005 No Ordinary Business with Akina Foundation - Part 2

Welcome back to Part 2 of a two-part conversation with Chris O’Neill, General Manager of Programmes at the Ākina Foundation.  

 

GINA:  Welcome back, Chris! Yesterday we left off our conversation speaking about social enterprise and social innovation in academia.  Today, I wanted to pick up our conversation exploring government support for social enterprise across New Zealand. 

 

CHRIS:  The New Zealand government has committed an investment of NZ$5.5 million over the next three years to grow the social enterprise sector.  What’s interesting about that process is that the initial decision was under a centre-right government but is implemented by a centre-left government.  So in New Zealand, we see social enterprise as being supported by both ends of the political spectrum.  From the conservative perspective, they see it as a great way to achieve social outcomes through market-based methods.  From a liberal point of view, they see it as a way to achieve greater social outcomes without government intervention as well as for a more balanced, equitable, and sustainable society.

 

GINA:  What about at other levels of government?  Is there collaboration?

 

CHRIS:  Within New Zealand, we have our central government and local governments. We work with the city councils, for instance in Christchurch we have a very strong relationship with that region and they are very supportive of social enterprises.  We are seeing more interest from town and city level governments for enabling social enterprise because they see it as a way to grow their community and reverse some of the effects of urbanisation that have left rural areas with fewer resources and less ability to engage.  We are working across the country, across the political spectrum and through all levels of government.

 

GINA:  So you’ve been up and running for ten years now, what are some of the challenges you have faced and overcome or are still facing?

 

CHRIS:  One of the barriers we have overcome is government engagement.  We now have a government that is highly interested and highly engaged in social enterprise and we see that as a key lever. Going forward, one of the main barriers is access to capital.  To address this, we are undertaking research over the next twelve months to understand what are social enterprise capital needs, what are the barriers to accessing that capital and what are the possible solutions.

The other opportunity for us is around regional engagement. We’ve had the best results when we’ve had strong local partnerships.  So going forward, the partnership approach is really important to us.  

 

GINA:  Can you describe how your partnerships work?

 

CHRIS:  We see the philanthropy, government, and corporates as providing the enabling capital we need to achieve our objectives, but these initiatives are most effective when they are community led so we try to find regional funders who want to invest and local organisations that are passionate about change so we bring together the money with the will and Ākina offers support and guidance on how to implement these programmes.

 

GINA:  My impression is (based on your comments) that there is an openness for this type of partnership and collaboration – is that a fair assessment?

 

CHRIS: Yeah, it’s more than openness but actually an expectation that this is how things would be done.  When we’ve been asked to support regional projects without the support of local partners we have encountered resistance and have not had as much impact.  Our success is greater and easier when it’s a local community-led initiative that a community feels ownership over.

 

GINA: It makes sense from both a sustainability perspective and also from the perspective of relevance.  Without local ‘buy-in’ you don’t have the support to make the programme a success and you don’t have the knowledge to tailor the programme to meet local needs.

 

CHRIS:  Exactly.  Through that approach, local communities are able to lead and to articulate their local needs from Ākina in order to enable growth in social enterprise.

 

GINA:  Do you use the SDGs as a framework or otherwise?

 

CHRIS:  We are agnostic as to the impact area but what we are seeing is much greater use of the SDGs as a common language.  We are seeing social enterprises use them as a reporting framework.  We are seeing corporates using them as a framework for procurement and for internal sustainability conversations.  I think they are gaining traction; we had a successful SDG conference here in New Zealand, which brought together not-for-profits, corporates, and government to have the conversation. I think we will see more and more of those conversations.  

What’s interesting is that our government is working on moving away from purely looking at policy on the basis of GDP alone, but they are framing up new approach called the ‘Four Capitals’ or the ‘Living Standards’ framework, which has four pillars: natural capital, social human capital, financial or physical capital. The intention is that the government will use those Four Capitals to evaluate and formulate a new policy that is not exclusively focused on economic growth.  They are recognising other factors as well, which I think is similar to the SDG approach.

 

GINA:  The approach is a consideration of all stakeholders.

 

CHRIS: Yes.  And it is a recognition that value creation can happen in multiple forms.

