Social innovation may seem like the new hipster concept on the ‘do-good’ block, but in reality it has been evolving longer than we may realize. Ask Ashoka–an organization whose founder Bill Drayton literally coined the term “social entrepreneur” and which has been facilitating and supporting social innovation for over 30 years.npr logoNational Public Radio (NPR) has featured a number of stories and interviews over the past decade that trace the growth and evolution of social entrepreneurship, at a systemic level. Below are a few that help set the scene for understanding where social innovation has been and where it is going.EvolvingIn listening to interviews over the expanse of a decade there seems to be a kind of progression in the movement of social innovation. Starting from concept and practice by specific efforts in developing countries that harnessed the power of entrepreneurship in the context of social change, social innovation gained support through focused support and vibrant community (i.e. Ashoka’s Fellowship program). The concept seems to have grown to a level of recognition calling for academic study (i.e. new courses, centers for study) and governance (i.e. White House Office of Social Innovation) to investment (i.e. green venture capitalism).

The next logical step may be legislated change (such as benefit corporation) that would enable social entrepreneurs to recognize of multiple stakeholders beyond shareholders (i.e. the ‘triple bottom line‘ of people, planet, profits) and focus on creating material positive impact.

NPR Interviews on Social Innovation

1. Social Entrepreneurs – January 2004

Neal Conan talks to a panel of social entrepreneurs in this episode of Talk of the Nation. The panelists introduce social capitalism as a concept and how it differs–but complements–traditional business and non-profit work. The panelists talk about specific problems they each recognized and how they engineered social entrepreneurial solutions.

There is discussion and questions from callers including an interesting caller perspective (at 20:40) regarding the relationship between systemic change and social entrepreneurship, and a question by a caller wondering why Muhammed Yunus had not yet won a Nobel Prize. (He was awarded the Nobel Peace Prize two years after the interview, in 2006)

The panel includes:

NPR’s Pam Fessler reports on the new initiative by President Obama’s administration established in 2009 in this piece for Morning Edition. The White House Office of Social Innovation and Civic Participation (SICP) was created to identify non-profit solutions to broad issues such as homelessness and poverty and develop solutions that could be expanded.

Citing organizations such as Teach for America, Fessler notes that successful concepts such as these often face challenges in expanding and growing for lack for funds and infrastructure. And these are the types of projects that the new initiative hopes to support.

Fessler also reports on naysayers to the new office. Those such as blogger Allison Fine claim that true social innovation requires more risk—taking a chance on an idea that hasn’t been proven–rather than one that has experienced success in a small-scale setting.

3. Change You Can Invest In: Social Entrepreneurship – December 2010

NPR Education Correspondent Larry Abramson reports on the growth and evolution of the field of social entrepreneurship and takes a look at how social innovation has found its way to academia at universities such as the University of Maryland’s Center for Social Value Creation, which is part of the business school.

In this report for Morning Edition, he talks with social entrepreneurs such as David Wish of Little Kids Rock about the original social innovation institution—Ashoka—and it’s ability to support and connect social entrepreneurs. Abramson also talks to non-profit consultants such as Chuck Harris about the importance of making non-profits work more like corporations for efficiency and to ensure oversight.

Hear More From NPR

Interested in hearing more? Here are more NPR interviews on social innovation that caught our eye.

How do you get from idea to state law?

In following the journey of California’s AB 361 and the number of other bills across various states that would create (or have created) a new corporate form called a benefit corporation—learning the impetus for the legislation is often as interesting as

photo: votesmart.org

photo: votesmart.org

understanding the process.

And the story of California’s AB 361 is particularly interesting. You can watch California State Assemblymember for the 6th Assembly District Jared Huffman talk about the crowdsourcing origin of AB 361 and other key points of the bill below.

Assemblymember Huffman is the sponsor for AB 361, which was recently voted through the California State Senate Committee on Banking and Financial Institutions and also successfully passed through the State Judiciary Committee.

Ask any law school graduate, and they will probably tell you that Michigan Supreme Court in Dodge v. Ford Motor Co. 170 N.W. 668 (Mich.1919) did.

Ford Overdrive

Dodge v. Ford: A Swashbuckling Tale for Maximizing Shareholder Profit

 

The historic case Dodge v. Ford tells a page-turning tale of astonishing innovation, mind-blowing wealth, deep rumination, distrust, and defection. There are larger-than-life personalities all-around, unafraid to use (legal) sword and shield to pursue and protect their interests.Less clear, however, is who is the hero and who is the villain. That can only be judged by the lens through which you see the story.

