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Corporate Social Innovation

Corporations are moving from writing cheques to supporting social purpose work to doing it themselves. SEWF 2013 heard from a panel of experts working in this area, identifying trends and discussing the implications for the social enterprise and not-for-profit sectors.

This session was moderated by Steven Fish, ED, Canadian Business for Social Responsibility, and featured:

  • Celia Cruz, Executive Director, Instituto de Cidadania Empresarial (ICE).
  • Andrew Hewitt, Founder, The GameChangers
  • Charmian Love, Chief Executive, Volans
  • Andreas Souvaliotis, Co-founder, Social Change Rewards

Transcript of session (includes Q&A):

Steven Fish: We’ve got a bit of a standing room only situation, which is great. I was concerned of the term Corporate Social Innovation might be seen as an oxymoron for some people and they might, might bail for other sessions so I’m pleased to see the turnout. Thank you so much for turning out in droves.

We’re going to spend a few minutes just sort of framing the discussion and talking a little bit about how we’ve come to the concept of corporate social innovation. CBSR was founded back in ’95, mostly social and environmental entrepreneurs coming out of the Greater Vancouver area. Early members like VanCity Credit Union, Mountain Equipment Co-op, Happy Planet Juices and the like were early members and early social and environmental pioneers.

So it’s not a space that’s foreign to us, but the predominant theme for our organization focused a lot more on corporate social responsibility and we’re going to talk a little bit about that today and about the evolution and the maturity of corporate social responsibility and how in my view, which we don’t always agree on as a group, is that it has evolved to be much more than the traditional philanthropic check rating that you’ve seen in the past to being something much more substantive, tied to the business, material to the business profit generating but also has a positive social and environmental attribute to it.

With that in mind, I want to start letting the panelists set this up for us and talk a little bit about how their work has touched on social innovation in the corporate space, or not. You’ll hear from some folks that are more in the pure social enterprise side and are maybe not all together comfortable with this idea of corporations dancing in this world.

Andreas Souvaliotis: I’m here for two reasons. First of all, because I am a misfit. I’m a misfit from the corporate world who one day woke up and realized that the corporate world actually can make a much, much bigger difference in changing the world than all the difference that NGOs and social entrepreneurs had made together. I came to the conclusion several years ago that it’s the corporate world that has the big muscle. We, the large corporations, when you think about it, we touch billions of consumers across the world and if we’re going to make the world a better place, we actually need to influence the behavior of the billions of consumers.

For a very long time, people have looked at me as the weird guy. They said, you know, “How … how can you say this when the main mission of corporations is actually to make money, not to change the world?”

So the second thing that I happen to believe in is that the best way for corporations to make money is by changing the world. Our world is changing in and of itself in the sense that the issues that we face, we don’t seem to be able to fix them. If you look at across every key indicator of the troubles that humanity is facing at beginning of the 21st century, whether it has to do with public health or whether it has to do with the environment and climate change, we’re actually going backwards. We’re not going forward. We keep bragging and celebrating how much money we’re donating to charities and how many volunteer hours we’re all donating to the world and so on and so on, but in reality, we’re not fixing anything. Things are actually getting worse, not better.

I don’t mean to start your morning with such depressing news, but that is truly the picture out there. We are devoting enormous amounts of energy in trying to make ourselves feel good because we’re doing good stuff supposedly for the world, but we have no results to show for it. And so my belief, which comes from the teachings of Michael Porter from Harvard and his shared value model, is that the only way we can turbo charge change, the only way we can actually truly start impacting some of these big files across the world is by finding ways to combine social value with shareholder value, by finding ways to empower not just social entrepreneurs like most of you in this room, and myself once upon a time, or not just NGOs, but corporations whose main mission is to make billions of dollars in profit – to empower them to completely intertwine social good with shareholder good.

The best way to do that is to make it impossible to separate the two, to make it impossible for a corporation to make money unless every unit of output they generate is also a unit of good. To do it, you know, for organizations like Nissan for instance who have devoted so much of their R&D to making electric cars, and some of the other car makers may have looked at Nissan some time ago and thought of them as being a little bit crazy and said, “Why are they are they going so much towards electric vehicles when the average consumer doesn’t want to buy an electric car?”, but they were smart. They said, “Eventually the average consumer will want to do good and when they get there, we will be ahead of everybody. We will actually be better at making electric cars than anyone else.” There are already examples of corporations who are saying we will sacrifice a little bit of our short-term returns for long-term serious returns. They are doing it for the money. They’re not just doing it to make the world a better place. If you find ways to marry the two, it works well.

So in three minutes or less, I’ll give you my story because it’s a little bit of an example of how that works. I founded, 6-1/2 years ago, the world’s first ever eco points program. I realized that consumers love collecting points all over the world when they shop, when they travel. We are, especially in our country in Canada by the way, we’re the biggest points addicts in the world. I had this silly idea which was very much a standout idea at the time. Everybody else thought I was a little bit of a misfit or a little bit crazy, and I created the world’s first green points program where, as a consumer, you would get more points if you shopped responsibly or if you behaved responsibly. Nobody had thought of it before. Everybody thought ‘let’s just give them points for shopping because we make a lot of money when they shop’, but nobody thought ‘hey, let’s give them more points if they shop responsibly because over time they will love our program more and they will become even more loyal to us’. So I created that.

Within a very short time, within less than two years, I was fortunate enough to be able to fuse my program, which was called Green Rewards at the time with air miles, and for those of you in the room who are Canadian, you’ll know that air miles is the most popular points program in this country and extremely popular here in Alberta. Air miles is actually the most popular program on a per capital basis in the world. Seventy percent of Canadians collect air miles and there’s no country in the world where such a high percentage of the population collects one type of currency. For me, frankly, it was like winning the lottery, having my idea and my little business concept get married with the largest and most popular points program in the world and that points program lives inside a billion dollar business. All of a sudden, I was a social entrepreneur, an eco-entrepreneur inside a billion dollar massively for-profit organization.