 

GINA:  I wanted to ask you about inclusion and how big a topic it is across New Zealand?

 

CHRIS:  I think the conversation about inclusion is very prevalent across New Zealand.  I think we realise we have some way to go to become a more inclusive society and that conversation cuts across different areas. Something that’s really important about New Zealand is that with our Maori indigenous population, there’s a concept of a bi-cultural approach or an approach that takes into consideration Maori values and their approach. As a country, we’ve done better than most in our relationships with indigenous populations but we still have a long way to go.

The other types of inclusion conversations that we are having are around LGBT, gender equality and the different outcomes people get based on where they are born in New Zealand.  For instance, we don’t stack up particularly well in areas like child poverty and as a country we should be doing much better.

 

GINA:  What are the risk factors that you have to manage or mitigate?  What is at the forefront of your minds at Ākina insofar as risk is concerned?

 

CHRIS:  For us, one of the key questions we have in New Zealand is who should define ‘social enterprise’ and can the social enterprise community itself form enough cohesion to do that or will the government define it?   There is a lot of risk around organisations with high profiles claiming to be social enterprises when they don’t fit the community’s definition.  How do we control that risk especially in the event that one of those organisations has negative PR or other significant public challenges that might cast a negative shadow across the entire sector?  With these organisations you also run the risk of ‘greenwashing’ or ‘impact washing’, in this case ‘social enterprise washing’.  That would be a key risk area for us.

 

GINA:  Are there any potential unintended consequences that concern you?

 

CHRIS:  We do think and talk a lot about unintended consequences.  We work across a lot of different industries.  If, for example, an organisation that we work with becomes so successful that it puts a traditional business out of business from an employment perspective that would be an unintended negative consequence. There is always going to be displacement risk with the growth of social enterprise but we are trying to shift the whole economy to be impact-led so eventually that risk is mitigated by the fact that everyone is trying to create impact and absorbing more employees that may have lost their jobs working in a traditional organisation.

 

GINA:  That is an inevitable consequence of increased efficiency in the marketplace so social enterprises would not be alone in causing disruption in this regard.

May I infer then that your definition of ‘social enterprise’ is such that it has to be impact-led?

 

CHRIS:  The key thing I am looking for when assessing to what extent something is a social enterprise is how much the individual or organisation talks with passion about the impact that they are trying to achieve?  If I turn up to their website and cannot find anything on the site that talks about impact or feels as if it is an ‘add-on’ or a marketing spin rather than a core commitment those organisations feel less like social enterprises to me.

We don’t hold strict views on the proportion of profit in our general work unless it is in the social procurement space so we are focused on how much commitment to impact an organisation really has over prioritising private profit.

 

GINA:  Would it be fair to surmise your position by saying that a social enterprise requires that impact be core to the mission?  

 

CHRIS:  For me, I tend to separate out the business model from the impact.  For some organisations the business impact is closely tied to the business model. For others, they may be purely profit driven but they then donate that profit to another organisation that might be a not-for-profit. 

 

GINA:  So in the case of the latter example you would consider that organisation to be a social enterprise?

 

CHRIS: Yes, but it depends on what proportion of profit is being donated to the charity.  We look at it on a case-by-case basis and the company’s rationale for the percentage it donates.

 

GINA:  i wonder about your second example of giving a for-profit that doesn’t have mission integrated into its business model the label of a social enterprise even though it allocates the majority of profit to a charity.  Without mission at its core could it not be conceivable that the for-profit might be causing harm if it fails to espouse the principles of responsible business (a core component to my mind of a social enterprise)?  In the absence of commitment to responsibility considering all stakeholders in all decision, I would be remiss to label it a social enterprise.

This conversation makes me want to put a question to you.  Do you think that Tesla is a social enterprise?  Let’s think about it for a minute.  They are producing environmentally friendly vehicles to conserve the environment.  Do they not qualify as a social enterprise because they are a big company?

 

CHRIS:  For me, that is the crux of why we choose to focus on to what extent is an organisation a social enterprise’ rather than to focus on whether a company is or isn’t. To some extent it depends on the lens you examine it through.  If you take the impact lens, through which you see the environmental good you could say yes, they are absolutely trying to improve the environment by accelerating the electric car industry rather than focusing on being the most profitable electric car manufacturers.

