Making social innovation happen

Introduction: Social Innovation addresses massive social problems, things like urban transport, indigenous disadvantage, poverty, climate change or the refugee crisis. Where should the answers come from? Is there a hybrid approach beyond domestic policy, foreign aid or Corporate Responsibility Programs? 

From the University of Sydney Business School, this is Sydney Business Insights, the podcast that explores the future of business.

Sandra: Hi I'm Sandra Peter. And today we talk to Jarrod Ormiston, who is Assistant Professor in Social Entrepreneurship at the Maastricht Centre for Entrepreneurship at Maastricht University. Jarrod's action research involves various activities with the Entrepreneurship Development Network Asia (EDNA) and working with social enterprises to enhance their impact.

Welcome Jarrod and thank you for talking to us today.

Jarrod: It's great to be here.

Sandra: What is social innovation?

Jarrod: The place I always start when I'm talking about something like social innovation and I guess it's the way that I start all of my courses on social entrepreneurship and sustainable entrepreneurship as well is to talk about these persistent wicked social problems. So in a domestic setting if you look at things like child protection, urban transport, indigenous disadvantage, use of natural resources, two bigger global issues like climate change, poverty, treatment of asylum seekers and refugees this sort of broader refugee crisis, I guess the sustainable development goals by the UN are another example of the type of wicked problems that we talk about and the nature of these types of problems are that they're complex, they're messy, they're interconnected and they need multifaceted solutions. So the idea of social innovation comes in.

It's about how can you address these wicked problems through something new, something novel, new ideas, new practices, new partnerships. And so the idea of social innovation is about how do you shift these unjust social structures and the very nature of it then is very much political, socially motivated in a lot of ways.

Sandra: They sound like very complex problems. Why is it important for government, private enterprise and non-profit sectors to collaborate on social innovation? And how can they collaborate to address these issues? 

Jarrod: If you look at these different problems you can see that all sectors of the economy have been focusing on them over many years. So from public policy activities, social sector activities, private sector initiatives. So in the public sector you've had a lot of domestic policy and foreign aid programs focused on these initiatives. You see the establishment of sort of local community based organizations, non-profit organizations, international NGOs trying to combat these issues. And you're seeing these sort of applications of corporate social responsibility, especially with these re-branded modern approaches to CSR, things like creating shared value and these bottom of the pyramid concepts all trying to address these wicked problems.

What's important is to not confine action on these problems to a specific sector and see how hybrid approaches can work that really get at multi-sector initiatives that can start blurring the boundaries between these sort of, what I guess, are traditionally siloed public private and social sectors. So there's this argument these multi-sector initiatives for addressing these problems and I guess when you look at why that's necessary, there's this idea of these problems are becoming more urgent and complex, you know you take the refugee crisis and climate change for example there's a need to involve more organizations in this space. So we need these multi-party activities. And then also just from an organizational perspective of why organizations will get involved in this cross-sector collaboration, it makes sense for them in terms of a) Being able to address problems that are too difficult for them to address as an individual organisation, but then also it helps them by sort of reducing their uncertainty, their risk, being able to access resources from outside, filling gaps in capabilities et cetera. So I guess what you're seeing at this sort of collective impact initiatives emerge and to talk in more concrete terms about this then some sort of specific ways people are coming together, you're seeing a lot happen around funder collaboratives.

So seeing groups of funders come together to support the same issue and pool their resources. So great example of that is the work led by my colleague and my mentor the late Richard Seymour in Myanmar and his collaboration with Chichi Yen a social entrepreneur over there. They set up something called Edna Myanmar which the Entrepreneurship Development Network Asia, and this was funded by one of these funder collaborative. So it is funded by Lift who is the Livelihoods and Food Security Trust fund set up in Myanmar. And basically this is a donor consortium between a bunch of aid organizations and the Mitsubishi Corporation. So you saw U.K. aid, Netherlands government, Australian aid, EU, U.S. aid, France, Switzerland, Luxembourg, New Zealand and Irish aid involved, and basically this funder collaborative, instead of going into Myanmar when things opened up again with all of their separate agendas and separate small projects they went in with a big budget, US$400 million, to focus on about 150 large projects.

So the focus of what they were doing were things around increasing incomes, increasing resilience for the poor, improving nutrition for women, men and children and enhancing policies around the public expenditure. So you had these aid agencies, Mitsubishi Corporation, then collaborated with the Burmese government, so Ministry of Agriculture Livestock and Irrigation Ministry of planning. And what they managed to do is sort of come together with these big projects work with local and international NGOs, civil society organizations, academic institutions and the private sector to focus on these big initiatives. So the work led by Richard and Chichi was focusing on educating 10000 grassroots entrepreneurs across Myanmar, through this six months mentoring program.