 

Ford Motor Co. Circa 1919: The Unstoppable Model T

 

In his enlightening law review article, “Everything Old is New Again: Lessons from Dodge v. Ford Motor Company” (December 2007) University of Chicago Law School Professor M. Todd Henderson sets the scene of the automobile industry in the early 1900’s.After two unsuccessful ventures, Henry Ford’s Ford Motor Company began expanding in a big way in the early 1900’s. With efficient mass production of cars, a growing market, and increased demand—the Ford Motor Co. was virtually unstoppable. The advent of assembly-line manufacturing led production of Ford’s original “Model T” to increase from less than 2000 cars per year in 1905 to over 2 million per year by 1923—growing over 700% in the span of 2 years.

 

An OMG Reaction to ROI

 

As reported by Henderson, financial life was not bad for the handful of Ford shareholders. Investments snowballed in their rate of returns. For example the brothers Dodge—who were shareholders at the time—made an initial investment of $10,000 and would yield over $35M over the next 13 years.

 

Restless Shareholders and Distrust

 

In his article, Henderson also paints broad brush strokes in describing the personalities of Ford and the Dodges. Henry Ford is described as suspicious and to some degree–unimpressed–that shareholders were so richly rewarded for investment of only money and no effort in creating the triumphant Model T.In the same vein, the Dodges were perhaps growing restless in the shadow of their overwhelmingly successful investment. And were ready to strike on their own. They knew of Ford’s plan to withhold dividends and build a factory—which would further lower the cost of manufacturing an automobile. And, incidentally, make it harder for them compete.

Legal Swords and Shields


Dodge v. Ford was not the first time Henry Ford stepped into a courtroom. He was well-acquainted with litigation and had filed cases to defend his name and reputation.

The Dodges decided to take action to prevent the building of the new factory by flexing their shareholder muscle. They first sent a letter to Dodge questioning the propriety of denying dividends and investing those funds in a large, expensive factory.

After their inquiry went unanswered, they filed a complaint demanding that the Ford Motor Co. establish a dividend policy that distributed all earnings except certain emergency funds and that an injunction be issued to prevent construction of the factory.

The Weight of Wealth


It is not clear whether Ford was always benevolent, strategically benevolent, or whether a sense of benevolence developed as he amassed great wealth. According to Henderson’s article, it may have been a complex hybrid.

Said Ford, “I believe it is better for the nation, and far better for humanity, that between 20,000 and 30,000 people should be contented and well fed than that a few millionaires should be made.”

It probably didn’t hurt the Ford Motor Co.’s prospects that the proposed actions (i.e. withholding dividend and reducing the cost of a car by ramping up production) would not only endear Ford to Americans but would also undercut future competition.

 

The Michigan Supreme Court Issues a Decision


While the lower court called for a special dividend to be issued and an injunction. The Michigan Supreme Court took a more subtle approach. It tried to keep courts at bay from making business decisions by declaring that courts must defer to the rational business judgment of a company. But allowed itself a loophole, by saying that Ford did not follow a rational business objective in denying dividends.

At the end, the Michigan Supreme Court gave Dodges their special dividend and Ford–the go-ahead for building his new factory.

 

Just a Load of Dicta?


In case law speak, judicial commentary articulating an opinion and not decisive to the case is known as “dicta” and is not binding in the court of law. The comments that have made Dodge v. Ford the single-most known case for defining a corporation’s duty to maximize shareholder wealth…comes in, well, dicta.

That has led some, such as UCLA Law Professor Lynn A. Stout to argue that Dodge v. Ford is not actually good law. She does so in her law review article “Why We Should Stop Teaching Dodge v. Ford“.

 

Why I am Fascinated by Dodge v. Ford


While I love learning the details of all of the law school cases I studied (note: this may be an overstatement :), I have truly been fascinated by the far-reaching implications of this case since the day I learned about it in a Corporation Law course. Whether or not the case has been misconstrued or is wrongly emphasized as an articulation of the maximize shareholder wealth principle, it is taught by law professors and learned by law students in that context.

And, in that context, the concept that the legal framework supports a single financial bottom line pursuit by corporations, I think, may impact the incentives and methodologies business chooses.

While, as Henderson argues, the Michigan Supreme Court may have found an ‘elegant’ solution to a complex situation of competing interests, the long-range result of emphasizing shareholder wealth above other measures suggests that other costs and outcomes are de-emphasized.

 

Triple Bottom Line and Shareholder Redefinition

Perhaps, to some degree, and according to the long-living dicta of Dodge v. Ford, businesses are not always incentivized to consider externalities such a corporation’s relationship to the environment, employee well-being, community involvement, and social justice.

If there was a way to work in such externalities to the ‘bottom line’ of rational business judgment outlined by Dodge v. Ford or expanding our definition of ‘shareholders’ to include non-monetary contributors it could literally change the way business is done by rewarding a company for its business acumen as well as its social innovation.

