Social Entrepreneurship: Harnessing Commerce for Good
by Darcy Hitchcock
The holidays usually put people in a charitable mood. And then we go back to our real lives, our regular jobs. What if you didn’t have to switch from one to another? What if the work you did and the corporation you worked for solved pressing social and environmental problems every day? Sure, you could go to work for a non-profit, but those are always strung-out workplaces where saying ‘no’ feels like handing down a death sentence for some person or creature, and funding comes in tiny packages with strings attached. Why not leverage the power of the marketplace and all the money in it to solve the world’s problems? That’s social entrepreneurship.
It is not just compassion that leads companies in this direction. It finally occurred to some that if they only focused on serving the developed world, they forfeited 5/6th of the world’s potential customers. CK Prahalad’s book, The Fortune at the Bottom of the Pyramid, chronicles a number of different companies that are making a healthy profit serving the very poor, people who earn less than $2 per day.
It may seem unseemly to make a profit off of the poor. And this market is certainly ripe for abuse. But consider this. Poor people often pay much higher prices for the things we take for granted. Cooking with kerosene may cost much more to boil a kettle of water than on your electric stove. If they need a little credit, they may pay interest rates of 10 percent per week or day from the local loan sharks! When you can harness the profit motive and the financial capital of business to meet social needs, you no longer have to limit your efforts to what you can pay for through donations. Think about how much money you spend every year in commerce: buying food, electricity, restaurant meals, clothes, airplane tickets, mortgage payments, etc. Now add up your annual charitable donations. If you’re like most people, 98-99 percent goes to commerce, not charity. What if we could put a significant portion of that 99 percent to work on the world’s problems?
A first hand look at how social entrepreneurship works
My annual sustainability pilgrimage in 2007 was to India, the second most populous country in the world and developing rapidly, yet saddled with persistent social and environmental challenges. What happens there will affect us all. I wanted to better understand how poverty, development, women’s rights and sustainability were playing out. So I joined a three-week study tour planned by Pacific University to southern India where we were hosted by a women’s university, Lady Doak College. We attended lectures, visited shrines, led art projects at an orphanage, and visited two great examples of social entrepreneurship. Here are some of the facts I learned about the country:
Darcy in native garb which
we were asked to wear
226 million have no access to clean drinking water
70% have no sanitation
135 million have no access to basic healthcare
Roughly 1/2 women are illiterate while infanticide of girl babies, child brides and wife burning still exist
1/2 children under 5 yrs old are malnourished
Rates of obesity and HIV/AIDS are rising; already heart disease affects 28.8 million & diabetes 31.7 million
Poor infrastructure; the roads are the scariest I’ve witnessed; bus accidents alone kill 40,000 people a year
One of highest rates of corruption in the world so the funds they do have get funneled away from the intended work
Pollution: some Indian cities have some of the highest air pollution levels in the world (Source: Global Asthma Initiative)
Gandhi in company of Hindu goddesses
The country seems to be tearing apart culturally. The vast majority of people still live in villages where sanitation, healthcare and clean water are non-existent. A small minority of urban dwellers is rapidly rising to middle class, becoming shopaholics gobbling up Western goods. Embracing globalization in the 1990s has led to unprecedented wealth and a booming stock market, along with choking pollution and a brain-drain exodus. And then there is social entrepreneurship, the Middle Path that Buddha talked about, a path out of poverty but in a way that honors their culture and heritage, reinforcing the messages of Gandhi, whose impact is still strongly felt.
Aravind Eye Clinic
The Aravind Eye Clinic was described in the Fortune at the Bottom of the Pyramid. When I noticed they are based in Madurai where we would be staying, I asked if we could go there. This is such an inspiring story. It was founded by Doctor Venkataswamy (affectionately known as Dr. V for obvious reasons) a retired physician nearly crippled with arthritis. He wanted to eliminate unnecessary blindness, which in India is not just a huge inconvenience; it’s a death sentence. The life expectancy after going blind is about 2-3 years.He built this clinic as he could earn funds. Two thirds of the people pay little or nothing for their service, but those who pay and those who don’t get the same doctors, the same quality of care. The only difference is the comfort of the facilities. You could be a billionaire and walk into the free clinic and get served, as long as you’re willing to sit on the waiting room floor (a common practice in India) instead of in a chair.
