Sunday, 15 March 2015

What is a startup?


What exactly is a startup? Most people in Hong Kong equate startups with entrepreneurs, and more specifically many think that startups are newly established businesses. This should not be the case.

Startups should be able to provide an innovative solution to a real problem. They should have a scalable business model and carry high growth potential. The innovation does not necessarily have to be technological, it can be innovation in the business process, business model, customer experience or even in the way the business is managed. Yet technology very often plays an important role in enabling the startup business to scale.

Startups are growth engines of every society, as they create substantial economic and social benefits. Cities around the world are vying to be the next Silicon Valley or the next Startup Nation (Israel).  Hong Kong is the freest economy in the world with rule of law. It is fast and efficient. It is a compact city with a small but sophisticated market, which is ideal for prototyping innovative solutions. All these attributes are very favorable to the development of startups. Many people attribute the high rental in Hong Kong as the major barrier to the development of startups. This is actually an exaggeration. If we understand the nature of startup business, the rental is never a major cost component. The high rental will only be an issue if one aspires to open a retail outlet in the main commercial districts – yet these are not startup businesses.

In moving up the value chain, Hong Kong has good potential to become a startup hub of Asia Pacific – not just for the home grown ones but also as the platform for Mainland and overseas startups to scale their businesses globally. The Financial Secretary has announced a package of measures to support the growth of startups in Hong Kong. The Government does have a role to play in enabling the development of startups. However, money (or the lack of it) is not the the crux of the issue. Investors are hungry for deals and money will come where there is a critical mass of good deals. The Government should not play the role of investors.

Yet the Government has the responsibility to provide a startup-friendly policy, notably a visa policy that can enable startup talents to come to Hong Kong easily.  Given the disruptive nature of startups, Hong Kong needs a regulatory regime that can allow innovation to happen. Equity crowd funding is a case in point.  Whilst the Singapore Government is facilitating the development of equity crowd funding, the Hong Kong authorities have yet to adopt a clear policy. The Government should also step up its marketing role with unifying messages across all departments and quasi-government agencies – in promoting home grown startups with high growth potential and also Hong Kong as a startup hub in the region. 

Finally, Government has a vital role to play in strengthening entrepreneurial education in our schools. Our children need to understand from a young age what it means and takes to be a startup. It does not mean that every child will grow up to run startups. But a good entrepreneurship education will enable our next generation to become more innovative. To become a startup hub, we need not only innovative founders but also innovative clients and employees. Hong Kong will become a true startup hub if a 10-year old can tell the difference between a startup and a small business. The child will know that opening a small coffee shop is not a startup!

Wednesday, 3 April 2013

Making Impact Investing More Impactful



There has been a lot of hype about impact investing since the term was coined 5 years ago. It is often described as an emerging asset class with an estimated market opportunity up to USD 1 trillion.  A lot of the ‘enthusiasm’ focuses on how impact should be measured, but advocates of impact investing reckon that the actual volume of transactions remains minimal at best.

The Global Impact Investing Network (GIIN) defines impact investing as investments made with the intention to generate measurable social and environmental impact alongside a financial return. This I believe is a broad enough definition that can encompass a wide spectrum of investment approaches, from creating social value as the key driver on one end to generating financial value on the other. 

Impact First

Most of the discussions on impact investing centre around the notion of channeling private capital to improve the life of the Bottom of the Pyramid (BoP) and the disadvantaged, especially those in emerging economies. These impact driven investments can have different rates of return, from below market to above market. Investors may take the profits or reinvest them back into the business, in parts or in their entirety. In developed economies, this type of impact investing is often associated with community investing. 

