Rewind: A Closer Look Wharton Social Impact Conference
Bart Houlihan heads B Lab, a non-profit organization that certifies Benefit (B) corporations, a new form of business that includes the social mission of the company in its articles of incorporation. B corporations have explicit responsibilities not just to shareholders, but also to societal stakeholders such as their employees, the environment, and the community. Interested companies submit an impact assessment and if they pass B Lab’s certification standards, pay a licensing fee to B Lab for the B corporation brand. About 20% of all B corporations are subject to external audits. B Lab has certified 327 B Corporations so far, and passed laws in Maryland and Vermont legally recognizing and encouraging benefit corporations.
Houlihan, an expert in what makes a social business and what doesn’t, was an ideal presenter to kick off the The Wharton Social Impact Conference in Philadelphia last month. B Lab’s impact-rating system also served as the basis for the Global Impact Investing Rating System (GIIRS). Excitement over developing shared standards or a “common dictionary,” as Marc Manara Water Portfolio Manager at Acumen Fund, called it, for social enterprise was expressed by several speakers.
The conference, by Wharton undergraduate and graduate students and the range of experiences showed in the Q&A sessions. Most sessions were packed and the speakers noted the rise in interest in social enterprise across their recent speaking engagements.
In the International Development Panel on SMEs, panelists discussed the reasons why SMEs are so popular right now. Compared to large corporations, SMEs have a comparative advantage to be more flexible and responsive to local market demand in emerging countries. They also allow for better local capture of benefits through sourcing of inputs locally and local sharing of revenue. While access to capital is often a focus in discussing difficulties SMEs face, a less-discussed barrier is the lack of understanding of the regulatory environment of a country. To help entrepreneurs scale up – they need not just access to capital and resources, but also a range of advice to navigate the legal and regulatory environment as well as human resources expertise to set up robust practices. These are the kinds of advisory services that organizations such as panelist Allen Kinsey Taylor’s Endeavor provide to promising entrepreneurs.
Panelists on the Measuring Social Impact panel universally spoke of the difficulty of measuring the secondary effect of social enterprises on communities. Manara, of Acumen Fund, explained that improvements to water quality and amount of water purchased by can be measured, but linking water quality to health outcomes is much more difficult to capture. Additionally, interventions can produce unanticipated externalities. Manara cited the finding that in communities in India, women are traditionally responsible for supplying water. However, when water is commercialized, men become involved, displacing women.
Mari Kuraishi, President of GlobalGiving Foundation, delivered the afternoon keynote on creating an online marketplace for international philanthropy. The most intriguing part of her talk was her case for technology providing real-time feedback from the beneficiaries of aid to donors. One of Kuraishi’s slides put it simply, “it’s about feedback, stupid.” The Internet allows for beneficiaries to self-report the effectiveness of funding as well as for peer reviews from funders. Kuraishi argues that this speeds up the process of innovation and has the potential to make philanthropy more satisfying.
This need to understand the needs at the BoP was the theme of the Beyond Microfinance panel. Sarah Leshner at BlueOrchard Finance, a commercial microfinance investment company, reminded attendees that BoP clients have their own sophisticated financial needs. Clients have needs for housing and overhead costs and as well micro-insurance to insulate themselves from health- and weather-related shocks that are traditionally not provided for by MFIs. The panelists agreed that the microfinance industry needs to collect more client data and provide more specific credit products to fill these gaps. Mark Pickens of CGAP cited CGAP’s recent report comparing branchless banking with MFIs in seven countries to determine access, prices, and demand for other services as a much needed start. He reiterated that with mobile phone technology, “we’ve demonstrated that the channel can work, but we do not know customers’ needs.”
Both the issue of measurement and accountability for social impact goals continue to challenge the field of social investment.
On the Social Finance and Impact Investing Panel, Catherine Burns of Gray Ghost Ventures, a for-profit microfinance fund explained its process of performing due diligence on the social impact of a business. After the fund makes an initial investment, however, as long as company financials remain good, there is no exit strategy if the company falls short of achieving its social mission. In an earlier panel, Marc Manara of Acumen, a non-profit fund, indicated that it has previously divested from organizations either because they did not fulfill their social mission or because they were capable of finding funding elsewhere. Many for-profit ventures do not have the same stringent requirements and do not seek to add reporting requirements for new enterprises. The question of how to create accountability for both social and financial goals for enterprises remains a contested topic.
What was clear from the conference was the interest in social investing. David Kyle, Founder and CEO of India School Finance Company and former CFO at Acumen, reassured the audience that the interest in social enterprise is not just a fad.
“If the recession has proved anything, it is the relevance and resilience of emerging markets,” he said.