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Taking care of business by caring, not taking
Philanthropy North Carolina
By Todd Cohen
October 1, 2012
GREENSBORO, N.C. — The seeds of a quiet revolution are taking root throughout the global economy, sprouting change and new business models for anyone who wants to get involved in fixing social problems.
Helping to drive that change are hybrid “social businesses” that blend the mission of charity with the processes and efficiencies of business.
The theory and practice of that revolution were joined last week at N.C. A&T State University in Greensboro, where 500 people gathered for a social business conference that featured a competition among 31 student teams from throughout the 17-campus University of North Carolina system that had designed social businesses to address social problems they had identified.
The conference, which attracted a diverse crowd of students, educators, venture capitalists, foundation and corporate executives, and nonprofit and government leaders, was inspired by Muhammad Yunus, a Bangladeshi economist who pioneered the concept of “micro-credit” and social business and who, with the Grameen Bank he founded, won the Nobel Peace Prize in 2006.
“We can do business on the basis of our selflessness,” Yunus said during a keynote talk at the conference. “That’s what social business is all about — finding solutions to make it happen.”
That approach to social change was reflected in the social business plans designed by the three student teams that won the competition.
A team from UNC-Chapel Hill, the first runner-up, has formed Sanitation Creations, a social enterprise that has a patent pending on Dungaroo, a portable toilet it says will be environmentally-friendly, waterless, odorless and cost-efficient, and will address the lack of access to adequate sanitation, a problem that affects an estimated 2.6 billion people.
A team from Fayetteville State University, the runner-up, has designed BioWaste Energy, a company that aims to help hog farmers secure funds to install systems to mitigate pollution from lagoons that hold hog waste, a huge problem in North Carolina, the second-biggest hog producing state in the U.S., and to help those farmers sell methane gas captured by those systems to power companies.
And the winning team, from N.C. State University, has created Pennies for Progress, a company that will work with for-profit businesses like supermarket chains, asking them to add a one-cent donation from customers to the total of every transaction, and using those funds to make micro-loans to partners abroad, and then use the loan repayments to support local community projects.
As Muhammad Yunus “has proved time and time again, the biggest ideas start small,” Tom Ross, president of the UNC system, said before announcement of the winning teams, which will receive free mentoring plus awards of $1,000, $1,500 and $2,000, respectively.
A social business fund also is being formed to invest in social businesses proposed by teams in the competition that move forward with their business plans, said Leslie Boney, vice president for international, community and economic engagement for the UNC system and organizer of the conference.
Grameen Bank — “grameen” means “village” — makes tiny loans to poor people, mainly women.
Formed in 1976, it grew out of an idea Yunus had several years earlier when, having returned to Bangladesh after receiving a doctorate in economics in the U.S., he found himself powerless to apply his formal learning to the famine that was ravaging his country.
So, with his students from a local university there, he went into the community to try to find a way to make a difference in the lives of even a few people.
He eventually focused on the centuries-old problem of “loan sharks” who preyed on poor women in the village.
Gathering a list of 42 names of women who had borrowed a total of $27, he loaned that amount to them so they could repay the predatory loans from the loan sharks.
But he went a step further, asking a local bank to make tiny or “micro” loans to poor people.
When the bank responded they were not “credit worthy,” he agreed to guarantee every micro-loan the bank made to poor people.
That effort grew into Grameen Bank, which is owned by its depositors, mainly poor women, has no lawyers, receives no government support, lends $1.5 billion a year, and has a repayment rate of nearly 100 percent.
“It’s all based on trust,” Yunus said.
His experience with the bank has led him to create 60 social businesses, none of them designed to make a profit, and all of them designed to solve specific social problems, including some businesses formed in partnership with big corporations.
One business sells seed packets for a penny or so each so families can grow produce to address a vitamin D deficiency that causes night blindness in children.
That business, with loans from Grameen Bank it has repaid, now is the largest seed-seller in Bangladesh.
“We had no intention of making money out of the business,” Yunus said.
Another company sells solar-panel systems to help poor families overcome their lack of electricity and dependence on costly, toxic and dangerous kerosene lamps.
In partnership with big companies, he has formed a yogurt company to address the lack of nutrients children get, as well as a joint ventures to provide essentials such as water, mosquito nets and sanitary napkins.
Grameen also opened a branch in New York City that makes micro-loans to women to create income-generating activity such as hairdressing, baby-care centers, catering services and pet care.
That effort has had nearly 10,000 borrowers, with loans averaging about $1,500 and a repayment rate of nearly 100 percent.
Making a difference
The key to social change, Yunus said, is to “create our own fate.”
And that will mean changing the way we think about education, the economy, business and personal values.
“All we do in our lifetime is make money,” he said. “And in the process, making money has become an obsession, if not an addiction.”
While human beings are “not financial,” he said, “we love money, we love to enrich ourselves.”
In addition to being “selfish,” however, “we are also selfless,” he said.
Still, our education systems do not stimulate students to explore their selfless side, and business is all about making money, not making change, he said.
What’s more, college and university faculty, in particular, can be disgracefully disconnected from and clueless about actual social and global problems.
Far too many professors, enabled by a weak tenure system that provides little accountability, are rooted in theory, not practice, and in the often insulated and self-referential “literature” of their academic discipline, not in the marketplace, and are sure they know far more than non-academics how the real world works and should work.
Universities are “not the real world,” said Yunus, himself a professor, at a pre-conference dinner for sponsors, speakers, judges and others from the social business competition. [This reporter served as a judge.]
Perpetuating business as usual is an overpowering “propaganda machine” dedicated to crushing the audacious idea that “we built a system that doesn’t work,” he said.
