The Social Enterprise World Forum kicked off in Milan this week with 800 delegates from 43 countries, ranging from Taiwan to Ghana, Scotland to Australia.
The global social enterprise movement is palpable yet diverse. Three key themes began to emerge – all core to the mission of Social Ventures Australia. These three themes are talent, access to capital and measurement and evaluation.
The social enterprise field is attracting a huge amount of talent – individuals who have eschewed well-trodden paths to focus on problems that really matter to them. Why? Harish Hande from SELCO (an Indian social enterprise focused on bringing solar energy to underserved communities) summarized it best: frustration. “Frustration”, Harish explained “drives all social enterprise.” Frustration with inequality, frustration with lack of action, frustration with business as usual.
For a frustrated bunch, the social entrepreneurs of SEWF 2015 have achieved a tremendous amount. Sophia Grinvalds of Afripads has established a business that has provided low-cost sanitary products to 600,000 African women and employs a further 150 in her factory remote Ugandan factory. Ruth and Amy Anslow from HiSbe Food CiC were frustrated with the UK supermarket industry, so they started their own. 18 months and £1.2m in sales later, they’ve established a successful social enterprise supermarket that’s ready to scale sustainably across the UK.
Social entrepreneurs are disrupting dysfunctional industries and tough social problems across the world. As Harish Hande said, “work out what’s frustrating you, stop going to conferences and get out there and do something about it!”
Access to Capital
A social entrepreneur without access to capital is destined to remain a frustrated social entrepreneur. Access to capital is critical for any successful social enterprise to scale. Fortunately, the sources of capital are as varied as the problems social entrepreneurs are trying to solve.
SEWF 2015 speakers spoke about raising money from family and friends (and even their own bank accounts) in early days. These early believers are often key to getting a project off the ground and proving its initial feasibility.
Other entrepreneurs tapped into the power of the public. The founders of the HiSbe Food CiC raised £200,000 required for their first supermarket in Brighton, UK from a combination of a £30,000 crowdfunding campaign and a large amount of pre-sales (essentially IOUs from the supermarket to its 2700 customers to enable the company to stock its shelves with ethical, low cost food).
At the larger end of the spectrum, Durreen Shahnaz has been instrumental in creating a whole new set of social capital markets across Asia. Durreen founded the world’s first social investment stock exchange, some 600 years after the world’s first (commercial) stock exchange was established in Bruges. Impact Investing Exchange (IIX), the Mauritius-based social stock exchange has helped 25 social entrepreneurs raise a total of $11m. The next step in Durreen’s disruption of capital markets: the democratization of impact investing. To date, tough regulatory rules have meant that impact investing opportunities have been somewhat restricted to ‘sophisticated investors.’ IIX’s recently launched Sustainability Bond, a $20m retail bond, will finance a pool of social enterprises and charities. Like the Big Issue Invest/Threadneedle Bond Fund in the UK, this area seems like the next logical step towards bringing impact investing to mum and dad investors.
Measurement and evaluation
The final theme of the day was measurement and evaluation.
For 80 years the dominant measure of society’s progress has been Gross Domestic Product (GDP). This measure has become the dominant focus of policy, politics and newspapers: politicians and central bankers live and die by this measure. Yet GDP is a flawed indicator as it ignores vital social ingredients – to use a simple example, a car crash is likely to increase GDP (panel beaters, lawyers and even doctors are likely see an increase in economic activity) even though it’s undeniably a bad thing for society. The father of GDP, Professor Simon Kuznets warned of this limitation in the first paper on GDP: “the welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP.”
So what is an appropriate measure of social progress in the 21st century? Michael Green from Social Progress Imperative UK, proposes a Social Progress Index. The Social Progress Index, launched in 2014, measures only social and environmental outcomes (therefore excluding consideration of economic outcomes and inputs, such as spending on healthcare). This approach has been rolled out to more than 120 countries covering 95% of the world’s population.
What makes this approach so interesting? By excluding consideration of GDP, it actually allows us to chart social progress against economic progress. The implications are profound. First, there is a strong correlation between social progress and economic progress (0.78 for the statistics boffins). Therefore we should not ignore economic growth – evidence would suggest it’s intrinsically linked to social growth. Secondly, social progress rises steeply at lower levels of GDP but then slows past about $30,000 GDP per capita. This suggests that increasing incomes in developed countries such as Australia will result only in marginal improvements in social welfare. Rather than chasing economic growth for growth’s sake, we should be starting to chase social growth. And finally, countries with the same level of income can have vastly different levels of social progress. To our host’s chagrin, Michael pointed out that Italy’s social progress is roughly the same as Costa Rica, despite having GDP per capita 350% higher.
The conclusion: let’s focus on problems that really matter, put our money into them and start measuring the right indicators!