With the Social Enterprise World Forum in Christchurch from September 27 – 29, The Spinoff is examining the way the sector is changing our economy. Alex Hannant, CEO of the Ākina Foundation, spoke to Simon Day about the development of the socially conscious business in New Zealand.
Should business be just about making money, or also improving the world? Can it do both at the same time? Corporates with an explicit commitment to a greater good are shaving off a growing portion of the marketplace, by offering the public a chance to consume their way to a better society.
A social enterprise exists for the primary purpose of achieving their social mission, over shareholder value. Although, these two objectives do not necessarily have to be mutually exclusive. Since the beginning of the 1990s the social economy has gradually come to be recognised as the ‘third sector’ outside of the private and public. Through the new millennium, social enterprise has become an increasingly important place for successful entrepreneurs to find greater fulfilment in their work, and consumers look for greater meaning in their purchases.
Globally TOMS shoes was one of the first companies to get mass breakthrough with their kinder approach to capitalism, where for every pair of shoes purchased by a consumer, a pair was donated to a “child in need”. The company has progressively expanded the development work it contributes to, and now helps provide clean water for vulnerable communities, sight restoration, and maternal health care.
In New Zealand, social enterprise Eat My Lunch was inspired by TOMS and based its work on the same model – for every lunch purchased, a lunch is donated to a child who would be going without food at school. Founder Lisa King, formerly a successful corporate marketer, was looking for a way to help alleviate the effects of New Zealand’s child poverty rates. Last month the company donated their 500,000th school lunch, and has brought huge publicity to the sector’s growth.
The “buy, one give one” model is just one approach in a movement that has gained significant momentum as businesses and entrepreneurs use their position to influence change. Meanwhile, increasingly woke consumers are looking for companies that benefit society at the same time as providing the goods and services they need.
“The term ‘social enterprise’ can be used, interchangeably, to encompass traditional ‘not-for-profits’ or charitable organisations with trading arms, community-owned business and co-operatives, and also mission-led, or profit-with-purpose, businesses. These groups, even within themselves, can vary greatly in size, structure, culture, and strategy,” says Hannant.
“However, when defining social enterprise it is, perhaps, more helpful not to try and homogenise the extent of diversity but to highlight the essential, non-negotiable, characteristics they have in common. That is, they a) have a business model, and b) that it is in service to social or environmental objectives.”
But as the presence of social enterprise in our economy expands, questions over their transparency and balance arise. There’s no guide to how much profit is acceptable when you’re selling your business as a social enterprise, and they need to be integrated as part of the greater solutions to issues like climate change and poverty.
The Ākina Foundation is tasked with growing social enterprise in New Zealand and helping build the infrastructural and legislative environment for them to flourish. The Spinoff spoke to CEO Alex Hannant about the why the sector is growing, how it can be nurtured and scaled.
How do you define a “social enterprise”?
A social enterprise is a purpose-driven organisation that trades to deliver social and environmental impact.
Lots of different people use the social enterprise model to deliver their goals, so they often look different and think differently. This is healthy and important as we need diversity and scale to drive the change we want to see in the world.
What makes the sector unique?
I’d say the unwillingness to make trade-offs between social, economic, and economic goals – all of these elements needs to be place and linked up for society to work, and we’ve treated them in isolation for far too long.
Is the sector growing?
Yes, very rapidly, and from all parts of society – communities, charities, entrepreneurs, and mainstream business.
For a number of reasons: innovation is in a golden age, and more and more people are now enabled to be enterprising through technology, or otherwise. And our social and environmental challenges aren’t going away, and I think there is general sense that we can all do more to make our world a safer and more sustainable place to live. Also, I think the forces of trade, capital, and policy are all slowly moving to recognise that a significant shift needs to happen, and that the 21st century will be fundamentally different from the last. Basically, the human race has to start acting like it wants to stick around for while.
Where is New Zealand in its social enterprise journey?
The individual social enterprise work going on in New Zealand is excellent, and has been for many years. But what we have lacked up until now is the connectedness, strategy, and coherence that will make our collective effort more productive and powerful. We have lacked the presence of an identity, the guidance of good information, and the grunt of a supporting infrastructure. So that’s the problem we need to solve – not just building enterprises but building an ecosystem.
Is there a global movement towards the social enterprise sector?
Yes, very much so. In fact, I would say there are a number of movements, and sometimes competing with each other as they try and find ways to grow and gain greater traction.
The simplest way to describe this clash might be the social leaning into to business vs business leaning into social.
What inspired this movement?
Inspirations and motivations will be many and mixed but ultimately I think it comes to down to trying to do things better, finding a new economic model based equally on sustainability, prosperity, and inclusion. And when I say prosperity, I mean more than wealth, I mean well-being.
What is the difference between a ‘charity’, a ‘social enterprise’ and a ‘business’?
There’s nuance here because a charity can be a social enterprise, and a business can have registered charitable status. The key things to think about are intention – why does the organisation exists? Legal structure – what is the model of ownership governance? And revenue model – how does the organisation create value and resource itself? A social enterprise needs to be mission-led and commercially viable. The legal form matters less (although will have implications), and we’re starting to see the development of fit-for-purpose legal forms for social enterprise being established in other countries.