From the other lens, you would have to ask to what extent would they be willing to sacrifice shareholder return in order to maximise impact?  Would they take $10,000 off the cost of their car to broaden access and enable more people to buy their cars but then end up with a lower margin of profit?  I would argue that they probably wouldn’t, they have a responsibility to their shareholders to maximise shareholder return while choosing to do things in a more responsible, environmentally conscious way.

 

GINA:  I tend to be more liberal on this end of things because I would like to stop perpetuating the concept that doing well financially and doing good for society are separate and that a social enterprise means foregoing profit for impact. This is a common perception that I like to push back on because I don’t believe there should be a universally accepted presumption that impact must always supersede profit.  That may actually be true in certain cases, but I am weary to assume it is an indisputable truth in order to achieve global sustainability and am afraid that it will deter business.

In the example of Tesla, they have introduced a more affordable version of the car, although there have been production delays, and certainly, as demand increases, costs will come down.  

Sometimes I wonder how rigid we should be about defining what is a social enterprise, maybe we should be focusing on the spirit of being purpose-driven and responsible as necessary components to warrant that label.  For me, I think that what is essential is whether your mission is core to your operations and business model and whether you consider all stakeholders in your decisions in an effort to be responsible.  

Anyway, this is an evolving area and my hesitation lies in the fact that I don’t want to keep business out of the picture of affecting real positive social change, which might happen if we make the definition of social enterprise too rigid.

 

CHRIS:  I think that legal definitions create distortions.  Looking at the UK model, there are organisations that fit the legal definition of a social enterprise but in substance, they are not one. Conversely, there are organisations that don’t fit the legal definition that are quite clearly impact-driven organisations.  Similarly, in South Korea, they are coming up on the 10-year anniversary of their social enterprise legislation and they are reviewing the definition of a social enterprise to evaluate whether or not it is working effectively.

A legal definition itself is only useful for tax and investment purposes.  That is the only time it truly makes a difference. The rest of the time it is a spectrum and broad bucket and by putting a strict definition around it we lose flexibility to evolve as we go along.

 

GINA:  My belief is that for us to achieve meaningful sustainable change, we need each sector, from the private sector to the public sector to academia to civil society to play their role in creating sustainability.  I don’t think any single sector is going to solve the quandaries facing the world today.  Rather, everyone is going to have to take a step back and evaluate what the consequences of their impact are.

The reason why it is so important for business to get on board is that they hold so much economic power and impact that nothing will improve if they are not a part of the solution.  By 2015 69 of the top 100 economies around the world were companies.  If we make it too hard for business to be purpose driven and mandate they curtail profits then I’m afraid we are cutting our nose to spite our face limiting the potential for positive change off and reinforcing the antiquated notion that doing well and doing good are mutually exclusive.

 

CHRIS:  What I think is fascinating also is to what extent is it okay to become rich doing good? If a CEO running an oil company gets a million dollar bonus we wouldn’t react, but we would be up in arms if the CEO of an NGO got such a bonus.  It wouldn’t be culturally acceptable. 

To me, it is a matter of reframing some of those expectations. For so many social entrepreneurs it is about the mission, but if we want to create a broad and scalable social enterprise space globally, some of that is going to be driven by economic opportunities, particularly if it is the only way to bring in investment capital and to create highly scalable companies.  So, for me exploring that conversation around when is it okay to make money when doing good is a really important conversation that I don’t think we have really tackled yet.

 

GINA:  It’s a taboo topic for sure. I am personally for it.  I think sustainability hinges on the commitment of successful business.  I am concerned that if we continue to assume that doing good cannot be associated with making lots of money that will continue the siloed divide and limit the impact.  I have a lot of empathy for many not-for-profits that I consider to be suffocated or otherwise limited because they are donation-dependent and their donors refuse to support infrastructure and talent.  The world’s challenges are too big to be addressed on the back of goodwill.

