Oct 202012
 

Written by Ryan Steinbach

Two weeks ago I took this question for granted: should social finance be incorporated into the business curriculum?  To me the answer was yes! Social finance is an emerging approach to managing money that delivers a social and/or environmental return in addition to an economic return. Why wouldn’t we include such an offering in the curriculum? After spending two weeks talking with professors and industry professionals as to why social finance isn’t more prominent in college education, I’ve come up against some serious reality checks. Here’s what I learned:

The majority isn’t convinced: When you get as caught up in the hype surrounding social finance like I have, you tend to forget it actually represents a tiny piece of the total finance market. The most optimistic reports estimate the near-term market potential of social finance at $650 billion which is 2.5% of the $26 trillion investment management industry in the U.S.

When I asked the Director of the Masters Program in Finance here at the Smith School, Michael Faulkender, if social finance is a topic of discussion in graduate level classes, he explained that it’s brought up anecdotally when discussing unique investor needs, but the simple fact is that an understanding of financial markets based on maximizing long-term shareholder value is what is required for an overwhelming majority of finance.

They aren’t hiring us:  Last week I attended an impact investing panel with representatives of some of the biggest names in social finance, thinking I would find a nice counter argument in favor of social finance in college education. Wrong. When asked what job opportunities there were in social finance for future graduates, the panelists politely explained that they were looking for experienced deal makers with strong affiliations to target emerging economies. Basically, there are no formal entry level positions.

Well this sucks! Not only is social finance a nonfactor in most situations, but the places where it is a factor aren’t even hiring college students. So how can we possibly justify social finance in college education?

Millennials are convinced: While today’s investors expect companies to maximize financial return, the millennial generation is proving to be far more socially conscious. As the percent of total investments shifts toward the millennial generation, the expectations of firms might also shift. Even Professor Faulkender admitted that the success of companies with a double-bottom-line or triple-bottom-line is conditional on investors having a duel objective or a triple objective. Social finance is small but there is evidence it’s growing rapidly.

We’re more hirable: I can’t speak for everyone, but it seems the traditional corporate 9-to-5 job is not what college students have in mind. More and more are fascinated by jobs in hybrid business models, start ups, and social ventures. While these opportunities are exciting and different, most are small scale operations constrained by traditional funding. Alternatives for seed, scaling, and growth capital are needed. Some options already exist, but they are hard to find and current employees often don’t have the time or understanding to pursue them. I don’t know about you, but that sounds like a huge opportunity to get your foot in the door to me.

Understanding the options and models in social finance won’t just make you more appealing to start-ups and social ventures. Everyone needs money, and growing interest in social financing could fundamentally shift how companies are financed in the future. I’m not saying that one day the stock market will be based on hugs and smiles, but I do think that social financing options will become a critical consideration for any company looking to grow or develop.

While we shouldn’t get ahead of ourselves, it is important that colleges recognize this space for what it is – an opportunity. But is that opportunity still too far in the future to be spending tuition dollars on? What do you think?

 

Ryan is in his last year of undergrad business school at the University of Maryland-College Park, majoring in Marketing and Management. He is also the online manager of UnSectored and a social media intern at the Newberry Group. Formally, Ryan worked as a New Media intern for Calvert Foundation. When not immersed in social media, Ryan explores and writes about social innovation and his millennial generation. If he were to ever pursue a career (wait, what’s that?), it’d be in writing, brand management, and/or digital marketing. Twitter handle: @R_Steinbach

 

 

Oct 152012
 

Written by Peter Berger

Thousands of heat records were broken over the past few months in one of the hottest summers in recent history. Thankfully, this heat wave has reengaged the public’s interest in climate change and what can be done to curb the emission of greenhouse gases. The fact of the matter is that consensus has shifted.  At the turn of the 21st century skepticism with regard to climate change was acceptable; this is no longer the case. Richard Muller, a University of California physicist and self-proclaimed skeptic of man’s effect on global warming, stated in a New York Times article that “Humans are almost entirely the cause.” This change in viewpoint was the result of a systematic and objective analysis dubbed the ‘Berkeley Earth Surface Temperature Project’, performed under the gaze of the Novim Group, an objective auditor.  This study analyzed data dating back 250 years (1753-2003), comparing global temperature trends to a variety of factors. Scientists from this study say that there is a “clear agreement between global land-temperature rise and human-caused greenhouse gases.”  Despite evidence suggesting that global warming is largely due to human activity, significant policies encouraging corporate responsibility for greenhouse gas emissions have not been introduced.

The disconnect between science and policy is in large part due to strategic responses by corporations, such as ExxonMobil and Chevron, who have spent fortunes challenging scientific research and lobbying against emission controls. These privately funded contending studies, which produce inconclusive data, have enabled such companies to plant seeds of uncertainty in the minds of policy makers and the general public alike. According to OpenSecrets Blog, a lobbying watchdog, “pro-environmental groups spent a record $22.4 million on federal lobby efforts [in 2009].” This is less than ExxonMobil spent over that same year, and is dwarfed by the $175 million spent by the oil and gas industry in 2009.