Most of the other people in the social entrepreneurship space would look at me and say, “There’s something weird with this picture,” right. “I thought this guy was out there to save the world, not to make money,” but in reality what happened by parking my idea on a giant elephant that was out there to make a lot of money is I got scale. Somebody handed me the largest steering wheel they could hand me. All of a sudden I had the ability to influence the behavior of 70% of Canadian households. I had this unlimited license to come up with new ideas on how to give each of you extra points when you do the right thing.

We may have started from the environment and we did great on the environment. We gave people points for taking public transit, for conserving electricity or gas, all kinds of other environmental things. But then we expanded to an even more important file, which was health, and we started giving Canadians points for exercising, for quitting smoking, for going to the grocery store and buying healthy groceries instead of buying hotdogs and hamburgers, and on and on and on, and it just mushroomed to into this great idea.

With my new business we’re taking the same idea to the rest of the world, but I won’t bore you with that because it’s really the same idea.

The meaning behind what I was telling you is that there are amazing opportunities to combine money making with changing the world and those are the only opportunities that in my opinion will have a fast enough impact on the world. We can no longer afford to sit and focus on the tiny little impact ideas. We have to think big and the best way to think big is to harness the basic human instinct which is greed. People want more money, more business, more life, more fun so if you can find a way to harness human’s greed and combine it with good, you can have a much faster impact. Thank you.

Andrew Hewitt: My organization is called the Game Changers and we’re based out of San Francisco. My journey in social entrepreneurship started in this province of Alberta where I was born and so it’s really awesome to be back in Alberta to be here with all of you where this journey began. I’m going to share a bit about that journey and then I’ll go into how it’s led me to corporate social innovation and learning about this movement and playing a role in it.

It was shortly after university when I started to realize that a lot of my friends who had graduated were really unhappy in their careers. They did what we all thought was the right thing to do which was look for the big brands to join and those were the dream jobs. But, after a few years into the game, that profit-at-all-cost mentality really started to wear on them and although they were working at major corporations and making good money, they really just weren’t happy. I thought it was such a waste of human talent and inspiration to see these people really numbed in that work environment. I thought, where is that database of organizations that make money, but are great work environments, that are purpose driven, that are changing the world?

As I started to lean into tha I really discovered this whole movement of social enterprise and how business was being used as a force for good. When I reflected on why so many young talented people ended up in these big corporations, what I realized is it was the promotion of that standard of success, through lists like the Fortune 500, and we kind of defaulted to seeing that as a successful organization. I wanted to help change that meme, change that belief system, so I set out to create an alternative to the Fortune 500 list, which is just called the GameChangers 500. I had no idea what I was getting myself into with this. As you guys know this whole space, there’s so many terms and there’s stilla development happening in defining what is this social enterprise, what is a benefit corporation or shared value corporation, and the lines are a little bit blurry.

I ended up in this research process of figuring out how do you define a business that’s a force for good. And I thought one of the greatest contributions I could make was to make that easier so people like me who spent my first three months in business trying to create a cool profit-sharing plan, and nearly going out of business in the process, and trying to decide between a nonprofit or a for-profit structure – all those things that come up. What if that was just easier to follow, what if there’s a road map, that made being a business as a force for good easier? So that’s what we did. We created a platform for that, a website that helps guide companies to becoming a for-benefit organization and we’ve added some gaming dynamics and, of course, the ones that do the best make the GameChangers 500 list.

It’s been quite the journey and through the process, I’ve got to look inside some really amazing organizations and a lot of big companies. One thing that really surprised me was when I started this journey, I wasn’t expecting large corporations like the ones on the Fortune 500 list to even be considered for the work I was doing. Yet, as time went on, I realized there are some really remarkable for-profit large corporations that are making a major splash as Andreas mentioned and they need to be considered as well.

I’m going to share a few of my favorite examples in a minute, but first I want to share my enthusiasm for why I think corporate social innovation is really going to make a huge impact in the coming decade.

So across the board it’s really being proven that doing good is good business. Ninety-two percent of consumers say they will switch to a brand assuming cost and quality is the name if it has a social mission. Ninety-three percent of employees say that if they’re engaged in a program of the organization that has a cause associated to it, they’re highly engaged and loyal to their company. Ninety-seven percent of marketing executives say that cause marketing is a great business strategy. There’s been a variety of social indexes that have been compared to the S&P 500, and across the board these purpose-driven organizations are performing between 400% to over 1,000% better than traditional profit-at-all cost companies. I’m incredibly excited about what the future has in store and I think what we’re going to see is these large entities that don’t shift to be more socially, environmentally conscious, that don’t start embedding more purpose into what they do, they’re not too big to fail.

This is becoming great business. It’s becoming essential business to do good as part of a business strategy to make money, but also to keep employees empowered and to keep customers buying your product.

I’m also a big fan of Bucky Fuller and his quote that, “You don’t change things by fighting the existing reality. You change things by building a new model that makes the existing model obsolete.” One of the biggest challenges we have in corporate social innovation is that we’re not just painting over a rusting profit-at-all cost model with ecofriendly, fair trade paint. That’s not going to fix the system. As we approach this space, we need to look at what are some of the systemic solutions and approaches we can make where we’re not just building on a rusting foundation, we’re actually creating a major shift in how business is done.

There’s a variety of initiatives such as the chairman of Puma has taken the challenge to bring on a new accounting standard that measures more than just quarterly earnings. These are seismic shifts happening in major corporations or IDEO, one of the greatest design firms in the world, creating where they’re taking their talent, their greatest resource, and they’re sending their employees to places in the world that really need help designing toilets and sanitation systems that will bring them out of poverty. Organizations like Chipotle, they’ve just launched a video game to help people learn about healthy eating habits and where your food comes from.

One of best ways organizations can make headway in this space is when they tune in to their assets, what they’re truly good at, and they use those to serve the world. When you’re using your strengths, that really keeps you inspired.