Finance First

Impact investing could also be a concept applicable to investments made with financial returns as the key driver, though this is less talked about. Investors will look at the investment returns but they will also base their investment decisions on sustainability considerations.  This is where impact investing and socially responsible investing (SRI)[1] overlap. The recent global financial crisis has led to a critical rethink of some of the foundational beliefs that underpin the financial markets and investment models. Jack Welch’s about-face remark that ‘shareholder value is the dumbest idea in the world’ epitomized the market sentiment for a more responsible capitalism. More mainstream investors have begun to see the case to integrate Environmental, Social and Governance (ESG) factors into their investment decisions, as a means to mitigate risks and identify companies with long term financial performance advantages. Some finance first investors also see their investment as an opportunity to help change the world for the better, in addition to the monetary returns. This is what Victor Hwang in his book "The Rainforest: the Secret to Building the Next Silicon Valley" referred to as "extra rational motivations". 

Whist impact investments with ESG considerations are largely applicable to companies with large market capitalisation,  the concept of impact investing is also highly relevant to innovative, small to mid cap ventures that seek to improve the well being of mankind. The Investors’ Circle, for example, was founded in the US over 20 years ago to catalyze the flow of capital to high impact entrepreneurs. It has so far propelled US$168 million plus US$4 billion follow on investments into 269 enterprises dedicated to improving the environment, education, health and community. So impact investing is by no means 'new'. Depending on how one defines impact investing, it may not be entirely correct to say that the volume of transactions is small.

Impact Investing Goes Mainstream

Hitherto the impact investing agenda has largely been shaped by foundations and non-profit organisations with philanthropic objectives. This is good, but not good enough. Impact investing should by no means be restricted as a humanitarian or community development tool. If impact investing is to achieve world-changing impact, we need more mainstream investors to join the discussion and more importantly the action. Traditional impact investments are private equity securities with very limited liquidity. Some analysts believe that publicly traded companies with ESG portfolios will unleash a new market for mainstream investors and bring in the largest dollar amounts of assets. We also need more angels, venture capitalists, and family offices to invest in entrepreneurs who seek to change the world for common good with innovative, sustainable and scalable solutions. And beware that these entrepreneurs come in different forms and shapes – they do not necessarily label themselves as social entrepreneurs.  Not only do we need thought leaders like Jed Emerson, we also need more visionary investors like Timothy Drapers and Peter Thiel who back entrepreneurs who seek to change the world through disruptive innovations.  This is particularly the case for Asia, as angel and venture capital investing are still at a nascent stage of development. 

Impact investing is far from being a single and discrete investment category. We should refrain from applying value judgment on whether a particular class of impact investing is more impactful than the others. Take job creation as an example. One may argue that all things being equal, there is no reason why creating job opportunities in developed economies should have less impact than in developing economies. Some businesses can also benefit both the BoP/disadvantaged segment and mankind in general. Clean technology is one obvious example. So are medical and health breakthroughs, which are not very often discussed in impact investing fora. Essentially, impact investors can have a portfolio of investment spanning across the whole spectrum, from finance first to impact first investment. One can also begin with finance first investment and then gradually migrate towards impact first investment over time.  

Indeed if impact investing is to gain market traction, a lot more work needs to be done with mainstream investors who are driven by financial returns. There is probably no need to position impact investing as a new asset class as such. From the asset allocation perspective, impact investment is no different from venture capital or private equity investment in terms of the structure and tools of investment[2].  From the risk and return perspective, impact investing is also similar to socially responsible and sustainable investing. After all, impact investing will only be able to achieve its impact if one day the majority of investors realise that doing good also means doing well in the long term. 



References:

Spectrum of Impact Investing, AVPN (www.avpn.asia/about-us/avpn-background/)
Values Based Investing, UBS (www.ubs.com/globsl/en/wealth_management)
World Economic Forum (http://www.weforum.org/content/impact-investing-how-do-we-harness-hype)





[1] SRI also includes negative screening of companies that do harm to the society and/or the environment.
[2] Dr Christine Chow, Founder, Homage Consulting

Saturday, 23 February 2013

Is Social Enterprise a Passing Fad?


The backlash against the deficiencies of capitalism has led people to rethink the purpose of businesses. Governments are advocating the development of social enterprises as a viable alternative to public service delivery. Impact investing has emerged as a new asset class. There are stock exchanges established specifically for social enterprises. Business schools are setting up social entrepreneurship programmes one after another.