Has it been difficult for the sector to justify making a profit at the same time as have a social cause at their core?
Yes, I think we’re still making sense of this. While we applaud a straight-up business that chooses to do good things, we’re still a bit grumpy about organisations that declare to be mission-first and then also allow themselves to make a profit to compensate their risk and efforts.
On one hand I think a culture shift has to happen so we can consider these tensions in a way that is not simply ideological. On the other, I think we need some quality assurances that a self-declared mission-first business is what it says what it is. And that the impact they claim is evidenced, and that there is a clear and proportional alignment between purpose, governance, business model, and investment strategy. Ultimately, what matters is the overall impact and integrity of practice.
How can government support social enterprise? Is NZ doing that? What sort of infrastructure and legislation is needed for the sector to succeed? Where is that being done well?
Going forward, there is a big prize, if we can better create the conditions for more social enterprises to start-up and succeed. There are plenty of working precedents of how this can be done, and making progress really comes down to taking a long-term approach and doing four things well. If we do this, I have no doubt that New Zealand can become a world-leading market for social enterprise within the next five years.
Firstly, we need to build skills and capability, and provide the appropriate growth support to social enterprises across the country, through all stages of their development. Done well, this support will pay dividends in both profitability and impact, move social enterprise into the mainstream, enable local leadership, and radically expand the number of people equipped to innovate, regardless of who, and where, they are.
Secondly, we need to build a market for impact investment where there is appropriate financing for both innovation and growth. This means making access to capital more efficient for SEs, as well as enabling more investors – be they private, philanthropic, or citizens – to use their capital for social change as well as financial return.
Thirdly, we need to build the marketplace for impact, so that consumers and supply chain managers, alike, increase their trade with social enterprises and unlock more value through their everyday purchasing and procurement decisions. And, indeed, that we create new markets for impact itself, so that we are better able to reward and expand the most effective interventions.
Fourthly, we need to establish a sector infrastructure where social enterprises are connected to each other, where we learn from robust and enabling data, where policy is connected to needs and opportunities of the market, and where the resources of government, local government, philanthropy, big business, and civil society are aligned with their own interests, complementary to each other, and focused on enabling entrepreneurs to get on with the job at hand.
No one party is responsible for making this happen, but it will only happen if every party does its bit.
Are we seeing the government outsource parts of its role to social enterprise?
Governments all around the world have been in the process of outsourcing stuff for years now.
Done well, this can be empowering for communities, and lead to more appropriate parties delivering better services at a lower cost.
Done badly, and you get corporate monsters doing complex things crudely, where their primary interest is maximising profit rather than duty of care.
I think the outsourcing conversation is actually a way into to a far more fundamental conversation about how we structure roles and responsibilities in society. I’m all for Government doing less and resourcing more, as long as commissioning is done through a lens of care, empowerment, innovation, and partnership. And social enterprises can play a pivotal role in this.
Beyond outsourcing public services, Government can simply buy more everyday goods and services from social enterprises, and also enable more impact to be created. For example, there’s an Australian social enterprise called ‘Who Gives a Crap’ that sells toilet rolls and redirects profits into sanitation projects. Why not buy your tens of thousands of bog rolls from them and effectively supplement your foreign aid budget through money you would have spent anyway?
How is social enterprise an emblem of the changing nature of our society and the way we look at the world?
At is best, and when we’re at our best, social enterprise represents a systemic, integrated, and compassionate way to live our lives in a modern society and economy – a new economy where we look after the place and no one is left behind. Everyone has the opportunity to thrive and we treat each other as the equals that we are.
Profit is easy to measure, how do you measure social impact?
To do this properly we need another conversation!
But suffice to say before you measure anything you first have to understand what you’re trying to change and what actually happens as a result of your actions – intended and unintended.
You have to identify what’s happening on a repeatable basis and then establish indicators of those changes that you can monitor practically and regularly. This is an area of weakness for the sector, and we really need to get better at it. The key thing is focus less on your solution and more on understanding the context you’re working in, the problems you are trying to impact, and the people that you seek to serve.
How significant is New Zealand hosting the Social Enterprise World Forum later this month?
Hosting the Social Enterprise World Forum is significant for New Zealand because the event has a track record of being a catalyst for sector development. Whether it’s the attention its draws in organising, the connections it facilitates in delivery, or the intention it leaves in legacy, SEWF has a precedent of being a transformative force for social enterprise in the countries where it’s held.
Certainly, by either luck or design, SEWF seems to be coming to New Zealand at exactly the right time. Our sector has just enough momentum for the event to have achieved real traction, but is still nascent enough for the conversations, connections, and learning offered by SEWF to have a profound impact on future strategy.
So it’s a big deal for social enterprise in New Zealand. And it’s also a big deal for the city of Christchurch, as it will be one of the biggest international events to be held there since the 2011 earthquake, and maybe the one with the most practical use and optimistic purpose.
It’s also a big deal for the SEWF itself, as this will be the biggest and best Forum to be held to date. Whether this is a result of growing global momentum or New Zealand just playing a blinder, I don’t know. Probably a bit of both.
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The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.