Serving the Community Through Innovation:
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1 Serving the Community Through Innovation: June 7, 2016 Creating and Supporting Social Entrepreneurship in Eusébio
2 ACKNOWLEDGMENTS ThisreporthasbeenwrittenandcompiledbyYi6WenCheng,AhmadDahdoul,Uyen Do,AnnaleeHabstritt,JudythHermosillo,RachelHuguet,VaneishaJohnson,JanetLi, LauraMcCollough,HariceNguyen,VíctorSánchez,CarolineServat,LeslieShim,and CharleneUnzueta.WewanttothankDr.GaryD.Painterforhisinsight,leadershipand supervisionofthisentireprocess.yourfeedbackandperspectivehelpedleadthe successfulcompletionofthisproject.wewouldalsoliketothankpaulorodriguesfor histirelessencouragementandday6to6daysupportofourgroup.hisabilityto troubleshootandcoordinateourvisittothefortalezaregionwascrucialinensuringwe sawthisprojectoutfromstarttofinish. TotheFundaçãoAlphavillerepresentativesGiovanna,Mônica,Hugo,Fernanda,Graça, Aline,Maria,Cláudia,Patrícia,Daniel,Francisco,Brendonandothers yourguidance andcommitmenttoensuringwereceivedasmuchinformationandsupportaspossible wasdeeplyappreciated.yourresolveinchangingthesocialconditionsofthosewho needitmostinspiredustoperformatourbest.wealsoextendgreatgratitudetothe MunicipalityofEusébioandMayorJoséArimatéaLimaBarrosJuniorforwelcomingus andourideas. Lastly,wearegratefultotheUniversityofSouthernCaliforniaSolPriceSchoolofPublic Policyforcreatingthisopportunitytoengageinthistransformativeproject.Wealso thankthecenterforsocialinnovationfortheircuttingedgeresearchandresources relatedtothefieldofsocialinnovation. 1
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4 Table&of&Contents& EXECUTIVE(SUMMARY(...(6 ISSUE(DIAGNOSIS(...(7 INCOME(INEQUALITY(...(7 QUALIFIED(LABOR(FORCE(...(8 PUBLIC(HEALTH(...(8 POLITICAL(CONTEXT(...(9 REIMAGINING(CHANGE(MAKING(...(10 STRUCTURE(AND(BENEFITS(OF(A(SOCIAL(ENTERPRISE(...(10 SOCIAL(ENTERPRISE(METRICS(...(11 FINANCING(MODELS(FOR(SOCIAL(ENTERPRISES(...(12 COMMUNITY(BANKS(...(12 ANGEL(INVESTING(...(12 CROWDFUNDING(...(12 SOCIAL(IMPACT(BONDS(...(12 IMPACT(INVESTING(...(13 SOCIAL(ENTERPRISE(CASE(STUDIES(...(13 CASE(EXAMPLE:(SANITATION(...(13 SANERGY,KENYA...13 ORGANIZATIONALSTRUCTUREANDSTRATEGY...13 FINANCINGINTHESTARTUPPHASEANDBEYOND...14 SUSTAINABLEINTEGRATEDLIVELIHOODS(SOIL),HAITI...15 ORGANIZATIONALSTRUCTUREANDSTRATEGY...15 FINANCINGINTHESTARTUPPHASEANDBEYOND...16 CASE(EXAMPLE:(SOLAR(...(17 SELCO,INDIA...17 ORGANIZATIONALSTRUCTUREANDSTRATEGY...17 FINANCINGTHESTARTAUPPHASEANDBEYOND...18 SHORTCASENOTE:CEARÁ,BRASIL...18 CASE(EXAMPLE:(TEXTILE(CARE(...(19 EVERGREENLAUNDRYCOOPERATIVE,UNITEDSTATES...19 ORGANIZATIONALSTRUCTUREANDSTRATEGY...19 FINANCINGINTHESTARTAUPPHASEANDBEYOND...20 RESEARCH(QUESTIONS(...(22 3
5 STRUCTURING(A(SUCCESSFUL(SOCIAL(ENTERPRISE(...(22 APPRECIATIVE(INQUIRY(APPROACH(IN(DEVELOPING(SOCIAL(ENTERPRISE(...(22 COMMUNITY(DIAGNOSTIC/MARKET(ANALYSIS(...(23 PARTNERSHIP(MODELS(AND(OPPORTUNITIES(FOR(COLLABORATION(...(24 PUBLIC(PARTNERSHIPS(...(24 PRIVATE(PARTNERSHIPS(...(24 ALPHAVILLE(FOUNDATION(...(25 INDICATORS(AND(PERFORMANCE(METRICS(...(26 SYSTEMATIC(OVERVIEW(AND(QUALITATIVE(APPROACHES(...(26 QUALITATIVEINDICATORSOFSOCIALENTERPRISESANDTHEIRIMPACT...26 SOCIALIMPACTANDIMPACTMEASUREMENTS...26 APPROACHESTOIDENTIFYINGPROMISINGPRACTICESFORSOCIALENTERPRISES...27 FUNDERANDINVESTORSELFAEVALUATION...27 CHARACTERISTICSOFANEFFECTIVEIMPACTMEASUREMENTSYSTEM...27 GOALS/OBJECTIVES/MISSION(...(28 PERFORMANCE(MEASUREMENT(...(28 ORGANIZATIONAL(STRUCTURE(...(30 PARTNERSHIPS(...(32 FINANCIAL(MODEL(...(34 COMMUNITYGARDEN/NURSERY...34 SOCIALENTERPRISEHUB...34 CONTINUOUS(EVALUATION(...(34 COMMUNITYGARDENANDNURSERY...34 SOCIALENTERPRISECOMMUNITYHUB...35 APPLIED(EXAMPLE:(ACCELERATOR/INCUBATOR(...(35 GOAL/OBJECTIVES/MISSION(...(35 PERFORMANCE(MEASUREMENT(...(37 ORGANIZATIONAL(STRUCTURE(...(37 PARTNERSHIPS(...(37 FINANCIAL(MODEL(...(38 CONTINUOUS(EVALUATION(...(39 CONCLUDING(THOUGHTS(AND(OPPORTUNITIES(...(39 POLICY(AS(A(CATALYST(FOR(SUCCESS(...(40 4
6 FINDING(MOMENTUM(IN(INSTITUTIONALIZING(PARTNERSHIP(BUILDING(...(40 APPENDIX(A( (EUSÉBIO(PROFILE(...(41 APPENDIX(C( (ENTERPRISE(RESOURCES(...(45 COMMUNITY(ANALYSIS(RESOURCES(...(45 METRICS(AND(EVALUATION(RESOURCES(...(45 SOCIAL(ENTERPRISE(BUSINESS(PLAN(RESOURCES(...(46 COMMUNITY(GARDEN(RESOURCES(...(47 INNOVATION(HUB(RESOURCES(...(47 APPENDIX(D:(SOCIAL(ENTERPRISE(INCUBATOR(ADDITIONAL(INFORMATION(...(48 POTENTIAL(INCUBATOR(PARTNERS(...(48 GOVERNMENT...48 UNIVERSITIES...48 NONPROFITSANDFUNDINGORGANIZATIONS...49 PRIVATE(SECTOR(...(50 SUPPLEMENTAL(PROGRAM:(ENTREPRENEUR(FELLOWSHIP(...(50 INCUBATOR(&(FELLOWSHIP(EXAMPLES(FROM(THE(UNITED(STATES(...(51 CONSTRAINTS(ON(THE(INCUBATOR(MODEL(IN(BRASIL(...(51 ENDNOTES(...(53 5
7 EXECUTIVESUMMARY Inacontextwheretheeffortsofgovernments,nonprofit,andprivatesectoragentsare unabletosuccessfullyaddresscriticalproblemsalone,socialinnovationhasarisenas tooldesignedtoadvanceprogressbyidentifyingsolutionsthatleveragemarketsto maximizesocialimpact.onetoolidentifiedinthefieldofsocialinnovationisthesocial enterprise,whichgeneraterevenuesandachievessocialimpactaspartofadual mission.thefieldhasgrowntoincludevariousformsoforganizationalstructure, financing,andevaluationandassessmentdesignsmeanttoensureeffectivenessand impact. Socialenterpriseshavecometoaddressamultitudeofpressingissues.Three examplesweupliftinthereportfocusontacklingkeyissueslikeenergyaccess, sanitation,andwealth6building.structuresvaryfromtraditionalstrongrelationships acrosssectorstocooperativemodelsthatallowemployeestogainequitystakeinthe venture.withsuchrichcontent,weaskedourselveskeyquestionswehopewould capturetheelementsofasuccessfulsocialinnovationstrategy: Whatarethenecessarycomponentsofasuccessfulsocialenterprise? Howdoweevaluatecommunitystrengthsandweaknessestoidentify opportunitiesforsocialenterprisestoaddresstheneedsofourfocalpopulation? Whatpartnershipandfinancialmodelscouldasocialenterpriseutilize? Whatimpactevaluationstrategiesandmetricsshouldbepursuedtoensure effectivenessofsocialimpact? Thetoolsandresourcesweprovideinthereportaredonesoinanefforttoinspire sustainedsocialchangethroughshowcasingleadingexamplesofstructure,partnership andperformance.weapplythelearnedframeworksintotwoproposalswebelievecan beapplicabletoeusébiogivenitsstrongtrackrecordofinnovation.weconcludeby offeringourobservations,andwhatpotentialopportunitiescanbeseizeduponbykey stakeholdersintheregiontodevelopasocialinnovation6groundedapproachintackling futureeconomicdevelopmentgoalsandproblems. 6
8 ISSUEDIAGNOSIS Communitiesinthedevelopingworldfacethechallengeofaddressingsomeofthemost complexsocialproblems,whileoftenlackingsufficientresourcesandtechnical expertisetosolvethem.therealityisthatneithergovernment,theprivatesectorora burgeoningnon6profitsectorareabletotackleissuesofeconomicinequalityorpublic healthalone.thesecircumstancespresentopportunitiesforsocialinnovationlocallyin communitieswherechallengesbestrequireamulti6sectorapproach.onesuch communityisthemunicipalityofeusébiointhebrasilianstateofceará,oneofthe pooreststatesinthecountry,whichwillbeusedasanexemplarofthechallengesthat communitiesthroughoutthedevelopingworldface. i Eusébioisamunicipalityofover50,000residentslocatedwithinthemetropolitanarea offortaleza,thefifthlargestcityinbrasil.eusébioisafairlynewcity,becoming independentin1989andpoliticallyemancipatedsince1988.thereare12,000 householdsand23neighborhoods,orbairros.themunicipalityhasanunemployment rateof7.5percentwithmostemployeesconnectedtotheserviceorindustrialsectors. M.DiasBrancoisthelargestemployerinthecitywithover1.500employees.Thecity hasgrowncloseto11percentbetween2010and2015. ii Thisexpansioninthe populationhascreatedanovercrowdingproblem,where37percentofhouseholdshave morethantwopersonsperroom.currently,thereare200condominiumsbeingbuiltin Eusébioaimedathousingtheuppermiddleclass. iii AmoredetailedprofileofEusébio canbefoundinappendixa. IncomeInequality TheGiniIndex,whichmeasuresincomedisparity,hasincreasedinEusébiofrom0.59 in2000to0.61in2010. iv Theaveragemonthlyincomeof50660percentofthe employedpopulationisr$1.132,75,withtheaverageincomeoftheunemployedbeing R$600. v ThroughthefederalBolsaFamiliaprogram,qualifiedindividualsreceiveR$77 andanadditionalr$35perchildinthehousehold.typically,abolsafamiliarecipient willreceiveuptor$200permonth.inadditiontothissupport,themunicipalityof Eusébiohasitsownsocialwelfareprogram,RendaMinima,whichsupplementsBolsa Familia,makingthetotaltakehomeassistancenomorethanR$600.Participatingin thisprogramrequiresthatatleast40percentoffamilyfoodbepurchasedineusébio, thatchildrenattendschoolandthatthefamilyvolunteer100hoursofcommunityservice permonth.tenpercentofeusébio spopulationisabeneficiaryofbolsafamilia. vi 7
9 QualifiedLaborForce IndividualsinEusébioareemployedinmanydifferentoccupationsandindustrysectors. Themostcommonindustryistheservicessector,whichmakesup45percentofall jobs.thecityhasconcentratedinbringingnewbusinessinfivestrategicsectors: service,industry,civilconstruction,retail,andeventually,technology.currentlythe largestemployerinthecityism.diasbrancowithover1.500jobs.by2016,therewill beatleasttwonewmajorcompaniesthatwillcreatenewopportunitiesforresidents. TheFiocruz(vaccinemanufacturerandhealthresearchcenter)hubandEletra (Chinesesolarpanelmanufacturingandinstallationplant)arebothexpectedtobring morethan1.500new jobstothecity. In2010,the unemploymentratein Eusébiowas7.47 percent,higherthanthe 6.7percentacross Brasil. vii Whentakinga closerlook,youthare mostat6riskforbeing unemployed. viii Those ages15617and18624 face22.74and15.54 percentunemployment Demographic Comparisons Eusébio Ceará Brasil Population 46,033 8,452, ,732,694 Age 15orless ormore 27.9% 66.97% 5.14% 26.30% 66.16% 7.54% 24.08% 68.39% 7.53% LifeExpectancy 72.66yrs yrs yrs. Unemployment 7.47% 7.56% 6.8% GINI respectively.ineusébio,studentsage566attendschoolat96.65percent,ages11613at 83.55percent,ages15617at58.72percentandages18620at31.24percent. ix PublicHealth Eusébiooffersfreepublichealthservicestoitsresidents,spendingmorethan25 percentofthecity sbudgetonhealth.therearelocalhealthcentersinneighborhoods thatprovidegynecologicalservices,mammograms,birthcontrol,sexualhealth educationaswellassupportandtreatmentforthosewhoarestrugglingwithdrug abuse. x Eusébioalsohasfamilyhealthcareteamsthatgooutintothecommunity. Nationally,theseprovidersserviceanaverageof1,500families.InEusébio,providers workwith700families. xi Themunicipalityhasaninfantmortalityrateof9.8percent,the lowestinthecountry.muchofthehealthconcernsthatthecityfacesstemfromitspoor sanitationinfrastructure.mayorjoséarimatéalimabarrosjunioridentifiedsanitation infrastructureashisnumberonepriorityforimprovement,assertingthatonly23percent ofwastewasbeingproperlytreated. xii A2010census,donebytheInstitutoBrasileirode GeografiaeEstatitica(IBGE)surveyed12,711householdswithpermanentprivate 8
