I'm very pleased to be here. In full disclosure, there is something that I have to confess here.
I hate the term social entrepreneurship.
It's something that comes from a legacy where, you know, it's like there's entrepreneurship and then there's social.
I actually believe that these two things are going to be combined more and more
so that every venture that is set up has to look at what are the environmental,
social and financial repercussions of what they are doing.
And tonight, what I'm going to talk about a little bit is the trends.
Many of you are interested. I assume you're taking this course because of the fact that you're interested in building your businesses.
And so I'm going to be talking a little bit about some of the trends that are going
on in terms of new kinds of business models that are addressing these issues.
But also, what are the big corporations doing? And this title of Beyond CSR is really where things are headed.
So I'm going to be talking about that. What I plan to do is sort of run through a couple of different points there.
Please interrupt me at any point in this discussion.
You know, it's looks very formal, but I really would much rather have you, you know,
have it be an interactive session if there's something that you want to clarify or don't understand or whatever.
So be talking about that. How many of you actually go to Oxford?
Oh, my God, everybody. All right, good. So you're all enrolled.
And how many of you are MBAs? A couple of numbers.
Okay, good. So I will tell you a little bit about me that wasn't introduced.
I basically I sound like a yank.
I'm actually from Ecuador, from Latin America. Is anybody here from Latin America?
We're in. But was raised until I was 17 throughout different countries in Latin America.
Came to the United States to do my degrees.
My first life, I was an economist at the World Bank. In my second life, I was a public health doctor.
And now I'm an entrepreneur. So you can go through all of these life changes as well.
I think that's really important to message to to convey here is that what you study
doesn't necessarily limit what you're going to go on to do as many of these will.
We'll talk about the first thing I want to. Do is okay.
These are the objectives that I'm hoping to accomplish in this session.
I basically want to review some of the emerging models that entrepreneurial ventures are moving towards,
that address financial sustainability, as well as social and environmental mission at their core.
The second thing is I want to talk about how these new ventures are similar or different to charities and mainstream bank.
We're really seeing a trend of something quite different that is emerging, which is exciting, in fact, given the state of the world.
The third is to really talk a little bit about what is the special role that these entrepreneurial ventures have in our societies today,
and then examine some of those models. And then finally, where do these organisations, these ventures, get their capital from,
given the fact that they are really sitting in between this hybrid position of actually being a Start-Up that's really focussed on changing something,
about transforming something, about the business model that is creating inequalities or unsatisfactory equilibrium in an environment or in society.
Where are those people coming from who are going to actually fund these ventures?
Where can you look for that kind of capital? And then the last one is looking at which I think fascinating.
What are the emerging trends in mainstream commercial sector that are actually looking at?
How do we rethink our model across the supply chain, across what we're doing with human resources,
etc., so that we're actually addressing the complexity of the issues because it's no longer.
Okay. Just to say, you know what, we're just actually maximising profit for shareholders.
We really want to look at some of those, some of that stuff.
On CSR as total greenwash.
Most of it is total greenwash, but you're beginning to see actually transition in this space, which I think is quite exciting.
So those are some of the objectives of what I'd like to accomplish tonight.
I want to start out by by really talking a little bit about some of these new hybrid models,
which are basically, if you look at the what is the definition of entrepreneurship?
It is about combining innovation, resourcefulness and opportunity.
So the entrepreneurs are always looking for opportunities where they can actually step in and
respond to something that they see as a market failure or a government failure in this case.
And so these are hybrid ventures that recognise we really have to address a market failure or
a government failure to and there is a business opportunity here and they do it in a very,
very business like fashion, which I'll describe. They're not focussed on Let's build the next hospital, let's build the next school.
They're focussed on what needs to happen to transform the health sector.
They are, like most entrepreneurs, completely focussed on transforming what exists.
The problem is that with most of us mere mortals, we don't see those opportunities because to us they're too risky.
I mean, some of the examples that I'll show you tonight, you'd have to be crazy to actually see this as an opportunity.
And, you know, several years ago, I wrote a book called The Power of Unreasonable People How Entrepreneurs Create Markets to Change the World.
And that's really what you're seeing happening, is that these are highly imaginative,
creative people who have a vision for an opportunity that others of us would see as far too risky.
And as I said, to sustain their activities in this hybrid space many times, because they're responding to a market failure,
they need other resources other than just earned income through contracts.
And so we'll describe some of that. They're cropping up all over the world.
They are really literally cropping up all over the world.
I've given you some of the examples here.
The Eden Project, which I will be highlighting here in the UK.
Has anybody been to Cornwall to visit the Eden Project? Okay, this is called one of the Eight Wonders of the World.
We'll talk very quickly about what that model is and why it's transformational.
