So­cial En­ter­prise

Pur­pose-driven busi­nesses we love

Good - - CONTENTS - Words Jes Mag­ill

S ocial en­ter­prise: it’s a term we hear more these days, re­flect­ing a grow­ing move­ment that fo­cuses on chang­ing the way busi­ness is done and em­pha­sises con­sumers’ abil­ity to do good with their pur­chas­ing power. Ac­cord­ing to So­cial En­ter­prise Auck­land, “So­cial en­ter­prises are hy­brid or­gan­i­sa­tions that trade goods and ser­vices to achieve so­cial, en­vi­ron­men­tal, eco­nomic and cul­tural out­comes.”

This global move­ment re­sponds to what some see as the fail­ure of the mar­ket-led econ­omy, lead­ing to bur­geon­ing so­cial and en­vi­ron­men­tal is­sues that younger gen­er­a­tions will in­herit.

As a re­sult, there’s more de­mand – es­pe­cially from mil­len­ni­als – for fi­nan­cial mod­els where busi­ness gives back to so­ci­ety as well as mak­ing a profit. In­creas­ingly, mil­len­ni­als want to work for these kinds of or­gan­i­sa­tions too.

NZ’s so­cial en­ter­prise jug­ger­naut

Nearly three years ago, Lisa King re­alised chil­dren in this coun­try were go­ing to school hun­gry, and of­ten lacked lunch as well. She couldn’t shake a sense of in­jus­tice. So, quit­ting her job as a food mar­ket­ing spe­cial­ist, she de­vel­oped a bold vi­sion, to en­sure no Kiwi child at school goes hun­gry. Eat My Lunch (EML) was born.

The ini­tia­tive is based on the buy-one, give-one model. When a donor buys a lunch from EML, they also pur­chase lunch for a child in need. Donors can choose which of the elected 48 low-decile schools the lunches go to, and vol­un­teers make the lunches early each morn­ing, ready for delivery to schools by lunchtime.

“We thought we’d make about 100 lunches a day, not thou­sands [at time of pub­lish­ing, they’ve made ap­prox­i­mately 630,000 lunches], and we never en­vis­aged we’d cre­ate a ve­hi­cle that would bring peo­ple to­gether. It takes all these peo­ple – our cus­tomers, vol­un­teers, staff and sup­port­ers – to make Eat My Lunch what it is to­day.

“We set up as a busi­ness, not a char­ity, be­cause we knew this had to be self-sus­tain­ing. We em­ploy 27 peo­ple now; we pay rent and taxes,” says King. “Eat My Lunch has shown New Zealand a busi­ness that puts a so­cial-pur­pose en­ter­prise at its heart can be com­mer­cially suc­cess­ful.”

Start­ing young

One of New Zealand’s youngest en­trepreneurs, Bon­nie How­land cre­ated In­digo & Iris after two very dif­fer­ent ex­pe­ri­ences nearly three years ago: spend­ing time in Van­u­atu, fol­lowed closely by a stint at New Zealand Fash­ion Week.

Aged 18 at the time, How­land be­came aware of the huge im­pact treat­able blind­ness has on Pa­cific Is­land com­mu­ni­ties. Back at Fash­ion Week, un­der­stand­ing the phe­nom­e­nal global spend on beauty and fash­ion in­spired her busi­ness idea. Con­sumers pur­chase beauty prod­ucts from In­digo & Iris, and 50 per cent of the prof­its go to projects through­out the Pa­cific Is­lands, in­clud­ing to cure treat­able blind­ness.

Press­ing pause on her stud­ies, How­land be­gan hunt­ing for the most beau­ti­ful mas­cara she could find. “After years of search­ing for the per­fect for­mula, we found it in Italy. We called it Le­vi­tate and launched a lim­ited run of pre-sales in Novem­ber, on Kick­starter.”