I've been doing some work on that very recently doing the impact measurement of it and we've seen that through this sort of multi-sector initiative, we've seen 1000 new enterprises started and 2000 existing enterprises sort of grow their incomes, grow their activities, start employing more people. And so it's great to see those types of projects having as opposed to the smaller project which you might often see which might focus on say only 100 entrepreneurs or something like that so how can you do something at large scale by bringing together these pools of capital. Just to talk briefly on some other examples beyond those funder collaboratives, you're seeing things happen around private non-profit partnerships, so in the Australian context, you see Westpac collaborating with Many Rivers, who is a microfinance institution focused in the indigenous space. So you've got Westpac providing or the back office support, allowing Many Rivers to spend their time focusing on what they have skills and capabilities in in terms of working closely with indigenous communities to provide microfinance. You're seeing multi-stakeholder initiatives is what they be called focused on more voluntary activities, people coming together.

I've got a Master student in the Master of Sustainability at the moment doing some work on modern slavery in Australia and that's another great example of this cross-sector collaboration where you've got this responsible construction leadership group which is a collaboration between the New South Wales office of Environment and Heritage engaging with various NGOs and then you've got Lend Lease, Mirvac and John Holland coming together to sort of leading private sector players looking to address the potential risks posed and the ethical issues associated with modern slavery in constructing industry supply chains. So they're the sort of things that are happening a lot more these days. And then I guess the bigger thing which is quite exciting is what's being called these collective impact initiatives where you're seeing these long term commitments between essentially all the actors in the space coming together with a common agenda and trying to develop common measurement frameworks to actually tackle some of these social issues. This would be a sort of successful example I think what's happening in the impact investing space so the international impact investing space and then also more specifically looking at Australia.

What we're seeing they’re Impact investing is this novel approach to financing social enterprises and sustainable enterprises where you have impact investors who are looking to achieve financial returns alongside intentional and measurable social and environmental impact. And on a global scale we're seeing all of these guys come together. So a lot of these collective impact initiatives need an international backbone organization to coordinate the activities to help developing these common measurement frameworks and keep this ongoing communication happening. We've seen the global impact investing network setups with 200 international members. So they're developing a common measurement framework around these impact reporting and investment standards. They're mapping their activities to the Sustainable Development Goals and annually tracking their progress. And then if you look specifically at what's happened in Australia, you saw the emergence of this impact investing sector be set up by the Australian Government or ceded by the Australian government in many ways. So back in 2010 you hadb20 million Australian dollars provided by the Australian Government through social innovation unit which then became part of the Department of Employment. And it set up these social enterprise development investment funds, and these funds were there to sort of test this impact investing market in Australia and try and deal with the capacity of social enterprises. And so it was this great example of this cross-sector collaboration this is how I first got excited in looking at this idea of cross-sector action.

So you had this seed funding coming from government that then mobilized matched investment from a bunch of superannuation funds, international social banks, philanthropic foundations and a series of high net worth individuals and private investors. And then these intermediaries were set up with this what became 40 million dollars to provide debt and equity finance to Australian social enterprises and trying to target market rate returns between six to sort of 13 - 14 percent whilst delivering social impact. And then what you see come around, so you had these sort of hybrid intermediaries that were set up, the private investors, foundations, government bodies involved and then a bunch of sort of institutional entrepreneurs emerge around this to help support the growth of that market. That sort of wrapped up this project at the moment but over the five - six years of that seed of piloting phase, you saw about over 60 investments in Social enterprises with impacts on over 9000 vulnerable people in Australia and a lot of positive employment outcomes for over 600 people. So big impact coming from these cross-sector collaborations.

Sandra: What are some specific examples that these funds have invested in? 

Jarrod: What seems to be the main focus in Australia is this notion of meaningful work and what seems to be a dominant business model for social enterprise or an impact model more appropriately, is this idea of work integrated social enterprises. So looking at how social enterprises can engage, running sort of traditional business activities whether that's a catering enterprise, cafes we're seeing a lot of them in hospitality space these type of enterprises that can provide employment and training opportunities for vulnerable groups. If you take the indigenous space and very close to home there at the University of Sydney got the Gardeners lodge and Aunty Beryl and her team providing training and job opportunities for Indigenous youth.

In Melbourne you've got a similar model that's been set up by Mission Australia through Charcoal Lane. The darling of the impact investment movement is some of the equity deals done with Street, down in Melbourne and they've got a work integrated social enterprise which is a combination of a bunch of cafes, a coffee roaster and a catering business focusing on working with youth and experienced homelessness. And that model was actually built out of the KOTO model, the know one teach one model in Vietnam which again is another example of where some of these impact investment has gone to. It's run by Jimmy Pham, this Australian Vietnamese entrepreneur, work with providing employment opportunities for kids off the streets. In one of our programs at the University of Sydney we've done a lot of work working with KOTO, if there's any undergraduate students listening to this has potential to get involved in January next year coming over to Vietnam and working with organizations like KOTO to try and expand their impact. And then we're also seeing this stuff happen in the refugee space, you've got the Bread and Butter project which is a collaboration with Bourke Street Bakery, working with refugees to provide employment opportunities and again Settlement Services International who is very active and in this refugee space and the social enterprise space, they're doing a lot to set up social enterprises focused on catering and Staples bags and food justice that could provide employment opportunities for vulnerable groups in Australia.