Embrace, founded by Jane Chan and co-workers, is basically a response to the fact that in many very poor rural populations,
when babies are born prematurely, they die because of a lack of incubators.
And what they have created has been a specific baby warmer, which is using the latest tools and technology and heated through solar, solar power.
And they are a for profit company and doing very well.
Waste concern in Bangladesh. Anyway, I could go on,
but I won't at this point because I want to just give you a little bit of a
snippet of the Eden Project to tell you about and also show you something from a.
Founder that has something to say to people. Those of you who are planning business and where he sees business model going.
But as I said, it's brought more than £1,000,000,000 into the Cornwall economy since its inception and Tim Smith
was a one time music producer and entrepreneur now and one of the he's just been knighted.
He hates to be called Sir Tim. You'll see why he's quite irreverent.
And I'll show you a very quick film clip of of him.
I mean, here we are. I'm going to do this one rather than all of the other.
The trouble is, everybody's looking for tips, aren't they,
about how to run good businesses and the worst people on earth to actually give you any tips about how to run anything.
Are the people who are actually doing it? Because what happens in real life is that you you describe your life backwards.
You. I am here. So the reason I got here must have been for purpose, a de facto.
All these things I did must have led me here. Which is not to bollocks.
Because. Because the truth is. The truth is real life is about making loads and loads of mistakes, having a couple of lucky breaks along the way.
And actually, it's usually a razor blade difference between success and failure.
It really is. I mean, the Eden Project is a case in point.
Just for those of you who've never been there or know nothing about it, it's a 34 acre clay pit whacking great hole.
We built the world's greatest conservatories in it. We have a turnover of about £19 million a year.
We've got 500 odd staff. We've contributed £930 million into the CORNISH economy over the last seven years,
which is more than double the entire European funding for the whole of the South-West over the same period.
We're very political. When we built it, we always intended that we should run it as if we were round our kitchen table.
Because where most people go wrong, where most men go wrong,
is that they don't realise the common sense you have at your kitchen table gets completely [INAUDIBLE] when you then go to work.
You have to impress other men and well, is this true?
I mean, come on with this. With this financial crisis, be with us.
If we had equal men and women in the boardrooms. Of course not. We know that's true.
And the other the other the other tips that tip.
The tip. So you said that was the Eden Project. Okay. And if I'm not to tell you anymore, don't be so mean.
Come on, visit. But the things the things I've learnt about business are, first of all, distrust.
Anybody who uses the word centre of excellence out of the box, out of the box, joined up thinking leading edge, cutting edge, bleeding edge.
Which is when I assume you're too close to the cutting edge and and and make absolutely sure that
you have nothing to do with anybody who thinks they're capable of thinking the unthinkable.
You can't think the unthinkable. But what you can do is to sit down next to a kitchen table and realise that some
of the world's great businesses were actually created around kitchen tables.
And the reason they created around kitchen tables is you're normally sensible at that point if you want to.
For those of you watching, don't do that. But for those of you watching at home, check out places like the Griffin Hospital near Boston.
Yeah, fantastic place. Why is it why did it go from the worst hospital in America to the best hospital in five years?
You know what they did? Revolutionary.
They asked all the potential patients who lived around them, what's the hospital they want to visit and built it?
Why don't we do that sort of stuff? But one of the best schools in the world, the Manchester School in Pittsburgh, the roughest part of Pittsburgh.
It's a fantastic school because the guy who runs the most inspirational man I've ever seen on a stage,
he has a motto about running it, which is, If it's good enough for rich folks, it's good enough for poor folks to.
Wonderful. I think I saw five grown ups cry when he spoke about what happens if you forget to put limits on people
and actually assume that everybody is capable of fantastic things because people are fantastic things.
But you actually need. You need to believe it.
What I learned in the music business before I went into Eton was something really profound, which was to shape my life,
which was if you love something yourself and you are not a freak, there will be millions and millions and millions and millions of people like you.
So therefore, the only problem is marketing. Let them know about it.
We've got a big market. So we'll stop there.
I highly recommend that you watch on on Tim's Tim's videos.
He's a profoundly intelligent person. Here's another interesting.
This is for profit sustainable enterprises.
The Eden Project basically started out as he tells a wonderful story of how the lottery was giving, I don't know,
millions of pounds in order for the construction of projects that were going to renovate a certain region.
And how he applied when the Eden Project was one big clay pit for this project and that, you know,
he had all the people gathered around him who were really excited about doing this and they even
bought a fax machine to find out whether they were going to win this this this pot of money or not.
And he said everybody was standing around. They had given up.
Many of these people had totally given up their jobs to work with Tim to pursue this crazy vision
of his of creating this incredible biosphere which houses every plant on the face of the earth.
And he said when the fax came through, he said there were three categories.