Amidst all the interest and enthusiasm, there is still no shared consensus on the essential nature of a social enterprise. Many people think that social enterprises exist to help the underprivileged by building up their capacities and creating opportunities for them. Some believe that social enterprises must be non-profits.

Wikipedia defines a social enterprise, based on the book “Understanding Social Enterprise: Theory and Practice” (Ridley-Duff and Bull, 2011), as "an organisation that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximising profits for external shareholders." A social enterprise can be structured a for-profit  or a non-profit. This is a very broad definition, and certainly encompasses more than just organisations with a charitable purpose.

If we take a look back at history, the function of business was to provide the goods and services that a society needed. It is largely in the last 100 years that the meaning of "business" has been distorted. Instead of satisfying needs, companies now “thrive on” creating wants and desires and value creation has become synonymous with returns on shareholder value on a quarterly basis.

The relentless pursuit of profit has wreaked havoc on our economy, society and environment. It is also unsustainable for businesses themselves. The average life expectancy of a Fortune 500 company is between 40 and 50 years. The pace of corporate funerals is set to accelerate, according to a Yale study.

Studies have shown that the companies that perform best over time are purpose-driven organisations. These companies make money but profit is not their raison d'être. They improve the lives of people, address environmental issues, provide meaning for their employees and build sustainable businesses in the interests of all stakeholders.

My favourite example of such a purpose-driven organisation is Zappos. Tony Hsieh, CEO of the online retailer, says Zappos is all about “making customers and employees happy.” By demonstrating the crucial link between the purpose of an organization and sustainable growth, the Zappos culture is influencing companies around the world in a big way. Nonetheless, most people would not equate Zappos with a social enterprise.

Instead of singling out social enterprises as a desirable category of business, there is a strong case to be made that every business should integrate a social purpose into its core. Instead of teaching social enterprises as an elective, business schools should inculcate in every student the imperative of building for-purpose organisations. We need to encourage all aspiring entrepreneurs to think about in what ways they can make a difference to society. It is with this objective in mind that we launched the Make a Difference (MaD) Venture Fellows Programme in Hong Kong last year.  The Programme celebrates and supports young, innovative, doing-good and doing-well entrepreneurs. 16 MaD Venture Fellows from Hong Kong and 9 countries participated in an intensive 4-day programme, meeting with mentors, potential investors and business partners, as well as inspiring other entrepreneurs.

The three 2013 MaD Venture Stars, selected through an expert judging and crowd-voting process, demonstrate the myriad possibilities for a business to create a better world through innovation:

·       Insight Robotics, Hong Kong (www.insightrobotics.com) applies robotics technology to protecting critical infrastructures and key resources around the world. It detects and visualises remote incidents such as forest fires, oil leaks, water pollution, floods, droughts and security breaches for management authorities and assists them in devising the most efficient disaster recovery and contingency plans.

·       Wibbitz ,Israel (www.wibbitz.com) has created text-to-video technology that automatically turns any text-based article, post or feed on the Web into a video within 20 seconds. It helps reduce costs and production time for SME publishers and content providers, breaks down language barriers and has tremendous application potential in education.

·       Wifinity Tech, India (www.wifinitytech.com) applies simple and cost-effective wireless technology and artificial intelligence to help enterprises and buildings monitor, manage and economise on energy and water consumption. Enterprises and public institutions can reduce energy bills by 20% and water wastage by 15%, with ROI in less than 12 months.

None of these MaD ventures identify themselves as social enterprises, but their founders definitely have the vision to change the world for the better. It is cool to talk about social enterprises these days. We hope that this will just be a passing fad, as one day all businesses should have a social purpose. It is time to get back to the basics.



Saturday, 15 September 2012

The Myths of Social Enterprises


The concept of social enterprises has a long history, albeit manifested under different names and orientations. The backlash against the deficiencies of capitalism in recent years has accentuated the development of social enterprises around the world. However, there is still not a shared consensus of what essentially a social enterprise is.