How­land heads to New York in Fe­bru­ary 2018 with CEO Han­nah Duder, to of­fi­cially launch In­digo & Iris. “Profit shar­ing is an amaz­ing way to not just ben­e­fit a small group of peo­ple, but ac­tu­ally have a pos­i­tive im­pact on the world with your profit. I think my gen­er­a­tion has a grow­ing de­mand for eth­i­cal busi­ness. This is ab­so­lutely the fu­ture.”

King of the good fizz

So­cial en­ter­prise pi­o­neer Chris Mor­ri­son is still go­ing strong since he co-founded his first start-up, Phoenix Or­gan­ics, back in 1985. He con­tin­ues to in­no­vate here and overseas, co-found­ing two more eth­i­cal com­pa­nies: All Good Or­gan­ics and Karma Cola (see case study pg 38).

Mor­ri­son sees op­por­tu­ni­ties for so­cial en­ter­prise ev­ery­where, but of­fers a caveat. “It’s even more im­por­tant for a so­cially fo­cused busi­ness to have a sound busi­ness case with your prod­uct or en­ter­prise on trend. Mar­gins can be tighter and there’s noth­ing in it for any­one if a great busi­ness fails,” he says.

“We’re get­ting to the point that if your busi­ness isn’t so­cially or en­vi­ron­men­tally fo­cused, you don’t have a fu­ture.”

“I think with my gen­er­a­tion, soon to be lead­ers of NZ busi­nesses and this na­tion, that there’s a grow­ing de­mand for eth­i­cal busi­ness. This is ab­so­lutely the fu­ture.” Bon­nie How­land, In­digo & Iris

Peo­ple are de­mand­ing prod­ucts that align with their val­ues, and they’re shar­ing great sto­ries and in­no­va­tions via so­cial me­dia. “On the other side, there are busi­nesses that aren’t do­ing so well, they’re a lit­tle shady and they’re be­ing outed. I’m ex­cited about that,” Mor­ri­son says.

But it’s not all fizz and fluff. “It’s harder do­ing busi­ness as a so­cial en­ter­prise be­cause you can’t go past the eco­nom­ics of it – it’s al­ways more ex­pen­sive do­ing the right thing. Be­cause you’re pay­ing a fair price for man­u­fac­tur­ing, your raw ma­te­ri­als and pay­ing the liv­ing wage, you’re usu­ally pay­ing more than your com­peti­tor. But the good thing about that is it forces you to com­mu­ni­cate re­ally clearly and drive ex­tra value.”

Truly in­spir­ing sto­ries

When Guy Ryan set up In­spir­ing Sto­ries, an in­cu­ba­tor for young en­trepreneurs, he was 24 years old. It was the se­rial en­tre­pre­neur’s fourth start-up; he was named Young New Zealan­der of the Year in 2015.

Ryan’s light­bulb mo­ment was re­al­is­ing young peo­ple are piv­otal to solv­ing to­day’s big chal­lenges. Ev­ery ini­tia­tive he has cre­ated is de­signed to in­spire and un­leash the pow­er­ful cre­ativ­ity he recog­nises in some of New Zealand’s youngest and bright­est.

More than 6000 of them have al­ready taken part in In­spir­ing Sto­ries’ pro­grammes: Fes­ti­val for the Fu­ture, Live the Dream, Fu­ture Lead­ers and Mak­ing a Dif­fer­ence. And when these en­trepreneurs launch their start-ups, In­spir­ing Sto­ries’ seed fun­der Fu­ture Fund will be there with sup­port as well.

Although a char­i­ta­ble trust, the or­gan­i­sa­tion’s goal is to be self-fund­ing through its five rev­enue streams: com­mer­cial ven­tures, pro­gramme fees, grant fund­ing, spon­sor­ship, and do­na­tions. In 2016, In­spir­ing Sto­ries’ op­er­at­ing rev­enue reached $850,000, and three com­mer­cial ven­tures have been es­tab­lished. All prof­its from the re­cruit­ment agency, speak­ers’ bureau and cre­ative agency will sup­port fur­ther pro­grammes.

Ryan says while in­ter­est in so­cial en­ter­prise has grown in the last five or six years, he hasn’t yet seen that be­ing matched by pub­lic in­vest­ment here, in com­par­i­son to im­pact in­vest­ment in Aus­tralia, Scot­land and the UK.