Walk into a grocery store these days and you will likely find that shortage of options is not an issue. Whether choosing flavors of bottled water or growing locale of a bushel of apples, you are the king, queen, and chief justice of choice.So what does that make you, me, and the billions of other buyers of goods and services—are we consumers…or voters? And what factors will tip us over the edge in deciding whether to pay or pass on something.Here are a few common factors that come to mind when deciding whether to buy a grocery product:
– cost (price, cost per serving, sales/promotions, incentives, bulk/bargain buys)
– nutrition (low calorie, low fat, high protein, gluten free, not gluten free, etc.)
– availability
– expiration date

but with a shifting focus on sustainability, health, and reducing our carbon footprint, a few more factors can come in play:
– was it grown locally?
– is it organic?
– fair trade?
– were hormones/pesticides used?
– did the company use sustainable practices?
– is the company a responsible employer?

voting or shopping

All of these various factors can complicate a simple grocery run for bread and milk—to say the least.

Certifications and badges can help guide our choices. For example the Guayaki bottle of organic mint yerba mate tea on the right features a mini display case of badges denoting its various certifications. And these can be decidedly helpful—if we know what they stand for & if we are on board with the certification process.

Guayaki notes its approval as a B corp—which is of special interest to me as that entails a number of other factors including social and environmental considerations.

Do certifications make a difference when you shop?
And do companies actually benefit by being evaluated for certifications?

Whether we see them as such or not, our purchases ($.25 or $25,000) are also votes for a particular product, brand, or type of product. Just as you cast a ballot for your favorite candidate, ‘voting’ for a product makes a statement to companies, suppliers, buyers, and retailers.

Arguably, however, no matter how aligned with our values a product may be, if it doesn’t meet our basic consumer instincts (i.e. do you love it? is it a good value?) it may not make it off the shelf and into our carts.

So, consumers or voters? I would venture to say both—and to examine further—we may see ourselves as consumers first and voters subsequent.  As ever, am curious to hear broader feedback :)

When delving into any field there is often special field-specific terminology that helps define and explain core concepts and ideas. Sustainable enterprise is no different. While attending the Sustainable Enterprise Conference I came across a few industry-specific buzzwords related to social enterprise, social entrepreneurship, and social innovation that were mentioned throughout the day. Here’s a rundown:

1. Triple Bottom Line

The “bottom line” for a company generally refers to profits. Triple bottom line results encompass people, planet, and profits (it is also called TBL or 3BL). It is the key performance indicator (KPI) for assessing a company’s success in the social enterprise context. The term, in fact, has been adopted by the United Nations as well as other organized bodies focused on sustainability. It calls for companies and organizations to focus on various affected stakeholders (social, environmental, financial) rather than solely the shareholders. Learn more about the Triple Bottom Line on Wikipedia, including supporting arguments and criticisms of the term.


2. Greenwashing

Greenwashing refers to the misleading or deceptive advertising or spin on products and services that make them appear to be environmentally-responsible when they may not be, or more environmentally-friendly than they actually are. Though there do not seem to be universal guidelines to determine the true “green” factor for a business, the Federal Trade Commission (FTC) has identified voluntary guidelines for environmental marketing claims. Greenpeace also outlines criteria for spotting “greenwash”.

 

3. Carbon Off-Setting

Carbon offsets refer to investments/donations to environmental projects and initiatives for the purpose of offsetting unavoidable carbon emissions. Products or services that label themselves as “carbon neutral” often take a two-step approach: 1) reduce their own carbon emissions (reducing waste, recycling, reusing, conserving); and 2) offset unavoidable emissions by funding initiatives that reduce greenhouse gases. The CORE Initiative website offers insight on identifying the “most influential” carbon offset programs.

 

4. AB 361

AB 361 is the title of the legislation being proposed in California to create an official “benefit corporation” corporate structure. The proposed benefit corporation would be a voluntary structure that would enable CA corporations to pursue triple bottom line goals. AB 361 was introduced by CA Assemblymember Jared Huffman.

 

5. Green MBA

Green MBA refers to graduate business management programs that examine in-depth the triple bottom line reporting and the complex interconnectivities between issues of business, environment, sustainability, management, conservation, and social justice. Two premier schools offering Green MBA’s represented at the Sustainable Enterprise Conference were Presidio Graduate School and Dominican University of California.