 

CHRIS:  What I love about social enterprise is that it opens the doorway for that conversation especially in the absence of legal definitions.  We can create a spectrum in that case, where on one end there is a charity that is trading to sustain itself and on the other end you have a for-profit strongly commercially driven and impact-driven but is generating private returns.   By having both ends of that spectrum included in the definition of social enterprise gives people the choice of where to place themselves without feeling guilt or judgement.

 

GINA:  Agreed.  We need to be having this conversation more with people across the public sector, private sector, and civil society in order to flush out these issues.   

Moving on, what guidance would you give someone who was considering becoming a social entrepreneur by either setting up a social enterprise or joining one? 

 

CHRIS: Don’t reinvent the wheel.  So many of the challenges have been tackled by someone before. The more we can learn from each other and the more we can partner and build coalitions the better.

My second piece of advice is to validate everything.  Get out there and test your idea as early as possible and as often as you can. Sometimes we come across organisations that are too far down the track and because they are so committed they find it really hard to step back if they find things aren’t working.

 

GINA: Apart from access to capital, what other needs to you see social enterprises having?

 

CHRIS:  The key factors that we see are the enabling ecosystem. Can people find others who are doing it so that they can understand the options and journey they can go on and once they do that will they have access to the resources that will help them do that?  These resources include online, face-to-face coaching and structured programmes.  Once they establish proof of concept then the question is can they support growth and can they access the market and capital?   

 

GINA:  Is there an enabling ecosystem across New Zealand?  Are there other organisations like yours that are supporting social enterprises throughout their lifecycle?  What’s the climate like for accelerators or incubators or other organisations such as yours supporting these start-ups?

 

CHRIS:  What excites me is that over recent years I’ve seen a number of other organisations and individuals getting into this space.   We see that as validation that the area holds potential and that there is sufficient demand.  For example, we see lawyers and accountants starting to specialise in this space. They are working primarily with mission-driven organisations.  New Zealand is not at the scale where we are likely to see much in terms of accelerators or incubators given the massive overhead cost of delivering them.  What we will likely see is more organisations getting into the consultancy, one-on-one capability development and professional services.

 

GINA:  There could be an opportunity for philanthropic capital to be invested to build up these types of supportive services.  

 

CHRIS:   Yes. We are seeing that with the regional services where regional funders want to fund regional projects and we are looking at how to grow those services locally.

We think that having specialised social enterprise support is critical because generic business support doesn’t meet the needs of social enterprises. It struggles to reconcile the social entrepreneur’s desire for impact and the compromises they are willing to make to achieve impact.

 

GINA:  I have a big question for you.  What do we need to do to shift the needle towards greater sustainability?

 

CHRIS:  Two things come to mind.  One is taking a systems approach and the other is partnership.  We work from the macro to the micro and are in the trenches with the social entrepreneurs as well as the highest levels within government. The only way we are going to transform the economy to become impact focused is to get organisations to collaborate at that systems level. How do we bring together corporations and business and community so that they can take that journey together? How do we get all to understand the benefits and the needs and expectations that individuals have as well as their demands for sustainability, authenticity, and real impact over PR exercises?  By driving consumer demand for impact, be it around the environment, animal rights activism, or other concerns, consistent and persistent action is the only way we will achieve sustainable change.

 

GINA:  Perfect! Is there anything else that you’d like to add before we sign off?

 

CHRIS:  New Zealand is very lucky in that we are small enough to experiment in a way that a lot of other countries cannot.  If you needed to get a hold of the Prime Minister in New Zealand you probably only need to make one or two phone calls to get the PM on the phone.  Also, as a country, we have a history of being pioneering and I think that spirit puts us in good stead as we move into the next phase of trying to be a beacon for the world.  There are a lot of exciting conversations happening around zero waste, around a circular economy, around lowering CO2 emissions.  It is a great place to test things and to keep an eye on!

 

GINA:  That’s great! I want to wish you and Ākina all the best!

 

CHRIS: Thank you!

 

GINA:  If readers want to connect with you, how can they reach you?

 

CHRIS:  LinkedIn is probably the best conduit (Chris O’Neill).  A personal note on LinkedIn will always get a response.  Or if they want to reach out to Ākina they can go to the menu on the website at www.akina.org.nz.

 

Chris O'Neill is the General Manager of Programmes at the Akina Foundation based in Wellington, New Zealand.