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Social entrepreneurs go mainstream

Never let a crisis go to waste. Social entrepreneurs take this economic upheaval to be a blessing, providing a chance for business to transition from an anonymous, complex system to one that is direct and transparent.

With loans from Root capital, members of the Ugandan cooperative UNEX can bring their coffee to market.

Photo: Root Capital

"Ultimately, there has to be some successor model to the unbridled capitalism of the last century that both businesses and investors coalesce around," says Henderson. "And that model will have to factor in business sustainability and social value."

Metrics is the buzzword in the social sector right now, and for good reason. If these enterprises are to thrive, they need to demonstrate their success, both financially and in terms of social change. The latter part is tricky. How do you quantify change? Can you measure the difference you've made to the lives of farmers in El Salvador, say, or the inner-city poor in Philadelphia? It can be a difficult pitch, but a critical one if you want investors to embrace smaller financial returns in favor of the larger social good.

Kassalow does his metrics by tracking how many pairs of glasses his company sells, whether the incomes of the people who buy them increase and, if so, how that money is spent—on better housing, health care and education or television sets and booze. Similarly, Foote of Root Capital has established 35 metrics to help him follow his company's loans and the economic, social and environmental impact they have. By judging themselves against hard metrics like these, he says, social entrepreneurs—and their investors—can go beyond the feel-good factor.

"It's great to have really good stories," Foote says. "Everybody needs hope. But let's get into a mentality of hanging hope on concrete, specific examples. We need to be explicit."

But social entrepreneurs know they can't effect widespread change on their own. The size of the sector compared to the conventional business sector is too small. And if businesses continue to neglect social problems, all the good in the social sector won't add up to much. To capitalize on the crisis, therefore, these entrepreneurs need to convince mainstream corporations to operate the same way they do. The best way to do that? From the inside.

A whole new niche of the sector has switched its focus to CEOs, their companies and the next generation of management. The Aspen Institute, which strives to inspire more enlightened leadership, runs programs geared toward moving aspiring moguls into this sector. Its Aspen Global Leadership Network includes 850 fellows from 37 countries. Reed Hastings, founder of Netflix, is a former fellow, as is Kassalow, who expanded VisionSpring after his time in Aspen.

"We're getting them to stop, think, hit the pause button and consider the platform they now command," says Peter Reiling, a former fellow and the Aspen Institute's executive vice-president. "If these messages of ethics and sustainability resonate with them, you get a ripple effect."

Two Aspen fellows, Jay Coen Gilbert and Andrew Kassoy, recently created B Corporations along with Bart Houlahan to expand this effort. B Corp offers a certification process for socially and environmentally minded companies, much like certifications for organic produce and energy-efficient buildings. To become B Corp-certified, companies must pass extensive reviews of their business practices, social outreach and environmental footprint. The goal is to ensure companies value their shareholders and communities equally. The 134 certified B Corporations include law firms, restaurants, advertising agencies and clothing manufacturers. "Everyone thinks of socially responsible businesses in a fairly narrow way," says Christina Houlahan, B Corp's vice-president of business services. "We want to broaden that understanding to disparate companies so that it becomes truly mainstream."

Business schools are another area of focus. Ten years ago, social entrepreneurs were virtually nonexistent in academia, and students weren't complaining. Now, they've made headway into business schools throughout Europe, Asia, Australia and North and South America. In the U.S., Stanford University has a department of social innovation, and most of the Ivy League schools offer classes. So too does ESSEC Business School in Paris, IESE Business School in Barcelona and Oxford University in the U.K.

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