Product Red: More than Cause Marketing

Tamsin Smith of Product Red came to our Social Enterprise class tonight. As you may have seen from all those Gap ads, Product Red partners with businesses like Gap, Apple, and American Express to produce and sell a line of products whose profits help fund health projects in Africa. 

I have to admit - I came in a little skeptical of Product Red, less from any facts that I had - which were few - and more from the flurry of ads I had seen of celebrities wearing Gap clothing and talking cursorily about helping people in Africa. Wasn't this just another cause marketing effort that tried to make serious issues "sexy" and whose impact on the company's brand was bigger than on those whom it purported to help? 

The impression I left with after hearing Smith was, no, Product Red is for real, and is a really interesting model for harnessing the power of business for social good. On what observations/facts do I base this? 

1. The model: Product Red has created a meta brand that isn't tied to the specific products sold under its label but rather to a set of values and a perception of caring. Sure, it's taken Bono, Bobby Shriver, Oprah and a host of other celebrities (which makes it not very replicable) but it's working. Brands are now coming to them seeking partnership. 

2. The leader: Tamsin Smith is an impressive woman. She has a multi-sector background, having worked on Capitol Hill, at Gap, and now at Product Red. She wowed the class with her thoughtfulness, humility, and quiet strength. 

3. The results: No arguing with the numbers. Product Red has generated a staggering 115 million in profits in less than two years, all of which have been given to the Global Fund, a highly regarded, highly transparent organization that disburses grants to health initiatives in Africa. 

Bottom Line: fascinating model, doing great work, and continuing to expand into new product categories. Check out their blog here. But is this replicable? Can a different meta brand be created for other pressing issues (like climate change)? Without someone like Bono, it isn't likely. 

 

ML

Read more!

Capitalism Next Seminar - Hunter Lovins Video

Hey all,

The video session of the first Capitalism Next session with Hunter Lovins is now online. Check it out:



Read more!

Several Net Impact Members attended last week's first ever Social Capital Markets Conference in San Francisco, put on by Good Capital and several other players in the social investing landscape. In addition, several of us blogged for the nextbillion blog. Here are links to the posts!

Cindy Chen on Breaking Silos

Roxanne Miller on New African Capital

Champa Gujjanuda on the Future of Fair Trade

Charlene Chen on Innovative Ways to Invest

Roxanne Miller on Beyond Microfinance

Mike Lee on Money and Meaning
Read more!

Capitalism Next: Hunter Lovins, A Second Perspective

On Wednesday, I had the opportunity to hear Hunter Lovins speak to a group of students from Haas and other UC Berkeley schools, including the schools of law, natural resources, and public policy. Lovins was the first speaker in a series of speakers, titled Capitalism Next, exploring how for-profit businesses can become truly sustainable. She proposes that because our world’s natural resources are becoming scarce, a new type of environmentally conscience capitalism is emerging, dubbed natural capitalism. During the industrial revolution, Lovins told us, human capital was in limited supply, and successful companies used machines and plentiful natural resources to create more value with less people. Today, in contrast, human capital is plentiful but our world’s natural resources are becoming scare. Consequently, we are experiencing a new capitalist revolution. Recognizing the value of natural resources, companies are now growing their bottom lines by minimizing their environmental impact. This is the capitalism of the future.

Lovins’ examples of companies “doing well by doing good” provides true hope for our planet. For example, Dow Chemical saved $3 Billion dollars over 3 years through their energy saving and waste reduction programs. Tesco, a leading international grocery retailer, has pledged to cut carbon emissions from all existing and new stores by 50%. Tesco has also launched a program to begin labeling foods sold in their stores with their carbon footprints. Companies are even voluntarily trading carbon on the Chicago Carbon Exchange. Participant companies include Dupont, Motorola, and Ford Motor Company. I was impressed that so many leading companies are taking steps toward environmentally responsible business.

I also came to Lovins’ speech with a unique framework. The same morning I had the privilege of touring Arterra, a new condo development which is positioned to become San Francisco’s first LEED certified residential high rise. For those who don’t know, LEED is a green building rating system that provides a set of standards for environmentally sustainable construction. The developers of Arterra are also proving that environmentally friendly business practices can lead to profitability. In this tough real estate market, Arterra has roughly five times the foot traffic of non-sustainable condo developments and is selling well. Arterra’s developers told the tour group that while green development projects do not sell for more money, the extra expense of sustainable building projects has become minimal. On this $90 Million dollar project, the extra cost of sustainability was only $300,000, approximately 1/3 of 1 percent of the total cost!

