Martin Montero

3 crystal clear cases why social entrepreneurship is an economic development tool

Stop talking about social entrepreneurship as a charity and start seeing it as a powerful tool of economic development. I’m soundly convinced that the true latent power of social entrepreneurship is as an economic development tool with the ability to turn a homeless/poor person from a tax burden charity/aid recipient to a consumer, tax payer and creator of value with the same kind of dignity and self respect the rest of us enjoy in our jobs and daily lives.

Pigeon holing it in the non profit arena is just reinforcing the status quo and gives credence to old, unjust and infective models. For profit social entrepreneurship should be encouraged, celebrated and supported just as much as, if not more so, than it’s counter part in the non profit sector. It should be seen for what it truly is; social entrepreneurship  addresses market failures by seizing opportunities and creating tangible goods and services that address real market needs and thus create value, jobs, increases the wealth of all stakeholders, strengthens the economy and lowers burden on taxpayer/aid funded public services. It’s about creating value, not warm fuzzies.

Over the past few years I’ve come to see and understand the traditional charity/aide/welfare system we have as some manufactured form of colonialism with a clearly defined aristocracy and complex social structure made up of funders, policy wonks, bureaucrats, service providers, volunteers and the poor all expected to play their assigned roles.

Too often well intentioned and highly educated individuals with higher income set out to change or to save the world by coming up with the latest innovations to revolutionize industry or more charitable ways provide relief to the poor without including them in the solution creating process. What is needed and has been missing for so long is what social entrepreneurship brings to the table: opportunity, prosperity, abundance mentality, dignity, wealth creation… Economic development.

When the poor are elevated to the status of partners and co-creators an entire new realm of possibilities, perspectives, skill sets opens up. It’s time we kick our charity feel good mentality and look at those we seek to help through the lenses of commerce, partnership and opportunity.

The concept of capitalism as a ‘pot luck dinner’ has been developing inside of me for some time now. Traditionally it is an invite only pot luck that is not well advertised and even if you happen to stumble upon it you must know some one already inside the feast to give you an invitation. Social entrepreneurship makes this pot luck an open invitation and makes sure that the poor are welcomed as equal beneficiaries and contributors. The broader and more diverse the pot luck guest and the dishes they bring the better off we will all be and the greater the chance that game-changing innovations will come out through 'combing the recipes’ of all the various economic and cultural classes.

The poor hold half, if not more of the answers to a great many of the world problems.  If we combine our half of the answers, resources and networks with their half I am certain that the degree and depth of innovative solutions will vastly surpass any achievement that either Industry or Humanitarian efforts have been able to do for their sectors and humanity even when combined. This new economy will truly create a stronger and healthier society not by the redistribution of wealth in 'IV drop dosages,’ but rather by expansion of opportunity and collaboration in a wide open flood gates approach.

Below are the 3 case studies of profitable social enterprises engaged in economy building and wealth creation for all stake holders:

Marie So of Shokay in 30 months she and her partner Carol Chyau have set up an amazing social enterprise making a huge difference in rural China AND, in the process, garnering sales of US$6 Million of, believe it or not, Yak’s hair and yak’s milk.

The milk is made into high-end cheese (called Mei Xiang Cheese Farm - a community of ethnic Tibetan yak herders who live in an isolated fir-lined valley not far from the border with the Tibetan Autonomous Region) and sold to hotel chains like Ritz-Carlton.

The Yaks hair is knitted in rural China into wonderful garments and it’s now being used by leading-edge designers like Paul Smith.

Even better than simply plowing the profits back into rural china, Marie and Carol now ‘workshop’ with people almost every week to find new Social Enterprise ventures they can support through their ‘Ventures in Development’ company.

One of the most interesting moments in the day came during the Q & A that all conferences in Singapore seem to feature. Marie was asked, “What’s the most important thing in selling the products, is it the Social Enterprise or something else?”

Marie was SO clear – “It’s quality and design only and the social impact comes in ONLY as part of the story behind the brand if the person we’re selling to is interested.”

When you visit Marie’s site you’ll see how she emphasises that theme with lovely taglines like 'Luxury with a story’ and many more.

