Jul

21

A Green Submarine Company?

July 21, 2008

Earlier today, on a visit to Toronto, Canada, I had the chance to meet with Andrew Heintzman, President of Investeco, a venture capital investor in early stage environmental businesses (get it? invest-eco). They are a bit like Impax Asset Management in the UK, with both private and listed equity arms. Perhaps I will write about them at some point this trip–but this post is about one of their clever investments–Triton Logging. As businesses go it is cute, shrewd and delightfully simple–like all the best ideas.
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Jul

18

ECT Recycling Group II–A Beer Raises More Serious Issues

July 18, 2008

WE HAVE HAD TO REPOST THIS BLOG TWICE DUE TO SPAMMING (YOU MAY HAVE NOTICED THE PHARMACEUTICALS ADVERT…) SO APOLOGIES TO THOSE WHO READ THIS BLOG AS AN RSS FEED AND HAVE RECEIVED IT THREE TIMES. WE ARE WORKING TO FIX THIS PROBLEM AND DO NOT INTEND TO POST IN TRIPLICATE EVER AGAIN!

In a recent blog post on the subject of ECT Group’s sale of its recycling business to May Gurney (MG) we raised a few questions about CICs in particular and the funding of social businesses in general. After a beer (OK, perhaps more than one) with Stephen Sears earlier this week, a number of other questions (four to be precise) emerged. I consider Stephen a professional friend and good guy, so if you think I cannot be objective on this one, stop reading now!

First, it still seems odd to me that a CIC (which I must remind readers stands for Community Interest Company–a UK form of association established a few years ago) was able to be sold in this way. It is clear from the start this sort of sale was allowed (at fair market value) but I suspect few observers realised that what was alleged to be an asset held for the “interest” of the community could so easily pass into private hands. The CIC itself is simply now owned by MG, but its contracts novated (passed) over from the CIC to MG over time–thus the economic value will pass. That ECT Group received fair value in what many might describe as a “fire sale” has raised some concerns. Defenders of the CIC, howevere, feel this all highlights their marvellous “flexibility”. To me this it seems somewhat farcical for one main reason. The benefits of the CIC structure, as presented by the Government, was that CICs would ensure the assets would be used solely for the benefit of the community. Though not explicitly stipulated, one was led to think this was for a very long time. It was argued that this would reassure charitable funders and social investors in CICs that they were charity-like. This has all been thoroughly discredited. That it has hit one of the biggest and seemingly most successful social enterprises is highly embarassing.

Second, by structuring as a CIC, ECT and others forgo the ability to raise genuine equity. Investors are unwilling to accept equity-like risk (which is associated with many of these CICs) for what are (lower) debt-like returns. Who could blame them? This is a fundamental flaw of the system, especially for fast-growing companies like ECT which require the cushion normally provided by equity.

Third, the same limitations which make equity-like structures impossible, make share options essentially infeasible for the hard-working staff of such organisations. Creative solutions can be devised but they are costly, inefficient and generally more cumbersome. Why do enterprises which serve a social purpose get penalized relative to commercial companies? Some argue that equity-like returns are “not the point” of CICs. But why should only the community benefit from the “fair value” created? Are not the staff equally deserving stakeholders?

Finally, for all the restrictions of a CIC there are simply no benefits. The reputational benefit meant to be conveyed is now in tatters because of the argument made above. If the Government wants CICs to thrive it must provide for some meaningful benefit to offset the limitations it has imposed.

Rodney Schwartz

Jul

11

A State of Denial for Social Enterprises?

July 11, 2008

The juxtaposition of two articles in Wednesday’s Financial Times was clearly not unintentional (it never is!). The first, entitled “MPs raise doubts on the not-for-profit sector”, highlighted the fact that there is no clear evidence that voluntary or not-for-profit sector companies improve outcomes. The second, obviously in response, was entitled “Charity chief criticizes Whitehall’s ‘barriers’”. The second is clearly meant as a riposte to the first. And to make its “fleshing out” of the issue complete (typical FT) it includes a comment piece on the same day by John Cridland, the Director General of the CBI (the UK’s business trade body). For me, these articles, and the broader issue of public sector provision, raise at least two vital points about the role social enterprise and social business can play in our economy. Readers will not be surprised to note that these points are not covered to any satisfactory extent in the FT’s pieces.
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Jun

21

The Sale of ECT Recycling: A Cause for Jubilation or Concern?

June 21, 2008

Recently our affiliated website socialinvestments.com commented on a report that the ECT Group has sold its recycling business to May Gurney (MG) in order to achieve scale (for the commentary click here). As over 80% of its turnover was in the recycling area one could effectively say that ECT has sold itself to MG—the remaining businesses will either be sold (like rail operations) or managed as a small remaining social enterprise (like the transport business). Readers of our blog will know that we normally applaud when successful social entrepreneurs sell out. For example, see our comments on the sale of the Body Shop. However, in this case we do not feel like celebrating—and we think the sale of ECT Recycling (ECTR) highlights at least two or three very serious problems for the social business sector.
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Jun

10

Riverford- a successful growth model for social business

June 10, 2008

This blog has been reposted because the original version was somehow replaced by a pharmaceuticals advert- apologies for any confusion.