10 housingineusébioandfound151ofthosehouseholdstobewithoutatoiletand989of thosehouseholdswhohaveatoiletrelyingonarudimentarycesspittodisposeoftheir sewagewaste. xiii PoliticalContext Brasil scurrentpoliticalclimatepresentschallengestomunicipalgovernments,local economicdevelopmentefforts,andqualityoflifeimprovementsforcommunities.two weeksafterthesenatecommitteedecidedtosuspendpresidentdilmarousseff,the legislativeprocesswashalteduntilafinalvoteonpermanentimpeachmentorrestitution washad.changesinthepoliticalcircumstancesoccurdaily,whichhasignitedcitizen protestsandfurtherentrenchedconcernsofpoliticalstalemate.transparency International,whoproducesanannualcorruptionperceptionindex,gaveBrasilascore of38outof100in2015,qualifyingthecountryas highlycorrupt. TheOrganizationfor EconomicCooperationandDevelopment(OECD)hostedaConventiononCombating BriberyofForeignPublicOfficialsinInternationalBusinessTransactionsin2011and subsequentlyfoundbrasil scorruptionenforcementtobe little, andmeasuredcontrol ofcorruptionoverallat60percent. xiv Theeconomicrecessionhasalsoexacerbateddispleasurewiththecomplexfederation ofgovernance.severalpublicofficialsnotetheunequalmannerinwhichgovernance responsibilitiesareassignedtomunicipal,state,andfederalgovernments,emphasizing thehighpercentageofcostsbornebylocalities.anexamplebroughtupisrelatedto financinghealth.throughbrasil sunifiedhealthsystem(sus),thefederalgovernment requiresthecitytospend18percentonhealth.eusébioexceedstheseobligationsin additiontotheireducationexpenditurerequirements. xv Wherechallengesariseiswhen thestateisnotdesignatedtomeetsimilarstandards,makinginfrastructure improvementsdifficulttoenactwithoutsecuringsignificantcontributionsfromthefederal government.theburdenofamandatedfinancingstructurehamperslargescale infrastructuredevelopment,whichisakeyambitionofeusébio sadministration, particularlyintheareaofsanitation. Thecomplextaxstructurepairedwithhighinterestratesassociatedwiththerecession createsabarriertolocaleconomicdevelopmentandinstabilitywithinnewindustry. AccordingtotheTaxPlanningBrasilianInstitute,Brasilianswhoworkedin2011saw 102days worthofincomegotowardsomeformoftaxorfee. xvi A2014studyranked Brasillastoutofthirtycountrieswhenexaminingtaxationagainstqualityofservice.This hascontributedtopoorlevelsofpublicapproval,magnifiedbytheperceptionof increasingfederalexpendituresandcollection.ineusébio,65percentoftaxrevenue goesstraighttothefederalgovernment,makingdesiredinvestmentareaslike infrastructuredisproportionatelydependentuponfederalfinancing. xvii Severalkey businesstaxesalsoinfluencetheentrepreneurialmomentumofamunicipality,anarea 9
11 thateusébiohascapturedwell.theimpostosobreserviços(iss),themunicipal servicetax,issetat2percentinanefforttoattractindustryintothearea. xviii Eusébiofindsitselfwellpositionedtoembarkonmorecreativestrategiestotacklingthe issueshighlightedabove.incomeinequality,questionsoveraqualifiedlaborforceand issuesofpublichealtharedifficult,butfarfromimpossibleissuesareasthatcanbe addressedeffectively.understandingthelimitationsthatcomewiththecurrentpolitical context,eusébiocansucceedbythinkingbeyondaone6dimensionalapproach,and investingincrosssectorcollaborationsanchoredbysociallyinnovativesolutions. REIMAGININGCHANGEMAKING Socialinnovationhasemergedasameanstoidentifysolutionstotheworld smost intractableproblemsbyharnessingthepowerofcapitalmarketstoachievesocial impact. xix Thesesolutionsareoftenmoreeffective,efficient,andsustainablethan existingprograms. xx Foraprocessoroutcometobeconsideredinnovative,itmustmeet twocriteria:1)novelty:theinnovationmustbenewtotheuser,context,orinits applicationoand2)improvement:itmustbemoreefficient,effective,orsustainablethan pre6existingalternatives.socialinnovationseekstoincreasesocialvalue,definedas thecreationofbenefitsorreductionsofcostforsociety througheffortstoaddress socialneedsandproblems inwaysthatgobeyondtheprivategainsandgeneral benefitsofmarketactivity. StructureandBenefitsofaSocialEnterprise Socialenterprisesrepresentahybridoftraditionalmission6orientedorganizationsand for6profitfirmsbycombiningkeyaspectsofeach.theyarebuiltonanearnedincome strategyinwhichtherevenuegeneratingactivityinherentlyfurthersthemissionofthe enterprise. xxi Socialenterprisesfillanimportantroleinsocietybyavoidingthepolicyconstraintsof governmententitiesandthefinancinglimitationsofnonprofits.ingeneratingtheirown revenuetheseenterprisescreateasustainablebusinessplanthatallowstheprojectto continueachievingsocialimpactaftertheinitialdonationshavebeenexhausted. Funderstakeonarolemoresimilartoventurecapitalists,seedingorganizationsthat havethegreatestpotentialforlarge6scaleimpact.relyingonmarketsalsocreates accountabilityoonlyorganizationsthataremeetingarealcommunityneedwillthrive. AccordingtoRogerL.MartinandSallyOsberg,developingasocialenterpriseconsists ofthreecomponents: 1. Identifyingastablebutunjustequilibriumthatnegativelyimpactsa disenfranchisedpopulation 2. Developingasocialvaluepropositiontocreatechangeoand 3. Redefiningtheequilibriumthatimprovesthequalityoflifeforatargetedgroup, andissustainedwithastableecosystem. xxii 10
12 Socialenterprisescanblendsocialservices,whichprovidepublicgoods,andsocial activism,whichaimstoinfluenceexistingsystems,intheirfor6profitmodel. xxiii Standards6settingorcertificationorganizationssuchasfair6tradeproductcertification aresuchmodels. SocialEnterpriseMetrics Socialenterprisesaredual6missionorganizationswhichmusthavemetricstoevaluate theirsocialimpactaswellastheirfinancialsuccess.thisisreferredtoasthe double bottomline. xxiv Whileeachprogramdevelopstheirownmonitoringframework,global organizationshavedevelopedstandardmetricstoevaluateandcompareoutcomes internationally.thisconsistencyiscriticalforinvestorsanddonorstofeelconfidentin theirchoicesaswellastheprofessionalizationofthesectormoregenerally.thetwo mostprominentare: 1. BMLab:Anon6profitmembershiporganizationthatevaluatesprivatecompanies socialandenvironmentalperformance,accountability,andtransparency.b6lab metricsrangetopicareasfromjobcreationtoenvironmentalimpact.different standardsarecreatedfordifferenttypesofsocialenterprises,e.g.,educational services,financialservices,andcontext,e.g.,developedoremergingmarkets.b6 Labalsohasstandardsforgreenbuildingsandhealthandsafetyofemployees andcommunitystakeholders.notallb6corporationsaresocialenterprises,butit isbeneficialtohavethecertification. xxv 2. IRIS:ImpactReportingInvestmentStandards(IRIS)ismanagedbythenon6 profitorganizationglobalimpactinvestingnetwork(giin)tomeasurethesocial, environmental,andfinancialperformanceofimpactinvestments.irisreports usecommonlanguageandstandardstoletcompaniesandinvestorseasily evaluatetheresultsoftheirimpactinvestments.over5,000organizationsuse IRIStoevaluatetheirsocialandenvironmentalperformance,and98%of investorsacceptthisreport. xxvi ExamplesofmetricsincludeAccesstoFood, AccesstoWater,andEmploymentGeneration.Asummaryofbestmeasurement andevaluationpracticesandtoolscanbefoundinappendixb. Amoredetailedexplanationofsuccessfulmeasurementandevaluationpracticescan befoundlaterinthereport. CrossASectorImpact Successfulsocialenterprisesleanonamulti6facetedapproachinsolvingcomplex problems.theseeffortsrequirecoordinationandcollaborationbetweenlocal,state,and federalbodiesaswellasnongovernmentagenciesinadditiontotheprivatesector. xxvii Effectiveenterprisespartakeincross6sectorcollaborationtoabsorbthefinancialand expertiserequirementsneededtobroadenimpact.whensocialenterprisesleverage relationshipsandnetworksacrosssectorsprogressisnotdependentonone organizationanditsfinancialcommitment. xxviii 11
13 FINANCINGMODELSFORSOCIALENTERPRISES Thefinancemodelofasocialenterpriseisacorecomponentofdesigninganew venture.thefollowingdetailsexistingfinancingmodelsthatsocialenterpriseshave exploredinordertohelpmeetinitialstartupandlongertermfinancialneeds.atableof thesefinancingoptionsaccompaniedbybriefexplanationscanbefoundbelow. CommunityBanks Acommunitybankisalocallyownedandoperatedbankthatlendstobusinessesand familiesinitsneighborhoodofoperation.theyprovideaformofmicrofinancewithfunds generatedbythesamecommunitythatwillbereceivingtheloansandinvestments. Theyspecializeinempoweringlow6incomegroupsbyprovidingaccesstocredit otherwiseunavailable. xxix Socialimpactoftheseinstitutionsisevaluatedbasedon metricssuchaspercentageofloanstowomen,loanstostartups,jobscreatedor returned,andgreenjobscreated. xxx Aswithanylendinginstitution,thereistheriskthat householdscouldbeencouragedtotakeongreaterdebtthattheycanhandle. AngelInvesting Unlikeventurecapitalistswhomanagepooledmoneyinaprofessionalfund,angelor seedinvestorsinvesttheirownmoneyinemergingbusinessstartups,oftenina businessfieldinwhichtheyhaveinterestorexperience. xxxi Theyfillthegapbetween friends6and6familyfinancingandmoreformalventurecapitalinvesting.withtheir investment,theycanreceiveownershipequityorconvertibledebtwhichtheycanlater exchangetoanumberofsharesofcommonstock. xxxii Potentialproblemswithangel investingincludethehighriskthatangelinvestorsmustbear,whichinfluencesthe projectsthattheypickandthepotentialcontroltheymightexertovertheorganization s mission. Crowdfunding Crowdfundingplatformsallowindividualsorteamswithanidea,cause,orprojectto publicizeittoawideaudienceofpotentialinvestors.twocrowdfundingplatformsmost relevanttosocialentrepreneursseekingfundingareyoucaring.comandbroota,with thelatteroperatinginbrasil.crowdfundingprojectshaveacertainfundraisinggoal,and onsomeplatforms,willonlyreceivetheinvestmentsifthisisreached. xxxiii Potential problemswithcrowdfundingincludeintellectualpropertyprotectionrisksanddonor exhaustionifteamscontinuetoreachouttothesamedonorcommunity. SocialImpactBonds AlsoknownasPayforSuccessBonds,thisperformance6drivenmethodoffinancingis onetypeofpublic6privatepartnership.thegovernmentcontractswithathird6party intermediarytodevelopfinancingforaninitiative. xxxiv Iftheprojectachievesitsgoalsthe 12