The first category was category A. We love your project.
You get the money. The second category was category B, he said.
We really like a project, but it could do some more work and we'll help you get this done.
And the third category was Category C, which was, as he says, don't ever darken our door again.
So he got the fax and it was Category C.
So he said, What do I do? I'm standing here with all these people and they're all waiting to hear that we've won, that we're going to get this money.
So he said, that's when I came up with the idea of. The construction of future truths.
So what he said was he told them, let's call a press conference.
He didn't say we got the money. He didn't say we didn't get the money. He called a press conference.
Press came from all over Cornwall.
He got up there and he said, I want to thank the Millennium Development Commission for their insight for this prize, blah, blah, blah.
Point was, the Millennium Development Commission was totally confused as to whether they had given him this money or not.
And that's the way he secured I mean, you can question his ways of doing this, but that's the kind of person we're talking about,
somebody who takes incredible risks and who does things because of a dream or a vision.
There are a few of us like that. Now, this is a different kind of model.
This isn't a hybrid. This is a pure for profit that we're going to be talking about.
I'm going to show you how these business models are really coming up with new ways of doing business in a way that is, I don't know,
philosophically positive and fundamentally innovative and also very morally compelling in terms of where people want to go and work.
So it's a new form of commercial corporation.
How many of you have heard of Kicks or the B Corps, the B Corps legislation that's now coming through the United States,
which has been passed in 18 states in the US, which allows what's called the For Benefit Corporation,
where in the Articles of the Constitution,
it's not that you are only maximising your shareholder profit and your shareholders agree that you have other commitments there.
So it's it's quite an interesting and revolutionary concept that's also beginning here in the UK.
There are a couple of big corporations in the UK, so we're seeing new forms of of corp of corporate constitution and these are fully self-sustaining.
This is a list of those I want to tell you about, one or two, actually, which are quite fascinating.
This is a Danish man. Do you think that these things only happen in emerging markets?
But actually Torkelson was a landscape architect and when his son was five years old, he was diagnosed with autism.
How many of you are familiar with autism? Okay.
The problem here with autism is the following. Autism range, there's a whole range.
So there are those that are mildly autistic, etc. I don't want to get into the clinical aspects of this,
but and the way that the worker was told by the people who diagnosed the son was Your
son will never have a normal life and your son will always have problems with work.
Relationships, probably will not be able to get a job, etc., etc., etc.
And the picture that I showed you of talking with the dandelion in the background,
he said, being, you know, a landscape architect, he said, Now, wait a minute.
Look at the dandelion. The dandelion for many people is a weed.
But for other people, it's a medicinal plant. How can I change the attitude of society around the autistic, around people that are autistic?
And what he did was he created a software testing company that employed only autistic people.
And it was amazing to see, obviously, autistic people have tremendous powers of concentration.
They're extremely detail oriented, as you can imagine.
And he basically created it as an I.T. consultancy that became one of the top I.T. consultancy for software testing in Denmark and basically had,
you know, major companies, major corporations as their clients.
And he was really making a very decent turnover.
Now, what ends up happening is, of course, people all over the world that have the situation of where they're dealing with autism realise,
wow, we could actually change the way people think about autism.
So here's, you know, a company that's totally reversed the way, you know, the opportunities for some in the autistic spectrum, not all some.
So there is using opportunity, resourcefulness, seeing an opportunity where any of us would have thought this is just not possible.
So it's interesting to see how business can really be a mechanism to do this.
And you're seeing this more and more. And the interesting thing is what happens to the people that work there?
They no longer see themselves as people with problems.
They see themselves as specialists because that's what they are and that's how they came up with this term, the specialist people.
I'll go on to something very, very different, which I can strongly urge you.
This is, again, a highly profitable venture, business venture that is using business principles,
market principles, to really transform a situation that is causing problems, which is the following.
There are tons of materials, as you know, that go straight to landfill, and one of those materials is decommissioned fire hose.
When a fire hose that firemen use all over the world or wherever it breaks down after years and years and years of service, there is no opportunity.
There's no way you can do anything with that except to send it to landfill.
So basically, Cressy Westerling and her partner James ended up identifying this as a huge opportunity.
And what did they do? They basically said we could completely use this material to compete in the
luxury market for making bags and wallets and all kinds of very interesting,
fashionable products. They created something called the Elvis and Christie line, which today is incredibly lucrative.
And they're competing with, you know, at a much lesser level. But people are really very attracted to this.
And I'll show you some of the some of the kinds of bags and things that they produce.
And also show you a little film clip about that.
And what they do is they give 50% of their profits away to fire brigade, the fire brigade, the UK fire brigade.
And oftentimes students will go, wait, why would you do that?