One of the big challenges for companies operating in the Social Business sector is managing growth in the business without sacrificing social principles. There are many examples which would suggest that once a Social Business reaches a certain size its owners sell out to large corporates or private equity companies (The Body Shop, Ben and Jerry’s and Green and Black’s, to name but a few). Inevitably, this leads to loss of control and, in many cases, a dilution of social values. One company that seems to buck this trend is http://www.riverford.co.uk the Devon-based organic vegetable box scheme, which was recently included in the Sunday Times list of 100 fastest growing private companies (2nd December 2007).

Jun

10

BNP Paribas: Leading with Philanthropy and Responsible Investment

June 10, 2008

In May I had the privilege of travelling to Paris to speak at a conference hosted by BNP Paribas. In the audience were 200 of its 300 wealthiest High Net Worth (HNW) clients—and the theme was “Philanthropy and Responsible Investment. By now you are probably thinking what I was thinking—it’s amazing that 2/3 of their richest clients showed up to hear about this topic. Or perhaps, “I wonder what happens when they have their real conference—you know the one on investments, tax planning and all that other stuff wealthy people REALLY care about.” It turns out however this WAS the real conference. I learned that this IS BNP Paribas’ single annual conference for these clients. There may be other smaller, more traditional sessions during the year but this is the big annual event. In attendance was the CEO (Baudouin Prot, who showed up twice!) the Chairman, Michel Pebereau and a host of Government officials and Nobel Prize winners (Kofi Annan, Wangari Maathai, Amartya Sen, etc). And the gala event was a lavish dinner to award the BNP Paribas Prize for Philanthropy—what on earth was going on at this large, profit-seeking European bank?
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Jun

7

A Tribute to Sarah Dodds: Social Business Champion and Much More

June 7, 2008

As a social business blog it seemed appropriate to offer a tribute to Sarah Dodds, a great Social Business Champion and remarkable individual, who recently passed away–this can be read below. Friends and colleagues of Sarah’s, anxious to communicate with each other, should click on the link in the section below in order to participate in a dedicated blog to Sarah organised by Nick Temple and Jessica Shortall. At the end of this post we have also added, at the request of Ben Metz, a note from the Dodds family detailing how you can make a donation in her honour. Over 30,000 extra hits have been registered on this site from friends, colleagues and loved ones, in just the last three days–a testament to Sarah’s memory. If there are other similar requests regarding posts onto this page, please contact me on rod@catfund.com.

PLEASE NOTE: WE’VE SET UP A DEDICATED BLOG FOR SARAH’S FRIENDS TO SHARE THOUGHTS AND PHOTOS. PLEASE VISIT www.sarahtribute.wordpress.com AND POST YOUR THOUGHTS THERE.

Tribute
In the past 24 hours (written Sunday 8 June) Sarah Dodds, the Director of Unltd Ventures (part of the UK social investment firm), died as a result of a cycling accident—she had been travelling with friends in northern France. She had been in a coma for about a week but sadly, the recovery we had all been hoping for was not to be. We are all in shock at the suddenness of this loss—people possessing Sarah’s energy, vitality, good humour and youth are simply not supposed to leave us so soon—with so much left to do and so much she would have undoubtedly achieved. As a blogger on social business I find myself doing the only thing I can think of to reconcile myself to this grotesquely unfair act of fate—writing about the wonderful things this woman has done and would do. I write also so that her spirit shall live on, as she had all the qualities we treasure in outstanding social entrepreneurs; passion, energy, commitment, and good humour.
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May

10

Red Button Design–Fundraising Techniques and the Dragon’s Den

May 10, 2008

Earlier this week we attended the ‘Good Deals’, social investment conference hosted by Phil Hope in his capacity as Minister for the Third Sector and NESTA. Although I am normally cynical about such things in this case my concerns were mis-placed. The conference was successful, well-attended and interesting. One of the most fascinating examples was a brief presentation by Red Button Design, and the co-founders James Brown and Amanda Jones. Their product, a simple water-carrier and purefier was an intriguing solution for developing world consumers, but what made them really stand out was their approach to fund-raising, and the success they have achieved.
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May

10

This Blog has Become Too Theoretical–Help Us Rectify This

May 10, 2008

Most of the comments we receive on this site are spam–advertising a host of things which are inapprorpiate to mention here. In other cases they are self promotion (some of which we do publish) and we get a fair share of general cristicism–which we welcome. The comment on the last post by Samantha Morshed, who worked in Bangladesh, was one of the most useful we have ever received. She points out that many of our recent posts are just theoretical–and she is absolutely correct. We used to use social business stories to convey important trends, but have recently dropped the stories, which in my view were far more important.

So mea culpa–we have allowed our mission to drift and I take full responsibility for this. I am very grateful for Samantha for pointing this out. As this blog now gets over 1000 hits each day from all over the world, I would like to ask for your help in dealing with this justified criticism. I will try to work in more stories but would be grateful for your help in doing so. Please send me (rod@catfund.com or by commenting on this site) what you think are some interesting examples of great social businesses from around the world (and why)and I will try to work them into this blog. Thanks!!

Rodney Schwartz

Apr

28

Blended value and the end of the “trade-off illusion”

April 28, 2008

Recently I attended an interesting lecture in London Business School by Jed Emerson, an eminent figure in the area of value creation, who has done pioneering work around an organisation’s ‘Blended Value’. The idea is that the value generated by any organisation (whether for-profit or not-for-profit) is financial, social and environmental and that these three constituents of value are indivisible from one another.
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Jul

21