Mike Zhao

Social Enterprise

TDB Week Eight Lecture

TOMS Shoes (Give back model)

Founded in 2006, TOMS Shoes immediately attracted attention with its innovative use of the so-called “One for One” business model, in which each purchase of a pair of shoes by a consumer triggers the gift of a free pair of shoes to an impoverished child in a developing country.

• “Moving forward, TOMS will dedicate at least one-third of our net annual profits to a giving fund managed by our very own Giving Team. We'll then distribute shoes and grants according to an annual investment plan that reflects the needs of the organizations we partner with, as well as the causes you care about most.”

TOMS Shoes website. https://www.toms.com/us/impact.html

Solar Sister (Innovation model)

Solar Sister is an example of a company that directly addresses a social need through innovative products.

• Solar Sister trains and supports women to deliver clean energy (solar lantern) directly to even the most remote communities in rural Africa (a women-centered direct sales network).

• Solar Sister entrepreneurs create a ripple effect impacting local women, their families, and the customers and communities who switch to using clean energy.

Solar Sister website. https://solarsister.org/what-we-do/

Faire Collection (Employment model)

Faire Collection is an example of a social enterprise that serves the common good by employing disadvantaged people at a fair wage.

• The company hires artisans in the developing world (Ecuador and Vietnam) to create jewelry that is sold on international markets, providing dignified wages and holistic social programs (such as scholarships, training programs and interest-free loans) that provide a path out of poverty to their artisans.

Faire Collection website. https://shopfaire.com/pages/our-story

1. What is the difference between social enterprise and traditional company?

2. What is the difference between social enterprise and corporate social

responsibility?

3. What is the difference between social enterprise and charity?

Discussion Questions

Defining Social Enterprise

Social enterprise can be challenging to define, in large part because the concept has been evolving rapidly in recent years and increasingly blurs the lines of the traditional business, government and non-profit sectors.  

“Organizations that address a basic unmet need or solve a social or

environmental problem through a market-driven approach.”

— Social Enterprise Alliance

Defining Social Enterprise

Social Traditionally, ‘capital hires labour’ with the overriding emphasis on making a ‘profit’ over and above any benefit either to the business itself or the workforce. Contrasted to this is the social enterprise where ‘labour hires capital’ with the emphasis on personal, environmental and social benefit.

“An enterprise that is owned by those who work in it and/or reside in

a given locality, is governed by registered social as well as

commercial aims and objectives and run cooperatively”.

— Spreckley, Social Audit Toolkit (1981)

Duff, R. R. & Bull, M. (2011). Understanding Social Enterprise: Theory and Practice, Chapter 3.

Defining Social Enterprise

Direct focus on solving a social problem or a market failure, less explicit recognition to employee-owned businesses and co-operatives.

“A social enterprise is any business venture created for a social

purpose – mitigating/reducing a social problem or a market failure –

and to generate social value while operating with the financial

discipline, innovation and determination of a private sector business.”

— Alter (2007)

Duff, R. R. & Bull, M. (2011). Understanding Social Enterprise: Theory and Practice, Chapter 3.

UK Government view on Social Enterprise

Most agree with the primacy of social value creation for social enterprise and that revenue generation is a secondary (albeit necessary) condition — primarily to maintain financial viability.

“A social enterprise is a business with primarily social objectives

whose surpluses are principally reinvested for that purpose in the

business or in the community, rather than being driven by the need to

maximise profit for shareholders and owners.”

— Department of Trade and Industry

Organizational form of social enterprise

The organizational form of social enterprises blurs the boundary between for-profit and non-profit enterprise, and its typology has evolved over the years.

It started with the spectrum of orientation from Dees (1998) that classified social enterprise as a blend of philanthropic and commercial orientations. For Dees, there are mission-driven enterprises — which are the charitable and non-government organizations, as well as the traditionally profit-driven businesses, and the hybrid of the two can be classified as the social enterprise business model.

Organizational form of social enterprise (Ridley-Duff, 2015)

1. Charitable trading activities (CTA), which are defined by their commitment to specified social purposes that positively impact on human or environmental well-being. • World Wildlife Fund (International), UNICEF (International), Oxfam (International), the Eden

Project (UK)

2. Co-operative and mutual enterprises (CMEs) which are defined by their commitment to democratic/inclusive ownership and governance. • John Lewis (UK), Fonterra Dairy Co-op (New Zealand), Barcelona FC (Spain), Real Madrid

(Spain), Desjardin Group (Canada), Co-op Kobe (Japan), WinCo (USA).

3. Socially responsible businesses (SRBs) which are defined by their commitment to (or innovative technologies for) ethical trading and sustainable development. • Ben and Jerry’s (USA), Grameen Bank (Bangladesh), Semco (Argentina), The Big Issue (UK).

Hidden Revolution – Size and Scale of Social Enterprise in 2018. 

• 100,000 social enterprises in UK. • makes a £60 billion contribution (3% of UK GDP) • 5% of all UK employment

Goodwill Industries

Goodwill Industries pioneered the notion of “not charity, but a chance” in 1902 when they collected used household goods and clothing in wealthier areas of the city, then trained and hired people who were poor to mend and repair the used goods that could then be resold to the general public or provided for free back to the poor.

• Still today, Goodwill aims to provide economic self-sufficiency and in 2014 created employment and job training opportunities for more than 2 million people while generating more than $4.6 billion in revenue – 86% of its total budget – through retail sales and other earned income sources.

Goodwill Industries website. https://www.goodwill.org/about-us/

Benetech

Benetech is a nonprofit that empowers communities with software for social good. Its mission is to empower communities with software for social good.