My favorite examples of corporate social innovation is when an organization isn’t just donating to charity or doing things that are environmentally sustainable, but they’re figuring out what their greatest gift is, the talent within their organization, and giving that to the world. I look forward to sharing some more examples and getting into some good debates throughout this next hour.

Charmian Love:  I’m Charmian. I’m from the UK, a Canadian really deeply in my heart. I also want to thank all of you who are here sitting down and around the side. I know that actually there are some fantastic other sessions going on right now including one around Corporation Innovation Labs next door and Joeri, from the MaRS Solution Labs who is involved in that session, and I were just tweeting and saying, “We should actually be breaking down the walls, silo busting. We should actually be bringing these two sessions together.” In the absence of that, I would encourage everyone to be tweeting as we can and cross-pollinating as much as possible between these sessions.

I’m going to be brief because both Andreas and Andrew both have amazingly set and built the case for corporate social innovation. I’m not going to talk very much about Volans except for to say that we are a global think thank and consultancy business, and we really work in the space of innovation and entrepreneurship and sustainability, and, to use your phrase, Andrew, blurring lines that exist between a lot of this language whether it’s shared value or the sustainability CSR space. We’re trying to really though position what we do at Volans to force really disruptive, ambitious system level change, and our sort of catch phrase, our hashtag within Volans is about breakthrough. So just think about the really sensational stuff that you think ‘wow, I have no idea how a company is actually going to manage that’, that’s the kind of space that we’re really quite keen on playing in at Volans.

In order to know what we do at Volans so it’s also helpful to appreciate our history. We are six years old. We were founded by John Elkington who some of you might know. He’s a thinker and a consultant in the sustainability space. He actually coined the phrase ‘triple bottom line’ about 30 years ago, which is a phrase that’s quite often used within companies when they start thinking about not just that bottom financial line, but their social and their economic value. We were also founded by Pamela Hartigan, who we’re going to be hearing from tomorrow afternoon so I won’t try and steal her thunder here.

One of the things that we do at Volans though is we do work with these big companies that are interested in actually developing a trajectory that looks at where and how they can activate their products or service development or strategies or internal processes that can help get them on this breakthrough trajectory. For example, we’ve been working very closely with HP for the last four years. Now that’s a company that’s obviously going through quite a bit of change right now, but they used to have a sort of more traditional CSR division within that company. Actually, they came to us at Volans having had a board level, you know, HP board level, impetus to say ‘we need to do something much more disruptive, much more focused on change’. And over the course of four years, they’ve actually evolved, and instead of having a CSR team, they actually have a division called Social Innovation, and that’s about harnessing the technology, the skills, the networks, and the resources within that company to create good in areas of health and education and also in environment and sustainability.

I’m not going to spend more time building the case for corporate social innovation because I think this is also something we can get into a debate, but what I thought I’d leave you with is five of the key trends that I’ve seen at least in the last year and a half or so that are starting to really bubble up within some of the big multinational corporations we work with.

The first one is this rise in pre-competitive collaboration. Essentially what it means is getting in the room with your hyper competitors to try and figure out how to solve some challenges, and this to me is an example of really interesting corporate social innovation. A company that’s done this recently is Nike with Puma and Adidas and H&M. Now these companies are as I say hyper competitors, like they really go head to head with each other, but they came together and recognized that in order to create real change in their system, they need to define new ways to work together. This isn’t just about working with NGOs or working with your supply chain, it’s working with those organizations, including those that you compete with quite actively in the market, and finding ways to actually transform the system.

The second one is the finance frontier. Andrew, you mentioned this a little bit with Puma and their EP&L. John’s actually just finishing his 19th book right now with Jochen Zeitz, who is the chairman at Puma who introduced this environmental profit and loss statement. This has the potential for big companies to actually change how their infrastructure, how the decisions get made using finance as a tool.

Another great example of how finance is the next frontier for corporate social innovation are how companies like Unilever, Paul Polman, you know, they have their Sustainable Living Plan which is excellent, but what I find is actually much more interesting to think about is how he’s actually said, “I am rejecting this idea of issuing quarterly share guidance. We’re just not going to do it. Our business plan we’re running at Unilever is not based on a 90-day cycle. It’s much longer than that.” He’s actually pushing back on the system and saying, “We’re doing things differently.” To me that’s an example of the leverage corporates have to innovate, not just within their own company, but innovate the actual system.

The third piece, now we know a lot about open innovation and open data is a great example of it, but open innovation is very broad and it can bring some amazing innovations to the market.

Actually, there’s a another step we can take forward, and that’s in looking at systems innovation. So it’s saying ‘how do we actually innovate not necessarily a product or a service, but up at that systems level, whether it’s capitalism or the health care systems?’

Not to sort of use Nike too much, but they’re just a company I happen to know quite well. I was at a really fabulous event that they ran back in the spring where Nike is working in partnership with NASA, with USAID, with the State Department in U.S., around where and how they can create new forms of materials and chemicals that are sustainable, and the definition of that is ‘it creates social and environmental good around the world’. They’re working with these partners that have an equal stake in the game when you start talking about the systems of materials. NASA knows that the same materials that are going to help them get someone onto Mars in 2030 are the materials that Nike is incubating right now in terms of what your running shoes might look like. Getting partners together that have a similar system in which they operate is another big trend that we’re going to see more and more of.

We worked with one client in recent months who said to us, ‘we’ve just had our 100th birthday as a company. We want to be thinking about what are we going to be doing when we celebrate our 200th birthday’. So think about that as a challenge of forecasting forward. What is the world going to look like in 200 years? And then back casting and saying well, what does that mean for the business and the investments that I want to make today in order to be relevant to that market?

We’re going to see as more and more companies start having their celebrations, their birthdays, their milestones. I imagine we’re going to see a lot more companies that are going to start forecasting forward in really interesting ways and that that is going to be a catalyst for them to be thinking about these issues of increased complexity from a social perspective as we gallop towards 9 billion people on this planet while being mindful of the critical key resources that are becoming increasingly competitive in the planet.

