Social innovation and the power of the private sector

Wednesday, 14 August 2013 13:10 GMT

REUTERS/Ahmad Masood

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We should be looking at ways to involve all sectors - government, business, and charity - to better solve the social issues of the day

This summer, I spoke at the Women Deliver conference in Kuala Lumpur, where 4,500 participants from over 140 countries came together to discuss how to empower and advance women and girls around the world. I was struck by the level of passion of the people I met. From small charities to big NGOs, we were all working on issues central to advancing women and girls' rights. There was genuine commitment to the cause and a strong sense of camaraderie amongst the participants that I met.

At the same time, I was also struck by the overwhelmingly traditional methods that many of the organisations at the conference were using. There seemed to be a big split between those wanting to innovate versus those who were happy to continue with the same old approach.

This schism was painfully obvious during the closing plenary, when Karl Hofmann from Population Services International spoke of the need for the sector to “look to the market to meet (financial) sustainability goals. ” He added that “…market forces are powerful… and we should figure out how to make them work for our agenda.”

It made a lot of sense to me. But Kavita N. Ramdas from Ford Foundation responded with a tirade: "Non-profits are told you need to become financially sustainable…but if markets were so damn wonderful they would have been serving the poor to begin with."

Her comments were met with raucous applause from the hundreds of women in the room. I cringed. Is this really how people in this sector feel?

Don’t get me wrong, the private sector has its own set of unique challenges. But surely we should be looking at ways to involve all sectors - government, business, and charity - to better solve the social issues of the day? I felt a strong sense of “us vs. them” at the conference as soon as anyone brought up the idea of the private sector being a potential partner. Having worked many years in social enterprise, this attitude took me by surprise.

At the Good Deals conference in London last year, Professor Muhammad Yunus spoke about the future of social innovation. Interestingly, his solution focused on not just collaborating with businesses but proactively involving big corporations too. He spoke about his work with the French multinational corporation, Danone, in bringing nutrient-rich yogurt to Bangladesh’s low income populations while at the same time providing employment opportunities for local farmers to work at the plants as well as low income women in distributing the products.

The project obviously has incredible social benefits in Bangladesh and even though it is designed to not make a profit for Danone, it has been incredibly helpful for the corporation to learn how to change their products and processes in order to successfully enter a brand new market. In other words, a win-win situation.

But let’s return to Hofmann for a second. The truth is that market forces are powerful and, in fact, many have already figured out how to make them work in a social context:

-In Brazil and Indonesia, Floresta is pioneering a new approach in restoring tropical forests by planting new and sustainable timber plantations on deforested land. The plantations offers employment for local farmers, who would otherwise be engaged in slash and burn practices, providing them with a legal and financially sustainable use of their land. The project will also generate carbon credits to be traded under California’s Cap & Trade scheme and contribute towards the financial sustainability of the project.

-In Denmark, Specialist People Foundation trains people with autism to provide assessment, training, education and IT consultancy services to a range of corporate clients, essentially providing employment to this group of people who otherwise would have difficulty integrating well in a typical work environment. The organisation generates the majority of it’s own funding from the corporate clients with which their autistic consultants work with.

-In sub-Saharan Africa, many farmers wait for the unreliable rains and can barely grow enough food to feed their family, let alone sell for profit. KickStart designs, manufactures, and sells high quality, low-cost irrigation pumps to these poor farmers so they can harvest year round, increase their production, and sell in local markets - increasing their net farm income by nearly 500%. For the first time, they can adequately feed their family, send their children to school, and afford proper healthcare.

On the other hand, I do understand some of Ramdas’s concerns. Sometimes involving the private sector can be disastrous such as the case of microcredit in many countries. Originally developed by Professor Yunus, it has provided hundreds of thousands of predominantly low income women with the capital and skills they need to start their own micro-enterprises, essentially lifting them out of poverty and enabling them to contribute to the local economy.

However, many banks have prioritised financial returns at the cost of social impact. The result in many situations is that beneficiaries have been dragged into a vicious cycle of debt where immoral or illegal methods are used by the banks to get their money back.

Some organisations at Women Deliver were innovating in incredibly novel ways, pioneering new approaches, challenging the conventional ways of doing things, rethinking their models, and partnering with unlikely bedfellows. I was a judge at the Women Deliver Social Enterprise Challenge where 10 social ventures pitched to me and three others for the first prize. Many of the participants were truly inspirational and just coming up with the top three proved to be a difficult task.

I guess the debate continues (as it should!) about the best ways of having the strongest social impact. It makes sense to me to think creatively about how to involve the private sector, especially considering the squeeze on governments to fund social projects following the global economic downturn.

I just hope that we can maintain an open mind and keep experimenting with new ways of ensuring a more equitable world. Relying on markets certainly hasn’t solved all our social problems but neither has relying on the goodwill of governments and philanthropists. I think most of us would agree that many of the traditional models of delivering social value should regularly be scrutinised. Hopefully, we can find the right combination of “private” and “social” that provides the most sustainable impact.

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