• “We achieve our mission by uniting two worlds: the social sector and Silicon Valley. We serve as a bridge between the social sector and Silicon Valley by working closely with both communities to identify needs and software solutions that can drive positive social change.”

Benetech website. https://benetech.org/about/

Mike Zhao

Co-operatives

TDB Week Eight Lecture

FC Barcelona

FC Barcelona, one of the world’s most successful and popular football clubs is run on a co-operative basis.

• FC Barcelona is owned and run by its 175,000 members who each pay an annual membership fee of approximately £150 bringing in around £25 million.

• The club is fully democratic, electing a President every six years. A delegate assembly is picked at random from the membership and is responsible for approving the accounts and authorising all financial decisions which will cause the club to incur debt.

• Youth development and fan welfare are prioritized by a co-operative model: 1). the average cost of an adult season ticket at Barcelona costing just £75, while Arsenal charges nearly £900 for a season ticket; 2). the club pays UNICEF €1.5 million annually to sponsor their own shirts. By comparison, Manchester United receive £20 million a year in shirt sponsorship.

Mondragón cooperatives

The most extensive system of cooperatives in Europe are the Mondragón cooperatives in northern Spain, which comprise over 100 consolidated firms in high-growth and high-technology sectors. • The Mondragón cooperative is the largest cooperative in the world with revenues of €12

billion and over 80,000 “owner-employees”. • The cooperative’s business is divided into four areas: finance, industry, distribution, and

knowledge, and it currently ranks as the 10th largest company in Spain.

Case: Innovation, Entrepreneurship and Enterprise (Page 28)

John Lewis Partnership

A prominent UK example is the John Lewis Partnership, the largest of over 300 employee-owned businesses in the United Kingdom. • The partnership of 83,900 employee-partners owns John Lewis & Partners department

stores and Waitrose & Partners supermarkets with revenues of £11.7 billion. • As co-owners, employees in cooperatives tend to be more committed to the success of the

company and are more entrepreneurial. The more open and participatory decision-making process also leads to greater community engagement and corporate social responsibility.

1. What is the difference between Cooperatives and traditional company?

2. What is the difference between social enterprise and Cooperatives?

Discussion Questions

Defining Cooperatives

Cooperatives bring people together in a democratic and equal way. Whether the members are the customers, employees, users or residents, cooperatives are democratically managed by the 'one member, one vote' rule. Members share equal voting rights regardless of the amount of capital they put into the enterprise. 

“Cooperatives are people-centred enterprises owned, controlled and

run by and for their members to realise their common economic,

social, and cultural needs and aspirations”

— International Co-operative Alliance (ICA)

Characteristics of Cooperatives

• Member-owned businesses; not investor-controlled

• Defined by members or by sector

• Members – employees, workers, consumers, producers, community

• Sector – agriculture, housing, banking, retail, manufacturing, utilities, telecommunications,

social services, community

• Not a marginal phenomenon, at least 12% of humanity is a cooperator of any of the 3

million cooperatives on earth.

International Co-operative Alliance (ICA)

The hub of the global co-operative movement, the International Co-operative Alliance, has accepted seven principles that guide all co-operative organizations:

1. Voluntary and open membership 2. Democratic member control 3. Member economic participation 4. Autonomy and independence 5. Education, Training and Information 6. Co-operation among Co-operatives 7. Concern for community

Co-operatives and Social Enterprise

• Co-operatives are a certain sort of social enterprise.

• A social enterprise is one which has primarily social aims. Many different forms, not for

profit and for profit

• Co-operatives are member owned and members share any surplus or profit. This is not true

for all social enterprise.

• But all share being “values led” – profit is needed for a purpose, not primarily for a return to

investors.

Cooperatives examples in US.

There are also many cooperative examples in the United States, such as:

• credit unions (financial cooperatives co-owned by their members), • agricultural cooperatives (e.g. Sunkist and Ocean Spray), • consumer cooperatives (many independent grocery stores, e.g. Equal Exchange, a well-

known fair trade and organic food distributor, which is equally owned by its 120 workers), housing cooperatives.

Mike Zhao TDB Week Eight Lecture

B-Corp

B Corp

The B Corporation or “B Corp” is a certification issued by the organization “B Lab Company” to sustainable for-profit businesses that meet rigorous standards of social and environmental performance, accountability, and transparency.

• The B Lab Company, a non-profit corporation that certifies B Corporation, conducts an examination of the company’s policies and practices to determine social and environmental responsibility.

“Certified B Corporations are a new kind of business that balances purpose

and profit. They are legally required to consider the impact of their decisions

on their workers, customers, suppliers, community, and the environment.”

— B Lab Company

B Corp

• B Corp certification to sustainable business.

• LEED certification to green building. (Leadership in Energy and Environmental Design)

• USDA Organic to milk. (US Department of Agriculture)

• Fair Trade to coffee.

Danone becoming a B Corp

In April 2018, Danone North America became a Certified B Corporation® (or B Corp™), making it the world’s largest company to earn this certification. The company is legally required to consider the impact of its decisions on a diverse set of stakeholders, including workers, customers, suppliers, and the communities in which it operates, in addition to shareholders.

A total of twenty-seven Danone entities have now earned B Corp™ Certification. As a result, over 45% of Danone’s global sales are now covered by B Corp™ certification, marking significant progress towards Danone’s ambition to become one of the first certified multinationals.

“Our ambition is to be fully certified across the company by 2025.”

— Danone

Prepare for TDB Seminar.

Muhammad, Y. (2010). ‘Building social business models: lessons from the Grameen experience’. Read the following parts: • Introduction • What is a social enterprise? • Appendix 1 — case study 1, 2, 3.

Grameen Bank introduced by Nobel Peace Prize.