Read More:

I had the chance to attend the Sustainable Enterprise Conference in Sonoma this past Friday. It was an opportunity to get plugged in on local efforts, campaigns, and ventures in the realm of sustainability.It was a great experience—I was struck by the sense of community within the sustainable enterprise movement. Like a tuned ecosystem–many of these companies collaborate, pool resources, and both support and are supported by a growing infrastructure of conservation and social responsibility  Here’s a high-level overview of the event and sessions I attended (note: there were a number of other workshop options)…with links so you can continue your research into the various orgs, speakers, and concepts mentioned.sustainable enterprise conference
Welcome by Genevieve Taylor (Partner, CircadiaOne), Brad Baker (President/CEO, Codding Investments), and Robert Girling Ph.D. (Author).Keynote address “California Legislation for a Sustainable Future” by California State Assemblymember for the 6th Assembly District Jared Huffman, JD

Keynote address “Ecological Sustainability and Economic Drivers” by Maggie Winslow, Ph.D. (Academic Dean, Presidio Green MBA)

Keynote address “Green Energy in the Golden State Under a Brown Administration” by Panama Bartholomy (Deputy Dir., Effiency and Renewables Division, CA Energy Commission)


Workshop: “Straus Family Creamery Strategic Planning” panel including Edward L. Quevedo (Sr. Counsel & Chair of Sustainability Practice, Paladin Law Group, LLP), Sarah Isabel Parriott (Sustainability Strategy PM, Paladin Law Group), and Deborah Parrish (CFO, Straus Family Creamery), with special guest Albert Straus (Founder of Straus)

Keynote address “Pulp Non-Fiction: Changing the Paper Industry” by Jeff Mendelsohn (President/Founder, New Leaf Paper)

Workshop: “Behind the Scenes with B2B B Corporations: Building the Vision and Infrastructure to Shape, Support, and Scale the Sustainable Business Economy” panel including Matt Reynolds (CEO of Indigenous Designs), Jonathan Storper (Partner & Chair of Sustainable Business, Hanson Bridgett LLP), and Carolyn McMaster (Principal, ThinkShift Communications)

Workshop: “Localization and Sustainability: Tales of Success” with panel including Mike McGuire (4th Dist. Sonoma, County Supervisor), Tom Scott (VP and GM, Oliver’s Market), Nancy Bailey, (GM, Quivira Wineyards & Winery), and Evelina Molina (Co-Founder, North Bay Institute of Green Technology)

Lessons Learned, Call to Action and Closing Statements by Oren Wool (Executive Director, Sustainable Enterprise Conference)

Read More:

Intrigued? I definitely was when I read a recent blog post from the Stanford Social Innovation Review titled “Monk, Architect, Diplomat” by Mark Albion.Don’t hold your breath for a punchlineAnd it turns out the post didn’t just have a witty title to pull readers in, well, unwittingly (on that note I will admit that I do give a hearty mental ‘bravo’ to witting, insightful, or just plain well-put titles). The article was a well-reasoned piece on how social entrepreneurs can successful scale-up as their organizations grow. Rather than lack of finances, Albion argues that the underlying reason social entrepreneurs have difficulty scaling to a larger version of themselves is due to challenges in leadership.Albion focuses his leadership advice into three simple statements:

1. Be a monk, not a father.

2. Be an architect, not a captain.

3. Be a diplomat, not a dictator.

Through these metaphors he describes the successful expanding social entrepreneur as one who is socially engaged in her work, and mindful of her impact on others. For the greater goal of the mission and vision, she is willing and capable of distributing leadership and building a strong team. And she’ll spot the forest from the trees by not hesitating to be collaborative and compassionate.

It’s a great read. And inspiring. Sometimes being in a hierarchical framework such as a corporation, non-profit, or social enterprise it may seem like you are on a ladder with the options being continuing up, falling back, or holding still. This article and metaphors of leadership, allow us to be makers of a delicate yet resilient web of work—far reaching, three dimensional, and progressing in more than one direction. I like it, and I like the possibility and scope of thinking of meaningful leadership in this way.

If I had to add a #4 to Albion’s list, it would be:

4. Be a sherpa, not a ranger.

While I have not been in a position to scale-up a social enterprise as Albion describes, I have been part of the active leadership of social organizations that have changed hands. And I have seen first-hand the importance of sherpa-ness. While sherpas (Wikipedia) supply the necessary support and guidance on a demanding trek, it is not their hike. They serve as support for those who have chosen to undertake a challenging journey.

In the same way, “alumni” or subsequent generations of an organization or cause don’t necessarily need to hide under a rock so as not to influence the path of successive leadership. But I think they can benefit from seeing themselves and their accumulated expertise as support. Perhaps the support that would have helped them when they were actively leading or the support to help traverse a particularly tricky pass. Most of all they should form the support that is asked for by the noveau leaders.

While rangers no doubt save lives, prevent forest fires, and maintain pristine surroundings—in a social entrepreneurship venture ‘naysaying’ by organization alums may create confusion and uncertainty that can handicap a growing organization.

Read on: