I recently came across an old Harvard Business Review (the June 2011 issue) and, re-reading a few pages, enjoyed the “Crucible” feature on Kathy Giusti, “The Reluctant Social Entrepreneur”. Giusti was a Harvard Business School graduate on the fast track at a large pharmaceutical company when she was diagnosed in 1996 with multiple myeloma, a deadly blood cancer and “orphan disease” [only 60,000 people in the United States currently have it, thus representing a small market for drug companies more interested in blockbusters] for which there is no cure. She then launched the Multiple Myeloma Research Foundation to help spur research on the topic.
The foundation has raised $165 million to date, a remarkable accomplishment in the nonprofit world. Giusti is a highly analytical person who “requires the foundation and the [research] consortium [16 medical centers and community hospitals] to use metrics, benchmarking and scorecards.” Her disease became active in 2005 and she underwent a stem-cell transplant in 2006; the cancer has been in remission since. Giusti’s success is imputed to her drive, her determination to reject the status quo (in her case, physicians had told her at age 37 she should not expect to live more than 3-4 years; she is now 52) and her implementation of rigorous business concepts to the nonprofit world. Giusti was named to the “TIME 100” list of influential people in 2011 and gave the Class Day Speech at Harvard Business School in May.
Staying on the topic of non-profits for this post, and going through old Schumpeter columns I saved (see my earlier post for additional Schumpeter columns I liked), I’ll point out the July 2010 column by Schumpeter, on “Profiting from non-profits”, with the subtitle: “Charities are often told they should learn from business. The reverse is also true.” According to Nancy Lublin, the author of “Zilch: The Power of Zero in Business”, successful not-for-profits (her preferred term) excel at motivating workers in spite of low salaries – a valuable skill for any company to have in this economy – and at marketing. Lublin steers clear of the theory that “businesses should all embark on missions to build a better world” but they should have a clear and well-articulated purpose to attract employees. They should also be willing to give new hires real responsibility quickly and build long-term relationships with their customers. It is too easy, Schumpeter argues, to dismiss “the whole lot as hopelessly inefficient.”
Also interesting is “A new alliance for global change”, a September 2010 Harvard Business Review article on how “corporations and social entrepreneurs can reshape industries and solve the world’s toughest problems” by working together and forming “hybrid value chains” (HVCs). The authors (the CEO of Ashoka and the founder/chief entrepreneur of its Full Economic Citizenship initiative) reckon that “businesses offer scale, expertise in operations and financing” while “social entrepreneurs offer lower costs, strong social networks and a deeper understanding of customers and communities.” The article provides several examples, from the low-income market for ceramics and home products in Colombia to the housing market in India for “informal” members of the workforce (with steady income but lacking proof of stability and so ineligible for mortgages) to drip irrigation systems in Mexico. Key markets for HVCs are: agricultural products and food, energy, low-cost housing and health care, for a total market size valued at $6 trillion in 2005.
To finish with a recent article, The Economist mentions in its January 7 2012 print issue “a new sort of caring, sharing company” called B-Corp (for Benefit Corporation) and now gathering momentum. The article focuses on Patagonia, an outdoor-clothing firm, which became on January 3 “the first firm to take advantage of a new California law designed to give businesses greater freedom to pursue strategies which they believe benefit society as a whole rather than having to concentrate on maximizing profits for the next financial quarter.”
The article also describes the requirements to qualify as a B Corp, which seem rather moderate: “an explicit social and environmental mission”, “a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders” and “independently verified reports on its social and environmental impact”. The push for B Corps is due to the nonprofit B Lab in the Philadelphia area; 6 states including California now recognize this new type of corporation. There are now apparently several hundred B-Corps in the US (517, according to bcorporation.net, totalling $2.9 billion in revenue over 60 industries).
A new law also took effect in California, creating the “flexible purpose company” (FlexC), which has a more specific social goal than B Corps. “Another option in America is the low-profit limited-liability (L3C) company”. The motivation for hybrid legal structures comes from the belief shared by many that “existing laws governing corporations and charities are too restrictive.” It will be interesting to see whether B-Corps and the like become prevalent in the business world or remain a tiny minority.
More on the topic of social corporate responsibility in next week’s post!