And she said, It's securing my supply line. Besides, I have the greatest marketing army of who doesn't love firemen.
And so we just have this great marketing, you know, potential of the fire men who are I don't think they're fire women,
but anyway, they're mostly firemen who are completely sold on us and are giving us all our material.
They also reclaim other things like coffee, sex, etc. But here are some of the materials, I guarantee you if you go on their website.
Beautiful stuff. So this is all fire hose.
It's top stuff inside is made from parachute.
So parachutes that are no longer usable.
So everything is what we call now the circular economy, which is reuse, reused, reuse rather than waste, waste, waste.
And I'll show you a very interesting little presentation that Christie does many times.
People say, where did you get the money to start this? And she'll tell you where she got the money to start this, which is a lesson in of itself.
My name is Chrissie and I co-founded Elvis and Chrissie about I think five years ago now.
We started collecting fire hose in 2005. We make it into beautiful products and then gave half of our profits to charity.
I think a lot of people think you have to have a lot of money to start a business.
And we didn't. We had a small, tiny budget and we actually spent about £40 on a rotary cutting tool, which I can show you.
It's now broken. This was the body of it.
This was the cutting edge.
We spent £40 on that to make our first big order of belts, and we used the cash from those belts to invest in other equipment.
So you don't always need a lot of money. Sometimes you just need a lot of effort and a lot of rolling up your sleeves and getting something done.
I think the biggest thing you've got to focus on is being unique. You got to look at who you are and you've got to research who that's going to be.
So find out about your name. Has anybody else used your name?
We've had this thing on X Factor where Little Mix was originally called Rhythmic X,
and that was the name of an existing charity which sent a letter to Simon Cowell and he changed the name to Little Mix, which was which was great.
But get on the Internet, find out about your ID, see if there's anybody else doing it, and then focus on your uniqueness.
Create a brand identity around what you do, who you are, because the innovation that you bring is what's going to set you apart.
Don't focus on what other people are doing, but you've got to find out what your competition is like from day one.
You are your brand and you're your best marketing tool, so you've definitely got to always have something with you to show.
And I have the iPhone holder so I can take my phone out and show people how it works.
Ooh, that's so sweet. But if you have a service or another kind of product that you can't carry around
and get pictures of it on your phone video on your phone video is fantastic.
One thing that social enterprises tend to be really good at is working with their stakeholders.
So if you are a stake on the site or if you're putting a stake on another idea,
then stay involved because those companies and those ideas are actually going to rely on you.
And it's really valuable to have feedback and people following you and people supporting you.
We've got a Facebook site. When we get enough Facebook people telling us to design a new product, we go for it.
We make it. So we really depend on our community. We depend on the charities we work with.
We depend on the people who supply us with waste. We depend on other people in the ethical fashion industry.
There's a lot of cooperation and collaboration. We do not exist in a vacuum.
So you really have to look around you and and take support from everyone.
So if you have one of these stakes to give, you know, you are a stakeholder in an idea.
Think about who you want to share your time with. Think about who you want to give ideas to really support those ideas.
We're reading a blog, I think it was by Solitaire Townsend and she actually highlighted this quote by Aldo Gucci.
It was about how the the bitterness of poor quality lasts a long time after the sweetness of low price has faded.
And this really encapsulates everything that we do. We take firehose, which is this incredibly durable, beautiful material,
and there would be absolutely no point in making it very, very silly design and not having high quality craftsmanship embedded.
It's got to be good quality. It's got to last forever. There's absolutely no point in doing what we do.
Interestingly enough, Kristie, I was just at a meeting with with a whole bunch of different investors.
And have you all heard of Donna Karan, who is like a big fashion industry, like, you know, Pierre Cardin, etc.?
She got in touch with Cressy and said, I want to carry your whole line in my New York store.
So, you know, usually these entrepreneurs are scaling very rapidly as well.
So you're trying to build a business and balancing how do we continue to innovate alongside,
you know, how do we continue to scale, which many times there is a sacrifice involved there.
Now, let's go on and talk a little bit about how these organisations that are cropping up
are quite different from government and quite different from your normal charity.
As you know,
the role of government is to also act as a redistribute because there are some people who have money and a lot of people who are left out.
So government through taxes and other mechanisms often, you know, that's why we collect taxes.
That's why we, you know, support. And and many times, you know, government can't do enough.
And that's where charities step in. Charities are really operate in a very distinctive role within our society, very important.
They are filling that redistributive function for people who have dropped out of the
system or at the the really do not have the same standard or opportunities as others.
The difference is with these ventures, they're aiming on actually changing a system, whereas charities like homeless charities like soup kitchens,
like, you know, people who address violence against women, they're much more how do we help in a palliative way rather than a transformational way?
How do we help people? They're not they're not really addressing the root causes of the problem.