Aravind: A one-stop shop for any eye problem
Woman being fitted with false eye
Dr. V was inspired by the success of Coke and McDonalds. If Coca-Cola can convince Indians to buy the sweet drink, perhaps similar methods could convince people to come in for surgery. If McDonalds can take people with low levels of education from anywhere in the world and produce a consistent quality, perhaps strong systems could enable Aravind to operate on thousands of people.The Aravind Eye Clinic is now the largest in the world. They have sophisticated real-time systems to monitor their performance. The quality of care is so good that the UK sends patients to them. Surgical interns from prestigious US medical schools go there to perfect their technique. Aravind designed their own intraocular lens for cataract surgery because the lenses they had to import cost $200, completely unaffordable for their patients. The model they make costs about $5 each and they are now exporting it. They send technicians into the villages to do eye exams and provide transportation, food and lodging for those who need more advanced care. They discovered that people were much more likely to wear glasses if the patients didn’t have to return to pick them up, so they make glasses and contact lenses on site. If you need something really unusual, they will FedEx your glasses to your village, no matter how remote. And they didn’t just stop there; they have shown others in many developing countries how to reproduce their results.
Tight funding was seen as a powerful catalyst for innovation. As Dr. V’s nephew, one of the surgeons, told us, “Innovation happens when you have scarcity. We too will become inefficient like the US, where we can just throw money at the problem. It’s inevitable. Eventually we will get there.”
In 2006 alone, they did over 98,000 eye surgeries and 1300 eye camps in the villages. They have their own eye bank, do research on eye cancer (I didn’t even know there was such a thing), and have developed tools for low-vision that are better and cheaper than anything we’ve found for my parents, both of whom suffered from macular degeneration and cataracts.
Here is how Dr. V (now deceased) saw his work:
“When we grow in spiritual consciousness, we identify ourselves with all that is in the world and there is no exploitation. It is ourselves we are helping. It is ourselves we are healing.”
You can hear echoes of Gandhi and Hindu spirituality in his words.
Perhaps social entrepreneurship seems obvious in a healthcare setting, so let’s look at other industries. Muhammad Yunus won the 2006 Nobel Peace Prize for his innovation of micro-lending through the Grameen Bank in Bangladesh:
“World’s income distribution gives a very telling story. Ninety-four percent of the world income goes to 40 percent of the population while sixty percent of people live on only 6 percent of world income. Half of the world population lives on two dollars a day. Over one billion people live on less than a dollar a day. This is no formula for peace…For building stable peace we must find ways to provide opportunities for people to live decent lives.”
Yunus discovered that poor people were actually a better credit risk than the typical banking customer, with lower rates of default. He formed teams of women, which built a strong sense of mutual obligation. He lent money almost exclusively to women because they usually spent funds on improving the lives of their families. While this was heretical in a largely Muslim country, Grameen Bank has prospered and at the same time raised the status of women. Here’s how Yunus describes the impact of micro-credit in Banker to the Poor:
“All her life she has been told that she is no good, that she brings only misery to her family, and that they cannot afford to pay her dowry. Many times she hears her mother or her father tell her she should have been killed at birth, aborted, or starved. To her family she has been nothing but another mouth to feed, another dowry to pay. But today, for the first time in her life, an institution has trusted her with a great sum of money. She promises that she will never let down the institution or herself. She will struggle to make sure that every penny is paid back.”
While he was talking about Bangladesh, the women of India face the same challenge.
In India, the Bank of Madura and ICICI Bank have made it possible for poor people to deposit extremely small sums of money, rupees at a time, via ATM cards, something that has allowed them to build wealth.The European conglomerate Unilever is making good money selling detergent and shampoo in single use packets. MIT designed a computer that costs only $200 for the One Laptop per Child effort. This has led to innovations in computer design that should translate to the expensive versions you and I own. The wifi capability is reportedly 3 times better and you can drop the laptop in the tub. Battery dead? Just crank the handle.
Certain more advanced technologies can actually be implemented more easily and cheaply than the traditional ones. Why string telephone cables all over a country when you can erect a few communication towers? And something as simple as a telephone can make a huge difference in people’s lives. Voxiva developed a public health system using public phones and menus to report and track infectious diseases in developing countries. This helps us all by identifying and treating outbreaks early. Cell phones in India have created employment opportunities for women as they sell minutes to their neighbors, and they have also helped farmers bypass greedy middlemen to get the best price for their crop.