Social enterprise has philanthropic roots in the US and cooperative origins in the UK.  More recently, some governments are also trying to encourage the third sector to take a more market-driven approach in providing social goods.  Social enterprises are therefore often narrowly seen as organisations seeking to solve the problems of the bottom of the pyramid or challenges in developing economies.

According to the wiki definition, a social enterprise is “an organisation that applies commercial strategies to maximise improvements in human and environmental well being, rather than maximising profits for external shareholders”. Social and environmental challenges are obviously not confined to the have-nots. Developed economies also have their challenges. Pollution, wastes, obesity, stress-related diseases, aging population, education, housing, workplace relations and work-life balance are but a few examples. Therefore it is conceptually inappropriate to limit the scope of social enterprises.

The second fallacy is that social enterprises must be non-profit organisations. To repute this argument, it is essential to understand what non-profit and for-profit mean. A non-profit organization is an organization that does not distribute its surplus funds to its owners or shareholders; whereas a for-profit organization can do so. It is also important to differentiate between the concepts of for-profit and profit maximization. Whilst the latter should be condemned, there is nothing wrong for an organization to provide incentives to its investors through the distribution of dividends. The distribution of profits should not compromise the enterprises' social benefits. Indeed if we want more private investors to be involved in the delivery of social goods, instead of just relying on government funds and subsidies, there is every justification that a social enterprise can be for-profit.

The social and environmental challenges that we are facing today are enormous, and in order to solve these problems, a social enterprise also has to be an innovative enterprise as well.  The innovation can be in the technology, product, service, delivery process, customer experience or in how the enterprise is managed.  Scalability is another issue, in order that the enterprise can attain maximum impact on the society.  

All in all, social enterprises should be a lot more than non-profit organisations serving the needs of or creating employment opportunities for the disadvantaged segments of the society.  And social enterprises should definitely not be a euphemism for non-profit organisations struggling to develop a viable business model with no or limited innovation.

Many of the enterprises that do not name themselves as social enterprises are also creating enormous benefits to our society. Many technology ventures are cases in point.  My favorite example is LinkedIn.  Most people will not associate LinkedIn as a social enterprise. But it is certainly doing a lot of good in connecting professionals around the world. Another example is Zappos. The happiness culture advocated by Tony Hsieh is creating a lot of good to its employees and customers. By demonstrating the crucial link between the purpose of an organization and sustainable growth, the Zappos culture is also influencing companies around the world in a big way. But I do not think Tony will ever call himself a social entrepreneur.

Because of the confusion and sometimes the unfortunately negative associations of a social enterprise, some organisations and advocates in social innovation have stopped using the term. We are seeing more and more people making references to “impact ventures” or “for purpose” organisations instead.

As Juliet says, "What's in a name? That which we call a rose
by any other name would smell as sweet." So long as the enterprise is making a difference and creating positive value to the society, there is actually no point in debating whether it is a social enterprise. This is the approach we take in the Make a Difference (MaD) Venture Fellows Programme. We are inviting young, innovative, do good and do well entrepreneurs to join the Programme in Hong Kong on 24-27 Jan 2013. They can work in diverse sectors from environment, energy, education, medical and health care to technology that enhances productivity and connectivity and management practices that build happy teams and customers. This Programme aims to celebrate and support entrepreneurs who are making a difference to scale new heights by connecting them with capital, networks and market knowledge in Asia. If you are MaD enough, please apply via www.MaD.asia by 28 Oct 2012.