The last thing and the one that I really want to drive home because to me this is what I’m most excited about and gives me the most hope with the big companies we’re working right now, and that is the rise of corporate venture capital. Now these groups of people within big multinational corporations have existed for a long time. Intel Capital is probably one of the most well-known inside venture capital funds. They exist inside these big companies. Intel Capital in the decade or so they’ve been running, they’ve invested $10 billion into new innovations and new companies, some of which enable Intel to do what it does really, really well and encourages its strategic development. Some of them are a little bit more of a wild card.

I was actually at the summit in London not too long ago. I kind of would never have gone to this kind of event except for someone had said, “There’s some interesting stuff around innovation happening here.” So I went and I was shocked. These guys were talking about ‘how do they find the right kind of health care investments?’, ‘how do they find the right kind of utility tools, new energy forms, access the base of the pyramid markets with mobility and social services?’ These corporate venture capital groups have identified the challenges that we are all learning about at this conference and are actively trying to find ways to partner with social entrepreneurs, with academics, with policy makers, with other businesses to really incubate and develop and scale really interesting ideas. There is a lot of money in that sector as well.

That gives me great hope to think that there will be ways that we can work with these corporate venture capital units and use that as a way to not just invest in the new enterprises that we really need to see ramp up quite quickly, but also develop a certain level of scale. When these big companies work in partnership with entrepreneurs, they can develop much more quickly because they can access the distribution channels so all of a sudden you’re not starting at the ground up and having to go seek your customers. Instead, you can tag on with IBM and the millions of customers they serve.

That’s the last one that I really wanted to highlight as I think is going to be a trend to watch in the next couple of years.

Celia Cruz: As we were planning this session, I decided that I was wanting to bring a little bit of the history of an emerging country. The social enterprise movement is growing a lot in emerging countries like in Africa, East Asia, and in Brazil and Latin America.

I want to tell you a little bit about my path in this movement to connect to social entrepreneurship, social enterprise, and corporate social responsibility, but also to show that in the developing countries the concept of social enterprise is really connecting how can we create products or services for low income communities or how can we create businesses that are more inclusive.

When I went back to Brazil after nine years working for Ashoka in social entrepreneurship, I decided that I want to work more with business leaders and investors to try to allow them to help to mobilize more capital for social change and to expand this social enterprise and social finance movement in Brazil, but my trajectory was a little bit different.

I moved from fund raising to working more with community development, like how can we do a collaboration in a systems change way, and then more recently, looking at ecosystems.

I did economics in a business school and I was happy to be here doing my master program, student exchange program at York University, and York allows you to do a volunteer work with the Canadian Opera Company in fund raising.

I went back to Brazil and started working as a fund raiser for the business school and that was my first connection to business leaders  – how they could support a business school. That was quite easy for them for philanthropists to give to a business school, it’s quite easy. I’m in my comfort zone. Brazilian philanthropists are far away from the philanthropists that we see here or in U.S. They are much more traditional, giving to traditional charities, like hospitals and churches, really not human rights issues. It’s really hard to move them from this path. Of course, around the ’98, we start seeing a different movement, in particular with the Ethos Institute who bring companies to think not just the traditional way of giving, but a little bit to be more innovative and think how their corporations could support this movement.

In 2002, I thought how can I help, instead of doing just fund raising, to think how can we mobilize more capital for the social sector, how can we bring more innovative philanthropists to Brazil? So I moved to Institute for Development of Social Investment who vowed to convince wealthy families to think more strategically about how to invest their wealth in social change to resolve social problems. We spent two years creating family foundations, corporate foundations, community foundations, the community foundations of Canada support a lot the Brazil movement, but after a few years our foundation center had only 64 foundations.

I remember we did a study with McKinsey in 2000 and we realized 500 families would be able to give from $500,000 to $1 million per year. Moving ahead, we are in 2013, and we have only 164 foundations that are members of our foundation center so it didn’t change philanthropy in Brazil even with Ethos Institute. They have now 2,000 corporations involved in them, but it’s really a small portion from those who could make a huge change in Brazil.

After seeing this challenge of creating this mobilizing capital, I changed to work for Ashoka. Ashoka was a big important period for me to see how social entrepreneurs were really thinking to make changes in a systemic way. Brazil now has 300 Ashoka fellows, social entrepreneurs, 600 in Latin America. We are talking about 3,000 in the world really thinking more on a systemic change level, but also as a force of the civil society to force corporations to change their agenda towards social problems.

One really important movement in Brazil in this corporate social responsibility process was that Ethos Institute, around 2000, created the seven pillars of corporate social responsibility, and particularly in the first phase of this movement in Brazil, they really recommend independent community investment. That was really strong for Brazil, particularly because this independent movement was really supporting the growth of NGO movement in Brazil.

Just think that at that period we are talking about 20 years of dictatorship in 1985, and then Ethos stimulating this independent growth helped a lot of NGOs to get more strong, innovative, and receive a lot of money from corporations, but also international foundations.

Back to Ashoka, it made me also think about like how this movement was going. All the Ashoka fellows were really strong, creating new agendas, but that was the phase that corporate social responsibility was moving more from giving to NGOs to thinking more the sustainability. Sustainability was really a strong issue in Brazil. If you think the Eco ’92 was in Brazil so the environment, the agenda of corporations, was really concerned about the impact that they were creating. So many companies brought this priority towards their company agenda. If you think about the amount of capital involved in corporations, of course, if those corporations can be more sustainable, you can see the huge impact in Brazil for their employees, for their environment. Still, for the agenda of the civil society, it was a lot of less money to the agenda so it was really reducing.

Just to finalize, with my new role as ICE, we are looking for how business leaders and investors can be more involved in a social change so we are looking for their philanthropy side, how they can invest more in accelerators, in social enterprise, because we don’t have the pipeline that you were talking about of social enterprise in Brazil, and the NGOs are still on the level of income generation, not sustainable social enterprise. We are also supporting how, in their companies, they can involve in the supply chain more social enterprise. Finally, we are trying to influence them to impact investing, how they can use their investment side to really invest more on impact investing to enable scaling up the social enterprise movement in Brazil.