They're, you know, scratching away at something, but not really looking at how do we transform the system, albeit they function.
We could not function without charities. We're not talking about charities.
We're talking about business models. And how do you use the market to perform functions in certain ways that it hasn't been used to before.
And so what we've seen as a trend away from the hand out much more to how do we
facilitate the hand up very much along the lines of helping people help themselves.
I think we'll see many examples of this as I keep going.
Another thing is the difference between these guys and activists, you might say, well, Chrissie Westlake is obviously an environmental entrepreneur.
She's a real activist around yes and no activist or Tim Tams, another one.
Tim definitely could be labelled as an activist, except there's a very different, different category here.
Activists are extremely important in a society.
Again, just like charities, they fulfil a very specific function.
When governments don't act through the usual mechanisms.
Social activists are out there saying, Hey, you're not doing your job.
They're out there protesting.
They're out there, you know, whether it's Greenpeace or Amnesty International, holding corporations, holding governments to account.
Okay. The difference between social activists and these entrepreneurs is that entrepreneurs are providing the tool or the solution.
If you take Muhammad Yunus, who I'm sure you've heard of his connection to Grameen Bank microfinance, Yunus didn't sit there and go,
you know, banks are unfair to the poor and carry placards around the street saying banks are unfair to the poor.
He came up with a tool that would actually help the banking industry completely reform the way they did business with the poor.
So these kinds of entrepreneurs, like all entrepreneurs, are very pragmatic and very solution oriented.
Mind you, we need the activists, we need the green pieces of the world.
But that's not the role that these entrepreneurs that I'm talking about play.
So I wanted to differentiate very much between normal charity that is important activists that are important.
This is a new kind of actor that's using business models to fulfil different functions.
What about the difference between mainstream business?
And I think this is one of the things I think that, you know, for years I was very involved with the World Economic Forum,
was very interesting to see how even the major CEOs of leading industries, leading companies would go.
You know, my life is divided between this is where I make my money.
But what you know, and this is where I do good. We've kind of compartmentalise those.
And that's where you had the CSR push. Oh, here we're going to make our money over here.
And then we're going to do stuff around charities and and etc., etc.
And many times it had nothing to do with their core business. That's changing, although not fast enough.
But it is changing so that you are beginning to see a coming together of it's not just about dividing because as I'm sure Steven Green,
who if you've read good value, he was the chair of HSBC and now he's, I believe, a minister of trade in the UK government.
And basically what he says is compartmentalisation is the curse of mankind.
Because if we keep bifurcating where we live our lives, this is my public face, it's my private face, and never bringing those fears together.
We will definitely have, you know, have challenges.
So the main challenge for mainstream business from his perspective,
is how do we break down those walls and how do we actually operate in a way that's a whole more holistic and true to ourselves?
And this is the quote from him. So these are some new ways that we're seeing that business is being done.
Managing for the long term, not just the short term. We've heard about, you know, the tyranny of the market with those quarterly returns.
People are beginning to question that. Mainstream companies are beginning to question it.
And that's where the B Corp came into being, because they were beginning to question that.
And so how do you balance that between cooperation with many stakeholders and competition, especially in the business space?
That's another aspect. And you're basically seeing, in fact, premium competitors in pre-market situations collaborating with one another.
I'll give you a very specific example. We had a roundtable with the main competitors of sports apparel who were being Nike was going to be taken
to task by Greenpeace for the use of some sort of chemical on the on the shoes that they were using.
And Nike said, hang on, we're not the only ones that are using this toxic chemical.
Adidas does, you know, etc., etc., etc. So if you're going to address this issue, we need to address it together.
And so these competitors came together pretty competitive to sort of lay out a roadmap for how they were going to
deal with actually doing away with using this particular toxic ingredient in the manufacturing of their footwear.
And by a certain date. So you're seeing a lot of that kind of cooperation before.
Pre competitive, I would call it. The other thing, I think that we also are becoming more and more aware of,
certainly here in the business school and the issue of accounting pushing off all your negative externalities and basically saying,
oh, we're not going to we're not. We're not going to address the externalities that our product is causing.
We're just going to in our accounting systems for accounting for, you know, a completely different set of of of profit indicators.
And now we're having this more and more this idea of full cost accounting.
How much is your company? How many goods and how many bags or your is your company producing and having that come into a full cost accounting
mechanism that really talks about the value to society and to your consumers that your company is is providing.
And so anyways, the whole marketing and branding thing. Now let's look at corporations and charity, just what I said.
You know, basically the whole trend has been let's put on some, you know, CSR, corporate social responsibility activities onto our mainstream stuff.
But you know, that's over here and many times, you know, you have banks doing stuff for something that's totally irrelevant to their core business.