Saturday, 7 April 2012

From Corporate Social Responsibility to Corporate Sustainability



CSR as Philanthropy

Corporate Social Responsibility (CSR), like many business jargons, means different things to different organisations.  For some companies, CSR is almost synonymous with philanthropy. From charity donations, planting trees to corporate volunteering, these companies pursue CSR activities as a means to build a good brand image. With rising public rampage against the evils of capitalism, the ‘need’ to adopt CSR as a reputation (or risk) management tool has become more real than ever. Other companies take a more integrated approach. They will consider the social and environmental consequences of their business activities.  CSR is not an after thought but aligned with their operation and stakeholder management processes to minimize the negative impact on the society.  Yet a 2001 Harvard Study by Mohr, Webb, and Harris showed that although these CSR activities inspire a positive image of a company, it is far from certain that customers will change their purchase behavior as a result.

CSR as a Value Creation Tool

Truly successful companies integrate CSR as part of the overall corporate strategy to enhance their competitive advantage. CSR becomes a proactive value creation tool to innovate the business, develop human capital, enhance energy efficiency and develop shared values with customers and the society at large.  Below are three examples:
  • P&G and Unilever deliver micro versions of their products to the bottom of the pyramid in developing countries.
  • Patagonia has launched an advertising campaign with the headline of "Reduce What You Buy”, appealing to the green conscious customers who are at the same time prepared to pay more for quality products.
  • Standard Chartered ’s partnerships with local blindness charities around the world has led the bank to introduce “speaking” ATMs with Braille keys and recruit the blind from the school for its call-centres. 
Proactive Corporate Sustainability

Some people consider the above as examples of Strategic CSR but I believe Corporate Sustainability is a more appropriate description. Corporate Social Responsibility, as suggested in its name, implies a reactive approach i.e. the company is obliged to giving back to the society (to ease its conscience) for all the money it makes. Corporate Sustainability in contrast is a proactive strategy to ensure an organisation’s long-term growth, taking a balanced development approach to profit, people and planet. It is a business approach that creates long-term shareholder value by embracing sustainability opportunities while at the same time successfully reducing and avoiding sustainability costs and risks.

Purpose-Driven Business

Central to the sustainability policy is the definition of the ‘core purpose’ of an organization.   Like a compass, the purpose governs the vision, the values, the brand promise, the strategic and operational priorities and the behavior of senior management. Organizations that put purpose at the heart of what they do give meaning to and establish strong emotional connections with their employees and customers alike.  It is a potent source of employee engagement and brand building, differentiating the winners from the losers in a commoditized and crowded marketplace.  A 2010 IMD/Burson Marsteller Corporate Purpose Impact Study showed that a strong, strategically coherent and well-communicated corporate purpose is associated with up to 17% better financial performance.

Developing Corporate Sustainability in Asia

Asia, probably with the exception of Japan, has traditionally been lagging behind Western Europe and North America in CSR practices. In recent years, we have witnessed more and more companies adopting CSR practices albeit a majority is still at the image building or reputation management level. Of the 2012 Global 100 Most Sustainable Corporations, 16 are from Asia - 11 from Japan, 2 each from Singapore and South Korea and 1 from India.  A recent study by EIRIS, a responsible investment research specialist, shows that only 1 percent of Asian companies made to the top grade based on environmental, social and governance (ESG) issues, compared to 20% in the UK. 
What are the key drivers for driving sustainable businesses in Asia? Companies in Asia obviously have to realise the case for sustainable business, that “doing good” is not just philanthropy but strategically linked to “doing well”. They have to take a long term and holistic approach to business growth and be prepared to sacrifice short-term gains.   It requires considerable mindset changes as well as capacity building work.

Role of Stock Exchanges

According to Richard Welford, Chairman of CSR Asia, governments and quasi-public bodies—particularly stock exchanges – are some of the most important drivers. In Hong Kong, Malaysia, the Chinese Mainland, and more recently Singapore and Thailand, stock exchanges are playing an increasing role in encouraging reporting on sustainability. Quality and transparent ESG disclosure is crucial for investors to start demanding sustainable business practices in lieu of short-term financial gains. The growing sustainable investment market also presents new opportunities for stock exchanges in the form of new products and services for responsible investors. These include specialized indices such as the Johannesburg Stock Exchange Socially Responsible Investment Index.