Sandra: Really big impact coming through, and yet over the last few years we've seen quite a few people argue for answers that could come purely from the private sector, or purely from the non-profit sector. So if sectors don't collaborate what can be some of the drawbacks of not doing this in the long term?

Jarrod: There's a lot going on in the shared value conversations. There's obviously groups at the University of Sydney focused on profits and poverty. My ex colleague Ranjit Voola doing some work in the auto bottom of the pyramid space and lost the work they're doing is obviously focusing on collaboration and engaging across sectors as well, I think there's a danger in holding up the private sector as the champion of solving these social issues. This is some of the problems that sort of Porter and Kramer work, where they sort of celebrate the role of market oriented approaches and the role of the commercial logics in solving these social issues. If you take the case of microfinance, so providing small loans to the poor, group lending a big innovation around this group lending focusing on women entrepreneurs etc. It sort of began with a very much hybrid approach that was combining development logics, engaging with a lot of non-profit organizations with these commercial logics and engaging with the private sector. And what you saw over time was that this idea of microfinance proved itself very successful according to the commercial logic, so basically as Muhammad Yunus would call it, being a banker to the poor proved to be a really strong business model. So you saw people getting excited by these really high repayment rates by the numbers of borrowers worldwide with these high numbers of loans going out. The impact side of things on the development logics didn't really play out.

There was no cohesive insights on whether microfinance and providing access to capital was actually alleviating poverty. And so what you saw you saw more of these commercial players getting involved, a lot of private players getting involved in this space, and then we sort of start to see what became the dark side of microfinance. So these really high profile examples where you had a couple of these microfinance institutions, have their IPOs and make a lot of money out of the space despite relying on a lot of grant funding in setting up their activities. So you saw a lot of individuals profit from this activity. And so that sort of raise some ethical questions. And then again in India you saw some high profile cases of suicides stemming from the pressures of microfinance. So in some ways the sort of financialization of microfinance in this conversion of Third World women in many ways into this asset class to be risk managed, had some very dark impacts in the end and I think that is the challenge when perhaps certain sectors logic especially in this case the sort of commercial sector logic is allowed to dominate.

A lot of my research in the impact investing space is looking at that there's a worry that venture capital logics and this way of engaging with social enterprises that stems from mainstream finance is starting to pervade. And that's very much led by a bunch of these individuals who've got a lot of experience in mainstream finance who are now wanting to do something good in their lives, jumping into the impact investing space but bringing over to many of the practices in ways of being and doing things from mainstream finance that have actually contributed to some of the social issues that impact investing is trying to address. 

Sandra: So you think collaboration would be the answer to some of the issues that have just raised? 

Jarrod: I think bringing the sector together is important. A big thing that's come out of my research though is the role of what I'm calling multi lingual brokers. Multilingual in that they have the ability to speak the language of multiple sectors. So what seems to be working well in the impact investing space in Australia in the UK at least, is that you've got individuals who spent time throughout their careers working across different sectors. So they've got experience in mainstream finance but then they've also potentially worked in the public sector, so doing various government initiatives potentially focused on entrepreneurship, social enterprise, employment etc. And they've also had experience working with various charities and NGOs. And so you're seeing these people start to populate some of the intermediary organisations and they're really able to facilitate a practice across these different sectors. And in some ways ensure that by speaking the language and being asked to adapt to the practices of the different sectors that no one sector or approach overly dominates. 

Sandra: So what's next for you? 

Jarrod: Starting to do a lot of these things I guess is the next thing so if I think to the two big projects I'm working on at the moment, I'm doing some work in the refugee entrepreneurship space. So I've been working with an organization called Catalysr, in Australia, who's working with refugees through an entrepreneurship mentoring program, trying to set up migrant and refugee businesses, but as an avenue towards meaningful work. So this idea of the role of entrepreneurship, cross-sector collaboration in creating meaningful work is sort of core to what I'm doing now. So working here in Maastricht now, building on this Catalysr model, I'm working with a non-profit organization the Refugee Project Maastricht and we're collaborating with the local municipality and engaging a bunch of private sector players as mentors to work with entrepreneurs here from the refugee community who are finding it difficult to find meaningful work.

So looking at entrepreneurship as an avenue to meaningful work for them and then also working with social enterprises who are wanting to work alongside refugees to create employment opportunities. The other project is in Cambodia at the moment, so this builds on some of the work I was talking about before that was led by the late Richard Seymour in Myanmar. What we're doing in Cambodia is we're working with farmers in the northwest of the country. They are faced by this rice crisis at the moment and we're looking at the role of entrepreneurship and community based entrepreneurship to see how these farmers can diversify into new crops, businesses and enterprise activities. And again we're really looking at the role of cross-sector collaboration there. So we have got a collaboration happening between the University of Sydney, Maastricht University and two local universities - Mean Chey University and the University Bungabong. And we're working with some local foundations, some international NGOs working closely with local government and then private sector players in the value chain to see how we can explore new opportunities for community based entrepreneurship to allow farmers to expand into other enterprise activities beyond rice farming. 

Sandra: Thank you for talking to us today. 

Jarrod: Thank you. It was really fun talking about this.

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