26 October 2016
Two girls learn how to make pastries at Miss Macaroon, a British social enterprise. Photo: Miss Macaroon
Two girls learn how to make pastries at Miss Macaroon, a British social enterprise. Photo: Miss Macaroon

Create shared value to sustain business growth

I joined the Big Social 2016 in London last month and made a speech on how to help social enterprises integrate into the mainstream business world.

The event was organized by UnLtd, the leading provider of support for social entrepreneurs in Britain.

Established in 2000, UnLtd offers the largest such network in the world. It oversees a 100 million pound (US$144 million) endowment called the Millennium Awards Trust.

Social enterprises need to have a mission and perspectives to solve social or environmental problems, as well as good management and execution capabilities.

Operating a social enterprise is just the same as running any ordinary business; you need capital, a well-defined budget, marketing plans, etc.

Without these elements, the most passionate entrepreneurs won’t be able to achieve sustainable growth in social enterprises.

UnLtd supports individuals who have their social ventures firmly rooted in delivering positive social change.

It provides professional consultation and assistance for social enterprises, helping them create shared value and achieve win-win alliance with more established social ventures.

Creating shared value (CSV) is a business concept first introduced by two professors, Michael Porter and Mark Kramer, in a Harvard Business Review article, “Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility”.

According to the article, companies could bring business and society back together if they redefined their purpose as creating “shared value” — generating economic value in a way that also produces value for society by addressing its challenges.

Companies could achieve this end in three ways.

1) Reconceive products and markets. Many demands stem from social issues, such as an aging population and a high jobless rate among young people.

For example, I’ve discussed with some social incubators in Hong Kong how to use non-invasive medical products for the elderly to mitigate Alzheimer’s disease.

The traditional way is for a company to buy these drugs through its charity foundation and give them to senior citizens in need for free.

However, large corporates could achieve synergy with social enterprises in a market model. A large company can tap the product offerings of a social enterprise through the distribution platform of the drug maker. The two can supplement each other.

It’s an upgraded version of the Company Social Responsibility. It would benefit the company’s image, brand and marketing, and create shared value as well.

Companies should allow social enterprises with mission to use their distribution platforms to scale up the social benefits.

Another good example is Miss Macaroon, a social enterprise in the UK that provides pastry chef training, work experience, confidence building and mentoring to young people, often school leavers experiencing difficulties in finding jobs. It’s quite similar to Jamie Oliver’s training kitchen.

Miss Macaroon is founded by the chef of a Michelin-starred restaurant. The founder believes that it’s possible to train a good chef who can make premium macaroons within a certain period.

The product, with high profit margin, can cover training and support expenses for those in need. And the business model can be easily replicated in other regions in the UK.

Miss Macaroon has alliances with many large food retailers to expand its presence all over the country.

2) Redefine productivity in the value chain. Big companies can introduce innovation within their organization, such as by improving energy efficiency and making the supply chain more sustainable.

Life Healthcare is a key role player in South Africa’s healthcare sector. The nation has been struggling with a high mortality rate and low healthcare standards. The company looks at these issues as opportunities to act.

Electricity is quite scarce in South Africa, and blackouts occur from time to time. Life Healthcare has bought its own power generators and promised to review its environmental management performance periodically.

The company has also endeavored to reduce the carbon emission and water consumption of patients since 2013.

These moves will have a direct impact on its balance sheet.

3) Build supportive industry clusters. A key theme of the Davos summit in 2015 and 2016 is inclusive financial services.

In 2014, JPMorgan unveiled its Financial Solutions Lab plan, a US$30 million, five-year initiative that supports promising innovations that can help Americans increase savings, improve credit and build assets.

The US bank has teamed up with partners to provide financial services for low-income customers. Helping socially vulnerable groups is already a trend that can’t be ignored.

This article appeared in the Hong Kong Economic Journal on March 29.

Translation by Julie Zhu

[Chinese version 中文版]

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Adjunct associate professor, Department of Finance, Hong Kong University of Science and Technology

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