I wrote this post for my friends at Unsectored. You can find the original post here: http://www.unsectored.net/values-the-way-to-a-greener-economy/
This month, UnSectored is discussing “Can social enterprise lead the way to a greener economy?” I think before we can have this conversation we need to better understand the question. Part of social enterprises’ challenge to date has been the lack of a clear definition among all within the field. That definition will hopefully become clearer over time, but it’s important to realize what you or I think is a social enterprise might not resonate with someone else.
At the same time what is a “greener economy”? Is it an economy that is more environmentally responsible? More socially responsible? Less focused on profits? All three? Or a combination?
What is missing from this question is values. Everyone has different values. Just because I value supporting women-owned social enterprises (and women-owned businesses in general), that doesn’t mean the social entrepreneur or the large multinational corporation next door feels the same. Takamoto Biogas is providing bio fuel to rural farmers in Kenya; SnackPackers is employing people with disabilities to provide healthy snacks to people all over the US; and DayOne Response is providing clean water to people in the aftermath of disasters. If you did a survey and asked people which of these social enterprises was doing the most important work I’m sure there would be no clear winner, because they are all doing important work. And the work of all social entrepreneurs is varied, important, and invaluable.
That value is starting to be seen more and more by large corporations, and many have their own green brands–Coca-Cola with Honest Tea, Colgate-Palmolive with Toms of Maine. Why have they made these investments? Because there is consumer demand for such products and these companies want to be a part of that market. Other companies like Maya Mountain Cacao, which is pioneering a direct trade model in a market that has traditionally been focused on fair trade, aren’t working directly with large multinationals but by competing for customers in a socially responsible and green way, they are forcing large companies to think twice about their own sustainability practices. We can only expect change if social enterprises continue to engage with and pressure traditional large corporations to go green.
Social enterprise is gaining steam as a result of consumer demand. Educated consumers know the issues they care about and know how products and services affect those issues. Large corporations and small startup social enterprises alike need to meet customer demands in order to be successful. There are tons of examples of BPA free products on the market because consumers demanded it. Ultimately, consumers have the power to see the market change based on their demands. Consumers should educate themselves not only on the issues they care about but also which companies (social enterprise or not) also care about those issues. By supporting companies with similar interests, consumers can lead the way to a greener economy and ensure we have a market that represents what we value.
I know, I know. You could have told me that.
I was lucky to grow up in an entrepreneur for a father and a mother who stayed home with us when we were little, went back to school then back to work, and ultimately gave up what she loved to work with my dad. I also have 10 amazing aunts and 10 uncles my aunts thought worthy of spending their lives with. I noticed when I was in college that I came from a family where everyone (admittedly I was in high school before I realized that there were people around me who really wouldn’t have the opportunity to go to college) except one of my grandmothers had a college degree and most have advanced degrees (MBAs, Phds, JDs). So that’s 3 grandparents, 2 parents, 1 sister, 10 uncles, 10 aunts, 5 cousins so far, and no reason to think the other 13 won’t graduate as well. That’s 37 people if you count me and Dan (and that’s only my extended family).
What I also noticed when I was in college is that none of these marriages (except one and that has lead to a happy second marriage) ended in divorce. Here’s the kicker my mom, grandma, and aunts (except 3, one of which doesn’t have children) all gave up or changed their careers at some point so they could be with their kids. I think that’s great.
But here’s what makes me nervous: My parents (and sometime I’m not sure they realize this) raised my sister and I to be go getters. I love that about us (and to be honest my sister works harder than I do, and she is second only to my dad). What that means is I never want to give up my career.
Dan and I have been married for just over two months, but I’ve been thinking about this for years (I can hear all you Sheryl Sandberg fans groaning). How do you balance two careers, especially when one of them has the potential to take you from city to city and not one we currently live in?
I don’t think one person’s career can win every time, but I also don’t think the person with the steady job and great benefits should be quitting (too often anyway). I won’t say I’m/we’re even close to figuring out the answer, but it’s something I wanted to put out there. Hopefully, some good thoughts will come back my way.