The attitude of some of the old guard in Corporate America with regards to climate change is egregious. But what’s worse is the possibility that it will go unchecked due to the perception that emissions curbing legislation would cause economic harm. Economic stagnation can be reversed over time, but the damage done to the environment could be irreparable. There is no single solution to overcoming the social vampirism that results from unsustainable business practices. Millennials, Generation Y, or whatever you want to call those that will soon enter the workforce, must begin to take responsibility for our actions as a society and instill a culture of transparency and accountability. Together is the only way forward.

Bio:  Peter Berger is a Junior Finance and Neurobiology major at the University of Maryland. Peter is originally from Baltimore, Maryland and is a graduate of the Entrepreneurship and Innovation Program at the University of Maryland.

Works Referenced:
http://www.opensecrets.org/news/2010/08/pro-environment-groups-were-outmatc.html
http://online.wsj.com/article/SB10000872396390444320704577569231537988226.html
http://www.nytimes.com/2012/07/30/opinion/the-conversion-of-a-climate-change-skeptic.html?pagewanted=all

New Perspectives on ‘the Bottom of the Pyramid’

 International, Social Value  Comments Off on New Perspectives on ‘the Bottom of the Pyramid’
Oct 062012
 

Written by Sonaly Patel

Over the past few years, a new trend in slum tourism has emerged with tours popping up in areas as geographically and culturally diverse as Brazil, Kenya, and India.  The concept has continuously attracted a great deal of controversy.  Critics say the tours cross sensitive ethical boundaries and create a spectacle of the communities while doing little to better the conditions of slum residents.  On the other hand, supporters of the idea maintain that the tours lift a veil of ignorance and provide a window into everyday life in the slums.

By Andreas Grosse-Halbuer, courtesy of Reality Tours and Travels

A glimpse inside Dharavi’s recycling industry where workers are cleaning, shining, and repackaging cooking oil cans to be resold and reused. Photo by Andreas Grosse-Halbuer, courtesy of Reality Tours and Travels

Last week, I went on a tour of Dharavi with intentions more resonant with the latter perspective, to get a better grasp on the realities of life in one of Asia’s largest slums.  The aptly named company, Reality Tours and Travels,* served as my guide into the Mumbai community that is home to more than 1 million people.

Our first stop was the industrial area where the more toxic trades are located.  We had a thorough look at the recycling industry, which sources discarded plastics – ranging from old toys to broken laundry baskets to punctured water barrels – from ragpickers and freelance plastic collectors at nominal prices.  The plastics are then crushed using a machine designed and built in Dharavi by Dharavi workers, washed, and left to dry on the shanty rooftops.  Once dry, the pieces are melted down into pellets, dyed, and sold to large plastic goods manufacturers.

Our next few stops were in the business district where we saw bakers, claywork artisans, fabric dyers, leather tanners, and soap cutters in action.  Afterwards, we wound our way to the Reality Gives community center, a vacant one-room home, a trash heap, and through the impossibly narrow alleyways of the religiously-delineated residential areas, catching a few glimpses here and there of people going about their daily lives.  Throughout the tour, we learned about the varying community reactions to government schemes in housing and sanitation as well as the history of Dharavi’s development.

In all honesty, the tour taught me a lot.  It changed my previously ill-informed view of poor urban communities in India, but just as importantly, it gave me a new perspective on interactions between social enterprises and the so-called “bottom of the pyramid” they exist to help.

When I was an undergraduate at Smith, I organized a session called “Designs for the Developing World” for the annual Social Enterprise Symposium.  I was ecstatic to say the least.  And I was elated by the possibilities the products and services featured on this panel and elsewhere could create for millions of people in developing countries.

In my excitement, what I did not understand back then was that innovative products and services can change people’s lives, but are not necessarily a guarantee that change will happen.  True innovation can involve new products and services, but requires a broader definition; it can also mean taking an existing idea, product, or service and applying it to a new context to catalyze change through resources that already exist.

In addition to unexpected industry and business activity, I witnessed an immensity of resourcefulness, strong work ethic, and creative entrepreneurial spirit in Dharavi.  I realized that we, in the social enterprise world, do not need to create solution from scratch.  Sometimes all that’s needed to help a community is to build off of the ecosystem and resources that already exist by contributing a simple catalyzer – It may not necessarily be new, but just missing in the context at hand.
*Reality Tours leads various tours of Dharavi as well as the greater Mumbai area, but its model has a unique social value proposition.  Eighty percent of the profits generated through tours is channeled to its sister nonprofit organization, Reality Gives, in order to give back to Dharavi’s residents.  The nonprofit’s initiatives include educational classes, nutrition workshops, and recreational activities for children to name a few.