The quality and design message is so 'on the money’ and something that we’ve been saying in blogs for some time now. Often we see Social Entrepreneurs ‘limiting’ themselves to flea-markets and the like and selling stuff that we feel compelled to buy because it’s made by ‘disadvantaged’ people. You and I buy it but then wonder what to do with the crocheted rabbit when we get it home.

Writing in the magazine Social Space, Professor B. Joon Park says it well: “A social enterprise is a business – it is not a fund-raising machine for charity. It must be sustainable.”

Marie So is one of a growing breed (Muhammad Yunus refers to the breed as ‘Social Business Entrepreneurs’) that are wonderful businesses giving back in wonderful ways.

Millions of girls and women in developing countries miss up to 50 days of school/work per year because they do not have access to affordable sanitary pads when they menstruate. Currently, girls and women in this setting—if they have an option at all—turn to premium priced international brands which are too costly to sustain (e.g., in Rwanda, of the girls who miss school, 36% of them miss because pads are too expensive).  Alternatively, they turn to rags which, in combination with a lack of a clean accessible water supply, are unhygienic and potentially harmful, let alone ineffective to contain leakage.
(See report: Addressing the Special Needs of Girls [PDF].)

Girls and women are vital to the well-being of their families, communities, and countries and it is important that they have access to education, good health, and jobs. For every dollar a woman earns, she invests 80 cents in her family (as opposed to 30 cents by men).  A pivotal study by Goldman Sachs shows that the greater the likelihood for women to work outside the home, the lower the fertility, reduced maternal and child mortality, and better health and education for current and future generations.  This, coupled with a Council on Foreign Relations study linking education levels to income earning potential, has driven SHE to do something about this problem!

SHE intends to fulfill girls’ and women’s unmet need by helping local women in developing countries jump-start their own businesses to manufacture and distribute affordable, quality, and eco-friendly sanitary pads.  SHE will look to use local raw materials, instead of all imported materials, to ensure affordability and accessibility.

SHE will couple its product innovation with a financially sustainable business model operated and owned by women in the community that can be replicated wherever the need exists.  SHE will instigate the launch of a local business by

• Partnering with existing local women’s networks;
• Ensuring a microfinance loan for women who will share start-up costs;
• Training local group in necessary business skills and health and hygiene.

Amid all the many charity-focused efforts to help the people of developing African nations, others strive to provide economic empowerment and help African entrepreneurs establish sustainable businesses. We’ve covered several of these—including some of the microfinance initiatives that have popped up—but Canadian shoe company Oliberté is taking a different approach by sourcing and setting up its manufacturing operations in Africa instead.

Oliberté makes and sells what it says is the first line of footwear to be made from natural rubber in Liberia. Two styles of lightweight shoes are currently available: Elika for women, and Rovia for men. Both feature a rubber sole crafted naturally and fairly in Liberia along with premium goat and cow leather sewn in Ethiopia. Elika is priced at CAD 106, while Rovia is CAD 115. Oliberté ensures that farmers, factory workers and suppliers are all paid fairly and treated responsibly, and it supports local training and communities in every country it works in. It’s also working in partnership with factories to improve its environmental footprint, it says. Toward that end, Oliberté even promises to take its shoes back at the end of their useful life, with plans to recycle and make them new again.

The company’s website explains: “Africa is more than just poverty and Oliberté is the start of a revolution that shows, through urban footwear, this is the real Africa! With every pair of Oliberté bought, we are making a powerful statement that Africa is proud, free and full of potential. You do this all while being a hero, because you are the reason men and women from Liberia to Swaziland to Ethiopia have a job, have food on the table and can send their children to school. Oliberté is not a charity—it is a company that believes you can change how the world views Africa and help build lives every time you buy a pair of Oliberté shoes.”

Oliberté’s shoes are available both online and through select stores in the US and Canada. Retailers: one to offer up to your own ethical consumers…?