That, as I said, is changing.
The other role that I think that sustainable enterprises really contribute and and you can see this in many of these areas, all of these areas,
renewables, microfinance, affordable housing, mobile banking, all of these industries were created by entrepreneurs who saw an opportunity.
Where business would not go because the risks were way too high in comparison to the profits that could be made.
They saw it is way too risky. Today, what these enterprises do is they pave the way for mainstream business to come in.
Now you have mobile banking all over Africa, for example, and highly lucrative.
You certainly renewable energy was started by entrepreneurs up in Denmark with wind farms and solar energy where mainstream,
mainstream commercial investment would not go. Now it's an entire industry.
So that's one of the roles they are harbingers for new business opportunities, new ways of doing things.
And that actually is one of the reasons why I get really excited about this space.
I think that one of the differences with mainstream businesses and with these
enterprises is that mainstream business really looks at the unit of analysis,
is the company that is the unit of analysis, whereas the unit of analysis in sustainable entrepreneurship is the entire system.
And basically you'll find many times these these mainstream businesses are saying we need to control what's happening within our company,
which albeit be yes, that's the usual way of doing business,
whereas what sustainable enterprises are doing is to really look at the broader picture and to achieve lasting solutions.
So you're seeing the shift and it's not presenting it in a very black and white way because many mainstream
businesses I sit on the boards of a couple of publicly listed companies are very much conscious of this shift.
It's very difficult for them to pivot, however. But it is happening, which is exciting.
Now we're going to get into where is the money going to come from for this? How many of you have heard of impact investing?
A couple of you. Okay. What is impact investing? This is a whole new trend.
There is a great enthusiasm for this idea called impact investing.
And many of our students who are doing their MBAs here. This is a space that they really want to get into.
It's the idea of how do you use financial?
How do you use finance to actually create a financial return for these kinds of ventures,
but at the same time, ventures that are really doing and generating positive social and environmental returns.
And many times I hear people going, wait a minute, you know, this is crazy.
I mean, I'm creating jobs. That's enough for me.
I mean, I'm creating jobs. That's a big, big deal. Being an entrepreneur.
Yes, sure. The Mafia creates jobs. And, you know, so does the tobacco industry.
But so that's not enough. Frankly,
even though jobs are a great thing and that's why we really want to foster entrepreneurship and man and the growth of companies because of jobs.
But it's not enough in this space. So at the last G8 meeting.
This was the hottest topic, according to the economists,
this impact investing and yet really very small amount of capital that's out there is actually going into these investments.
We're still in a very nascent stage of a new industry, which is quite interesting.
The other problem is there's a huge confusion on what is impact investing.
Some people say, oh, it's actually impact investing is I you know, if I'm supporting a charity, I'm actually making an impact invest.
Others are going, no, no, no, no. You actually have to have a financial return when you're doing impact investing.
It's not enough to just give to charity and say, okay, I'm making an impact investment.
So there's a lot of confusion here. And I'm on the G8.
One of the task forces in the U.K. at the G8 has asked to look into this particular space,
which is businesses that are very actively delivering social value,
and where the investment for that is going to come for or what they call mission locked businesses.
Social businesses give you a very specific example.
How many of you heard of daylight in India?
This is a social business basically created by two Stanford grads who really wanted to focus on how do we lessen the impact from NOx,
kerosene, etc., that the poor have to use in order to light their homes.
So they basically this is their achievements.
They've improved lighting to more than 60 million people at this point, and that's how much money they've saved.
They had $20 million of investment from a couple of impact investors.
That's the amount of money that they that that they've actually saved consumers.
Now, mainstream investors are starting to get into this space saying, hey, you know what?
There's a financial return here, too, made to be made. And so that is something that has sort of, you know, sparked people's interest.
And so they this is what they're hoping to do. Which 100 million of the 2 billion users now?
This is a big business opportunity for an impact investor that wants to get a financial return.
And the financial return I'm talking about here, you know, could be, you know, market rate or just below market rate.
But at this point, they are looking at market rate returns. But there's another one.
This is a case in Brazil. The social South Koreans basically started by a paediatrician and a hospital.
That was the reference hospital for the poorest areas around Rio de Janeiro, the favelas.
And she got very tired. Her name was the record label.
She got very tired of seeing the same kids coming through the door of the hospital with the same disease week after week.
They would you know, they would get the medical attention they needed and then they would be dismissed or sent home.
And she said, you know, this is crazy. These kids, they're nuts.
There's nothing I can do about the situation they're living in because this is caused by poverty.
It's nothing that medicine is going to be able to solve.
So what she did was she quit her job at the hospital and she formed a very strong link with the hospital, but with the rest of society and said,
we're going to address the issues that this child is living in, which usually was the mother had no job.