Consumer Education

Consumers and the civil society also play a vital role in demanding more sustainable businesses. Unlike those in North America and Western Europe, consumers in Asia fall largely in the price sensitive or brand conscious groups. What a brand stands for, in terms of its core purpose and values, is relatively unimportant for most Asian consumers. However, this is changing as more and more Asian societies become more affluent – especially amongst the young generations.  As more Asian consumers start to move up the Maslow’s Hierarchy of Needs in search for meaning and self-actualisation, companies will be obliged to change their brand strategy.

Role of the Civil Society

The civil society can be a catalyst in consumer education, as well as in delivering sustainable solutions together with corporations.  NIKE, for example, has transformed its corporate responsibility function into Sustainable Business and Innovation to integrate sustainability into its business model. One of the key pillars of its sustainability strategy is to mobilize the civil society in scaling solutions. It has been working with Creative Commons and other brands to build a digital platform (the GreenXchange) to enable the sharing of sustainability innovations on a global scale.

In Hong Kong, we have recently launched Let’s Make a Difference – a network of like-minded philanthropists and corporations - to promote the development of innovative and sustainable businesses. It grows out from the Make a Difference initiative that was introduced in 2012 to inspire and empower young people to create positive economic, social and environmental changes for Asia. We are recruiting members to Let’s Make a Difference and look forward to partnering with organisations that want to leverage the creativity, knowhow and network of young people in making a difference.

Thursday, 5 April 2012

Innovating Capitalism: Making Money with a Difference

Does capitalism in its current form still serve the common good of society?  The global financial crisis has triggered intense debate, most recently in the Financial Times, about the future of capitalism, and whether capitalism -the driver of innovation - is overdue for innovation itself.

The answer to the call for “better capitalism” lies, in part, in a critical rethink of the role of business in society. Maximizing shareholder value is no longer the Holy Grail. Companies that perform best over time are purpose-led organisations that seek to build sustainable businesses in the interests of all stakeholders.  

These companies make money but purpose, not profit, is their raison d'être. They advance productivity, improve the lives of people, address environmental issues, boost job satisfaction, manage a socially-responsible supply chain and so on.

Such companies do not necessarily have to be big. We see that at the Make a Difference forum held each January in Hong Kong.  MaD runs an award scheme to identify and champion young change-makers who can bring about economic, social and environmental benefits to Asia an innovative and sustainable manner. Winners of the 2012 MaD Award amply demonstrate how small enterprises can change the world in a big way.

Take Marina Gana Vida (MGV), a company which runs a fish farming business in Mindanao, an area of the Philippines that has been plagued by widespread poverty and civil unrest caused by religious differences. By introducing an eco-friendly supply chain, from fish breeding, to making nets, storage, processing to distribution and marketing, MGV contributes to conserving marine resources and improving the livelihood of 2,500 Muslim households.

Founder Jonah Nobleza established MGV as a social enterprise unit of Strategic Development Corporation Asia in 2007 at the age of 30.  "MGV is governed by three maxims," he said. "We believe in healthy food for consumers, vibrant and resilient coastal households as well as a happy earth." Armed with compassion, courage and business acumen, Jonah and his team aspire to develop MGV as the leading supplier of all natural marine products in the Philippines in the next ten years.  As the Grand Award Winner of the 2012 Make a Difference Award, MGV will use its US$20,000 cash prize to set up a community feed mill to facilitate its shift to full organic fish farming.

Doing good and doing well is not confined to social enterprises. Arthur Huang, a university professor, engineer and architect, founded MINIWIZ S.E.D., LTD in 2006 at the age of 28.

“Producing less and buying less are the only solutions to sustainability. But how can we achieve this when business demands growth and consumers desire more?”  Arthur saw this as the challenge and opportunity for Miniwiz. Synergizing expertise in design, engineering and manufacturing, his company delivers innovative, cost competitive and attractive solutions and products under its 3Rs mantra – Reduce, Reuse and Recycle.

Miniwiz’s most prominent project “EcoARK” was built for the 2010 Taipei International Expo using 1.5 million PET (plastic) bottles that were 100 per cent upcycled.  It has also developed ground-breaking waste composites called POLLI-BER, made with recycled thermoplastics and agricultural waste. Miniwiz is now working with the Harvard Graduate School of Design to research into sustainable construction and materials with a specific focus on Asia.

Small organisations can also make a big impact by influencing large companies and leveraging their resources. Beijing-based Horizon Corporate Volunteer Consultancy, founded by Wang Zhong Ping in 2005, has assisted over 100 enterprises in China – including Fortune 500 companies - to run corporate volunteerism programmes by pairing charity organisations with corporate resources. The consultancy has worked with over 100,000 volunteers and 600 charitable organisations, benefiting more than 100,000 children, the elderly and the disabled.

Productivity growth backed by decades of conventional capitalism has resulted in cheaper consumer goods becoming more available while basic needs such as food, housing, healthcare, energy and education are becoming less affordable. Governments all over the world are facing the dual challenges of meeting these needs without landing themselves deeper in debt.

I believe today’s opportunities lie not so much in producing more, better and cheaper consumer goods, on the old capitalist model, but in businesses providing innovative and profitable solutions to meet the social and environmental needs in both developed and developing economies. As each year’s crop of MaD Award winners demonstrate, such businesses can succeed on their own or in partnership with governments and NGOs.

Tuesday, 13 December 2011

Myth about 'social enterprises'

The controversies surrounding social enterprises in Hong Kong stem from three fundamental reasons.  First, the definition of a social enterprise is contextual. It is difficult to come to a universal consensus on what a social enterprise is. Creating job opportunities in rural India is certainly a social enterprise, but it may not be the case in Hong Kong. The government advisory committee for social enterprise funding discussed a definition for months, but unable to reach a consensus, decided to put it aside.

Second, the Government puts policy responsibility for social enterprises under the Home Affairs Bureau. But as rightly pointed out by Raymond Yim of the Social Enterprise Incubation Centre, social enterprises should not be the monopoly of NGOs and should definitely not be run as charities. Making profit should not be perceived as something evil. Indeed I would argue that we should encourage more for-profit companies to run social businesses. This is the only way to ensure that people with business skills can build and grow the enterprises on a sustainable basis.

Third, most people assume that enterprises can only do good by benefiting the ‘bottom of the pyramid’ - the disadvantaged, the disenfranchised and the disabled. But the reality is that challenges in health care, environment, education and many other social issues are as relevant to other segments of the society as to the underprivileged. An enterprise can still be ‘social’ if it is addressing the obesity issue of middle class kids.

The November issue of the Harvard Business Review carried a special feature on good companies that ‘create value for society, solve the world’s problems, and still make money’.  This is a new generation of companies that are doing good and doing well in a variety of ways. They improve the lives of people, provide jobs, address environmental issues, enhance employees’ job satisfaction and quality of life, develop a responsible network of suppliers and partners, and last but not the least operate on a financially viable basis to provide resources for the attraction/ retentions of talent and continuous innovation.  They can be big multinational companies as well as small and medium sized enterprises.  Whether they are social enterprises or not are irrelevant. My favourite example is Google. Is Google a social enterprise? Probably not. But has it created enormous value for the world? A resounding yes.

Policy priority (and resources) should therefore be directed at encouraging and supporting the development of ‘good companies’ that can create economic, social and/or environmental value in a profitable (and thus sustainable) manner. Government policies and regulations should encourage responsible investment taking into account Environment, Social and Corporate Governance (ESG) issues.  Government funding support should favour entrepreneurs who aspire to do good and do well.  The annual Make a Difference Award, which champions young and innovative change makers, is a case in point. We have selected 3 finalists for the 2012 Make a Difference Award, and not all of them are the classic ‘social enterprises’. But they are definitely doing good and doing well. You can check them out from www.MaD.asia and cast your vote on the Grand Award winner.