Question: How does someone embed a progressive recycling program into a consumer bottling company? How do we address their waste supply?

Charmian: It’s quite scary to be put on the spot of being a big company, but I did want to step up on this one because what immediately came to mind when you asked that was the example of what Nike and Puma and Adidas had to do because it’s a lot to ask of a single company to make the kinds of massive investments that are needed. We’re talking about an entirely new processing plant, manufacturing that can actually digest a range of different materials.

As a company, perhaps what we should be doing is getting some of the other companies, bottled companies in the room and say ‘let’s figure out how do we pull our resources so that it’s not just one of us making the investment in this plant. Let’s figure out how we can all invest in that plant because we know that it’s an important thing to do and by the way, when we all invest in it, that means we can leapfrog the kind of technology that’s developed in order to speed up the process of iterating new different models and trying a bunch of different things out’. So I would take that question on and say actually the impetus or the next step that we as members of a company would want to do is start engaging with some other players in the market and sharing the cost that would be required to do that and do it very well at a very disruptive level.

Steve: Trend number one in your list.

Charmian: That is trend number one, yeah.

Andrew: Another thing that we can do is look at other companies like Method that have successfully built a cradle-to-cradle process into their manufacturing of the materials. Cradle-to-cradle certification  looks at the whole, creating zero waste and being carbon neutral, in your manufacturing products and process. What we could do is we could look at those standards and see how they’ve done it in other industries, and ensure that we’re not just putting a green top on the bottle and using cause marketing to look good, but actually look the systemic solution. Are we actually improving the model or are we just going to market something so that we look good? It’s very important to look at existing models like cradle-to-cradle, looking through the whole process.

Celia: I’m more thinking about how to involve again like low income communities. In Brazil a recycling process as you probably know and have seen in other developing countries are really still depending on cooperatives of capabilities. A lot of corporations in Brazil, they were saying that they need to involve the employees in this process because sometimes you think it’s good, but when you start dealing with this population that are involved with our police or don’t have houses, how do you really design the whole employee system to support your work with this cooperative? In Brazil, it’s one of the best in recycling aluminum from the bottles because of those low income communities that are involved in cooperatives. If you work with a global corporation other models that you need to involve in this process include low income communities. Don’t design alone with your corporations. Go to the countries and talk to how a different model of recycling is in process.

Question: How can you justify if you’re producing something that as far as many consumers see really has no nutritional value, painting it with green washing.

Andreas: That’s a great point. That’s where regulatory frameworks come into it. The system will never function perfectly unless you have all three constituents participating at the same time:

  • Consumers, so we have to be smart enough to know what we want from those who make the things we consume.
  • The actual corporation, so the corporation has to have enough vision to anticipate the future and anticipate how the consumer sentiment or the regulatory regime may change.
  • The regulations. And the regulators are us, right? We elect governments and we somehow impose on governments our appetite and our passion, and the things that we want them to do for our health and for our environment in the future.

I’ll give you a perfect example that I just lived through three days ago. I was at an airport in North Carolina and I walk into the Starbucks, and I was shocked to see that next to every single product that was listed on their billboard they had calorie counts, which is not regulated on a state by state basis in the U.S. It’s not in every state, but it’s in a whole bunch of states. Unfortunately, it’s not happening in Canada yet, but I found that fascinating. First of all, it changed my behavior as a consumer. I promise you I bought a smaller coffee, a smaller latte than I would’ve bought because of the calorie count because I looked at the number and I thought ‘oh, my God, that is crazy’. That already is a remarkable step in the right direction, but it wasn’t Starbucks that made the decision to post the calories. It was the state that said ‘if you are selling food in my state, you have to post the calorie count’.

So you can see how everybody has a role to play in this. If Starbucks is smart or if any manufacturer of food or beverage is smart, they will see this coming. The future obviously is headed this way. Everybody’s concerned about obesity. One way or another, whatever bad they’re doing to us will be exposed and that will start to impact behavior. Starbucks has a choice. Do they anticipate this and start producing healthier beverages or lower calorie beverages in anticipation of this or do they not? At the same time, the government has a major role to play. Why should it only be in certain states and not everywhere? It’s such an incredibly easy thing to do to simply impose the posting of calorie counts and in my scenario changes behavior. I bet you a lot of consumers will change their behavior based on a very simple piece of data like this.

It’s an ecosystem of three parties: regulators, corporations, and consumers, and we have a role to play. But it’s that kind of mass scale change that I’m advocating and if it’s done right, it makes a lot more money for the corporation because whoever adopts first has a first mover advantage. If Starbucks becomes the healthy coffee beverage company ahead of others, they stand to win.

Celia: Why civil society is so important and needs to still be funded because in cases like that. I remember the movement that Ethos created to think about it was well known that McDonald’s in Brazil was using soya from Amazon deforestation, and they created a big discussion. With pressure from Green Peace and the Ethos institute, that’s a corporate social responsibility movement in Brazil, made the president sign that they were not going to buy soya anymore from land that was devastated in the Amazon. How can you bring civil society to get aware not only about the nutrition, but also the process where the products come from? Can you understand the chain like you have Forest Stewardship Council, that looks to the whole process of production. Then you understand the products they are using, where they come from, and get consumers more engaged and more activists in selecting the products either by nutrition, but also looking to the paths they are using.

Charmian: We’re talking a lot on the consumer side, but then from the company perspective of what we do as a company, this is where I think there’s a lot of interest in innovation labs that are starting up within big companies, R&D wings, that are specifically designed to think about this whole equation of micro-nutrition. How can you actually use the distribution channels you already have? If we’re going to take Fizzy Pop as an example, and say ‘if we’ve already got these distribution channels and people are buying really highly sugary drinks, what can we do to that product in order to improve it and make it more healthy knowing that we could actually do net good rather than net bad if you find a right way of selling that product, making it attractive, making it interesting.