It was usually a female single headed household.
The housing conditions were terrible. A whole series of things that were causing that illness today that it's been amazing.
She has been she linked closely with the hospital and she basically said, send me the kids that keep coming through your door.
The same kids that keep coming through your door. And those are the kids we're going to work with.
And so what she did was she she and her army of different people coming from these different sectors,
housing, nutrition, etc., would actually work with that mother or the family in terms of.
For a whole year to help her get to a point where she was going to be able to sustain a job, specific skills, etc., etc.
And the recidivism rate in the hospital dropped by 60% today.
She is here today.
It's been replicated in more than 23 centres.
Now, this is really interesting because how many of you have heard of Social Impact Bonds?
The Sims, the famous Sims here, Social Impact Bond is an extremely creative financial instrument that was developed
here in the UK and has attracted tremendous interest in many other countries the US,
Canada, Australia, etc. And the idea is the following There are some ventures that are going to need funding this.
This venture obviously is never going to give anybody a financial return.
It depends on philanthropic philanthropic dollars, but it is saving society a huge amount of money.
It's saving this I mean, it's saving government a huge amount of money. So how can government reward those ventures that are basically addressing huge
market or government failures in a way that helps and support their activities?
And what it does is it creates a bond that you invest in and is dependent on the success of the delivery of,
let's say, in this case, kids who don't keep going through the revolving door.
And so they get to have a certain time frame, a certain horizon.
It is measured by independent evaluators.
There's a experiment going on right now here in the U.K. with prison recidivism, where the people invest in that bond.
It's a long term bond and you get a market rate return.
If certain goals are met. If those goals aren't met, you lose every penny or.
It's a it's a it's a it's a philanthropic donation. So this seems to be have caught on in a way that's interesting.
And that's been called an impact investing.
For me, it's a fancy and very innovative way of doing effective philanthropy, whereas the daylight example is what I would call an impact investing,
where you're actually really generating a financial return and you don't stand to lose your shirt if if certain things aren't mentioned.
But this is a big hot item here in the U.K. just so that, you know, the issue is impact investing is not an asset class.
It's basically a lens that you look at through which investments made.
There are two things that qualify because many times pick up. Any investment I make is an impact investing.
I mean, this is crazy. I mean, so one is the issue of intentionality.
A pharma company obviously does a lot of good. It produces pharmaceuticals that, you know, cure illness, etc.
But the intention isn't from the outset that the intention is to generate returns and obviously to pay for their R&D costs,
etc. They happen to be doing benefit for society.
But from the beginning, the thing that differentiates impact investing is the whole issue of intentionality.
They are actually investing with the very intention of creating that social, environmental return.
And then they are very vigilant about measuring outcomes.
What are the outcomes? What is the impact that these investments are having on the kinds of things that matter to us?
These are still, as I said, this is a really nascent industry.
There are lots of people who want jobs in this industry.
There are not enough jobs in this industry because many times people that go into this, for example, come from the corporate sector.
They've been in the banking sector. You know, they're tired of, you know, being in the banking sector.
They want to do something that they feel is going to be more rewarding. This industry is just getting off the ground.
We'll see where it goes. It's actually quite interesting. One of the ghosts that haunts this whole conversation is, well, what are acceptable returns?
You know, that the jury is still out.
And I think that one of the things, again, to to figure out is that this is a very nice industry.
And, you know, what is if you get if you're investing in something like a delight,
are you actually sacrificing financial returns for the social impact?
Now, this has been a big post that's haunted the conversation.
And interestingly enough, there's this sort of idea that somehow these kinds of impact investments always generate below market rate returns.
But Deutsche Bank did a very, very interesting study where they teased apart different types of quote unquote, impact investing.
And they really looked at these three categories.
And what they found was the third category, which is environmental, social and governance, governance,
investment were actually had higher rate returns with governance as a big part of why that difference was.
So that was a really interesting report the.
It's beginning to come in now. That shows that companies that are really looking at these aspects are actually generating higher market rate returns.
So interestingly enough, where, you know, the problem is we're still looking at what are the best models for impact investing.
Clearly, something like Arena said is not.
But there are other other things that can businesses where you might want to think about.
There is a business that I could develop that could actually really do both or three things,
whether it's the solar lighting or mobile authentication, micro insurance, drinking water,
all of these areas we're just beginning to explore in terms of what are businesses that can do these different aspects
that we're looking for in terms of the role that business functions and how business can really improve our society.
And I want to just highlight something many of you, I'm sure, have heard of microfinance.
Right. Okay. Let me tell you a little bit about the history of Grameen.
Even though microfinance has existed for years before Grameen came, Grameen basically formalised it and sort of universalised the model.