Website: www.oliberte.com

Here are 2 personal examples of how I have seen this play out in Austin:

A couple of years ago I helped a local church launch a micro loan program inside it’s bi-weekly breakfast for the homeless.   One of the first loan recipients was William, a sharp and hardworking man in his mid 50’s with a 6th grade education and criminal record. Due to some some circumstances out of his control and some bad choices he made William was pretty much unhirable by typical standards; the only jobs he could get where manual labor which he was getting to old for.

William, however, posses a great skill set being that he was a 6th generation woodworker. One day William showed me his work and I told him, “Man people pay good money for stuff like that!”  He responded, “Well I don’t know those people and they would not buy from me even if I did.  Besides I no longer have my tools or money to get new ones and have to stay close to the homeless shelter so I can take care of the basics–food, clothing and shelter”

We offered William a loan in the form of a pre paided card to Lowes to buy the tools he needed and helped him get his cabinet and custom woodwork business get started. Now William is self employed making a decent living using the skills he already had. He no longer relies on the shelter’s charity and is a consumer of Austin’s goods and services as well as a taxpayer.

Mark, who is in his late 30’s and has an MBA from the university of Texas in Austin, had a nasty drug and alcohol problem that caused his downfall. I met Mark at the homeless shelter I used to work at shortly after I took over its computer lab, which was mostly used to check myspace, match.com and to play online games.

I transformed it into an employment center, where people could get help with making an inventory of their work experience, skill sets, and professional interest, as well as get help finding a job, creating resumes, brainstorm and develop entrepreneurial ventures with access to the tools and networks needed to help launching their ideas.

Mark started volunteering in the lab as he was working on kicking his addiction.  After a couple of months Mark became an indispensable part of the operation of the lab and I was able to convince a non profit to hire him to run the lab while I shifted to helping run the micro loan program and the “Bootstrap Homeless” initiative we had developed with a local entrepreneurial organization to develop and support homeless entrepreneurs to successful ventures and lives.

Mark was able to move out of the shelter into an apartment, and started rebuilding his life and took the shelter’s computer lab from a simple job center to a metrics driven results producing employment agency. Using all the skills that both his street knowledge and top ranked MBA degrees afforded him. He has since moved on from working at the shelter with a new lease on life, renewed sense of pride and accomplishment and has a steady income and an opportunity filled future.

Examples from the corporate world:

Manchester Bidwell corporation who very wisely forms partnerships with industry giants such as Bayer Corp. and provides them with custom trained employees from the ghetto of Pittsburgh who might otherwise be slaves to minimum wage, welfare or prison. Manchester does this so well that their graduates stand a better change of being hired than graduates from the Pennsylvania’s public colleges and universities. They have given these individuals a renewed sense of purpose, a clear path way out of poverty into opportunity and prosperity.

Malcolm Gladwell did a case study called “The Million Dollar Murray” in which he followed a middle aged man around for a year keeping a tally on how much it cost tax payer to support Murray daily use of the shelter system, detox programs, county jail and emergency rooms. The result was one million dollars to run this man through a half ass perpetual tax payer/donor funded life support system.

As Gladwell reveals, the amount of money it takes to solve the homeless problem could well be less than the amount it takes to ignore it.

Multinational corporations such as Unilever have created a large a amount of wealth for themselves and the communities in the developing world in which they do business by treating the poor as partners and customers rather than charity cases by employing the bottom of the pyramid approach.

There are tons more applications from health to the environment to our national food systems… This is not a matter of how do we do our charitable giving better. It is a matter that affects all rich and poor, young and old.

We live in a hyper interconnected world where every action has a huge ripple effect. This is more and more evident on a global scale everyday, we can no longer think “Well the problems of the poor in my country or the developing world don’t have a direct personal and financial impact on me.”

We have a choice to actively destroy or create our future. It is in all of our best interest to start creating and/or supporting these solutions. To shift from a pity mentality to an entrepreneurial mentality where we turn big nasty problems into profitable solutions.

Those who take the lead on this will not only create a better living conditions for themselves and their loved ones but stand to make a very good profit!

For further study: Harvard Business School professor Rosabeth Kanter’s working paper: Informed and Interconnected: A Manifesto for Smarter Cities.  it is an excellent read that masterfully unpacks this concept as city wide ecosystem approach.