However, as exciting as I find the idea of natural capitalism to be, Lovins’ speech left me with many un-answered questions, some of which I hope will be addressed during future Capitalism Next sessions. First, I would like to understand more about the role of government in moving industry toward environmentally conscience business. My background is supply chain consulting. While I had the privilege to work with some companies that were cognizant of their environmental impact and actively addressing it, I saw many that were not. In addition, not every change toward corporate sustainability is going to have a positive ROI. Government has played a significant role in shaping and regulating our current capitalist system. For those organizations that are not voluntarily moving toward natural capitalism or taking sufficient steps in that direction, what role will government play?

In addition, I perceive an educational gap in the ability of our nation and the world to rapidly adopt more sustainable business practices. Classmate Ari Frankel pointed this gap out to me on the Arterra tour. While most real estate development companies recognize that green building is the future of development, and while they know green projects are sound business, many companies currently lack architects, developers, and interior designers with the knowledge and skills needed to bring an environmentally friendly project to fruition. What change in education will be needed to support natural capitalism and on what scale? How will existing educational institutions manage this?

I hope to find many opportunities at Haas to continue exploring the role of business in addressing the world’s social and environmental issues. I am definitely looking forward to future sessions of Capitalism Next.

--Lauren Stark
Read more!

Capitalism Next: Hunter Lovins

As an undergraduate student I studied biology and environmental science at Oberlin College, where liberal environmentalists debated how to overtake the American capitalist system with a new "green" capitalism. We made models of the low-carbon economy and held Hunter Lovins' book "Natural Capitalism" as the bible for the future. However, after I left Oberlin, I was challenged to find pragmatic solutions to the environmental problems we face and became frustrated with the sparce guidance that Lovins and others of her generation provided for today's problems.

Yesterday at UC Berkeley, Lovins spoke to crowd of students, faculty, and members of the general public about the tenets of "natural capitalism," the philosophy that we can transform an existing economic system that thrives at the expense of natural capital into one that thrives as a steward of natural capital. Her talk came at the heels of a World Bank report, which claims that the world is losing more money due to deforestation and biodiversity loss than to the current financial crisis.

Lovins emphasized that companies can improve their bottom line by taking measures like cutting waste and cutting carbon. However, sustainability will not always improve the bottom line. In fact, true sustainability is going to hurt. It won't always yield a positive ROI and it's going to change our consumption patterns in ways that we may not like. If we are talking about seriously transforming our system to account for the financial, social, and cultural values of natural capital, we must be upfront and honest about what these changes entail. Sugar-coating sustainability, like so many in the ranks of Lovins and other environmental writers do, is not going to lead society in the right direction.

I asked Lovins to help us understand how to value natural capital, given the inherent trade-offs and equity implications in doing so. "We don't know," was her answer, "but we know we have to do it." Frankly, that answer might have been sufficient 7 years ago, when I was in undergrad, but today, as companies are scrambling to understand environmental problems, it just isn't. Lovins created a movement of people who believed that they could change things. The next step is to create solutions and that is where I challenge Lovins to go.

At one point in the seminar, Lovins asked us to close our eyes and imagine our lives without oil. "It can happen," she cried. But, wait a minute. Oil is in everything. Petrochemicals are the building blocks of our clothes, buildings, toiletries, even food. Yes, we can redesign our cities for mass-transit, but it is going to take alot of work and much more than idealistic rhetoric.

Frankly, I believe it is the onus of those of us in the audience to understand and design specific, practical steps towards sustainability. We believe in Lovins' philosophy, but we crave more specificity and more guidance. In less than a year, I will be making my way through the capitalist jungle, and it is going to take alot more than closing my eyes to imagine a sustainable future.

Mira Inbar
Read more!

Open Source as Social Enterprise

In my Social Enterprise Class taught by Jim Schorr on Tuesday, we had a class on Technology in Social Enterprise which featured Mitchell Baker, chair of the Mozilla Foundation. Most of you know Mozilla for producing Firefox and for using an "open source" model for developing its browser software. They were created in the 90s as a response to the monopoly that Microsoft's Internet Explorer had on the browser market and the growing concerns about pop-ups, spyware, and other privacy-invading practices. Their vision is a free internet and their belief is that private companies, without something to check their commercial impulses, will necessarily act in a way that will hurt consumers.

My first reaction to Mozilla is that it is an amazing case study in organizational behavior. They use a distributed system of authority whereby ownership of the product and company rests in the hands of hundreds and thousands of developers, most of whom are volunteers. They are a nonprofit foundation that houses a for-profit entity that generates nearly 80 million in revenue. Going up against giants like Microsoft, Apple, and now Google, Baker said that participation and ownershipby their volunteers and employees is their competitive advantage in the face of a huge resource disadvantage. Product decisions are made in a very collective fashion, and while this creates tradeoffs in terms of time spent on decision-making, Baker said the benefit is that people are extremely bought in (which means easier recruitment of talent, greater retention, and more productivity).

I wonder what other industries or products could work with this open-source model. Knowledge creation (e.g. Wikipedia) for sure, but hard to think of many others products whose development can be split up into such discrete parts and can be coordinated over long distances.