14 governmentrepaystheinitialinvestmentplusreturnsbasedonthesavingsaccrued throughthesuccessoftheproject. xxxv Whilelow6riskforthegovernment,thethird6party evaluatormustbeimpartialtoensurethatonlysuccessfulprojectsarepaidoutbythe government. xxxvi ImpactInvesting Impactinvestingisanumbrellatermthatreferstoarangeofinvestmentswiththe explicitgoalofachievingmeasureablesocial,cultural,orenvironmentalbenefitsin additiontoafinancialreturn. xxxvii Itincludesindividualsinvestinginasingleorganization toprivateinvestmentfirmsandfundswithdiversifiedportfolios.thepracticehas propelledthedevelopmentofindicatorsforcapturingimpactofsocialenterprises, includingtheaforementionediris,tostandardizethemeasurementofsocialreturnson investmentglobally. xxxviii Foracompletesummaryofthementionedfinancingoptionspleaserefertothetableon thenextpage. 13
15 14 Model Definition Financial Return Context Strengths Weaknesses Cases:Brasil Cases:International Community- Bank-/- Community- Development- Finance- Institutions Locallyownedbank lendingtobusinessesand familiesinneighborhoods ofoperation Loan, usuallyat below market rates Focusedon local, smaller investments Community>driven Requiresmorestartup costsaloansdonot havetobeforsocial enterprises,canbefor personalbenefits InFortaleza:Pirambú, Riosol,SãoCristóvão, Palmas,DendeSol, SitiodeSãoJoão xxxix Kye(Koreanconcept), CenterforCommunity Self>Help(Durham,NC, US) Crowdfunding Rewards>based,equity> based,ordonation>based publicinvestmentsfor specificprojectsorcauses Donation orequity Broad, project> based Investmentscanbe sourcedglobally Mostcrowdfunding platformstakea percentageofthe moneyraiseda IntellectualProperty (IP)risks Broota(equity crowdfundingplatform forsmallangel investors) Kickstarter,IndieGoGo, CrowdRise,Kiva (microcredit),usreal estatecrowdfunding platforms Angel/Seed- Investing Investingforstartupsin needoffundingin betweenfriend>and>family financingandventure capitalfinancing.angel investorscanoperate individually,innetworks, orthroughequity crowdfundingplatforms. Equityor convertible bonds Startup companies atstage before seeking formal venture capital Accesstomore capitalaangel investorsofteninvest incompaniesintheir ownfieldsandcan offerexpertadvice andmentorship Highriskinvestingso tendtobelimitedto companieswithvery highpotentialreturns Angelinvesting growing:40%of angelsin2013were first>timeinvestors. xl AnjosdoBrasil(angel investornetwork) SiliconValley:TechCoast Angels,JeffBezos (Amazon),PaulBuchheit (YCombinator,Gmail) Social-Impact- Success Performance>driven contractbetweenpublic sectorandprivateinvestor whichpaysreturnson successfulevaluationof theprogram Long>term Investment Public sector programs Accountabilityin publicsector,saves taxpayersdollars,low> risktothegov t, encourages innovation,money returnedcouldbe reinvested Musthaveanimpartial evaluator,requires publicsectortobein debttoprivatesector, investorsmaybe unaccustomedto waitingforresults SITAWI(?),Instigliois workingonit xli Instiglio(Colombia),Third SectorCapital(SF,USA), NonprofitFinanceFund (NYC,USA),Social Finance(USA&UK) Impact- Investing Arangeofinvestment typeswiththeexplicitgoal ofachievingmeasurable social,cultural,or environmentalbenefitsin additiontoafinancial return Varies widely, often involves equity stake Broad Variessignificantly, requires measurementof socialimpact(iris xlii ), allowsnonprofitsto grow,leverages knowledgeofthe investor Variessignificantly, sometimeslowerthan market>ratereturns, couldcausenonprofit tocompromise mission ArtemisiaSocial Business,theAvina Foundation,Potencia Ventures(formerly Artemisia International),Vox Capital,SITAWI VitalCapitalFund (Switzerland),Triodos InvestmentManagement (Netherlands),The ReinvestmentFund(PA, USA),BlueOrchard FinanceS.A.(Switzerland)
16 SOCIALENTERPRISECASESTUDIES Case%Example:%Sanitation% Sanergy,)Kenya) SanergyisanorganizationinKenyathatplacessanitationunitsincommunityfacilities which are franchised to local entrepreneurs who then charge a small fee to use the toilet.therevenuegeneratedstaysinthecommunityandsanergycollectsthewasteto be processed and sold as energy and fertilizer. Their work attempts to solve the challenges of clean water, quality healthcare, access to hygiene sanitation, food security,energyandeconomicdevelopment.theorganizationissetupascollaboration between Sanergy employees, franchise owners known as Fresh Life Operators, communitymembersandpartnersfromboththeprivateandpublicsectors. Organizational)Structure)and)Strategy)) Sanergy sought to design and manufacture toilet facilities at minimal cost. The toilets are 3 x 5 and made of prefabricated concretewithasquatplate,oneholefor urineandoneholeforsolidwastewhich is collected in removable waste cartridges.xliiithefacilities,whichcanbe assembled in one day, are sold at cost for approximately US$500, which includes installation and daily waste collection. Sanergy also created a network of franchises that would operate in individual communities throughout Kenya. During this stage the organization works with local residents thatpurchaseandoperatethesanitation facilities as franchise partners. Sanergy provides training, access to financing, operationandmarketingsupport,anda daily waste collection service to these Fresh Life Operators. It is the job of Source: every franchise to generate demand for the product and maintain the cleanliness ofthefacilities,includingsupplyingtoiletpaper,soapandahandwashingstation.the distribution of the sanitation facilities to the communities are done in three different ways:paypperpusetoiletsthatareoperatedbylocalentrepreneursincommercialareas andcostapproximatelyfivecentsperuseqtoiletsplacedinresidentialareasthatcanbe 13
17 accessed by community members at any timeq and sanitation facilities in schools, churchesandclinicsasawaytoprovideaccesstovulnerablepopulations. xliv Sanergyisresponsibledailyforcollectingwasteateachofthesanitationfacilities.The wasteisthentreatedandconvertedintoorganicfertilizer,insectpbasedanimalfeedand renewableenergy,aprocessthattakesapproximatelyfourtosixmonthstocomplete. Thefinalstepistosellthefertilizer,animalfeedandenergythatisproduced.Fertilizer and animal feed are sold to farms in Kenya anywhere from US$300 to US$600 per metricton.adiagramofthisprocesscanbeseenbelow. Source: ExplorationPReport.pdf Financing)in)the)Start)Up)Phase)and)Beyond) ) Theinitial$200,000neededinfundingwasprovidedafterthefoundersofSanergywon themitentrepreneurshipcompetitionandthediamondawardatthemasschallenge StartupCompetitionandAcceleratorin2011.Between2011and2013,Sanergy receivedtwograntsfromusaid sdevelopmentinnovationventures,thefirstwas $100,000andthesecondwas$1.5million.Thiswasinadditiontoreceivingfunding fromtheswedishinternationaldevelopmentcooperationagency sinnovationsagainst Povertychallengefundtohelpintheinitialdevelopmentoftheproduct. xlv Sanergy s otherpartnersincludethekenyangovernment,kiva,kenyawaterservicestrustfund, Kentainer,theBill&MelindaGatesFoundation,andOxfam,justtonameafew. xlvi InFebruary2016itwasreportedthatSanergyhadraised$1.7millioninorderto expanditsoperation.thisfundingcamefromthreesources:aventurecatalystfirm callednovastarventurethatworkswithsocialentrepreneurstoimplementinnovative businessmodelsineastafricaqacumen,anonprofitventurefundthatworkstofight globalpovertyqandtheeleosfoundation. xlvii Withthisnewfunding,Sanergy sgoalin thenextfewyearsistoprovidetoiletstomorethanhalfamillionpeopleinafrica, generate11,000tonsoffertilizerannuallyand7.5millionkilowatthoursofelectricity.) 14
18 Currently,Sanergyhas683activesanitationunitsinKenyathatprovide29,800daily usestocommunitymembersininformalsettlementsandhasremovedandtreated 8,935metrictonsofwaste. xlviii Sanergycreated755jobs,326ofwhichareFreshLife Operators,whohaveinturnbecomemicroPentrepreneursandcreated157jobsfor residentsintheircommunities. xlix ExpectedrevenueforeachFreshLifeOperatoris US$800toUS$1,000peryear.Theadditional272jobscreatedareteammembers withinsanergyaswastecollectorsandprojectmanagers. Sustainable)Integrated)Livelihoods)(SOIL),)Haiti) ) Since2006,thenonprofitSustainableOrganicIntegratedLivelihoods(SOIL)hasbeen promoting dignity, health, and sustainable livelihoods through the transformation ofwastesintoresourcesin Haiti. This is achieved throughtheimplementation of a business model focused around ecological sanitation (EcoSan). EcoSan is a process in which nutrients from humanwastesreturntothe soil rather than polluting the environment when sewage waste is not disposed of properly. The goal is to approach the issue of inadequate sanitation, declining soil fertility, and extensive erosion. In 2001, SOIL s Source: household toilet program began in collaboration with Stanford University School of Engineering students who helped with the design of the household facilities, and with partial funding from the Bill and Melinda Gates Foundations "Reinvent the Toilet" campaign.) Organizational)Structure)and)Strategy) The method used by SOIL, of ecological sanitation, begins with SOIL toilets that are installed into people s homes for a monthly fee of approximately $5 USD. The householdtoiletmodelcostsapproximately$35usdtobuild.soilsanitationworkers thenvisiteachhouseholdweeklytocollectthewaste,whichisthentransportedtoone of SOIL s waste treatment sites. Waste is then transformed into compost through a carefully monitored process that includes lab testing. Finished compost nourishes the soiltohelpstabilizetheenvironmentandbearnutritiousorganicfoodforpeopletoeat 15
19 and then excrete, which begins the cycle again. Two other services provided by SOIL are temporary mobile toilets for special events or construction sites and humanitarian sanitation in the form of free public toilets in some of Haiti s most vulnerable communities. Providing facilities to communities who lack the proper infrastructure is oneofthedirectbenefitsreceivedinhaiti.anotherbenefitincludesjobcreationforthe constructionoftoilets,forthesellingofcompost,andforharvestingcrops.soilhopes to eventually make this process selfpsustainable through the combining of compost revenue and user fees to pay for the ongoing maintenance, collection, and treatment costs. Financing)in)the)Start)Up)Phase)and)Beyond) For the 2014P2015 year, SOIL s expenditures totaled $1,228,801 USD, which includes maintenance, education, as well as other costs to run their operation. SOIL s revenue totaled $1,262,592 USD, including: $740,229 USD from foundation grants, $215,148 USD from individual and corporate contributions,$240,901usdfromreligious,civicand partnerorganizations,and$66,244usdfromearned income. SOIL s compost purchasers include: small farmers, backyard gardeners, community gardens and reforestation projects, large businesses and organizations, and agricultural enterprises. Some of the biggest sales have been to Heineken, the Food and Agriculture Organization of the United Nations, the St. Luke Foundation, and Meds & Foods for Source: okarptillgangenppapmat/ Kids.Otherpartnersinclude:AmericanRedCross, UNICEF, and NRG. SOIL is also able to leverage crowdfunding on their website, where every $1 USD donated sees 93 percent of that contribution going directly to the sanitation and environmental programs in Haiti. One steady source of funding comes from SOIL Cultivators, which are individuals who are monthly givers who provide a stable source of funding for SOIL to deal with unanticipated challenges and roadblocks that come with working in Haiti. SOIL Cultivators receive a quarterly impact report on how monthly donor funds were spent and what outcomes were achieved and notices about SOIL events. From 2014P2015, SOIL provided approximately people with access to safe sanitationintheirhomes.inthatyear,soilalsoearnednearly$18,000usdfromthe saleoftheirlocalcompost.thispriceisbasedoffoftheavailabilityofmaterialsinhaiti. SOILisalsocommittedtoeducationandtheeconomy.From2014P2015,SOILreached over people who participated in SOIL outreach events, partnered with 3 internationalresearchinstitutionsand4haitianuniversities,providedonthejobtraining to15agricultureinternsand1administrativeintern,andemployed14localcontractors intoiletconstruction,5ofwhomwerewomen. 16
20 Case%Example:%Solar% % SELCO,)India) ) SELCOisasocialenterpriseestablishedin1995inIndiatoinitiallyprovidesustainable energyservicestoremotelocations.theunreliableavailabilityofelectricityhasstymied economicdevelopmentinthecountry.ofthe1.1billioninhabitants,404.5million Indianslackedaccesstoelectricity. l Theorganizationrealizedthatfinancinghindersthe abilitytodeliverservices Organizational)Structure)and)Strategy) SELCO skeyfeaturesare:1)creatingproductsbasedonenduserneeds,2)installation andafterpsaleserviceand3)standardizedfinancepackages. li SimilartoBrasil,India s bankingsystemdidnothavethenecessaryfinancialportfolioforsolarenergy technology.therefore,selcoforgedpartnershipsbanks,ngp sandcooperativesin ordertodeveloptailoredfinancial solutionsforfocalpopulationsand theirfinancialcapacity. lii Their internationalinvestorsinclude S3IDF,internationaldevelopment consultants,thelemelson FoundationandTheGoodEnergies Foundation.BecauseSELCO s financialportfolioaddressesit missiontomakeprofitwhile providinganeededservice,ithas managedtosurviveduringa dramaticchangeintherenewable energymarketbetween2004and 2009duetothegrowingpopularity ofsolarpanels.asaresult,selco hascreatedover300skilledjobs,and Source: installedover solarhome lightingsystems.selco soperational structurewasstrategicallydesignedtomakedoubledigitprofitstoavoidacop dependentrelationshipwithgovernmentgrantsandbecomealongptermsustainable enterprise.thestructureincludesemployeesanchoredinruraloperations,eachone havingaserviceterritoryinwhichitmarkets,sells,installs,andprovidesservices. 17
21 Financing)the)StartDUp)Phase)and)Beyond) In1995SELCOfoundersstartedthecompanywith$40,000USDdollars.Acouple yearslater,selcosecuredaconditionalgrantof$ usdfromwinrock Internationalalongwithraising$2.5millionUSDinprivateequityfinancingfrom Europeaninvestors.Thecompanyalsomadeequityinvestmentsof$ USDinits Indiansubsidiary.In2003,SELCOalsosecureda$1millionUSDloanfromthe InternationalFinanceCorporation(IFC),theprivatelendingarmoftheWorldBank.By 2005,SELCOhadreachedmorethanhalfamillionpeoplebyprovidingelectricityto morethan80.000households,micropenterprisesandcommunityfacilities,makingitone ofthelargestsolarsystemprovidersintheworld.in2001,selcobrokeevenforthe firsttimeandearnedmodestprofitsforanumberofyears,peakingataprofitof$ USDinfiscalyear2005. liii Short)Case)Note:)Ceará,)Brasil) Fortalezaisleadingthewayinrooftopsolarinstallation. liv Therearetwolocalprivate companiesthatprovidemanufacturinganddistributionwithothercompanies.therural electrificationmarketisoneofthe underservedmarketsthegovernment isfocusingon,andisnotdominated byanyoneorganization.the combinationofincreasingdemandfor lowercostofelectricity,favorable naturalconditions,newfavorable governmentpoliciesandtaxare opportunitiesforsocialenterprisesto establishthemselvesinthesolar market.forexample,asolar cooperativecaninitiallyretaina contractthataddressesthecostof materialwiththecitythenevolvetoindependentcontractswithinnewcommunity developments. Brasilhasspentadecadeconstructingthebestdynamicsforallsectorstocontributeto thecountry sgoalof7gwby2024.newpolicieshavebeencreatedforinstallationas wellasfundingforworkforcetraining.thegovernmentisprovidingincentivestoinstall solarpanelsandencouragesenvironmentaleducationtomeetthisaggressivesolar generationgoaltoreducecostforallbrasilians. 18
22 % Case%Example:%Textile%Care% Evergreen)Laundry)Cooperative,)United)States)) ThecreationoftheEvergreenLaundryCooperativewasastrategicdecisionaimedat establishinganenterprisethatwasprofitable,actedasaleaderinsustainability,created wealthforlocalresidentsandcontributedtothesuccessofthelocaleconomy.the founderssoughtoutastrategicplanforeconomicdevelopmentthataddressedfivecore areashighlightedinthefigurebelow. lv Moreimportantly,however,Evergreenaimedto playacriticalroleindrivingtherebirthoftheclevelandeconomy,acitywhichhasmore than30percentinpovertyandwhosepopulationhasdeclinedto from since1950. lvi BasedintheGlenvilleneighborhood,Evergreenoperatesinanarea wherethemedianhouseholdincomeis$18.500usdayear. lvii Focusedonsix neighborhoods,evergreenlaunchedthelaundrycooperativeleaningonthe MondragonmodelfromSpainasastrongreference. lviii Creatingprofitableenterprises thatgivesworkersownershipstake,allowingforreinvestmentandthecreationofnew enterprisesiswhatdrivestheevergreenstrategy. Organizational)Structure)and)Strategy) WhatmakesEvergreen uniqueisitsgovernanceand operatingstructure. AnchoredbytheEvergreen CooperativeCorporation (ECC),this501c3 1 takesthe roleoftheholdingcompany, assistingwithindependent fundraisingaswellas capacitysupportforthe socialenterpriseswithinthe Evergreenumbrella.To ensureproperfinancial guidanceandsupport,the ECCmaintains20percent ownershipofeach cooperative,safeguarding againstsystemicrisksthat Create)financing) and)management) capacity)to)scale)up Integrate)efforts)to) growing)segments) of)the)economy)to) allow)leveraging)of) latge)scale)public) investment Leveraging)anchor) institutions)to) redirect)money)into) the)community Evergreen Vision Create) environmentally) sustainable)energy) and)green)jobs Source: (c)3referstotheTaxIdentificationstatusofanonforprofitorganizationintheUnitedStates.Thisisequivalenttothe OrganizaçãodaSociedadeCivildeInteressePúblico(OSCIP)inBrasil. Create)a)profitable) network)of) cooperatives)that) services)anchor) institutions)needs 19
23 mayoccur. lix Theprofitsgeneratedfromtheenterpriseareredistributedinafewways. Thefirstisacertainpercentagethatgoesintoaninnovationfundthatallowsthe cooperativenetworktoinvestinnewventures.thesecondisinmaintainingoperations andcapacitywithintheenterprise.andlastly,theremainingprofitsaredistributedtothe workers. EmployeesoftheEvergreen LaundryCooperativeresidein Clevelandneighborhoods. Thosenewlyhiredbeginas temporaryworkers,withjob placementslastingforsix months.duringthatperiodof time,theyareevaluatedbytwo oftheirfellowcoworkers,andif theycandemonstrate competencyandtheabilityto contributetothecooperative, theyareinvitedtobeworkerp owners.allemployeesreceivea higherthanlivingwage,health Source: newplocalpeconomicpdevelopmentplearningpfrom benefitsandpartownershipaftercontributing$3,000usdintothecooperativepwhich canbedonewithin3years.paymentsof$,50usdperhourinpayrolldeductionallow forthesecontributionstobedoneinanequitablemanner.themoneyraisedfrom workerpaymentsarenotusedincapitalization.employeescannotborrowordraw moneyoutuntiltheirrespectivecapitalinvestmentsarehigherthan$65.000usd. lx Afteraccumulationofassetsreaches$65.000USD,workerPownersareabletouse fundsautonomouslypforadownpaymentonahouseorcollegetuition. lxi Atimeline detailingtheinitialstepofbeingaprobationaryworkertothefinalstepofbeinga financiallyautonomousworkerpownerisdemonstratedbelow: Financing)in)the)StartDUp)Phase)and)Beyond)) ) ThestartPupcostsfortheEvergreenLaundryCooperativewere$5.5millionUSD,with $5millionUSDbeingleveragedNewMarketTaxCreditfunds,andtheremaining 20