After my first conversation with Emily, I knew she was a natural leader full of inspiration and empowerment. I also had the luxury of reading her business plan through my work with WJF, so I knew I would be working with a strong business that had values I really believed in.
I didn’t talk to any other members of the team before I got here, so I wasn’t exactly sure what to expect or what type of dynamics I would be walking into. I’ve been involved with more than one organization where the leader(s) talk about employee and community empowerment as something that is extremely vital to the organization, but when it comes time to act either don’t know who to create a culture of empowerment, are blind to signals that that’s not the culture they’ve created, or don’t really practice what they preach.
What I’ve seen here in the Toledo District of Belize was reinforced yesterday at the Maya Mountain Cacao Staff Leadership Retreat. I had high hopes going into the retreat after the Mission-Money Matrix exercise I led at a staff meeting a few weeks ago. That day the staff totally embraced the exercise, spoke their minds, debated points of view, and we came out with a really strong framework of where we think the hybrid structure of the MMC for-profit and non-profit organizations should focus.
At the leadership retreat, we started of with Whitney leading us through a fit framework for MMC and then individual fit frameworks for each employee. I then worked the team through a logic model to think about what a non-profit partner of MMC would be focused on and how it could support MMC’s overall mission and vision. After lunch, Ana led the team through and exercise on accountability and then Emily facilitated a discussion on what it is each team member was responsible for and what they need to be sure to provide to those they report to. The day was a total success overall. We all worked hard and as a team to make sure that MMC is operating as best it can, and there were no egos or negative words to hinder the spirit of teamwork.
Bringing together people of different education levels, cultural backgrounds, and value systems can be difficult in the simplest of circumstances. Empathy is not something that comes easily to most (Although I wish I would and it’s something I personally work had at.). However, at MMC you can tell empathy is valued and everyone is empowered to express their opinions and do their jobs as they see fit. The MMC team makes it look easy and are a team to aspire to emulate.
There’s been article after article about choosing the right legal structure for your social enterprise and even a flurry about creating a hybrid model that uses both the for-profit and non-profit structures. After reading a large portion of the literature, I thought the hybrid model was the way to go. After getting closer and actually working to create a hybrid model, I’m feeling more conflicted.
To be clear, I still think Maya Mountain Cacao (MMC) is doing great work and in no way question their motives. MMC is looking for ways to have the biggest impact and figure out the best way to occupy the gray area between the for-profit and non-profit legal structures that social enterprise occupies. It should be noted that I am writing from a US legal perspective, and MMC operates in Belize where the legal requirements differ and I am much less familiar with. It should also be noted that I am personally having a difficult time accepting how the non-profit funding model works right now, so I have a somewhat negative perspective. (This is probably a sign that it’s time for me to get back to the for-profit side of the sector).
So here are the things I’m struggling with in relation to a non-profit and for-profit that have a contract-based relationship for working together. Again, these are thoughts running through my head:
1) Is it ok to start a non-profit as a backdoor way to access capital for your for-profit?
2) Many start-up social enterprises aren’t in a position to fund a non-profit supporting their work. What happens if funders aren’t interested either?
3) How to you protect the social/environmental mission of the for-profit if you transfer most of the social/environmental goals to the non-profit?
4) I’ve spoken to several hybrids that have up to four legal entities that allow them to do their work. Most often the stakeholders on the ground don’t know this complicated structure exists. Is it alright not to try to explain it in a way they can understand?
5) Is it better for the for-profit to start the non-profit and then find the right person to lead it or find the right person to lead it and let them start it?
I’m still working through all of these ideas and more, but would love to hear your thoughts, insights, and experiences on any and all of these.
After a push from my mother (“Aren’t you going to write anything in your blog?” referring to my up to this point photo blog of Belize: http://dontstopbelizin.tumblr.com/), I am renewing my goal of being a more active blogger now that I have more free time. The real challenge for me is coming up with topics to write about. I find it much easier when the topic isn’t me or my feelings. But I’m going to make the effort.
So what am I doing with Maya Mountain Cacao (MMC)?
