On Social Ventures - The Way to Achieve True Responsibility

On Social Ventures

Prepared and presented by Tibor Héjj

Budapest March 24th, 2014.

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True (corporate) responsibility is much more than just abuzzword or „actions”, and is to be seen in its complexity

In addition new, unknown buzzwords are emerging, such as we will see soon

It is almost trendy to criticize the near hegemonic capitalist

economic system…

• Many people see this way (Business Insider, Jan. 28, 2013.):

"The crisis itself has ruthlessly laid bare many of the illusions about Capitalism. The

‘U.S. model’ that many elites worshiped has lost its appeal and been discredited. Sharan

Burrow, Secretary-General of the International Trade Union Confederation, believes

that the Capitalism of the 20th century is out of date and does not fit the 21st century.

World Economic Forum Founder and Executive Chairman Klaus Schwab raised the

issue of ‘outdated and crumbling models.’ He said that Capitalism, in its current form, is

no longer suitable for the world around us. IMF Chief Economist Kenneth Rogoff cited

many problems with modern Capitalism and pointed out that the current Capitalism is, in

essence, transitory in nature. The U.S.-U.K. model that leads the world will be replaced

by other models."

…but the perceptions differ pretty well about

what comes next or what should come next…

The previous quote was cited from the flagship magazine of the

Central Committee of the Communist Party of China

• … and their conclusion, solution and perspective:

„Now ‘Marxism fever’ in the West can no longer be ignored. One can see a strong

contrast between the decay of Neo-liberalism and the popularity of Marxism. Today,

Marxism has become a main character in Western political life.”

„The revival of Marxist thought shows the inevitable trend of the development of

world history.”

• But the former mainstream approach should not be buried, as it is strong and alive…

…most probably in all of us, because who would not want his pension contribution to be

kept in profitable capitalist enterprises (but instead let it flow away as a donation

without return?!)

• Do we have, or at least can we have our own answer to this paradoxial challenge?...

Not an easy task, but we should not give up!

I am here today to give you some inputs and thoughts – so you can decide…

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Thus the neoliberal capitalist model and the altruistic model arevery far from each other…

For—profit enterprise

Non—profit donation

fundraising

For a long time it seemed that the gap beetween the two worlds could not be bridged

„Profit-peak” „Altruism-peak”

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Michel Porter and Pope Benedict XVI are popes or apostles ofapparently two different worlds

Porter

• The ” anointed apostle” of free market

capitalism

• The guru or even the „pope” of profit-

generating

• The most important influencer of

managers not dealing much – or at least

so it would be logical for several people

– with spiritual things .

• Who and whose followers focus only on

money

• Believers of wordly (immanent) and

material (money) values

Pope Benedict XVI

The anointed apostol-successor of Jesus’ mission

The Pope of the Church focusing on spirituality

The most important inflluencer of clergymen (priests) not dealing much – or at least so it would be logical for several

people – with economic and business things

Who and whose followers focus only on idealistic conceptions

Believers of unwordly (transcendent) and spiritual (virtue) values

Probably they have never met physically, and mentally they also live in a completelydifferent world - or at least we would think so

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But the leaders of both worlds have recognized that a holisticapproach is needed not just disjoint sets

• We are not just profit-making robots…

• If and until we regard ourselves as such, we do not get out of the crisis

• Global thinking means global responsibility too

• Destruction of the environment physically and ruin of personal life is not worthy

• We know it from our private life that it is not just material goods that counts for happiness

• BUT: we can’t and we don’t want to induct complete ”system change”, just at least a partial paradigm shift

• We do not have just spiritual life…

• If we can’t provide guidance in economic questions, we leave the people alone in a very important field of life

• Seeing the world through God’s eyes requires not only global, but holistic approach as well.

• Human development includes development from a divine perspective in all the "secular" area,

• Only money can’t buy happiness, but with no work and no money, few can live happily

• AND: following Jesus is not limited to isolated areas, but the fullness of life

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ONLY „for-benefit”, truly responsible enterprises can ensure sustainability in its multiple aspects!

„for-benefit” models

„CSV” „CiV”

„Profit-peak” „Altruism-peak”

„Benefit”= advantage, profit, gain

„Public benefit”= common good

For—profit enterprise,

maximizing the financial interest

of the owner

Non—profit fundraising tominimize the

number of needy inthe society

Optimizing the needs of the entire

society

The shift from for-profit (for shareholders) to the concept of for-benefit (for all concerned) is the basis of long-term sustainability.

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• CSV = Creating Shared Value (2011)

• According to Michael Porter companies have three key ways to create shared value

opportunities:

1. by reconceiving products and markets,

2. by redefining productivity in the value chain,

3. and by enabling local cluster development.

