Economic and social equity (development and poverty alleviation).

— Education.— Environment (including

energy and water).— Health.— Housing.— Institutional responsibility

and transparency.— Peace and security.— Tolerance and human rights.— Something else

(please specify).


Annex 1Survey Instrument

49

Annex 2Participants

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

Growing Opportunity

John DanielsSakena YacoobiTrevor CreeCyndi Rhoades Keerti PradhanLisa FitzhughKamal Bawa

Barbara Hofmann

Chris UnderhillJim FruchtermanKarl MundorffDaniel F BassillSylvia AruffoJim Rough

Thankiah Selva RamkumarJeroo BillimoriaGreg RuebuschArt LilleySatyan MishraChristopher LondonBunnie StrassnerKyle ZimmerMarv BaldwinMarcus ColchesterNick SalafskyRory StearMartin Burt

Daniel Taylor-IdeRichard WongKavita RamdasShashi TyagiGeorge WagnerNevzer StaceyGary CohenJosh TostesonRick SurpinLeland StewartKaren TseRandall Hayes

Garry Neil

Katherine FreundJohn TarvinElana RosenSharron RushAlison BockDeborah MeehanLinda Hahner

Talia Aharoni

Paul Holthus

ABT Insulpanel LimitedAfghan Institute of LearningAgmachine.com LtdAntiApathyAravindArts CorpsAshoka Trust for Research in

Ecology and The Environment Association for the

Children of MozambiqueBasic NeedsBenetechBioReaction IndustriesCabrini ConnectionsCareguide SystemsCenter for Wise

Democratic ProcessesCentre for Social ReconstructionChild Savings InternationalColdBlastCommunity Power CorporationDrishtee Dot Com Ltd.Educate the ChildrenFascinating Learning FactoryFirst BookFoods Resource BankForest Peoples ProgrammeFoundations of SuccessFreeplay EnergyFundación Paraguaya de

Cooperación y DesarrolloFuture GenerationsGifts In Kind InternationalGlobal Fund for WomenGramin Vikas Vigyan SamitiHarvest WindHasNa Inc.Health Care Without HarmHydrogen LLCICSIndependent Energy CorporationInternational Bridges to JusticeInternational Forum

on GlobalizationInternational Network

for Cultural DiversityITNAmericaJumpstart Just Think FoundationKnowbility, Inc.Landmines BlowLeadership Learning CommunityLiteracy Center

Education Network MAALA (Business for

Social Responsibility in Israel)Marine Aquarium Council

Dave PearceDr Devi ShettyMia Hanak

Anil PansariDavid NuttleOlga Murray

Damian MillerDr Davida CoadyDavid Gordon

Faisal IslamBecky Crowe HillKenneth LuongoDr Chris EliasDaniel SalcedoSuraiya HaqueLynne PattersonScott PearsonPeter McFarrenBrett JenksAndrea ColemanJohn WoodHeidi KühnDennis Sizemore

Dr Antonia Neubauer

Vera CordeiraGraham MacmillanJohn MarksCyril R Raphael

Russell de Lucia

Ibrahim NatilWilliam H ConklinJill VialetSharon Walden

Mark BorchersJay JacobsRon SmithCharles KnowlesGerald ChertavianAli Raza

MiasoléNarayana Hrudayalaya HospitalsNatural World Museum

of Environmental Art Naveen Gram AgrotechnologiesNeedful Provision, Inc. Nepalese Youth

Opportunity FoundationOrb EnergyOPTIONS Recovery Services, Inc.Pacific Environment

and Resources CenterPadmaPartners in SchoolsPartnership for Global SecurityPATHPEOPLink, Inc.PhulkiPro Mujer Inc.ProtonexQuipus Cultural FoundationRareRiders for HealthRoom to ReadRoots of PeaceRound River

Conservation StudiesRural Education

and Development, Inc. Saúde Criança RenascerScojo FoundationSearch for Common GroundShri Bhuvneshwari

Mahila AshramSmall-Scale

Sustainable Infrastructure Development Fund, Inc.

Society Voice FoundationSolarAMP, LLCSports4KidsStop Abusive

Family Environments, Inc.Sustainable Energy AfricaSummer SearchVerdant PowerWildlife Conservation NetworkYear UpYES Network Pakistan

50Growing OpportunitySubheading

AllianzFounded in 1890 in Berlin,Allianz is now present in morethan 70 countries with over177,000 employees. AllianzGroup provides its more than 60 million customers worldwidewith a comprehensive range ofservices in property and casualtyinsurance, life and healthinsurance, and assetmanagement and banking. www.allianz.com

DuPontFounded in 1802, DuPont putsscience to work by creatingsustainable solutions essentialto a better, safer, healthier lifefor people everywhere.Operating in more than 70countries, DuPont offers a widerange of innovative productsand services for marketsincluding agriculture, nutrition,electronics, communications,safety and protection, home andconstruction, transportation,and apparel. www2.dupont.com

The Skoll FoundationThe Skoll Foundation wascreated by Jeff Skoll in 1999 to pursue his vision of a worldwhere all people, regardless of geography, background oreconomic status, enjoy andemploy the full range of theirtalents and abilities. Skoll, whowas the first employee and firstPresident of eBay, believes thatstrategic investments in theright people can lead to lastingsocial change. The Foundation’smission is to advance systemicchange to benefit communitiesaround the world by investingin, connecting and celebratingsocial entrepreneurs. www.skollfoundation.org

SustainAbilityEstablished in 1987, and basedin London, Washington DC, andZurich, SustainAbility combinesconsulting, research and publicinterest activities.www.sustainability.com

Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems

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