I don’t have any many examples in the beverage business, but I do know that in some big fast moving consumer good companies, Nestle for example, which I’ll disclose we shouldn’t probably talk about them as a client, but they’ve taken their bouillon cubes, and they’ve actually embedded in those cubes that are distributed throughout emerging economies, where there isn’t the sort of same nutrition level that we have here in places like Canada, the nutrients that are missing from those diets and that they’ve used those distribution channels that they already have in order to get those missing nutrients.

Grameen Danone is another great example of a yogurt company that has developed a form of yogurt with nutrition that’s missing from the population there. As a company, I think I would respond to that question and say absolutely, there’s an imperative for us to make sure that if we want to be truly a breakthrough of corporate social innovation, a shared value company, it’s not just about selling products, it’s about selling a good product that actually creates net good. There are some companies that are thinking very seriously about that and thinking about how they can become healthy rather than net bad.

Andrew: As a publicly traded for-profit organization, we need to keep our shareholders in mind and there needs to be a business case for it as well. One business case is that consumers are demanding healthier products, and we can test marketing and drive demand as you were saying for a healthier alternative and we should do that. Another business case I think we can make is represented by why Steve Jobs was able to recruit John Sculley from Pepsi by saying, “Do you want to be known for selling sugared water the rest of your life?” And, you know, it’s not just John Sculley that feels that. It’s a lot of the employees at their company. They want to stand for something. And so I think there’s a strong business case as well for us to make that this is a great way to get our work force more empowered, more inspired by mission beyond just selling a beverage that we know is unhealthy.

Andreas: Just to add to a point that Andrew made earlier and it’s such an important point about changing work forces around the world. When I was a long time ago doing my MBA, all we were being trained on was how to make more money. When kids are coming out of MBA schools today, they’re being trained on how to generate more value period and there is multiple definitions of value. One of the remarkable studies I looked at a couple of years ago is that across the United States on average, an MBA graduate is willing to forgo $12,500 salary in order to work at the right company. So just think of the impact that would have on the choices employers are making right now, just to reinforce the point that Andrew just made.

Question: Why not have the packaging in the local economy so rather than cradle-to-cradle package side you engage consumer awareness so they are think about how they want to live their life as consumers?

Charmian: Sorry, can you just clarify what’s the real question you’ve got here? Because I think I heard about, you know, closed loop, and that’s where I’d say groups like, Grameen Danone, which we used. I mean one of the great challenges that Muhammad Yunus gave to the guys at Danone, the yogurt manufacturer, says, “If we’re going to do this, if we’re really going to create a yogurt that is designed for what the needs are of the Bangladeshi community, then why are we not letting them eat the packaging in which the yogurt is distributed?” and Muhammad Yunus, if anyone’s heard him speak, uses this beautiful story about how he said, “We have ice cream cones, right, and you eat the cone. Well, what’s the difference? Why can we not eat the packaging that yogurt comes in through.” I actually think that that’s very much on the cutting edge.

There are some great companies that are doing some amazing research right now, and I think they’re even in beta right now, the edible packaging for dairy materials, not just with Danone Grameen, but with cheeses and with other forms. I don’t know how it would get to the beverage industry, but I think it’s a pathway that’s going to happen soon.

Question: Every person on the planet is going to put something into their mouth. What is it that our company can do to make sure that from first step to last step that we are the brand and category that appeals to sustainably focused consumers?

Charmian: I would just have one word to answer to that and that would be ‘values’. Values are how you actually get that full engagement of customer from the time they wake up in the morning and ’til the time they leave in the afternoon.

Andreas: As much as I love Charmian, I would actually counter that by saying values alone do not make you money. Companies only exist to make money. If they don’t make money, they don’t exist and the jobs go away. What we need is a perfect marriage between values and making money. So values have to be there, but they have to somehow be turned into opportunities. You have to figure out if I’m going to make the right beverage that comes in edible packaging, how do I create that in a way that consumers will love it, will buy it over anything else and that way business will flow my way? So that’s the perfect marriage of capitalism with values. If you just go with values alone, unfortunately you may look really good and you may feel really good, but you go bankrupt.

Charmian: Yeah, you know, I’d agree with that. I think it isn’t just about values, but I think values need to be what guide those business decisions that make it a profitable business. If you make it profit ahead of values, you’re going to have an attrition of those values because trade-offs are going to be made that might not be in the right decisions. I agree with your point. I think it’s a matter of what you prioritize in the business.

Steve: I think about Gap Adventures when they stopped sending people to Burma on principles alone. They did not make money on those trips. They put their principles first, but it hasn’t seemed to hurt them financially long-term that their underlying principles and values have really carried them.

Question: Are we willing be in the social side for the long haul without seeing immediate returns? I’d like to understand too how your company understands and describes the path and how it’s measured? Because a lot of the successful social development outcomes aren’t necessarily quantifiable in the same metrics that you would find in a company’s profit and loss statements

Steve: I’m thinking that Unilever’s a great example of this where Paul’s come out so publicly with such strong statements and such an anti-short term as a message.

Charmian: There is lesson we can learn from Unilever, but let’s face it, the reason why Unilever can do it is because they’re a pretty massive company and they’ve got pretty deep pockets in order to be able to take that luxury of saying we’re in it for the long haul. When you look at small to medium size enterprises and listen, I run a small to medium size enterprise, I know it’s really difficult to protect some sort of cash in your bank to play with sort of these future ideas. I wish I had an answer for you and I don’t. There has to be some level of leadership within the company and, a recognition that yes, companies are in it to make money, but some of the investments that are going to have to be made are not going to have an immediate payoff or a very quick payoff.

