Is 'social enterprise' just a buzzword or something more worthy?

by Paul McBeth / 27 November, 2017
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The corporate ethos of past decades may have been take, take, take, but a new breed of social entrepreneurs apparently has more noble aspirations.

Is “social enterprise” an overworked buzzword designed to soften the hard-edged image of a profit-driven business, or something more worthy?

When corporates like to trumpet their charitable work – who they donate to, the hours of company time they allow for volunteer work and the backing they give to this or that conservation project – it’s easy to be cynical. However, a growing community of social entrepreneurs is intent on setting up businesses aimed at alleviating society’s ills.

A pioneer was Ecostore, whose range of environmentally friendly products is on supermarket shelves throughout the country. Since its 1993 launch, it has set aside a portion of profits to fund social and environmental initiatives.

It was a complete outlier when it began doing so, but more than two decades later, Ecostore has been joined by such outfits as KiwiSaver fund manager Simplicity, organic produce supplier Ooooby and consumer-behaviour app-maker Conscious Consumers, which have all set out to make money to do good.

Deb Shepherd.

Deb Shepherd, who teaches entrepreneurship and professional development at the University of Auckland, sees a lot of young business heads setting up social enterprises as a way to do something meaningful without having to accumulate wealth first. “There’s a real sense of purpose that sits at the heart of this,” she says.

Veteran company director Rob Campbell picked up on the vibe in a talk at Parnell Rotary Club in July, where he said, “The generation coming of age now is adopting a new dominant theme that I perceive as ‘the quest for authenticity’, which has strong social values and ethics at its core.”

The drive to do something meaningful inspired Christine Langdon to jack in her community relations role with Z Energy earlier this year to set up the Good Registry, an online gift register where people opt to nominate a charity rather than receive a present they probably didn’t want anyway. The idea is it redirects funds into worthy causes and cuts down the waste that comes with unloved gifts.

“We get really conditioned about what success is: success is a corporate lifestyle and the salary attached to it and the security attached to it,” Langdon says. “It’s scary leaving that, but at the same time it’s hugely worth it.”

Chris Simcock.

More profit = more good works

The Good Registry launches this month, in time for Christmas and four months after Langdon settled on the idea. She has faced the usual obstacles to setting up a business but has found the social-enterprise community generous with their time.

“We’re conscious that the more people use the Good Registry, the more its turnover will be and the more impact it will have. That’s what will excite us about making a profit,” she says.

It’s not just the start-up end of the market luring young talent into social enterprises. Chris Simcock walked away from working on big corporate deals at First NZ Capital to pursue his social and environmental goals, drawing on his investment-banking background to establish advisory firm Impact Ventures.

He’s been around the country trying to raise money from experienced investors for the Impact Enterprise Fund, a tie-up between the Ākina Foundation, New Ground Capital and Impact Ventures, which will focus on local social enterprises. The fund is aiming for $10-15 million, which would be invested in eight to 15 firms, with a life of about 10 years.

Simcock says New Zealand is lagging behind other nations when it comes to impact investing, which differs from “responsible investment” by putting money directly into ventures that tackle “big problems”.

Christine Langdon.

He has potential investments in his sights, although the first round of fundraising doesn’t close until the end of this month. Among sectors on the fund’s watch list are agritech, sustainable food production, clean energy and education.

In doing the rounds, Simcock has come across 750 or so different social enterprises, nearly 2% of the country’s 39,500 companies.

Simcock says the rising demand from social enterprises for capital is driving the appetite to invest, and the introduction of impact investment lines up the goals of investor and investee. That wasn’t always the case in the past.

Shepherd, who is a director of impact investment vehicle Soul Capital, says the social-enterprise movement is following in the footsteps of the broader start-up community, which began to achieve the scale and momentum needed to be taken seriously about 15 years ago.

“People are mobilising and now we’re starting to see the investment people saying if social enterprises are going to succeed, they’re going to need capital, resources and support,” she says.

Rob Campbell.

The big end of town

Those with serious money aren’t ignoring the opportunity, either. A report on growing impact investment by EY and investment firm JBWere estimates it could develop into a $5 billion market from the present $100 million.

Among the sector’s challenges is the need for a robust measure of the social and environmental results its businesses seek, and the struggle many people have with a potential contradiction between the simultaneous pursuit of profit and the higher purpose.

Shepherd warns against overselling the concept. Social enterprises aren’t a “panacea” for the world’s woes, nor are they anti-business. “The market is the primary lever” being used.

“It’s more a melting pot of business morphing into taking more social responsibility at its heart,” she says. “There’s a lot of blurring of the lines.”

Still, she views the evolving business model as offering hope for the wider business world, especially as few lessons seem to have been learnt from the global financial crisis a decade ago.

Growth has become an unquestioned  requirement of success, without “stepping back and asking ultimately what’s the purpose, and at what cost”, she says. “That’s where the social entrepreneurial movement is saying we can’t afford to keep operating the way we are at all costs.”

This article was first published in the November 11, 2017 issue of the New Zealand Listener.

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