 

Sonaly Patel is a recent graduate of the R.H. Smith School of Business. Through her involvement with the Center for Social Value Creation, she worked as a strategy consultant for a livelihoods initiative for cacao producing communities in Ecuador’s rainforests and a communications consultant for Liberty’s Promise, a local nonprofit serving immigrant youth.  At Maryland, she was a founding member of Students Ending Slavery, a leader in the AshokaU campus initiative, and a proud resident of Language House Spanish Cluster.  During her undergraduate years, she also interned at the Grassroots Business Fund in DC and studied abroad in Barcelona, Spain. Upon graduation, Sonaly moved to India to live and work in Mumbai through the IDEX Fellowship in Social Enterprise.  She will be in India until May 2013.

#SES12 Reflections (8 of 8): How To Explain CSR To An 8 Year Old

 Social Enterprise Symposium  Comments Off on #SES12 Reflections (8 of 8): How To Explain CSR To An 8 Year Old
Oct 032012
 

by Graham DeJong (MBA ’13)

Note: Each of the participants in the Spring 2012 SVC Smith Experience was asked to blog about a session that piqued their interest at this year’s Social Enterprise SymposiumThis is the last post in this series; mark your calendars for the 5th Annual Social Enterprise Symposium on Friday March 1, 2013! 

Today was a good day. Today I had the opportunity to interact with socially-minded professionals and students. Some were corporate fixtures, some were entrepreneurs. All of these bright and motivated people were in one place: the 4th Annual Social Enterprise Symposium at the University of Maryland, College Park.

Sponsored by the Center for Social Value Creation in the Robert H. Smith School of Business, the event included two keynote speakers, five break-out sessions, two “fishbowl” limited-attendance discussions, a networking reception, a sustainable campus tour, and even a stretch break. Though I attended various segments throughout the day, two noteworthy events were the Social Enterprise Business Pitch Competition and the “fish bowl” discussion with Keynote Speaker Letitia Webster, Director of Global Corporate Sustainability, VF Corporation.

Let me tell you about my surprise when two sisters, Sunmee Huh and her younger sister Dahlia, pitched their non-profit search engine business called Good 50. Sunmee is a freshman at UMD and Dahlia is a freshman in High School; they were incredibly poised! They created Good 50 in 2010 to help their grandfather. He was experiencing problems reading Google search results. The site allows users to toggle to a more readable font size and type while utilizing Google’s search engine. However, the business is socially minded with 50% of their revenue donated to charity. Very impressive ladies!

MyMaryland.net co-founders Natalia Cuadara-Saez and Ben Simon pitch their idea

I was equally impressed at the pitch competition by MyMaryland.Net. Ben Simon, Natalia Cuadra-Saez and Natalie Martino are the founders, and their vision for My Maryland is to provide a two-way platform for MD lawmakers and constituents to communicate with each other. Ben and Natalia stated the problem: currently email, phone and “snail” mail correspondence to elected officials often go unanswered. MyMaryland.net was created to generate more real-time dialogue between elected officials and the people they represent. Though the website is not live yet, the expectation of significant participation by state-level, local-level and most importantly, federal-level elected officials, has me believing that government can actually become more transparent through their social enterprise. So I wasn’t surprised when MyMaryland.Net won the pitch competition.

Speaking of real-time dialogue, I had the distinct opportunity to talk with Keynote Speaker, Letitia Webster, in a “fish bowl” setting with only two other UMD students for 45 minutes. It was quite an unusual setting for interacting with a Director of a $12 billion company. Thanks to the SES organizers, however, I and about 40 other students were given the opportunity to have a conversation with Ms. Webster and other distinguished panelists in a intimate setting. And Ms. Webster was very forthcoming.

Corporate Social Responsibility (CSR), in her opinion, has come a long way. She should know. She started the CSR department for The North Face in the 1990s. Change agents exist in all levels of organizations, she exhorted, within various business units and across all job functions. The challenge in any large organization is to find these people and leverage what they are already doing. Not an easy task for a former Crested Butte ski instruction who now directs CSR for VF Corporation, a company that owns a slew of top brands including: Wrangler, Lee Jeans, Chic, Eastpak, JanSport, The North Face, Reef, Vans, Timberland, Nautica, Ella Moss and many more.

I thought Ms. Webster was refreshing: CSR is here to stay, she said. It’s not just a marketing ploy. Having said that, she went to say it’s very difficult for companies to add value quickly to their products when integrating CSR into the entire value chain. This fact frustrates her as well as customers and many of their employees. She confidently stated CSR and its role in business is now accepted in the corporate culture and gaining traction. Her job is to continue expanding the role of CSR in VF Corporation and across their brands. Some days her job is easy (like today!), and some days it is hard.

So when asked (from a fishbowl card): how would you explain CSR to your 8 year old nephew? She replied: that’s a really hard question. But gracefully, she did come up with an answer. And then the four of us all agreed that even an 8 year old knows that you should be nice to people and the planet.