2008 comes to a close in a matter of days. This was a bittersweet year indeed. We saw great progress in the field of impact management and social capital investments. We saw industry groups come together to address impact issues in areas ranging from ecotourism to microfinance to affordable housing and beyond. We saw the first ever Social Capital Markets Conference (SoCap 08) host a double-capacity crowd in San Francisco and give birth to SoCap Media to continue convening the leaders in this field. The list of achievements goes on.
Of course, 2008 was also a time of great challenges. The global economic crisis has affected everyone—companies, investors, funders, NGOs, entrepreneurial endeavors of all kinds, and of course individuals. In times of crisis there is a tendency to ‘stop the bleeding.’ That is, to get things back to a stable state and try to solve the underlying troubles once this stabilization has happened. The flaw in this reasoning, however, is that doing so means recreating the stable yet troubled state that led to the problems in the first place. Hundreds of billions of taxpayer dollars (and their monetary equivalents) are currently allocated to ‘bail out’ industries from banking to automobiles. Bailouts, unlike any fundamental restructuring, essentially bring troubled industries right back to the the brink of disaster. This is inefficient at best.
A better solution would be to learn from what went wrong and use such significant funding to find a better approach, rebuilding from the current state rather than recreating the past. The idea of creative destruction is not new, but unfortunately what we’re seeing so far is that governments around the world have made financial commitments to industry with little thought as to how that money could be used to fundamentally alter its course to a better place. The opportunity does still exist to use this government investment in a way that reflects the new understanding of industry’s role in our global lives that all of us in the social capital markets share. 2009 remains a moment when we can make a real shift, from industry being something that succeeds at the expense of people to something that helps people succeed.
Doing this means at least two key things: 1. aligning the needs of individuals with the abilities of companies, and 2. holding them accountable for achieving a set of social and environmental, as well as financial, goals. Clearly this economic redesign is a large topic that can cover many years of blog entries (and will no doubt be touched upon in SocialEdge in the coming year). But in short, for profit entities can exist to proactively help people and planet and still be profitable. To do so, managers and investors must arrive at a clearer understanding of stakeholder needs. They must work through how a business’ offerings can address them. They must set clear milestones. And they must measure, and be held accountable for, performance. We have all seen numerous illustrations of this new business ideal on a smaller scale. Renewable energy is a perfect example as it attempts to solve a need that is both human and environmental, and to turn a profit by doing so. Now, though perhaps a revolutionary thought to many, the global community can apply these practices to other industries in ways that are perhaps less obvious.
This change, however, will require innovation; innovation in processes, practices, materials, and ideas. Though troubled times may heighten survival instincts, causing people to be conservative and ‘hunker down,’ now is the time we need innovation most. Fortunately, innovation is often at its best when times are worst. It is through innovation, and in our context, through entrepreneurship, that we can devise new approaches that are informed by past failures and that aspire to a new vision. Now more than ever is the time to foster innovation, to support the creative minds who can conceptualize new ways of addressing needs that do not bring us right back to the edge of disaster where we just were. We can take advantage of markets and investment to steer progress away from simple growth and aggregation of wealth to something that not only solves current challenges, but prevents future ones. This is of course no easy task, but not an impossible one either.
2009 is a year of opportunity. It is a year not to merely stop the bleeding, but to begin to reform the global economic infrastructure using the tools social entrepreneurs have forged. Social entrepreneurs and impact-oriented investors should see 2009 as a ripe time to find the best solutions to the social and environmental challenges we face and solve them in ways that benefit all involved—through innovation, accountability and alignment of the interests of all parts of the economic ecosystem. The opportunity is ours to put forth a better way.
This entry was originally published on the Skoll Foundation’s SocialEdge.org website on our other blog – SVT on Impact.
Here’s to an innovative new year!