Slide 1: Social Entrepreneurship and Responsible Business
Social entrepreneurship and responsible business will only succeed in fulfilling their promise as transformative economic and social movements if their development is guided by a system-based perspective and implemented in a deeply cooperative manner.
By social entrepreneurship and responsible business, I include the broad landscape of businesses founded to do “good” in the world as an absolute and non-negotiable part of their mission.
By a systems perspective, I mean a perspective that ensures its aspirations are guided and measured by a holistic, vales-driven set of metrics.
These definitions are crude and need much more formal boundaries. So, let me begin with a more detailed definition of what I mean by social entrepreneurship and responsible business.
Slide 2: What is Social Innovation?
We must start with principles – principles that drive the design of corporate purpose and governance. Corporation 2020 developed six principles that guide responsible corporate governance. I’ve adapted those principles that to define responsible business:
Responsible business must be resilient and regenerative, “good” not less bad.
The purpose of the responsible business is to harness both public & private assets to serve the public good.
Responsible business shall accrue fair returns for investors, but not at the expense of the legitimate interests of other stakeholders.
Responsible business shall meet the reasonable needs of the present while improving the ability of future generations to meet their needs.
Responsible business shall distribute the value and the wealth they create equitably among those who contribute to their creation.
Responsible business utilize governance structures that are democratic, participatory, transparent, ethical, and accountable.
These ask us to explore the premise I mentioned earlier: “that social innovation will only succeed in fulfilling its promise if its development is guided by a systems-based perspective and implemented in a deeply cooperative manner.”
Slide 3: How Did We Get Here?
1) Key inflection points – or how did we get here?
A failure to accept our limits has landed us where we are (Too much ain’t enough, or as Alan Greenspan famously said, “greed is good”). Population growth and resource constraints are caused by economies and businesses designed in an unsustainable manner:
The Japanese tsunami reminds the world of business’ vulnerability to nature
Unsustainable business design
No full-cost accounting
Externalization of costs.
2) Successes worthy of celebration, but not indicative of the future
We suffer from a misguided belief in what creates happiness and fulfillment. One book – “The Spirit Level” – has inspired me and I recommend it.
What we need is movement – from “Siloed Interests” To Shared Purpose, from Quantity to Quality (We must simply buy less stuff), from Individualism to Community (What’s in it for us, not just what’s in it for me?), and finally, from Matter to Meaning (for me it was moving to Vermont. Scale matters).
3) Our challenge: Poorly defined standards and unclear goals or many movements with shared values that fail to cooperate.
Citizens United: proof that business and wealthy individuals can legally buy elections and our political process.
4) Ensuring success and accelerating change
Social disruption has unfolded across the globe – putting a spotlight on social inequality. Think Occupy Wall Street, the Arab Spring, the Israel Fall, and the European economic crisis.
Yet, we have achieved some great successes (Slide 4-5):
- Ethical personal-care products grew from $5.3 billion in 2005 to $8.1 billion in 2009, up 53%
- U.S. organic food sales rose from $12.6 billion in 2005 to $21.4 billion in 2009, up 70%
- Sales of local food, which travels less than 150 miles from source to table, rose from $4 billion in 2002 to $7 billion in 2011, up 75%
- In 1994 there were 1,755 farmers’ markets, by 2010 there were 6,132, up 250%
- In 1992, 935,000 acres of U.S. farmland were planted with organics, rising to 4,800,000 acres in 2008, up 413%
- In Europe sales of fair trade–certified products grew from €220 million in 2000 to €3.4 billion in 2010, up 1,400%
- The U.S. LOHAS market (lifestyle of health and sustainability) of products is estimated at more than $200 billion.
Major corporations have watched this growth closely:
- Toyota Prius sales rose from 3,000 cars in 1997 to more than 400,000 in 2010.
- Whole Foods sales grew from $90 million across ten stores in 1991 to $9 billion across 300 stores in 2010.
- Kashi cereal, owned by Kellogg grew from $25 million in 2000 to almost $1 billion in 2011.
- Global alternative energy deals climbed 40% from 2010 to 2011 to $53.5 billion.
Yet, the challenges we face will prevent the continued progress we so urgently need.
Challenge: Poorly defined standards
Ask yourself: What’s a better choice? 1) A locally-made, natural non-toxic, Fair Trade cleaner, or 2) An organic cleaner, made by a B-Corp, financed with micro-lending?
It’s entirely unclear to most people what separates and differentiates:
- Corporate Social Responsibility
- Sustainability movement
- Social Innovation
- Cause related marketing
- Fair trade
- Impact Investing
- Social entrepreneurship
- Animal rights
Every Fortune 500 Company is a socially responsible business, and every multi-national company is a member of the UN’s Global Compact.
- USDA’s definition of organic
- B-Corp’s new standards for “benefit corporations”
- The Good Guide’s excellent, but imperfect rating system for consumer products
Challenge: Unclear goals
What is a “good” product?
When “good” becomes “less bad”
We stop asking how good is good enough
Challenge: Competition rather than cooperation
We have integrated a belief in the zero-sum game (A world in which my gain is your loss)
In the design of the way we work, we design our strategies and set our goals
Credit Unions compete with each other
We have over 2 million NGOs
The Path Forward: 10 Ways to Ensure Success & Accelerate Change
1. A systemic approach
Holistic, not compartmentalized
No more “ethanol” or “palm oil (tell stories)
2. Real innovation
Not “green” products that cost more money, but “green” products that cost less
Unilever and Johnson & Johnson have proven that investing $1 in wellness saves $4 to $6
3. Revolution, not just iteration
The Tridos Bank
As you’ll hear about today:
The Evergreen project in Cleveland
The Bronx Cooperative Development Initiative
4. Ownership & compensation matter
5. Boundaries & metrics
Measuring what matters most: Stonyfield
Developing holistic non-financial metrics
6. Accountability & radical transparency
Disclosing what’s wrong with Seventh Generation products
7. Corporate governance
American Sustainable Business Council
9. Values & personal behavior
As Gandhi councils and, “Be the change we seek.”
Smile more & meditate longer
Quality vs. Quantity
Long term vs. short term
Community vs. Individualism: What’s in it for us, not just what’s in it for me?
Meaning vs. Matter
10. Public Policy
End all corporate financial subsidies
Institute a corporate flat tax
Provide $10 billion of capital for 40,000 social enterprises
Decrease the defense budget by 25% over the next 10 years and invest 100% of those funds in education, research and infrastructure
Mandate over the next three years that women make up 50% of the directors of all public and private companies.