We wrote a report about two years ago called ‘The Future Quotient’, and we put out there into the world and said ‘we track what people’s IQs are in terms of your intelligence and we track what your emotional quotient is, like how sensitive and empathetic are you – all very important factors in running businesses – but we said there is a missing element and that is in leadership in how we run businesses. We should be calibrating a little bit on how our team members think relative to time, and that there’s those people who actually can take a really, really longer term view. We should be supporting them to do that and not just crashing them down and saying ‘that’s something that doesn’t make money right now so it’s not a priority’. We should be finding ways to support them because those are the people that are actually going to track the future of the business.

Andrew: It’s a great question and ironically I don’t think there’s a short-term solution for it. What gives me hope is organizations like the B team that you guys might’ve seen launch, Richard Branson’s latest thing, to put a group of visionaries in business together to solve some of these very questions. It really comes down to changing some incentive structures of how we measure performance in organizations, and that it’s going to take some pretty seismic level shifts to make that happen. When you have companies like Unilever and Puma stepping up to be part of this to incubate and put resources into testing that I think that means that we will come to a solution eventually.

Andreas: I’ll tell you what gives me hope, because I’ve lived longer than my fellow panelists and I’ve seen some pretty significant changes in our world. What gives me enormous hope is gatherings like this. So the definition of entrepreneurship has changed. Once upon a time entrepreneurs were only out there to make money and it was a fantastic sport frankly. Today, I happen to speak at business schools all across the country and I see these emerging entrepreneurs whose priorities are so blended between social good and financial good, and they can’t imagine running a business that does generate good as in social good. All you need inside the organizations that you were asking about is more of an entrepreneurial spirit.

If somebody’s looking ahead, to your point Charmian 01:02:42, about the future, if somebody’s looking ahead and saying ‘how are we going to survive?, how are we going to be relevant as a business in the future?’, they will not be able to stay along a single axis anymore. They will not be able to say ‘oh, we’ll just make it cheaper, oh, we’ll just sell more of them’. They’ll have to think that people will want us more because we are better, because we’re doing something meaningful. The two have to be intertwined and that’s why I keep going back to my broken record message about the fact that regulators also have a role to play because regulators will force us to intertwine social good, financial good, and it’s starting to happen all over the world in little ways.

You have a little bit of a regulatory foundation and then you have the best foundation, which is a new kind of entrepreneurial spirit. You have these new types of leaders who are saying ‘I only want to run a business or be an executive in a large corporation if I’m generating profits for the future, not just for tomorrow morning’. So I’m optimistic. I can’t give you an exact picture of how it’ll lay out tomorrow and I’m sure there’ll be lots of short-termism in the meantime that’ll frustrate all of us, but everything is heading in the right direction and the best change that’s happening is all of you guys, is a new generation of leaders who are care about the blended picture.

Question: What are the environmental opportunities on a localized level that global companies can bring?

Steve: That has been the model for Procter & Gamble and Unilever in some of the emerging economies. To not only package their products in such a way where they’re more affordable for example, but they also can create economic opportunities for reseller relationships in the region as well. I know that some of the major consumer package goods companies have taken that approach and Celia’s going to add to that.

Celia: Small packaging has been really criticized in developing countries because it’s true, a small packing of shampoo, you can pay that, you buy that, but it creates a huge environment impact, and this was really well criticized. Some beverage companies, just in example in Brazil, that they said, “Okay, let’s train low income communities to become more entrepreneurs and we will support them to create their own shops,” but then you are in a slum in Brazil and in the end of training them to be more entrepreneurs to open their own shops, they need to sell this beverage in a really low income community if they provide nutrition. So we need to go there and design those process with low income communities.

My point is are we designing a Capitalist 3.0 for us to become more rich global companies or are we really redesigning our process to engage low income communities to be part of this Capitalist 3.0? Sometimes I feel that we are not in an ethical world, and I dream about this kind of hybrid world. Sometimes I see us designing from let’s say students from Harvard, really well educated, but we are not incorporating low income community in the process of the design. So think about how our new processes are going to change the mindset of the products that we are developing.

One issue that will differentiate these kind of companies from traditional business is metrics. If we don’t have metrics that from the beginning say ‘what’s my theory of change as a company, what kind of change I want to produce in this country?’ We need to think about metrics more strongly and I don’t have the answer.

Charmian: Has anyone in the room heard of Cola Life? This is really is to me a really great example of corporate social innovation that’s helping the communities that are able to receive distributions of beverages like cases of bottled Coca-Cola. Sometimes areas where health care isn’t even able to be delivered. There’s this great innovation in the UK where they’ve actually created a model of a carrier for the medicines that are needed that fit into the spaces between the Coca-Cola bottles. So all of a sudden, you have the distribution of health care that otherwise wouldn’t happen being enabled because of the distribution of the bottles.

And to your point, sir, I appreciate that there’s a real irony there, you know, sugared Coca-Cola and plus, you know, the vaccines and some of the things that are needed to fix some of the chronic illnesses in these communities, but it’s an example I think of how companies can actually build some reach to the communities and begin by thinking really differently and out of the box or out of the crate.

Question: The question I have for you is how do we incentivize corporations to do the  social obligation just like what you’re talking about?

Steve:   Some of the financial mechanisms and, Celia you were talking a lot about the measurement of companies in their performances, there are some exciting initiatives like SASB, for example, where sustainable accounting practices are being brought into place where they’re putting a price on water and putting a price on natural capital. That seems like a very odd thing right now, but it is working. It is very much, becoming institutionalized and companies are starting to use these methodologies to not only look at their bottom line, but look at what are the risks and opportunities associated with ‘we require a lot of water to make all of these bottled drinks but we don’t have an endless supply of water’. That’s an enormous flag and a risk, and maybe a cost that triples, quadruples in the coming years. These are things that they’re looking at very closely and that’s a great nudge in the right direction.

Andrew: I think that’s a great question. I think the biggest reason to shift from the corporate social  obligation is because there’s a real strong business case for the alternative, which is consumers are getting smart. They’re sick of just cause marketing to try to Band-Aid over a big problem that corporations created. Employees are also smart and they want to work at organizations that truly are engaging in projects and initiatives that have good intentions. There’s a strong business case to be made from an employee engagement perspective and attracting talent, and I think there’s a business case to be made that consumers are smart and they don’t like green washing and they want to see real, authentic initiatives coming from these organizations.