24 comingfromthecommonwealthbankandthedevelopmentauthorityloan.thehigh amountwasduetothescaleof operationssoughtouttoservice. Asdetailedinthetable,financial resourceswerediversifiedacross public,privateandnonprofit sectors. lxii Success,however,is largelydependentonthecontracts theventuresbringin.evergreen LaundryCooperativedidgothrough difficultyinsecuringlongpterm contractswithinthefirstcoupleyears ofexistence. lxiii Theabilityforthis venturetoperseverewasdependent onrelationshipsbuiltwithindustry partnersandanchorinstitutions. TheEvergreenLaundryCooperativereliesonpartnershipsbetweentheresidentsofthe sixeastsideneighborhoodsittargets,theclevelandfoundation,thedemocracy CollaborativeattheUniversityofMaryland,theOhioEmployeeOwnershipCenterat KentStateUniversityandtheanchorinstitutionsofCleveland sgreateruniversity Circle.AnchorinstitutionsaredefinedasbeingnonPprofitinstitutionsorcommercial entitiesthat,onceestablished,tendnottorelocateelsewhere.commonanchor institutionsareuniversitiesandhospitals,whicharerootedintheircommunitiesdueto theirmission,investedcapital,and/orrelationshipstothepeoplewhotheyservice. lxiv Thecharacteristicsofanchorinstitutionsmakethemcrucialtourbanrevitalization strategiesbecauseoftheirvalueforinvestmentanddevelopment,andtheirabilitytofill ingapswhereindustrieshaveleftcities.theanchorinstitutionsinevergreen scase spend$3billionusdannuallyongoodsandservices,andtheevergreencooperative hasbeenkeyinkeepingasmuchofthatmoneyintheneighborhoodaspossible. lxv In leveragingcontractswiththeseanchorinstitutionspspecificallyintextilecarep Evergreencreatesmarketsupplyforitself,allowingforaconsistentstreamofbusiness. Asaresult,profitmarginshavebeensubstantialfortheLaundryCooperative,grossing $1.1millionUSDannually,andemploying25P35employeeswiththepotentialtoscale upto60p70workerpowners. lxvi 21
25 RESEARCHQUESTIONS GiventhecontextandopportunitythatpresentsitselfhereinEusébio,wenowseekto betterunderstandsomecorequestionsthatwillenableustoproposesocialenterprise modelsandstrategiesforconsideration.forthis,thefollowingsectionsrevolvearound addressing: Whatarethenecessarycomponentsofasuccessfulsocialenterprise? Howdoweevaluatecommunitystrengthsandweaknessestoidentify opportunitiesforsocialenterprisestoaddresstheneedsofourfocalpopulation? Whatpartnershipandfinancialmodelscouldasocialenterpriseutilize? Whatimpactevaluationstrategiesandmetricsshouldbepursuedtoensure effectivenessofsocialimpact? STRUCTURINGASUCCESSFULSOCIALENTERPRISE Appreciative%Inquiry%Approach%in%Developing%Social%Enterprise% ItissuggestedthatpotentialsocialentrepreneursusetheAppreciativeInquiry(AI) methodologythatthealphavillefoundationemploystoconductacommunitydiagnostic andmarketanalysisbeforestartingasocialenterprise. lxvii ApplyingAI lxviii tothe developmentofasuccessfulsocialenterprisefollowsthesesteps: lxix Discovery Dream Design Destiny ApplicationtoSocial EnterprisePlanning IssueDiagnosis Performance Measurement Organizational Structureand FinancialModel Continuous Evaluation Question lxx Identify Strengthsand Opportunitiesof Community Envisioning Impact CoPconstructing thefuture Sustainingthe Change Activities Researchand Community AnalysisTools Identifying Goalsand Corresponding Measurement Tools BusinessPlan Resilienceand AdaptiveCycle, IntellectualCapital (IC)Balanced Scorecard lxxi Thefollowingsectionsprovidefurtherdetailineachofthestepsandofferresourcesfor useduringplanningandimplementation. 22
26 Community%Diagnostic/Market%Analysis% PhysicalEnvironment Conductingathoroughanalysisiscriticaltoensurethat thesocialenterpriseisaddressingarealneed,isnot Education duplicatingworkthatiscurrentlybeingdone,andis SafetyandTransportation operatinginamannerthatisappropriatetothelocal context.usingastrengthspbased,asopposedto PoliticsandGovernment needspbased,approachhelpstobuildonacommunity s assetsandcandrawattentiontoresourcesthatmay HealthandSocialServices havebeenignored.itisrecommendedtoavoid Communication focusingonagroup sdeficits,whichcandetractfrom theirsenseofagencyandleadtodependencyon Economics outsidegroups. lxxii Itiscriticalthatallstakeholdersare Recreation consideredintheprocess,especiallymarginalized groupswhichmayincludewomen,underrepresentedorsocioeconomically disadvantagedgroups,andthedisabled. RecognizingdifferencesbetweenamarketanalysisthatwouldbeconductedbyaforP profitandnonprofitsectorisimportantincreatinganappropriateandmeaningful communityanalysis.acriticalelementisrecognizingtheroleofgovernmentinthework ofnonprofits.governmentpnonprofitrelationshipsarecomplexandeverpchanging. Giventheregulatoryroleofgovernmentaswellastheimpactofpoliticalmobilization andcivicengagement,acomprehensiveapproachtounderstandingthestructural, cultural,andpoliticalconstraintsfacingthenonprofitsectoriscritical. lxxiii,lxxiv Acompletecommunityanalysisshouldincludestatisticscollectedfromrelevant governmentorinternationalorganizationscomplementedbyaparticipativeprocess involvingsurveysandfocusgroups.avarietyofstrengthpbasedanalysistoolsexistthat provideaframeworktoaddressthecomplexitiesofnonprofitplanningandidentify potentialjuncturesforsocialenterprisestointervene.detailedapplicationofthesetools canbefoundinappendixc:communityanalysisresources.theseinclude: SWOTAnalysis:Asksacommunitytoevaluatetheirinternalconditions (Strengths,Weaknesses)aswellastheenvironmentinwhichtheyfind themselves(opportunities,threats)inasimple,straightforwardquadrant system. lxxv MarketFacilitationDiagnostic:Callsonthesocialenterprisetoaskfivequestions criticaltoidentifyingandbetterunderstandingtherootsofthemarketfailureitis tryingtoaddressaswellasthebestapproachtosolvingit. lxxvi CommunityMapping:Hascommunitymemberscreateamapidentifyingphysical spacesthatrepresentsignificantresources,areasofdanger,orculturally/socially importantplaces. lxxvii 23
27 SeasonalorDailyCalendars:Askscommunitymemberstocharttheiractivities duringdifferentperiodsoftime.helpstoidentifyfluctuationsinresourcesor operationsthatanevaluatormaynototherwisewitness. lxxviii Whenconductingacommunitydiagnosticitisimportanttokeeptheevaluationareasto therightinmind. lxxix PARTNERSHIPMODELSANDOPPORTUNITIESFORCOLLABORATION Theroleofpartnershipsinlaunchingsocialenterpriseventuresisacorepieceto success.ashasbeendiscussedinlengththroughoutthisreport,socialenterprises utilizemultiplecombinationsofstrategicpartnershipsthatleveragerelationshipsand networkstoensurestablefinancingintheshortandlongrun,soundorganizational structureandaccountability,andcontinuedprogrammaticsuccess,whichincludesthe recyclingrevenuefornewventuresandgrowth.belowwehavehighlightedthree specificsectorstoconsiderwhenlaunchingaventureaswellaspotentialimmediate collaboratorsinthegreaterfortalezametropolitanarea. Public%Partnerships% Apartnershipwiththepublicsectorcanbecriticaltosocialenterprises.Ifprojectsare successful,itincreasesthelikelihoodforexpansion.governmententitiesinparticular arelookingfornewandinnovativewaystoimprovetheircommunities.social enterpriseshelpthemachievethisgoal.thetraditionalapproachistousepublicsector subsidiesasawayofenticinginnovativeprojectsinspecificsregions.limitationscan existhowever.examplesofinnovativeapproachescitedintheprevioussectioninclude socialimpactbonds,wherethegovernmentpaysacontractedamountbasedon documentedreductionsincrime,increasesinpublichealth,etc.workingwiththepublic sectoralsoentailsnavigatingcapacityissuesaswellasresourceswithinbureaucratic structuresthatcanoftenslowdownprocesses.regardless,thepublicsectorcanbea keyallyinachievinglegitimacyandbroadreach.thefollowingareafewexamplesof publicentitiesincearáthatcanbepartneredwith: MunicipalityofEusébio CityofFortaleza StateofCeará UniversidadeFederaldoCeará(FederalUniversityofCeará) UniversidadedeFortaleza(UniversityofFortaleza) Private%Partnerships% Partnershipswiththeprivatesectorhavethepotentialofbeingmutuallybeneficialforall partiesinvolved.bothpartiesgointobusinesstogether,withtheforpprofitpossibly takingequitystakeinasocialenterprisewhosegoalsandmissionalignwithitsown. Thiswouldbenefittheformerbyimprovingtheirpublicimageandrelationshipwiththe community,andincreasingtheirsalesbecausethesocialenterprise sworkcould expandthemarketfortheforpprofit sproductsandservices,orreducetheriskintheir supplychainoroperatingenvironment.thesocialenterprise,inreturn,canbenefitfrom 24
28 25 marketingandbrandequity,financialreturn,aswellasincreasedsocialimpact.the privatesectoralsohastheexpertiseandknowphowthatthesocialenterprisecan harnessinordertoeffectivelytackleimportantsocietalissues.thefollowingarea coupleofexamplesofprivateentitiesthatcanbeenlistedaspotentialpartners: MDiasBranco Petrobas % NonCProfit%Partnerships% Developingpartnershipswithanchorinstitutionscanbeessentialtothesuccessofa socialenterprise.anchorinstitutionsarenonprofitenterpriseswithrootsintheir communitiesduetotheirrelationshipswithresidents,employees,andvendorsaswell asthecapitalthattheyhaveinvestedinthearea.thesetiespreventanchorinstitutions fromrelocating.moreover,anchorinstitutionscanfillinthevacuumsleftbycompanies thathavemovedelsewhere.inmanyplaces,anchorinstitutionshavebecometheir region sleadingemployers,andcontributesignificantlytocommunitywealthbuilding andstabilization.themostcommonanchorinstitutionsareuniversitiesandnonprofit hospitals,althoughtheycanalsoincludeculturalinstitutions,libraries,community foundationsandfaithpbasedinstitutions. Anchorinstitutionscanleveragetheirassetstopromotelocalprivatesector developmentinthelocalcommunitythroughavarietyofsuchmeansas: Directingagreaterportionoftheirpurchasingpowertowardlocalvendors Hiringmoreworkersfromthelocalcommunity Providingworkforcetrainingformorevulnerablesegmentsofthepopulation Incubatingthedevelopmentofmoresocialenterprises Leveragingrealestatedevelopmenttopromotelocalretailandhousing Partnershipswithnonprofitsthatarenotanchorinstitutionsarealsoworthwhile,aswell aspartnershipswithinternationalaidorganizationsandprograms.manyinternational organizationshaveprogramsestablishedinothercommunitiesthatcanprovidea frameworkforsocialenterprisesinnewlocations.thereareanumberofinternational examplesofnonpprofitfoundations,suchasthebillandmelindagatesfoundationthat provideimportantfundingfordevelopment,andplayanimportantroleintheprocessof definingprioritiesandcomingupwithsolutions. ) Alphaville%Foundation% Dependingontheprojectchosen,thepartnershipsthatafoundationsuchasAlphaville decidestopursueandtheroleofthefoundationwillbedifferent.ideally,therewouldbe integratedpartnershipsacrossallthreesectors.thecomplexchallengesthatsociety facesareusuallyinterlinkedandrequireamassofresources,expertiseand perspectives.itiscrucialforthesocialenterprisetobeabletotapdifferentcapacities, exchangeideasanddifferenttypesofknowledge,andthiscouldonlycomeupwith inclusion,dialogueandtheactiveparticipationofallthedifferentsegmentsofsociety.
