Every entrepreneur a social entrepreneur: Hartigan
It’s perhaps a little surprising to hear Dr Pamela Hartigan, Director of the Skoll Centre for Social Entrepreneurship at Saïd Business School, Oxford University, confess she’s starting to dislike the term “social entrepreneur”. But she has her reasons.
“It was a very useful term at the beginning of this movement back in the 1970s … [when] we desperately needed to identify those people with the entrepreneurial mindset … to transform systems that were inequitable,” she told a boardroom seminar at UTS Business School. “Now what I think it is doing is dichotomising ‘This is where we make our money’ and ‘This is where we do good’.”
But every entrepreneur needs to be a social entrepreneur, says Hartigan, one of the world’s leading proponents of social entrepreneurship, who also delivered a master class to MBA students and others during her recent visit.
“We cannot afford to be compartmentalising this thinking,” she says. “You can’t be an entrepreneur and not be thinking about the social and environmental impact of what you’re doing, and you can’t be a social entrepreneur without thinking about the financial liability of your operations.”
At Saïd, entrepreneurial thinking is being “mainstreamed” into the MBA program, she says. UTS Business School Dean Roy Green told the gathering social entrepreneurship was an area "growing in importance as part of what we do". The Business School has just introduced a Social Innovation Fellowship Program - the first of its kind in Australia - under which its top postgraduate students will work with social enterprises to develop new business models and help them become more “investor ready”.
Talking to a boardroom group that included investors, bankers, consultants and leaders from social enterprise and philanthropy, including representatives of Commonwealth Bank of Australia's institutional banking and markets group, Social Ventures Australia, Deloitte and Social Enterprise Finance Australia, Dr Hartigan addressed “impact investing” – investment to generate financial return as well as social or environmental value.
Dr Hartigan says impact investing is still in its infancy but the potential is huge. It has caught the attention of the Group of Eight, which last year established a Social Impact Investment Taskforce, bringing together government officials and senior figures from finance, business and philanthropy from across France, Germany, Italy, the United Kingdom, Japan, the United States, Canada, and Russia. Australia has observer status.
But there is still real confusion about what impact investing is, Dr Hartigan says. Often, people talk about impact investing when they are really talking about philanthropy or about business that is having an impact as a by-product rather than as its main goal.
Impact investing is about “fundamentally changing the way business is done, about rethinking business”, she says. It’s about “mission-locked” social business and business actively delivering social value.
“This is really where the G8 is looking,” she says. It’s the locked-in focus of the B Corp, or benefit corporation, movement.
“For me, two things are required: intentionality and measurement,” Dr Hartigan says of impact investing. “A pharma company that produces a great drug that cures cancer, their intentionality was not a social mission, it was to make money. It’s great they did this, but the intention has to be there.
“And measurements have to be very accurately looked at – the social and environmental return as well as financial return,” she says
'We cannot afford to be
compartmentalising this thinking'
Dr Hartigan shares a few of examples of businesses that could be considered impact investments: New Leaf Paper, d.light and Waste Management Inc.
American Jeff Mendelsohn started New Leaf Paper about 15 years ago as a for-profit company but one with the aim of changing the way paper was made.
“Today [New Leaf is] highly successful and they have managed to influence the mainstream paper industry in terms of how they produce paper, because they started to really compete in the market,” Dr Hartigan says.
“Jeff’s ultimate motive is not to become the king in the paper industry but to change all of his competitors’ behaviour,” she says. “So there’s a different logic of action involved. That to me is the most exciting thing that’s going on. The more money we can get into this space the better.”
Two Stanford graduates set up d.light design as a for-profit social enterprise about six years ago, after co-founder Sam Goldman, on Peace Corps service in Benin, Africa, saw his neighbour’s son badly burned by an overturned kerosene lamp.
This incident inspired him to join a class called Entrepreneurial Design for Extreme Affordability at Stanford's design school and to develop solar light and power products. With initial capital from the Acumen Fund, d.light now has more than 10,000 retail outlets in 40 countries and Hartigan says it is attracting the interest of mainstream investors.
Another example is Waste Management Inc in the United States, which Dr Hartigan says transformed its traditional waste operation into one entirely focused on sustainability. As a renewable energy provider, it now produces more than twice the amount of renewable electricity than the entire US solar industry.
Dr Danielle Logue, a specialist in entrepreneurship and innovation who co-founded and directs the UTS Business School Social Innovation Fellows program, says this is about "rethinking business models in the context of the resource constraints and problems that are facing economies everywhere. There is an emerging market infrastructure at a global scale to support businesses that are doing just that, such as social stock exchanges," she says. "The hope is that 'impact investing' will become just 'investing' in future decades."
Dr Hartigan says the “ghost” hovering over impact investing is expected return on investment (ROI). She says it’s too early to start talking about ROI but points to a landmark Deutsche Bank study. “It’s one of the best, looking at a large pool of information, and it found that mainstream companies that incorporate environmental social and governance principles into their DNA, and act on that, are getting better than average financial returns,” she says.
Microfinance institutions (MFIs) – which provide financial services such as small loans to the poor, for purposes such as running a small business – are the only social entrepreneurial model to have scaled worldwide, so far, Dr Hartigan says. “Microfinance has served hundreds of millions of people, and tens of billions of dollars from very mainstream players have flowed into that sector,” she says.
Impact investing has much more promise because there are many more types of industries to invest in, she says. Still, what we forget is that an estimated $US20 billion in subsidies over 30 years was needed to get microfinance to the point of being virtually mainstream, she says. It also took time to build a supporting infrastructure, such as rating and auditing services.
“I think it’s an exciting time,” she says, “but we have to balance patience with urgency.”
Main photo: Dr Pamela Hartigan Credit - Supplied