Question: I’ve been member for several decades of the Social Venture Network in the United States, and what’s really been interesting to see over time it’s how you’ve got a number of smaller companies that have gotten quite successful who’ve been bought out by big corporations, especially the organic group, but also in the soft drink and ice cream industry. Right now in the United States, you go and you see a name that you associate with great companies is really owned by Coca Cola. There’s been an ongoing debate which I think is relevant, and that is from a social impact point of view. Given to the fact that the reach of a large corporation is much greater than a small company, is there a benefit to be made to work in conjunction or actually be bought out by big corporations in terms of the distribution?

It applies to something like Ben & Jerry’s, a company bought by Unilever, but lo and behold a year ago, two years ago, Ben & Jerry’s becomes a big corporation. It’s a really interesting model of how a multinational, you have a unit that is embedded in social responsibility while the parent company is not. Another strategy might be to reconsider just looking at what companies out there you can actually purchase or get into relationship with that can bring their innovation to you.

Andreas: As the guy who had a small company that was bought by the very large company, I just want to completely endorse your approach. I remember the conversation as if it was yesterday. Five years ago, the CEO of a billion dollar company sat down with me and said, “Imagine the impact.” Those were the magical words for me, right, ‘imagine the impact’. It was no longer about ‘hey, imagine the check I’m going to write for you or imagine how cool your story is going to be’, it was ‘imagine the impact’. I am going to give you this massive reach that you didn’t have and we’re going to change the world together. Now the beauty of it all is ultimately, he was also fueled by greed, by capitalism. He knew that if he actually embedded this goodness inside his corporation just like your Ben and Jerry example potentially, if you embed it you can be successful. Long-term, he also gets to do a lot better financially, but his pitch to me was all about impact, and he was absolutely right. I think that’s a brilliant approach and I wish every large corporation would absorb half a dozen startups like that.

Question: Yes, but the devil was in the details. It’s all about the greediness and I’ve talked to a number of people in these situations and really, there is a lot in terms of what we can achieve with a social mission.

Andreas: Sure. And believe me having been through the journey that followed that, there’s always going to be some tension.

The lucky thing for us back to my story, because the corporation that bought me had a remarkably young employee base, very smart young people, they believed in this stuff so much that the momentum just multiplied. As soon as we announced to our couple of thousand of employees that we were now a combined entity, the employees went crazy and said, “How much more can we do?” not how much less, you know. Instead of resisting the disruption to their traditional money-only business model, they embraced the change even more which was fantastic. Having said that, I was a social entrepreneur who’s suddenly living inside the walls of a $2 billion entity and there was tension. There was definitely tension, right, because every day you wake up and you want to do things faster, cleaner, more authentically than a large Titanic can be steered, but that’s okay. I think that’s also very productive tension for everybody.

Steve: And this was precisely what we were hoping to tease out in this session, is that there are corporate examples of people working within but then there’s the other example of these young social entrepreneurs that are at the conference this week, that may have an opportunity to be partner proactively with corporation and take something to scale. This is very exciting to me and I hope it is to you.

Question: How’s the whole regulation thing working? Are regulators actually enhancing social value? Do we see regulation as stifling innovation to some extent?

Andreas: I’ll answer the second one first. Absolutely not. I don’t see regulation as stifling innovation. If … anything, regulation sort of creates opportunities in the eyes of entrepreneurs like us because when we see things coming, when I was standing at that airport and seeing calorie count on the Starbucks thing, I was thinking ‘oh, my God, this is coming to the rest of the world. So who’s going to get ahead of this train first and do better?’ I think regulation really always creates the foundation for more innovation.

Do I see enough progress from a regulation perspective? That’s a very complicated question frankly because it depends on which country you’re in and which topic you’re talking about. Our country and in fact, it’s almost ironic I’m saying this as I’m standing on a podium in Calgary, our country has become so addicted to selling energy that it’s almost impossible for us to regulate energy at this point because we’re so concerned about losing the wealth race that we’re on right now. We do need to have to blend that with a little bit of future vision because at some point people will not be buying oil. We got to figure out what people will be buying 50 years from now. Regulations should accommodate for that, but we haven’t quite cracked the code and we’re truly becoming like a nation of addicts, right. We’re addicted to selling energy and so we try not to regulate it. When the IPCC report came out last week about climate change, our government did not even offer an official comment on it because we are so terrified of taking a climate change.

So it really depends. There are other countries where things are more progressive. I’ve always been a believer in the United States, which has the largest potential to change the world because the U.S. is a very entrepreneurial culture, so it turns on a dime. When people in the US realize that there is benefit to be had by regulating health for instance or obesity, which is their biggest issue there, I think you’ll see a sea change of regulation, a rapid development of regulation that’ll create amazing innovation within that society. So again, I’m not giving you a single answer because it really depends on the jurisdiction.

More About SEWF

sewfThe Trico Charitable Foundation was honoured to host SEWF 2013. It made history in a number of ways – it was a first for Canada and attracted a record number of speakers and attendees (1,000 individuals from more than 30 countries and over 100 speakers from 20 countries) – but we are most proud of the quality of the discussions on Skills Building, Social Finance, Indigenous Social Enterprise, Collaboration, Policy and Research, and Social Innovation.

A special  thanks to Photos With Finesse by Suzan McEvoy for the pictures, BizBOXTV for producing the videos, and Employment and Social Development Canada for helping to make this post-event coverage possible.

We would also like to thank the following partners for making SEWF 2013 possible:

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Each year SEWF gives a different host country an incredible opportunity to celebrate and nurture its own social enterprise movement. The inaugural SEWF met in Edinburgh, Scotland. Since then it has been to Melbourne, Australia; San Francisco, U.S.A; Johannesburg, Africa; and Rio de Janeiro, Brazil. Learn more about SEWF’s history here.

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