Social entrepreneurship doesn’t have to start with a sugar daddy. In Dharavi, the largest slum in Asia, people have set up their own recycling system. The average household in Dharavi now earns between 3,000 and 15,000 rupees a month, well above agricultural wage levels and employs over 250,000 people. Eighty per cent of Mumbai’s plastic waste is given a new life there. And enterprising people have set up private schools in the slums of Hyderabad, charging a pittance every day.
Yunus believes that charity is actually counterproductive but he also provides guidance for bounding globalization:
“When we want to help the poor, we usually offer them charity. Most often we use charity to avoid recognizing the problem and finding a solution for it. Charity becomes a way to shrug off our responsibility. But charity is no solution to poverty. Charity only perpetuates poverty by taking the initiative away from the poor. Charity allows us to go ahead with our own lives without worrying about the lives of the poor. Charity appeases our consciences.
“The real issue is creating a level playing field for everybody—rich and poor countries, powerful and small enterprises—giving every human being a fair chance. As globalization continues to encroach on our socioeconomic realities, the creation of this level playing field can become seriously endangered unless we initiate a global debate and generally agree of the features of a ‘right’ architecture of globalization, rather than drift into something terribly wrong in the absence of a framework for action. This framework will no doubt have many features, but we can keep in mind the following: The rule of ‘strongest takes it all’ must be replaced by a rule that ensures everybody a place and a piece of the action. ‘Free trade’ must mean freedom for the weakest. The poor must be made active players, rather than passive victims, in the process of globalization. Globalization must promote harmony and partnership between the big and the small economies, rather than become a vehicle for unhindered takeovers by the rich economies. Globalization must ensure the easiest movement of people across borders. Each nation, especially poor ones, must make serious and continuous efforts to bring information technology to the poor people to enable them to take maximum advantage of globalization. Social entrepreneurs must be supported and encouraged to get involved in the process of globalization to make it friendly to the poor. Special privileges should be offered to them to let them scale up and multiply.”
Social entrepreneurship opportunities in the developed world
Perhaps all this talk of problems in other countries seems too far afield for you. Yet we too have serious problems in our own backyard. In this country, it’s still common for foundations to fund these efforts but much of the money behind these foundations comes from the profits of business. It’s not just Bill Gates getting into the act.
Take Oakland, California, for example, the murder capital of California. Van Jones, an advocate for social justice and founder of the Ella Baker Center for Human Rights, has secured funds to train disadvantaged people, especially those of color, for green jobs to put up solar systems in Green Enterprise Zones. If this works, his non-profit will lift people out of poverty and reduce Oakland’s environmental footprint at the same time.
Shorebank transformed a tough part of Chicago and now its sister organization, Shorebank Pacific, is screening loans on sustainability criteria and offering technical support and training for their customers.
What can you do? How can you change how you do business to…
Give more opportunities to the disadvantaged and our youth?
Solve social challenges in your own community such as hunger, poverty, and access to healthcare?
Lift people out of abject poverty in developing countries?
Reverse climate change or other pressing environmental challenges?
As New York Times foreign correspondent Thomas Friedman said, “We are the people we have been waiting for.”
Prahalad, CK (2005) The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. Wharton School Publishing.
Shore, Bill (1999) The Cathedral Within. New York: Random House.
Yunus, Mohammad (2003) Banker to the Poor. Public Affairs.
Luce, Edward. In Spite of the Gods.
Crook, Cline, “The Ten-Cent Solution” Atlantic Magazine, March 2007, p.38
McDougall, Dan, “Waste not, want not in the £700m slum” The Observer, March 4, 2007.
Hollender, Jeffrey (2004) What Matters Most: How a Small Group of Pioneers is Teaching Social Responsibility to Big Business, and Why Big Business is Listening. Basic Books.
Paine, Lynn Sharp (2003) Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance. New York: McGraw Hill.
Bornstein, David (2007) How to Change the World: Social Entrepreneurs and the Power of New Ideas. New York: Oxford University Press.
Columbia University’s Research Initiative on Social Entrepreneurship