First I should tell you what is. MMC is a company started three years ago by Emily Stone, Managing Director, and two others. Emily is an amazing individual with a passion for moving the cacao industry beyond fair trade. She moved to Belize after an initial two week trip to start a company focused on direct trade (sourcing cacao directly from farmers and paying above market prices). Three years later MMC is going strong. MMC has a great staff of locals (with the exception of Emily) who I can see from just two weeks with them have amazing talent, passion, and drive to make their communities a better place. As part of that, the team has developed both social and environmental missions in addition to producing the highest quality organic cacao.
I’ve been brought in to help MMC create a hybrid model. What exactly is a hybrid model. In this case it means creating a separate non-profit that will have a similar mission & vision to MMC. This non-profit will take over technical assistance, education, community organizing, etc.
Why do this? Two main reasons: 1) It will allow MMC to focus on creating a profitable social enterprise (they won’t be giving up their social and environmental missions) and 2) it will allow the new non-profit to access grant capital that MMC wouldn’t be eligible to receive as a for-profit. So in the first two weeks I’ve spent a lot of time thinking about hybrid models and talking to other organizations that have them as well as with the staff learning about who they are, what they do, what they think, and what they want as the future of MMC.
As part of that I lead a Mission-Money Matrix with the staff at the last staff meeting which went extremely well. Photo here (sorry there isn’t more detail).
Stay tuned for more details.
This is a blog post I co-wrote with Mary Fritz. It was originally posted on the Criterion Institute blog on July 2, 2013. You can read the original post here: http://criterioninstitute.org/womeneffectinvestments/2013/07/02/constructing-alternative-term-sheets-for-gender-lens-investments/
Every six weeks, Criterion convenes a set of people interested in barriers to capital access for early stage, impact, and normal growth companies. Applying a gender lens to these questions reveals the gender dynamics below the surface. Investing with a gender lens means intentionally looking at and analyzing those dynamics, and we believe that using that lens in examining this issue will help us to find new opportunities for women entrepreneurs to access capital.
The April call included participants from Criterion Institute, Village Capital, Upstart Ventures, Cutting Edge Capital, Morgan Stanley, Prime Advocates, the University of Michigan, and the Global Social Benefit Incubator at Santa Clara University. The conversation revolved around this question: Rather than encouraging women to do something different, how can we encourage and equip investors to work with the kind of businesses women are building? In our current system, women have low success rates in attracting equity investments. So how can we restructure available capital to make sense for normal growth businesses?
A clear goal rose from the rich discussion: to create a template for a new kind of term sheet, one that both entrepreneurs and investors will be comfortable with. We want to shift the status quo toward new options that span the spectrum from debt to equity – and beyond. There’s a gap here, and we see that as an opportunity to contribute to a new standard.
So what would it take to get there? In order to think about creating something that’s simple enough to use, flexible, and still tackles all the necessary questions, the group identified the core elements and challenges of a nontraditional term sheet. Our next steps are to think through how emerging investment vehicles, such as blended debt/equity, revenue sharing, demand/dividends, etc., will affect and be affected by questions like conversion, balance sheet positioning, thresholds, caps, governance, and transaction costs.
We’re working on a draft template to discuss and revise with the group. Through this process, we’re identifying success stories and case studies where alternative instruments have been used. The next question will be how to get people to test and use the template. Alternative term sheets are an important step in building the field of gender lens investing. But before tools like alternative term sheets can become wide spread we need to understand where the field is now.
Gender lens investing, what it means to different individuals, groups, and companies, is still being hashed out. There are many who are eager to get involved, but how they want to become involved, what they what to achieve, how they will make it happen need to be better understood. By understanding as many of the moving pieces of the gender lens investing space as possible we can begin to see and what needs to happen in order to continue to build the field. Criterion Institute is playing the facilitator role by engaging as many people and groups as possible to understand this field. In addition to creating alternative term sheets, Criterion is in the early stages of a project to look at the ecosystem as it currently is and what building blocks need to be put in place to get us where we need to be in 10 years. Stay tuned – we’ll keep you updated on our progress!