But lending groups have been going on since community started, etc. So don't think that microfinance that Muhammad Yunus just,
you know, came down and gave the model of microfinance been around.
But in 1976, he founded Grameen. 40 years later, the microfinance sector serves millions and millions of people.
And billions of euros or UK pounds or whatever you want to say have been actually investing,
including big pension funds, mainstream investment banks, etc.
Money has flowed into the MFI sector, but.
An awful lot of subsidy was needed.
Basically, look at how much money over 30 years microfinance received in grants from whether it was the Rockefeller Foundation,
the Ford Foundation, etc. It was heavily subsidised.
And it's the same thing in government, by the way. Government heavily subsidises lots of industry, as we well know.
So this issue of subsidy is like the angel investments that's needed to grow a sector, and it's the same thing with anywhere.
So it took a lot of time to build up the microfinance industry and to give it credibility and also to build that ecosystem.
We forget that today in the financial industry, we have a whole ecosystem that supports that industry,
whether it's consultants, whether it's accounting firms, whether it's the legal system.
I mean, a whole host of different things. We don't have that in this industry of, you know, what we're calling sustainable entrepreneurship,
these weird hybrid organisations that are still trying to figure out are we fish or fowl and trying to, you know, find a new way of doing business.
So all of these things, it took time to build that ecosystem.
And during that time, now microfinance is a mainstream sector.
Many banks have, you know, microfinance windows within the bank.
So I wanted to just close by giving you a couple of really interesting insights into where the corporate sector is going.
These are some of the highlights of corporations that are really trying to figure it out.
They're trying to figure out how can we actually transform the way we're doing business so that we are actually
looking at reusing things that are wasted or creating a different way of doing business with our supply chain.
Marks And Spencer, you know, has the plan A or because there's no plan B, they're all trying.
None of them are succeeding completely, but they're really pivoting or trying to pivot their operations in this way.
And interestingly enough, shareholders are rewarding them for that.
Which is interesting at this point. So we'll see where this whole trend goes.
But it is exciting. Look, Waste Management is the largest waste management company in the entire U.S. Do you know that it produces more solar,
more electricity or more power, more energy from solar, from waste than the entire solar energy sector in the United States.
That is a publicly listed company and they are purposely doing they're still looking.
How can we use waste to completely generate and energy?
And and it's a fascinating story what they're doing and they've had to pivot completely.
The CEO of that organisation came in and basically revamped the whole thing with the support of the shareholders.
Sometimes shareholders aren't so crazy in the case of our aren't so excited about it in the case Royal DSM, which is a fascinating couple,
is the biggest producer of vitamins and other kinds of nutrients and nutritional things and its beat
the B to C company and Holland it's a publicly listed company the CEO had to almost sort of say,
I'm stepping down because this is the way I want to go, and if you're not with me, I'm stepping down.
And then the shareholders stepped up and said, okay, let's try it out. So it's not you know, it's it's tension.
It's tension. If you've always been driven by certain things, it's hard to change that model, but it's exciting.
So this is what we call future proofing business.
Lots of different things cropping up. All of these movements around sustainable capitalism, responsible capital in Calgary.
It keeps going and going.
And all of these have different organisations that are big businesses that are part of these little clubs and there's a huge fragmentation of effort.
You see it at the West, you see it in the UN Global Compact. There's just a whole crop.
This is a trend. Every company wants to be on this bandwagon and figure it out.
So I think that they also identify that we've got mega problems and number one, and opportunities.
Yes, the climate change threat gives rise to big opportunities in the clean economy.
We have major resource constraints in terms of rising commodity prices, but there's a huge growth of the middle class around the world.
And then we're basically looking at much more demand on transparency, open innovation, etc., which presents, again, a whole other opportunity there.
And just to conclude, this is why companies realised that they've got to do something.
The world is getting hotter, it's getting scarcer.
I mean, commodities are it's much more transparent.
You can't hide anymore. And it's very unpredictable.
So how does a company actually take advantage of that?
I'll just quickly run through this and let's talk about you.
I actually think there are very few of us that are going to go out and form the
kinds of ventures that I've talked about at the very beginning of this talk.
But there is something that all of us can do, and that's what I believe is we can be entrepreneurs.
And wherever we are, we can be thinking innovatively, from wherever we're working, even within an 800 year old university.
We can be thinking differently. We can think how do we actually contribute to a way of leading and changing a system or a way of of of fixing
things that have perhaps not lived up to the kind of potential that we'd hope in a very rapidly changing world.
So I really believe that the most important thing is to stop focusing as much on entrepreneurship,
which has been very narrowly focussed on new venture creation, which is great.
But I actually think it's a much bigger piece than I think.
As I said, you know, we can actually be entrepreneurial wherever we are.
So with that, our conclusion and just open up to any questions you might have.