29 INDICATORSANDPERFORMANCEMETRICS Systematic%Overview%and%Qualitative%Approaches% Qualitative)Indicators)of)Social)Enterprises)and)their)Impact) ) Keytosuccessisaccuratelyassessingimpactthroughvalidated,costPeffective,and integratedperformancemeasurements.thefollowingpresentsstrategiesthatassist withthedevelopmentofmetrics.moredetailedinformationontoolsandresourcescan befoundinappendixb. Source:Golden,K.,Hewitt,A.,&McBane,M.(2005)Social)Entrepreneurship:)Social)Impact)Metrics.)MaRSDiscovery District.Retrievedfrom: Adapted from: Impact Value Chain in The Double Bottom Line Methods Catalog, Clark, Rosenzweig, Long and Olsen and The Rockefeller Foundation, 2003 Social)Impact)and)Impact)Measurements) Impactmeasurementisneededtoanalyzehowtheorganizationishavinganimpact, howtomarkettotheircustomersandstakeholdersaswellasacquirefundingand continuallydevelopandenhancetheirproducts,services,andanyorganizational processes.mostimportantly,itcomputesthesocialimpactcreatedbythesocial enterpriseanditsrelatedactivities. Organizationscanuseaplanned organizationexecution designwithfinancialand socialmetricswhereimpactisregularlymeasured.routineassessmentsand measurementsmotivatethesocialenterprisetofocusonthegoalswhilealertingof adjustmentsthatneedtobemade.marsutilizesthestagesof innovationptopadoption processtogrowthesocialenterprisefromanideatoatangibleinnovationthatiswidely availableinthemarketandsociety. lxxx Thenextchartrepresentsthestagesofmaturity forsocialenterprisesanditsmeasurementsofimpact.eachstagehasaprocessof testing,growth,andfulladoptionoftheideawithperformanceassessments.beingable 26
30 tomovethroughthisstaggeredsystemofgrowingasocialenterpriseisitsownindicator ofsuccess. Approaches)to)Identifying)Promising)Practices)for)Social)Enterprises) Themostcrucialdevelopmentisstageone,wherethesocialenterpriseisestablished, attractsresourceswhileexhibitingtheircapabilityand potentialtocontinuethroughthecycleoftesting,validation andgrowth. lxxxi Therearethreespecificapproachesto measuringthepromisingpracticesandsuccessofasocial enterprise.firstmeasurementistoassessthestrength andviabilityoftheenterprise.theinvestorsfocusonthe idea sfeasibility,evaluatesthemanagementskills,and howquicklytheorganizationimproves,usingthe traditionalspiritofentrepreneurshiptomeasure development.thesecondapproachtoimpact measurementisembeddingmetricsintothedesignofthe productand/orservice.ifsocialenterprisescanintegrate valueintothedeliveryoftheproductand/orservice,itcan provideinstantfeedbackandimprovement,whichis compellingforinvestors.thethirdapproachismirroringa measurementsystemofaparentorganizationorother similarorganizationinitssector,whichcanlendtointernal innovativepracticesandthenrefineanexistingframework. Also,socialenterprisescanexpandontheir effectivenessandefficiencyandcommunicatethisto fundersandinvestorsbydemonstratingonlogic models. Funder)and)Investor)SelfDEvaluation) Source:Golden,K.,Hewitt,A.,&McBane,M.(2005)Social) Entrepreneurship:)Social)Impact)Metrics.)MaRSDiscovery District.Retrievedfrom: content/uploads/2011/02/marsreport_social_metrics.pdf Fundersandinvestorscanevaluateandimproveontheirownperformancein conjunctionwiththesocialenterprise,insteadofcollectingdata.theycandothisby advocatingforpublicpoliciesthatsupporttheirprograminitsfinancingoritsgoals. Anotherwaythatfundersandinvestorscouldhelptheirenterpriseisgraduatethesocial enterpriseoutofthebeginningstagesofpilotprojectorasastartpupbyadvancingits systems.finally,fundersandinvestorsshouldassessandassistsocialenterprises becomefinanciallyselfpsufficient.fundersandinvestorscouldanalyzehowtheyasthe monetarystream,maybeapplyingnonpvaluepaddedcostsandpressuresthroughtheir proceduresforfunding/investmentandreportsofperformancemetrics. Characteristics)of)an)Effective)Impact)Measurement)System) 27
31 Thecharacteristicsofaneffectiveimpactmeasurementsystemincludehowthesocial enterpriseaddsimpactandvalueinthelongpterm,howthegoalsofthesocial enterprisealignwiththoseofthefundersandinvestors,andifthesocialenterpriseis economicallyfeasible,howitshouldbedevelopedbasedonindustrystandards.the performancemeasurementsshouldreflectthemissionofthesocialenterpriseandits impactshouldbethefocus.theyshouldbeclear,meaningful,whilebeingsimple enoughtomanageandunderstand. APPLIEDEXAMPLE:CommunityGardenKNurseryandRetailHubinEusébio We now turn to provide potential examples for how two social enterprises may be developedinthecommunityofeusébiothatincludemunicipal,private,andfoundation partnershiptobesuccessfulinaddressingcommunityneeds.fromourassessment,the municipality of Eusébio has an opportunity to implement social enterprise solutions in addressingcommunityneedsinasustainableway.insightsfromthediagnosticprocess reveal concerns related to unemployment rates, growing income inequality, environmentalconservation,communitydevelopmentandaccesstocommunityspaces. A specific priority expressed was the need to bridge the divide between the Alphaville developmentsandtheneighboringcommunities. lxxxii ThisproposalconsistsofaCommunityGardenandNursery,maintainedincollaboration betweenalphavilleresidentsandeusébiocommunitymembers,andasocialenterprise Community Hub, an entrepreneurship hub for community members to share their businessexperienceandmarketproducts. Goals/Objectives/Mission% The social enterprise solution addresses the needs of the community by providing access to healthy locallypsourced produce, preserving native plant species, creating jobs,leveragingtheenvironmentasaresource,andcultivatingasenseofcommunity. Performance%Measurement% In order to measure the efficacy of the Community Supported Agriculture and Social EnterpriseCommunityHub,performancemeasurementtoolsshouldbeimplementedto evaluate progress towards missionpdriven goals in the areas of social impact, environmentalimpact,andfinancialimpact. Project Indicators LogicModel Inputs (Whatisbeingput intosocial enterprise) Activities (Primaryactivities ofenterprise) Outputs (Resultsthatcan bemeasured) Outcomes (Changestosocial systempevents thatwouldhave happenedanyway =Impact) Goal Alignment (Resultsandgoal adjustment) 28
32 29 ASSUMPTIONS/EXTERNALFACTORS Community Garden& Nursery StaffHours:30 hoursperweekfor eachstaffmember takingpartinthe maintenanceof thegardenand/or nursery,trainings, workshopsor nurserytours Planning: Participants involvedindesign andsetupof project Materials:Land, plants,soil,seeds, gardeningand compost equipment Partners:Local businesses, governmentaland community organizations Participants:25 cooperative members,plus5 supportmembers fromthealphaville Foundationand/or communityleaders Whoarewe reaching: Communityof Eusébioand Alphaville Urbanismo residents Whatarewe creating:locallyp sourcedproduce, preservationof nativeplants, compost,andjob creation Whatarewe delivering: Nutritional products,native plants,fertilizer, andeducation regardingnutrition andenvironmental sustainability ShortKTerm: Rateofindividuals withaccessto healthyfood, revenue,cost Intermediate: Ratesofobesity andassociated conditions,number ofevents connecting communitiesin Eusébio LongKTerm: Incomelevelof membersof cooperative, biodiversityand naturalresources conservation ShortKTerm: (increasedknowledge orskill) Increasedskilled laborforce Intermediate: (changesincommunity programs,policies,or practices) Bridging communitiesof Eusébio LongKTerm: (changeinbehavioror populationklevel outcome) Sustainableland use,improved economicstatusof community Goal: Producehealthy locallypsourced produce,creating jobs,leveraging theenvironment asaresource,and cultivatingasense ofcommunity. Results: Evaluateoutputs andoutcomesin relationto measuresat outsetofproject. Utilizequantitative andqualitative data. Basedonresults, determineareasof growthandissues requiringattention. Adjust: Basedon evaluation process, reestablishgoals forcontinuationor marketexit SocialEnterprise CommunityHub StaffHours:30 hoursperweekfor staffmanagingthe hub,aswellasfor thelocal entrepreneurs Planning:Garden andnurserystaff leadtheorganizing ofthevarious social entrepreneursand events Materials:Land, infrastructurefor retailspace,and goods. Partners:Local businesses, governmentaland community organizations Whoarewe reaching: Communityof Eusébio,Alphaville Urbanismo residents,and surrounding communities Whatarewe creating:aspace forlocal entrepreneursand consumersto cometogether Whatarewe delivering: Opportunityfor local entrepreneursto selltheirgoods, forumfor collaborationand mentorship ShortKTerm: Employmentrate, numberof engagedcitizens, andnumberof productsmarketed Intermediate: Numberofsocial enterprises,rates ofparticipationby neighborhood LongKTerm: Economicgrowth, marketshareby categoryin comparisonto retailsector ShortKTerm: (increasedknowledge orskill) Increaseinskilled workforce specializingin business management Intermediate: (changesincommunity programs,policies,or practices) Growthinlocal economy,bridged communitiesof Eusébio, increasedskilled labormarket, growththrough mentorship LongKTerm: (changeinbehavioror populationklevel outcome) Capacitybuilding Goal: Leverage communityasa resource,create forumforjob creationandskill building,andbuild community capacity. Results: Evaluateoutputs andoutcomesin relationto measuresat outsetofproject. Utilizequantitative andqualitative data. Basedonresults, determineareasof growthandissues requiringattention. Adjust:
33 30 Participants: Communitygarden &nurserystaff, Alphaville Foundation,local entrepreneurs, consumersinand aroundeusébio Basedon evaluation process, reestablishgoals forcontinuationor marketexit Inanefforttomeasureifthesocialgoalisbeingmetaswellasifrevenueisbeing createdfromthesocialenterprise,variousmetricswillbeusedtomeasuretheoutputs intheshortterm,intermediateterm,andthelongterm.forphase1,thecommunity GardenandNursery,therateofindividualswithaccesstohealthyfood,andrevenue willbemeasuredintheshortterm.ratesofobesityandassociatedconditionsand numberofeventsconnectingcommunitiesthroughouteusébiowillbemeasuredinthe intermediateterm.inthelongterm,theincomelevelofthemembersofthecooperative andthebiodiversityandnaturalresourcesthatareconservedwillbemeasured.to determinewhetherthegoalsofphase2,thesocialenterprisecommunityhub,are beingmetemploymentrate,thenumberofengagedcitizens,andthenumberof productsmarketedwillbemeasuredintheshortterm.thenumberofsocialenterprises engagedinthehubandratesofparticipationfromthesurroundingneighborhoodswill bemeasuredintheintermediateterm.inthelongtermeconomicgrowthandtheshare ofthemarketincomparisontotheretailsectorwouldbemeasured. Organizational%Structure%% Proposal FinancialStructure Organizational Development TimeHorizon Location Community Supported Agriculture Community collectivesocial enterprise Impactinvestments forstartpupcosts Revenuegeneration throughonpsiteand offpsitesales streams. Collaborationwith startpupleadership supportfrompublic, nonprofit,and privatesectors(see Partnershipstable) 6P12months GardenandNursery operatesatthe currentnursery locationinalphaville Urbanismo. Integrated Community CooperativeHub Socialenterprise. CommunityBankfor enterprisestartpup costs Collaborationwith startpupleadership supportfrompublic, nonprofit,and privatesectors(see Partnershipstable) Phase1: 6P12months+ Community SupportedGarden andnurserylaunch Phase2: 24P36months+ Retailspace available,launch Hub Agricultureland (garden,nursery) withincurrent nurseryspaceor adjacenttoeusébio. Retailoutletwithin proposedretail space(withoptions toexpandin Eusébio,whichmost likelydependona favorableleasefor
