Happy New Year…I’m expecting 2011 to take off with energy this week.
As we dive into the new year, I quote from the background page on ReachScale:
Over the past forty years, over 200,000 nonprofits were established. Only 144 achieved budgets of 50 million (USD) or more. Of that group fewer than 15 were scaled through corporate financial contributions.* In other words, corporate funding has scaled one nonprofit every three years.
Corporate philanthropy has historically favored the same large nonprofit organizations even though each dollar donated results in less than a dollar of impact. While business leaders are very aware of the upside potential for scaling an entrepreneurial business venture, the concept of applying the same principles of scaling to viable social enterprises has not been explored.
We did a lot of exploring in 2010—36 conferences and over 4000 conversations with social enterprise and corporate leaders. Our client Healthpoint announced their first corporate scaling partner, Procter & Gamble, and several other highly innovative social enterprises are in serious discussions. [For more about Healthpoint, see the coverage in Fast Company and my earlier post.]
One reason that these conversations are taking shape is the recognition that there is a new additive triple bottom line of benefits to global corporations that realize that their business and innovation talents are squandered when they are not driving scale in every investment and social responsibility activity.
ReachScale works with companies to achieve their sustainability and social responsibility goals by partnering and scaling innovative, problem-solving social enterprises. Selecting an area of social concern that affects a company’s core business and then innovating to make measurable progress in solving that problem is a win/win/win opportunity.
Here are three examples of what that triple bottom line could look like.
License to Grow
Social impact scaling that can demonstrate progress in meeting people’s fundamental needs while making a modest profit is a new innovation. It results in ethical marketing instead of interruption marketing. As corporate strategy guru Michael Porter pointed out in his article coauthored with Mark Kramer, “Strategy and Society” in the Harvard Business Review:
No business can solve all of society’s problems or bear the cost of doing so. Instead, each company must select issues that intersect with its particular business. Other social agendas are best left to those companies in other industries, NGOs, or government institutions that are better positioned to address them. The essential test that should guide CSR is not whether a cause is worthy but whether it presents an opportunity to create shared value–that is, a meaningful benefit for society that is also valuable to the business.
Healthpoint and Lifespring Hospitals are two examples of licenses to grow, one in rural villages and the other in maternal health. Arogya Parivar, an innovative outreach by Novartis India to rural regions of India is another example. AP received a prestigious award for “Best long-term rural marketing initiative” from the Rural Marketing Association of India (RMAI).
Increasingly companies will recognize that it is not enough to do less harm. A license to grow requires more vision and more impact. It requires building ecosystems and innovation models that turn problems into profits.
Reputation based on Results
Jason Saul of Mission Measurement said it best at Sustainable Brands: Donations and volunteer hours are no longer newsworthy unless presented in the context of strategic commitments to solve real problems.
This theme was repeated in a number of sessions at Sustainable Brands as forward thinking companies like Nike and Timberland admitted openly that they know their businesses are not currently environmentally friendly. Going forward they need to drive innovation to change their businesses drastically. In the future we cannot produce every day products like T-shirts the way we do today. The companies that do not exemplify this shifting reality will not be able to use “pretty pictures” CSR to shift their reputations.
Choosing an appropriately big problem and making measurable results in its solution can and will shift reputations based on results.
Return on Investment
This triple is not new. What is new however is how it is being achieved. In the past the core business produced the return and a small percentage was allocated to CSR and philanthropy—the cost centers. Increasingly global companies are seeing that the most pressing problems that seemed to be intractable resource sinks can be, with appropriate innovation and collaboration, profit making (or at least break-even after scaling and capacity building investments.) General Electric’s global business strategy centers on two critical challenges: health care and energy.
In the case of the for-profit through innovation and collaboration opportunity, the new goal becomes demonstrating the people impact, license to grow and reputation value. These can be mixed and deployed to attract multiple sources of capital. As you watch the investment announcements in 2011, you will increasingly see strange bedfellows clasping hands and acting together to drive integrated social and monetary returns.
Capacity building opportunities can be attractive as well. They enable the founders to develop social brand equity with great returns. Imagine if your organization had been the strategic scaling founder of Teach for America, a question we have addressed in an earlier post. Scaling to create profitable or breakeven portfolios of solutions or to attract a broad range of supporters who gladly join because of high impact through social innovations enables value creation without incremental funding.
This new triple bottom line enables the leveraging of corporate strategic and brand resources with highly innovative social enterprises. This achieves impact, enhanced reputation and a return on investment that can then go after new challenges.