Despite all those obstacles, Yunus said, young people like the ones submitting social business plans at the conference hold the hope for a future that will eradicate poverty and other social ills.
And schools and universities, if they embrace the real world, can prepare students who are engaged in their communities and can make change happen.
“We need students who come out of our institutions who can think and do, who are ready to change and act, and perhaps most importantly, who are ready to dream and then execute,” said Ross, the UNC system president.
Students also need to use a “reality check” to test what they learn in the classroom, he said, by getting out into the community, talking to people, assessing models for fixing problems, and finding gaps.
“Think big and dream big,” he said.
And based on that reality check, he said, “don’t propose anything that can’t be sustained, and think in advance about where revenue would come from to sustain their business.”
Yunus said that, equipped with digital technologies that are rapidly changing and were barely conceived of 20 years ago, young people have instant access to the information they need to help them serve as those change agents.
By identifying social problems and creating “inclusive” social businesses to address them, he said, young people can make a difference.
To help make that happen, schools and universities should help students understand who they are and what they value, and give them the thinking and learning skills to identify real problems, figure out what they want to fix, and create solutions to make that difference.
“Something is wrong with the system, he said. “Fix the system.”
Social businesses are part of an emerging social economy that is fueled by the desire to fix social and global problems, and is sector-agnostic.
What matters to these change agents is investing their time, know-how and resources in strategies that are effective and for which results can be measured, not whether the sector in which they invest those assets is nonprofit, for-profit or government.
Accelerated and shaped by rapidly changing digital technologies and social media, the social economy is a diverse and seemingly ramshackle mix of strategies that reflect and share a growing hunger to fix problems and move beyond the paralyzing mindset that is mired in business as usual.
So traditional nonprofits are looking for ways to be smarter about developing new revenue streams that free them from dependence on charity and a sense of entitlement to it.
“B” corporations are emerging that are rooted in a mandated double bottom line that requires both that they make a profit and benefit a social cause.
A growing number of for-profit companies are aiming to create “sustainable value” by using their business processes to identify social or global problems that pose obstacles to their financial bottom line and to develop philanthropic strategies to address those problems, in the process benefiting their communities and their business.
A growing number of foundations are not just making grants that help meet the requirement that they “pay out” 5 percent of their assets each year in grants and overhead, but also are becoming more informed and active shareholders, investing their endowment assets in companies with products, services, values and social and environmental impact that are in sync with the foundations’ philanthropic missions.
And a growing number of political donors, given a green light by the landmark Citizens United decision by the U.S. Supreme Court that makes it easier to support political campaigns, are investing in politicians they believe can make a difference in fixing social problems.
Traditional nonprofits are struggling to survive, hammered by escalating demand for services in a damaged economy, by rising costs, and by increasingly demanding and critical philanthropic funders and donors.
Often panicked and paralyzed in trying to figure out how to sustain themselves financially, nonprofits become consumed with asking for grants and donations, often acting as if the importance of their cause entitles them to philanthropic support, regardless of whether or not their programs and operations are effective and efficient.
Social businesses, in comparison, count on social investment they can pass on to their clients in the form of the training and investment they need to create businesses and jobs.
Traditional nonprofits can learn from social businesses about the need to use the philanthropic investment they get to create new social-enterprise opportunities for their clients, instead of simply creating new or bigger programs to serve those clients, Yunus told me in a brief conversation.
In addition to sheltering victims of domestic violence and equipping them with the skills to become financially independent, for example, agencies that focus on domestic violence also could make loans their clients could use to create savings accounts and find jobs that would actually make them financially independent, while also repaying the loans and generating revenue the nonprofit agency could use to serve even more clients.
Maimonides, the 12th-century Jewish philosopher, said the highest form of charity was to make a loan to a poor person, creating an incentive for that person to figure out how to establish financial stability and repay the loan.
That’s the way social businesses think and work, and it is the way nonprofits will need to think and work if they expect to survive in the social economy.
In addition to believing in their clients and investing in ways that enable those clients to find ways to sustain themselves, nonprofits need to develop business strategies that will free them from their addiction to philanthropic support, and generate new streams of revenue they can use to better serve their clients while repaying their social investors and sustaining their own organizations.
While they are 800 years apart, the philosophies of Maimonides and Yunus share a belief in the need for social investment rooted in trust and self-help.
Will, faith and seeds
The emerging social economy and the range of social enterprise it has spawned reflect a rich mix of variations and mutations, each incorporating the particular needs, interests, resources and creativity of activists, advocates, investors, donors and other social entrepreneurs.
They all can learn and are learning from one another, sharing what they have know about what works and what does not.
And they are limited only by a failure or limitation of imagination, aspiration, will and faith in their dreams, their ideas, and their ability to turn them into lasting change.
“People say, ‘Why create a company not to make money,?” Yunus told people attending the Greensboro conference. “Our mind is so much made up by existing concepts of business, cannot entertain any other concept.”
So taking on huge, seemingly intractable problems like poverty can seem overwhelming to many people, but not to Yunus.
“Poverty is not created by poor people,” he said. “Poverty is created by systems. We’ve designed the system wrong.”
Humans are creatures who are both selfish and selfless, he said.
“Social business is based on our selflessness,” he said. “We want to make other people happy, and in the process make ourselves happy.”
Ultimately, he said, people can improve our communities and world through social enterprises they create to take on social problems they identify, often starting with modest ambitions to make life better for just a handful of people — like the 42 impoverished women in his village who were virtual slaves to predatory lenders because they could not repay their combined $27 in loans.
“If it works, it will grow into a giant tree,” he said. “Social business is a kind of seed.”