34 theenterpriseto remainviableinthe sustainingphase). The structure of this social enterprise will consist of two phases. Phase 1 is the Community Garden and Nursery that would be maintained by a collaboration of AlphavilleresidentsandEusébiocommunitymembers.Phase2istheSocialEnterprise Community Hub, which would be an entrepreneurship hub for community members to sharetheirbusinessexperienceandmarketproducts. BothphasescanpotentiallybehousedandtakeplaceontheAlphavilleUrbanismosite, sincetheinfrastructuretoaccommodateagardenandnurseryisalreadyestablished.if this location is no longer feasible, then a site near Alphaville Urbanismo is preferred. AdditionaloptionsaretorepurposeavacantlotorpurchaselandoutsideofAlphaville. During the first stages of implementation, leadership support from the Alphaville Foundationwillbenecessarytoidentifyandrecruitcommunityleaders,aswellasother partners in the public, private and nonprofit sectors. This first phase of the social enterprise would seek to recruit an estimated 25 cooperative members, plus 5 professional support members from the Alphaville Foundation and/or community leaders. This Community Garden and Nursery would be managed as one large space through thecoordinatedeffortsofalltheparticipants.therefore,itwillbeimportanttodevelopa wellporganizedleadershipteamandpotentiallyorganizecommitteeswhoareassigned to specific tasks (for example: recruitment, partnership development, special events, garden/nurseryorganization).leadershipwillthenbeinchargeofgrowing,cultivating, and selling the produce from the garden. For the nursery, participants will collect, propagate and replant native plant species for landscaping purposes, in addition to contributing to the selling of the products. They will also implement a composting system,andsellthiscompostasfertilizer. Eventuallymemberswouldalsoneedtolearntheskillstonotonlygrowtheirproduct, but also to sell it. This will lead to Phase 2 of the project, the Social Enterprise CommunityHub.Phase2willrequiretheestimated30membersfromPhase1withan additional25socialenterpriseparticipants,dependingonthesizeandscopeofthehub. These 25 social enterprise participants can be recruited from the community with the assistanceofthe5professionalsupportmembersfromthealphavillefoundationand/or communityleaders.membersfromphase1canreceiverequiredtrainingsthroughthe partnershipsmadewiththeassistanceofthealphavillefoundation.astheparticipants 31
35 learnthevariousskillstoleadandmanagethegardenandnursery,theywillbebetterp equippedtoalsomanagetheinitiationoftheintegratedcommunityhub. Examplesofexistingcommunitygardensandhubsinclude: Midtown) Global) Market,) USA: gives new and emerging entrepreneurs a prime location and support to build a business. Many of these new entrepreneurs are lowincomeorrecentimmigrants. lxxxiii Dia) Dia,) Venezuela:) dedicated to the efficient distribution of food to excluded sectorsinvenezuelabyeliminatingintermediatelayersinthevaluechainoffood distribution that keep prices high. Development of communities throughout Venezuela is also promoted through recruitment, training, and staff development. lxxxiv Company) Shop,) UK: works with Great Britain s largest retailers, manufacturers and brands to redistribute surplus products. The Company Shop launched the Community Shop in 2013 to distribute food particularly to disadvantaged communitiesandimprovehealthandeconomicoutcomesforfamilies. lxxxv Urban) Ventures,) USA: adopted a holistic system of programs and social enterprisesdesignedtoequippeoplewithresourcesandopportunitiesinorderto combat urban poverty. Their programs include job skills training and nutrition education. lxxxvi Northey)Street)City)Farms,)USA:Thiscommunitybasedurbanpermaculturefarm demonstrates, promotes, educates and advocates for environmental and economicsustainabilityinahealthy,diverseandsupportivecommunity. lxxxvii Partnerships% PotentialPartner Relevance RoleinthePartnership PublicSector MunicipalityofEusébio LocationoftheCommunity GardenandNursery. Allocateaportionoffundsthatare designatedforsmallbusinessesfrom thecommitteeforsocialaction.land wouldneedtobeleasedtothe enterprisefromthemunicipality. DonateretailspacefortheIntegrated CommunityHub Installwateroutletsasneeded UniversidadeFederaldo Ceará HasanAgriculturalCenter. Provideexpertiseonsustainable farmingmethodsthatcouldalsobe incorporatedinworkshopsandtours Expertsandstudentscangetinvolved withgardeningandeducatingthe communityaboutenvironmental sustainability 32
36 UniversidadedeFortaleza Prohuerta ProgetoFomeZero InternationalDevelopment ResearchCenter NonprofitSector HasaHealthSciencesCenter, includingnutrition. Apublicpolicyprogramthat promotesagropecological productionpracticesforselfp sufficiency,foodeducation,and fairsandalternativemarkets. Afederalgovernmentprogram thatfightshungerandextreme poverty. Researchcenterthatfunds researchindevelopingcountries tocreatelastingchange (previouslypartneredwith GovernadorValdarestodevelop communitygardenswith municipalsupport). Provideexpertiseonnutritionthat couldbeincorporatedinworkshops andtours Expertsandstudentscangetinvolved withgardeningandeducatingthe communityabouthealthyeatinghabits Providetraining Disseminateappropriatecrop productiontechnologies Provideexpertiseonrepurposing vacantlandinthecasethatthe communitygardenhastolocateto anothersite Providesupportforsubsistence farmingandaccesstomicrocredit Assistineducatingthecommunity abouthealthyeatinghabits Developpartnershipwithsocial enterpriseandmunicipalitytodevelop thecommunitygardenandschoolmeal programs OrganizacaoCidadesSem Fome RUAFFoundation Ciclo Sebrae PrivateSector Organizationthatstarted21 communitygardensbasedon organicfarming. Collaborateswithmunicipalities torealizefoodprojectswith vulnerablegroupsandto enhanceaccesstonutritious food. Organizationthattrainsand disseminatesinformationin areasofpermacultureand relatedpracticalskills. Nonprofit,privateentitywiththe missionofpromoting sustainableandcompetitive developmentofsmall businesses. Teachworkershowtomanagetheir ownbusinessandbecomefinancially independent Provideinformationregardingprevious Brasilprojects Teachfoundationstaff/cooperative leadershiphowtorunsuccessful program Fundsandfindsvolunteersand beneficiariesforprojects AssistswithhandsPonPlearning, practicingandexperimentingwith permacultureideas Fostersentrepreneurshipbyproviding guidancetohelpsmallbusinesses growandgeneratemoreemployment Canconsultandtransferknowledge andknowphow Forestablishedbusinesses,itoffers courses,lecturesandtrainingso there sabetterunderstandingof marketchallengesandhowtoexpand 33
37 M.DiasBranco HorizonteFertil Ownsthelandthatisbeing developedatthealphaville Urbanismosite. Acompanythatdealswith biotechnology,agricultural consultancyandwaste management. Canactasasponsorofthe garden/nurserybyprovidingmaterials, tools,support Actasaconsultantforthe implementationofbiodigesters Provideinnovativecomposting techniques BRPetrobas Hasaprogramcalledthe PetrobrasDevelopmentand CitizenshipProgramQin2013,it investedr$170millioninmore than1600social,environmental, culturalandsportsprojects. Provideassistanceintheanalysisof marketdemand Establishdirectlinkageswithbuyers Providefinancialsupportforthesocial enterpriseanditsproductdelivery systems Financial%Model% Community)Garden)/)Nursery) For this cooperative model, all start up funds and revenue will be used and shared equally among all participants, with no one member having complete control. Startup fundsfortheinitialmaterials,includingseedsandtools,willbeprovidedthroughimpact investing created through a partnership between the cooperative and another entity: private, public or nonpprofit. This model provides a communitypsupported and sustainablefundingsolutionindependentoffoundationsupport.revenueisgenerated through product sales. Goods harvested can be sold within Alphaville as well as the surroundingcommunity.afterthefirstharvestthegardenwillbecomeselfpsufficientand function through the cycle: plant, harvest, sell, repeat. Profits are allocated equally amongmembersofthecollectivedependingonnumberofhoursworked. Social)Enterprise)Hub) StartPup funds for the social enterprise hub will be provided by a Community Bank, fundedallorinpartthroughtheprofitsofthecommunitygardenandnursery.byusing theprofitsfromthecommunitygardenandnurserytofundasocialenterprisehub,the membersofthecollectivearenotonlyexpandingtheirbusinessbutbecomingowners of their own retail space. Initially the products sold will be goods from the community garden/nursery, but can be expanded to other industries as additional community interest is cultivated. As more retail space is established, revenue and profits will increase, allowing for additional programs to be create and retail spaces to be purchased. Continuous%Evaluation% Community)Garden)and)Nursery)) Producing healthy locallypsourced produce, creating jobs, leveraging the environment as a resource, and cultivating a sense of community are the goals of the project and shouldcontinuouslybemet.inordertomeasurewhetherthesegoalsarebeingmet,the 34
38 outputsandoutcomesshouldfocusonevaluating:therateofindividualswithaccessto healthyfood,revenuegenerated,ratesofobesityandassociatedconditions,numberof events connecting communities throughout Eusébio, the income level of the members ofthecooperative,andthebiodiversityandnaturalresourcesthatareconserved Social)Enterprise)Community)Hub) Leveraging community as a resource, creating a forum for job creation and skill building, and building community capacity are the primary goals of this phase of the project. Outputs and outcomes should also be evaluated using the following metrics: employmentrate,thenumberofengagedcitizens,thenumberofproducts,thenumber of social enterprises engaged in the hub, rates of participation from the surrounding neighborhoods,economicgrowthandtheshareofthemarketincomparisontotheretail sector Insum,ifadjustmentsneedtobemadetoimproveresults,thengoalsmayneedtobe reestablishedinorderfortheprojecttocontinue,orplansmayneedtobemadetoexit themarketifadjustmentsarenotfeasible. APPLIEDEXAMPLE:ACCELERATOR/INCUBATOR CommunityresearchhasidentifiedanopportunityforjobcreationprojectsinEusébio, particularly for young students who may otherwise have limited options. To meet this need the Eusébio Social Enterprise Incubator would build on the success of current youth development programs, such as Alphaville s communitypsupported Jovem Sustentavel, program to serve as the next step for graduates. The participants could develop their community service project into a social enterprise which is financially sustainable in the longpterm. The incubator would develop these and other emerging socialventuresthroughaccesstofinancialcapitalinvestment,mentorship,training,and networking. It would support social innovation by providing a workspace for local entrepreneurs and organizing various seminars, training sessions, interactive workshops, conferences, and field trips to develop their skills and competencies. lxxxviii Existing socially conscious businesses in the area could provide further examples for the participants to learn from. Ceará is the state in the northeast with the highest number of incubators, according to the Rede de Incubadoras de Empresas do Ceará (Ceará Business Incubators Network) (RIC) indicating that there is expertise in the regionthatcouldbeleveragedforsocialenterprises. lxxxix Goal/Objectives/Mission%% TheEusébioSocialEnterpriseIncubatorisamodelPsharingcommunityforinnovators, consultants,andfreelancersworkinginsocialinnovation.theprimarygoalsareto fostersocialentrepreneurshipamongsttheyouth,createjobsinthecommunity,and 35
39 promoteeconomicdevelopmentinareasofunderinvestment.itwillserveasaregional hubforsocialinnovatorstoshareideasandbestpractices. % Potential)Metrics % Numberofsocialenterprisessupported Networkstrength Numberofmentors Numberofinvestors Amountofinvestment Numberofvisitors Numberofevents(networking) EducationalImpact Numberoftrainingprogramsandworkshops Numberofexpertsbroughtin Successofsocialenterpriseslaunched SocialImpact Financialhealth EnvironmentalImpact 36
40 Performance%Measurement% ConsistentperformancemanagementmetricsarecriticaltothesuccessoftheSocial EnterpriseIncubator.Thefollowinglogicmodelhasbeendevelopedaroundthe indicatorsandmetricsthataremostrelevanttotheincubatortotrackitsimpactonthe community: Organizational%Structure%% The first phase of developing an incubator is forming a multidisciplinary management team to provide expertise for a variety of potential social enterprises. The incubator would be established as nonprofit governed by a board of eight individuals with the traditional structure of a president, vice president, secretary, treasurer, and historian. Additionally,itwouldincludeamemberofthelocalfoundation,theCityofEusébio,and the university partner, as well as topic experts and impact investors to select the participating social enterprises. The incubator would be operated by a partnership between a foundation, the City of Eusébio, and the university partner. The shared workspace would be focused on a single social enterprise field, such as environmental/energyenterprises,tofacilitateconcentratedideapsharing.theincubator would be centrally located with ample access to public transportation, other small businesses,andresourcesthattheentrepreneursmightneed. Proposal FinancialStructure Organizational Development TimeHorizon Location Social Enterprise Incubator Alocalfoundation providesgrantsor investmentsforinitial operatingcostsqlandis donatedbycityqfacility builtbyprivateindustry donor/partnerq Enterprisesare supportedbyarevolving loanfund PartnerwithCityof Eusébio,UFC, privateimpact investors Requiresatleast5 yearsuntiltherewill befinancialreturns AlphavilleCeará TownCenteronone floorofcommercial ormixedpuseprivate development Partnerships%% StrongmultiPsectorpartnershipsarecriticaltothesuccessoftheSocialInnovation EnterpriseIncubator.Theserangefrompublicorgovernmententitiestononprofitsand foundationsaswellastheprivatesector.universitiesarethemaincatalystfor incubatorsinbrasilqmorethan40percentofbrasils59federaluniversitieshavesome kindofincubator. xc Thelistofpotentialpartnersbelowsuggeststhewidevarietyof resourcesthatpartnershipscanleverage,fromcapitalinvestmentsandfinancial donationstoexpertiseandmentorship. 37