Another reaction I had is that while Mozilla's existence owes itself to the belief that commercialization and profit-seeking will create a less free and vital internet, its success has required business savvy and scale to be a relevant player in the market. Mozilla has to think about diversifying its revenue streams (which mostly come from Google ad revenues from its toolbar), has to think about how to market firefox to the non-digerati without a big marketing budget. Paradoxically, Mozilla's success in achieving its social mission rests on its ability to be a business success.
Read more!

A Student's Perspective on... Student Perspectives

This past Tuesday, a group of second-year MBA students shared their experiences working in CSR-focused summer internships. Jo Mackness, the new Executive Director of Haas’ Center for Reponsible Business, provided her perspective as well.

One interesting trend Jo mentioned is that CSR is becoming increasingly integrated at many companies: rather than having a “CSR Department”, employees are asked to take social issues into consideration when formulating their strategy. Karen Salvini, who spent the summer working on environmental issues at a large tech firm, found the attitude was that “every job is an eco-job.” Justin Parker worked with a large chemical company on a large-scale development plan in India. Instead of “corporate philanthropy”, where a company puts in a one-time investment, this plan will create a financially viable business, providing much greater long-term impact. To me, the model of creating a financially viable business that also helps people has tremendous potential- if you’re similarly inclined, check out The Fortune at the Bottom of the Pyramid by CK Prahalad.

As someone who shared the skepticism many of us have about business’ commitment to social ventures, it was encouraging to hear there are companies with such strong commitments. There is still a need and place for foundations, however. Charlene Chen worked in business development in Ghana through Good Morning Africa, which provides support for social entrepreneurs. Wellesley Fraser helped education reform in America with Education Pioneers. For those interested in socially responsible business, there are real opportunities around the world, in a variety of capacities, which is pretty exciting. I'm hopeful that as the country and the world deal with the current financial turmoil, companies don't lose track of the importance of CSR.
Read more!

International@Social Impact

The continuum of social change is incomplete without an international perspective. Hence the Net Impact club organized a panel discussion of students to share their views and experiences of international development opportunities at Haas. The panel discussion reinforced my belief that problem solving at ground level is the emphasis of the international experience at Haas.

The panelists discussed their experiences of the International Business Development (IBD) program, the Mayfield fellowship, Management of Technology (MOT) trips to Asia, Social Enterprise Education Design (SEED) fellowship and the Blum international research fellowship and international internships.

Megan Ryskamp and Lissa Wilson talked about their IBD consulting assignments in El Salvador and Africa respectively. Megan said that her interactions with her fellow team mates on the 3 week engagement in El Salvador taught her more about strategy and consulting than she had learnt in another formal setting. What struck me the most was that it worked wonderfully for her as immediately after the IBD tour she started her internship with British Telecom in London and was able to apply her learning of IBD to her internship in corporate strategy at BT.

Lissa Wilson said she decided to take the 10 day study tour to India as India was one of the least likely places she would visit on her own. I am glad I listened to Lissa talk about her experience as it helped me make up my mind to apply for the study trip to Brazil. As an international student coming from India, I realized that this may well be my best chance to go to Brazil – a country which I wanted to visit since the Brazilian government developed programs to attract Indian farmers to cultivate land in Brazil!

Jon Burns, a Mayfield fellow said that “the Mayfield fellows program was a great fit for my entrepreneurial goals”. Jon was a part of the eight member team that went on a two week visit to Asia. Jon’s satisfaction in his choice of Mayfield fellows rubbed on to many present including me as his specific focus areas allowed him to seamlessly combine the objective of social impact with technology in an international setting.

Panelists Nadia Madden, a SEED and Blum fellow, Michael Martin and James Platts too shared their experiences with those present. One thing that was equivocally stated by all panelists was that the international experience truly added value by exposing them to new cultures and different ways of doing business. But it also challenged them to work in in difficult and unfamiliar environments making them better team players and winning them great friends for life –the most cherished takeaway of the panel’s international experience. I think attending the panel discussion has made me articulate my own takeaways from the international opportunities I want to pursue and yes a bunch of great friends definitely makes the list.

Read more!

US Poverty - It's Not as Hard to Solve as We Think

Just listened to this podcast from This American Life. It's takeaway: lifting kids out of poverty in the US is not as hard as we think. It's being done right now, in Harlem, by Geoffrey Canada. Search for the "Going Big" episode here.

The deeper context for me here is something that Carla Javits of REDF said on Thursday during our Social Impact Week session on Financing Social Change: that folks in business school seem to be more excited about fighting poverty in the developing world than right here in the US. I agree that this is the case but WHY?