Guid­ing the mil­len­ni­als

To cre­ate the right en­vi­ron­ment for so­cial en­ter­prises to flour­ish, build an ecosys­tem that gen­er­ates its own mo­men­tum, ac­cord­ing to Dr Jamie Newth, lec­turer in so­cial en­ter­prise at the Univer­sity of Auck­land’s Busi­ness School and the co-founder of Soul Cap­i­tal, an im­pact in­vest­ment or­gan­i­sa­tion.

“We’ve got a good idea on what helps de­velop in­vest­ment mar­kets be­cause we’ve done it with an­gel in­vest­ment and ven­ture cap­i­tal in NZ since 2000. We now have a thriv­ing ecosys­tem for this type of cap­i­tal and there’s no rea­son why we can’t do the same for im­pact in­vest­ment,” he says.

“Gov­ern­ment has a spe­cific role too, much like it has with Cal­laghan In­no­va­tion and for tra­di­tional cap­i­tal. There are also leg­isla­tive changes gov­ern­ment can make to ease the hes­i­ta­tion that big phil­an­thropic or­gan­i­sa­tions have about mo­bil­is­ing their in­vest­ment cap­i­tal into this space.”

Newth de­scribes the mood of many mil­len­ni­als he teaches as “op­ti­mistic dis­sat­is­fac­tion”. “They can see they’ve grown up in a pros­per­ous so­ci­ety, but one that has in­jus­tices. To their mind, gone are the days when a tra­di­tional busi­ness can be com­pletely ap­a­thetic about its so­cial and en­vi­ron­men­tal im­pact.”

He agrees with Mor­ri­son: be­ing a so­cial en­tre­pre­neur in­volves an ex­tra bur­den. “As well as need­ing all the ca­pa­bil­ity of a tra­di­tional en­tre­pre­neur, you also need to do the hard work on build­ing your so­cial im­pact model.

“If you’re want­ing to ad­dress an is­sue with so­cial en­trepreneur­ship, you re­ally need to de­velop a deep un­der­stand­ing of the prob­lem so you can gen­uinely make an im­pact. It’s about get­ting real versus just hav­ing a pas­sion.”

Kiwi en­tre­pre­neur and speaker Derek Han­d­ley says New Zealand is of­ten seen as a great test­ing ground for new de­vel­op­ments, be­cause of our small and well-in­te­grated mar­ket. “We have a real op­por­tu­nity to be­come lead­ers in cre­at­ing and back­ing im­pact-ori­ented com­pa­nies, and in­spir­ing ev­ery en­tre­pre­neur to tackle a so­cial chal­lenge, not just a mar­ket prob­lem.”

EML founder Lisa King is hope­ful that soon, and quickly, peo­ple will start think­ing about busi­ness in a very dif­fer­ent way. “You need courage to step out­side your com­fort zone and do some­thing dif­fer­ent. If there’s one word I would tat­too on my body, it would be ‘courage’. I think it’s one of the most im­por­tant at­tributes; mov­ing be­yond your fears, be­ing brave enough to risk it.”

How to build a busi­ness for so­cial im­pact

Derek Han­d­ley over­sees Aera, a char­i­ta­ble trust he founded to in­vest in causes and com­pa­nies ad­dress­ing so­cial is­sues. In 2016, the foun­da­tion formed Aera VC, a ven­ture cap­i­tal in­vest­ment com­mu­nity for so­cial-im­pact busi­nesses around the world. Han­d­ley’s other en­ter­prises in­clude The Hyper­fac­tory, Snakk Me­dia, and with Sir Richard Bran­son, The B Team, an ad­vo­cacy

Derek Han­d­ley, Aera Foun­da­tion

“While busi­ness and en­trepreneur­ship are the most pow­er­ful and in­spir­ing forces of progress, in this cen­tury they have a far greater re­spon­si­bil­ity than purely fi­nan­cial profit.’’

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