41 NameofPotentialPartner PublicSector xci RoleinPartnership CityofEusébio UniversidadeFederaldoCeará/ OtherUniversityPartner NonprofitSector Providelandand/orfacilityQPromoteorcreatefriendlypoliciesforsocial enterprisesqhelpdeveloppartnershipswithprivatesector TeachbusinesseducationandsocialentrepreneurshipQHelpadvisebusiness modelqbringinstudentstobothtraininsocialinnovationandbecomeenterprise mentorsorcreators NESst xcii Sebrae xciii AnjosdoBrasil xciv OtherNPOs Avante xcv Sitawi xcvi VoxCapital xcvii PrivateSector ShareuniversityPfoundationpartnershipmodelandincubatorandcompetition model Provideconsultingservicesforsmallbusinesslegalization Providemorefundingthroughaccesstoangelinvestors CooperateonprojectsthatcouldbesocialenterprisesQShareinformation, experiencesandresources Providefinancialservicesandfinancialeducationtoindividualswithlower educationallevels ProvideaccesstolowPrateloans Providemorefundingthroughventurecapitalatanegotiatedequitystake PrivateCompanies xcviii IndividualInvestors InvestinsocialenterprisesrelatedtoindustryQProvidevolunteeringopportunities throughmentorship InvestinsocialenterprisesQOffermentorship Financial%Model% Fortheinitialstartupphase,theincubatorwillhavetofundraiseforlandandfacility costs,aswellascostsfortheprogramandstaff.landcouldbedonatedbythecityof EusébiofrompercentageoflandallocatedtothecityfromAlphaville,whichtheCityis alreadypursuingforbusinessdevelopment.thefacilitymaybedonatedfromapublic orprivatepartner.itcouldbedevelopedononefloorofacommercialormixedpuse developmentbuiltbyaprivatecompanyorfirm.thereareglobalexamplesofprivate industrypartners,likemicrosoft,whohaveinvestedinbusinessincubatorsduetothe beliefthattherewillbeareturnoninvestmentfromtheinnovationecosystemthatis developed.theincubatorcouldalsopursuegrantsorloansfromgovernmentsor privatefoundationsinitsstartupphase. Duringthesustainablephase,aftertheinitialstartupperiod,theincubatormaycontinue topursuefundingfromgrantsandloansbutwouldfocusonrecruitingimpactinvestors toinvestcapitalintheincubatorinanequitypartnership.equitypartnershipsarehow thesocialenterprisesdevelopedbytheincubatorwouldbefunded.theincubatoritself wouldalsotakeasmallequitystakeineachsocialenterprise.impactinvestorscouldbe recruitedfromtheresidentsofalphavillecearáitself,orelsewhereineusébioorthe metropolitanregionorstate.thereisalsopotentialthattheincubatorwouldrequire 38
42 ongoingpublicfundingduetoprivateandfoundationinvestmentsnotcoveringthe entirebudget.however,thecitycouldstillhaveapositivereturnduetosavingsonother socialprograms,likerendaminima,whichwouldnothavetobeasheavilyfundedby thecitybudgetduetothesocialbenefitsandincreaseinwagesgeneratedbythriving socialenterprises. % % % Continuous%Evaluation% Continuousevaluationandimprovementisacorecomponentofthesocialenterprise incubator smanagementsystem.thesuccessoftheprojectwillbemeasuredby financialandsocialreturnsoftheincubatedorganizationsaswellasthelarger institution.metricswillincludethefinancialreturnsofenterprisestotheirinvestorswhich willinvolvecloselytrackingtheirprofitandlossmarginsaswellassalesgrowth. Qualitativedataoncustomerserviceratingsandthecommunityperceptionofthe enterprise sworkwillbecollectedthroughinterviewsandfocusgroups.furtherdatawill becollectedontheoverallimpactoftheincubatoronthecommunityincludingjob creation,networkgrowth,andimpactonunderservedpopulations. CONCLUDINGTHOUGHTSANDOPPORTUNITIES Problem solving social issues through the framework of social innovation PPspecifically throughthecreationofasocialenterprisepppresentsanopportunitytopursuenoveland sustainablesolutionsthataddresstheneedsofcommunitieswhilecreatingrevenueand reinvesting back into the focal region. Due to the fact that social enterprises are dual missionporiented, it is important to apply the appropriate metrics to ensure that the objectivesarebeingmet,suchmetricscaninclude:numberofjobscreated,numberof investors, or rate of individuals with access to healthy food. While metrics vary, depending on the social enterprise that is undertaken, resources such as BPLab and IRIS can assist an organization with evaluating their social impact and financial success. Financial models will also vary depending on the resources available to an organization, these models include: a community bank and/or community bank 39
43 development finance institution, crowdfunding, angel/seed investing, social impact bonds,andimpactinvesting. Several successful enterprise examples exist globally that can serve as a strong reference for Eusebio. This report specifically has highlighted examples that leverage the best practices identified in terms of funding, structure and evaluation, all ventures thathaveprovenimpactfulintheirmissionsandscopeofwork.eusebiofindsitselfina uniquepositiontotakeadvantageofsuchexamplesandthinkcriticallyastohowsocial innovation can play a role in addressing pressing needs within a rapidly changing environment. From our research, we have observed a couple key findings we believe willbeusefulineusebio spursuitofinnovativeproblemsolving. Policy%as%a%Catalyst%for%Success% Themunicipalityfindsitselfinanopportunemomenttoleverageitsstrongtrackrecord ofstrategicallyattractingindustrybyexpandingitsscopetothepotentialfoundinalso promotingsmallbusinessandsocialenterprisegrowthanddevelopment.onewayto assistinsparkinginnovationisbyseekingapolicythatwouldprovidesomeformoftax incentivesforsocialenterprises.missionpdrivenenterprisesshouldbedifferentiated fromotherforpprofitentitiesinregardstohowtheyaretaxed.doingsowouldaidin sustainingenterprises,makingthemlessreliantonfoundationsandothergrant providers.asareference,themunicipalityofgovernadorvaladares,brasilhasputforth severalpolicymeasurestosupportcommunitygardens.theyhavereducedproperty taxesbyupto3percentaswellasexemptingthosegardeningoncommunallotsfrom payingforwater. xcix IncentivizinginnovationisonewayEusebiocanremainaheadof thecurveinitsachievingstrongandcontinuedeconomicdevelopment. Finding%Momentum%in%Institutionalizing%Partnership%Building%% Throughoutourobservationsonethinghasstoodoutveryclearly:Eusebioisa municipalitythatretainsaconsistent,openmentalityontheneedtohavestrategicand deeppartnershipswithnecessarystakeholders.thisroutineisembeddedintheway themunicipalgovernmenthasexperimentedwithnewprogramsandinitiatives,allinan efforttobetterserveitsresidents.webelievethateusebiocanachieveevenmore.one suggestionwouldbeforthemunicipalitytoinstitutionalizeintentionalpartnership buildingacrosspublic,privateandnonprofitsectors.specifically,thecreationofa specificstaffpositionorofficethatisdedicatedtosocialinnovationwouldassistin securingthelongtermsuccessofprojectsandinitiativeseusebiohascommittedto experimentingwiththathaveprovenimpactful.creatingastaffpositionwouldallow theretobealiaisonforgovernmententities,nonpgovernmentagenciesandcommunity memberswhocouldassistwithcapacitybuilding,navigationofgovernmental apparatusesaswellascommunityrelations/communicationforsocialenterprisesand relatedinitiatives.astaffpersonwithacommunitypulsecanhelptransformpilot programsintolongtermstrategiesforchange. 40
44 APPENDIXA EUSÉBIOPROFILE Eusébioisamunicipalitywithinthestateof Ceará,locatedintheNortheastregionof Brasil.Eusébio spopulationofapproximately 50,000residentshasincreasedby11%overa 10Pyearperiod.Eusébio s2012budgetwas approximatelyr$170,843,000.thetop3areas thecityallocatedfundstowardswereeducation 29.52%,Education20.94%,andAdministration 11.42%. c Table1showsthatthereisrelativelya smalldifferencebetweenitslargercounterparts, withtheexceptionofthelargedistinctionamid theaveragepercapitaincomebetweeneusébio andceará. SocioKEconomicProfile Demographic Eusébio Fortaleza Ceará Brasil Comparisons Population 46,033 3,615,767 8,452, ,732,694 Age 27.9% 23.91% 26.30% 24.08% 15)or)less 66.97% 69.77% 66.16% 68.39% 16)D) % 6.32% 7.54% 7.53% 65)or)more LifeExpectancy 72.66years 73.62years years years Unemployment 7.47% 8.03% 7.56% 6.8% GINI HousingStatistics:ComparisonbetweenEusébioandBrasil 41
45 HousingIssue Eusébio Brasil Overcrowding(More than2peopleper room) souptothoseinneed. 37% 28% Runningwater 77% 87% Indoorplumbing 77% 87% Garbagecollection 93% 97% Electricity 99.4% 98.6% Thelargepopulationgrowthhas createdovercrowding.indicatorsof overcapacityarenotedinbasic servicesinthecitysuchaselectricity asseenintable2. Howitlookslike:Urucunemaisknown asafavelaandisfilledwithinformal housing.infrastructureforsanitationis poor.therearesmallinformal businessesinpeople syards.thereis oneschoolandonecommunityspace whereclassesaretaught,and humanitarianworkisdone,distributing IncidentsofCrime Deathsfromviolentcrimeshavesteadily continuedtoincreaseinthecountryas mirroredbythegrowingprisonpopulation. ci Therearenospecificstatisticsoncrimeforthe cityofeusébio,butislocatedintheregion withthesecondhighestlevelsofcrime.within thisregion,crimeratesincreasedfrom2014to 2015.Thenumberoftheftsjumpedto9%. cii Residents)of)Santo)Antônio)in)general)have)a) Crimes Theft(Pettyto Grand) Number%of% Number%of% incidents% incidents%in% in%eusébio%% the%state 1,919 4,327 ArmedRobberies 331 6,215 ViolentCrimes 222 4,019 lowerlevelofeducation)and)mostresidentsdependonbolsafamilia.thesolutionsfor thegrowingamountofviolence,drugtrafficking,andlackofworkforcetrainingare prioritiesforthiscommunity.)infrastructureforsanitationandpedestrianfootptrafficmust beimproved. EducationinEusébio ThefullPtimeschoolsfundedbythemunicipalitieshavea 100%attendancerateamongEusébio seducationsystem 32ElementarySchools (SeeTable3).Students schoolattendancewasaveraged 5Preschool/Kindergarten at10.13yearsin2010(from8.67in2000q5.73in1991). Theseschoolprogramsweredevelopedinconjunctionwith 3HighSchools anefforttoreducecrimeandviolencewithinthecity.in 1VocationalSchool JabutiresidentsareprimarilylowPincomeandmostdepend onbolsafamilia.manyresidentsareemployedfabrica Fortaleza.Communityissuesthatresidentscareaboutisthegrowingamountof 42
46 violenceanddrugtrafficking,leadingtoalackofsociallifeinpublicspacesand squares.manystudentsdropoutofschooltoworkinformallyforsmallenterprisesdue totheperceivedimprobabilityofattaininghighereducationorformalemployment. 43
47 APPENDIXBKMetricsandIndicators Thefollowingaretoolsdesignedforperformanceevaluationforsocialimpactprojects: ImpactReportingandInvestmentStandards(IRIS)cataloguesmetricsin afashionthatmeasuresperformanceofenterprisesindifferentissueor investmentareas.thecatalogue,whichcanbefoundontheirwebsite allowsyoutotailoryoursearchesandrefinewhichmetricswouldbemost usefulinyourwork. ciii SampleSocialImpactObjectives: Accesstocleanwaterandsantitation Accesstoeducation Accesstoenergy Accesstofinancialservices Accesstoinformation Affordablehousing Agriculturalproductivity Capacitybuilding Conflictresolution DiseaseDspecificpreventionandmitigation Employmentgeneration Equalityandempowerment Foodsecurity Generatefundsforcharitablegiving Healthimprovement Communitydevelopment Humanrightsprotectionorexpansion GlobalImpactInvestingRatingSystem(GIIRS)usesIRISdefinitions toassessventuresandenterprisesbasedontheirsocialand environmentalperformance.thisresourcegeneratesimpactreports thatallowsforaccurateassessmentofeffectivenessinidentified categories. civ PULSEisa portfoliomanagementtool,administeredbyapplication Experts(AppPX),andiswidelyavailabletoclientsandcomespreP loadedwithirismetrics. cv LogicalFrameworkAnalysis(LFA)isbroadlyusedforinternationaldevelopmentprojectsfor thedesign,monitoring,andevaluationofinternationaldevelopmentprojectsandservesasa basicmatrixformeasuringsocialimpact. cvi AhelpfulresourceforperformancemetricdevelopmentcanbereferencedusingBrian Treistand sframeworkpublishedininnovations. cvii Thisframeworkdescribes overarchingindicatordevelopmentandassociatedperformancemetricsusing alternativeterminologyestablishedbythestanfordsocialinnovationreview. 44
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