There are many explanations, some more flattering than others, but I believe one reason is that fighting poverty internationally in many ways just seems easier. The poverty in the US feels more rooted in the social, economic and political structures that exist here, and therefore, less mobile. We talk about upward mobility in America a lot but addressing poverty on a massive scale in the US feels harder to address here than it does in a place like India. An interesting possibility but this podcast makes me question whether our lack of interest is that it is harder here or just that we just aren't trying hard enough. -ML
Read more!

Corporate Sustainability: Still Cynical?

So you’re interested in “doing well and doing good,” you want a job that’s financially rewarding, and you’d even like to work for a large company. But, the pragmatist in you realizes this is a tough combination to reconcile. Large, publicly-traded and sustainable? Is this possible, or a paradox? A group of second-year MBA students held an intimate roundtable last Wednesday to share their experiences and tell us, yes, progressive and sustainability-focused companies do exist – it’s a matter of finding the right one!

The panel, entitled “Can Business Really Be Sustainable?,” asked five Haas students and moderator Megha Doshi to recount their experiences working in CSR and sustainability initiatives with multinational companies like Dow Chemical, Brown-Forman, Gap and Nike. A common thread ran through their stories: student is skeptical about the seriousness of large-scale corporate sustainability issues, student takes internship with market-leading company, student slowly sees that companies are starting to “get it” and affecting change. As panelist Mahta Eghbali explained about working for Gap, “I came in as a cynic but [the experience] silenced the cynicism. Some corporations do good work.”

The key phrase for me being “some corporations.” I’ve come fresh from the PR world, working for an agency where clients viewed CSR initiatives as a form of penance for past and future sins. At my firm, the key objective for any CSR initiative was improving brand image (and therefore increase sales), rather than serving some ingrown need to “do good.” And while this still characterizes most companies in the US business landscape, our panelists highlighted the key characteristics needed to find those companies that have gotten religious about making a difference:


1. Family-owned or community-centric. Brown-Forman and Gap are two companies that have strong ties to their founding families. This creates a tighter community, and allows the company to act as a vehicle for the family’s social causes, such as women in developing countries (Gap, Inc.) and responsible drinking practices (Brown-Forman).

2. Senior executive sponsorship for CSR initiatives. Panelist Mira Inbar recounted how executive buy-in at Dow Chemical allowed her project team to develop and pitch a business plan that is now being integrated throughout the company. Jeff Shah found that the leadership at Brown-Forman wanted to be authentic about their corporate social responsibility plans, and not just look as if they were jumping on the green bandwagon. They were thinking strategically, not reactively!


3. A strong belief in the product. The panelists felt that the most responsible companies truly believed in their products, and gave serious thoughts to how their products (and their companies) can make the world a better place. Megha realized that Nike is in midst of an existential discussion about the nature of consumption, and how improving the durability of their shoes might make them less money, but would improve the double-bottom line.


For the socially-minded MBA, there’s a growing field of opportunities to make a difference with large, market-moving companies. After the event, Megha gave the hint that this is just the tip of the iceberg. “More companies are realizing the need for CSR programs that are effective and real. Think of how far they’ve come from 5-10 years ago. It’s only going to get better.”
Read more!

Will Rosenzweig- Successful Entreprenuer, Investor, and Teacher - Returns to Haas

I just listened to Will Rosenzweig speak at the kickoff event for Social Impact Week. Simply put, it was one of the most inspiring and insightful hours I have spent here at Haas. He started with a timeline of his remarkable career and titled it, “It takes 15 years to become an overnight success.”

He talked of planting seeds and described how he serendipitously had a hand in the beginning of what have now become established landmarks in the socially responsible business landscape. From running an early TED conference to helping found Net Impact, Business for Social Responsibility, Republic of Tea, Haas’s Center for Responsible Business, and the Global Social Venture Competition, Will has found himself –whether a central character or role player – an actor in many of the key events in the history of socially responsible business. The point I took away from his talk was that the field of socially responsible business we see blooming today took years of seed-planting and nurturing to grow and that we should not forget that the seeds we plant today, if nurtured, will continue to bear powerful fruit over time.

Amazingly, the second half of his talk was even better. He shared with us 10 guiding principles that he has learned about having a successful career at the intersection of business and social change. Some of my favorites were:
• Reciprocity and generosity – not talked about in business school, he said, but a truly powerful force in business.
• Keep your overhead low – financially, emotionally, and spiritually, he said it allows you the flexibility to respond to opportunities.

But my favorite was “Don’t be afraid of niches.” Business school often makes us afraid of niches and instead encourages us to follow the big thing, but niches are where you will find many of the future innovations. I think many of us who come to business school with dreams and interests that fall outside of the recruiting mainstream can easily feel under assault in business school. Coming from a man who has integrated his personal values and interests with his professional career, these words provided further proof that investing in heart and meaning is almost never a bad choice.

Will has graciously agreed to send us his presentation deck which we will be posting here shortly.
Read more!