• Results:

• Innovation

• Growth

• Societal profit

• „Each of these is part of the virtuous circle of shared value; improving value in one area

gives rise to opportunities in the others”

• Real social entrepreneurships are also creating shared value besides social benefit. As

a result boundaries are blurring between successful for-profits and nonprofits.

Capitalism can get to a higher level thanks to CSV and theeconomy and society will benefit from this process

Source: http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/pr

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The 2009 encyclical letter „Caritas in veritate” (CiV) addressesthe business world directly, as if it were a call

• „The market is subject to the principles of so-called commutative justice, which

regulates the relations of giving and receiving between parties to a transaction. …

Without internal forms of solidarity and mutual trust, the market cannot completely

fulfill its proper economic function.” (35) Thus: market, equality, solidarity, and trust – it

is possible and necessary to coordinate the integration of these!

• „Thus every economic decision has a moral consequence.” (37) Thus: the

economy, and business should (also) also have a moral basis!

• „responsibility on the part of everyone with regard to everyone, … cannot therefore

be merely delegated to the State” (38) Thus: if everybody is our brother/sister, we

should be responsible for everyone – without professional, national, geographic, etc.

limits!

• „In recent decades a broad intermediate area has emerged between the two types of

enterprise. … one which does not exclude profit, but instead considers it a

means for achieving human and social ends.” (46)

So the approach of Porter and the approach of Pope Benedict XVI might not only meet in „infinity”…

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After CiV in 2009 and CSV in 2011, in 2013 the synthesis wasreached: President of Worldbank (Jim Yong) visited the Pope andsaid something interesting…

• “I was so grateful to meet the Holy Father and was inspired by his passion and

commitment to help the poor, the sick, and the hungry,” Kim said. “We talked

about ways we could work together with faith leaders to make a

preferential option for the poor, so they can have greater opportunity and

justice in their lives.”

• “Pope Francis and I agree on the urgent moral imperative to lessen the

suffering of over 1 billion people and to end the scandal of poverty. We

share a vision of a world with greater compassion for all people in need.”

• “At the World Bank Group, we have set a goal to end extreme poverty in

less than a generation, and to boost shared prosperity for the bottom 40

percent of people in developing countries.”

Source: http://www.worldbank.org/en/news/press-release/2013/10/28/world-bank-group-president-kim-pope-francis-efforts-end-

poverty

„With the pope we say the same: growth won't happen if you don't invest in people”

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Tax fraud, corruption,

Illegal employment

Let us now segment the companies according to the combinationof their interests and their values

Self-interest

INTEREST

Common good

Illegal

Legal

Ethical (besides

acting legally)

Offshore, tax evasion

Tax optimizing multinational

company, profit abroad

Local company, not optimizing,

profit spent locally

Company + CSR

VALUE+

-

Foundation, organizations

living on charity

„CSV”

Altruistic (besides

acting

ethically and

legally)

True responsibility means close to common good and not just „legal correctness”!

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Tax fraud, corruption,

Illegal employment

It is difficult to define social entrepreneurships, there are varioussegmentations

Self-interest

INTEREST

Common good

Illegal

Legal

Ethical (besides

acting legally)

Offshore, tax evasion

Tax optimizing multinational

company, profit abroad

Local company, not optimizing,

profit spent locally

Company + CSR

VALUE +

-

Foundation, organizations

living on charity

„CSV”

„Doing business for others”

Altruistic (besides

acting

ethically and

legally)

„Social entrepreneurships”

True responsibility

True responsibility means close to common good and not just „legal correctness”!

Forprofit Nonprofit

Hibrid

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Thus the traditional segmentation of companies andorganizations became more complex by today…

For the common

good

E.g. environmentalprotection, privateschool, privatehospital…

E.g. a foundation for the disadvantaged people

Traditional,general

E.g. stock market companies, private companies

E.g. a for-benefit company providing jobs for the handicapped

For-profit, for the owner

Non-profit/for-benefit,for a target segment

Orientation, that is:

„For whom does the organization exist?

Based on content, activity, that is:

„What does the organization do?”

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Few know that the owner of Erste and Zweite Bank is a foundation, which was established in

1819 in order to help the poor!

…moreover the same activity (e.g. bank) can find its place in eachclass

For thecommon

good

Banca Etica

- For-profit bank of socially beneficial enterprises

Grameen Bank

from M. Yunus

- Providing micro credit, without

official structure and branches

Traditonal, general

Classic banks, e.g.:

Erste Bank

Bank-like operation, but with

volunteers and CSR manner,

e.g.:

Zweite Sparkasse

For-profit, for the ownerNon-profit/for-benefit, for a

target segment

„What does the organization do?”

„For whom does the organization exist?

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I agree with the approach and definition of „social venture” as afor-benefit company

Every organization, which is socially beneficial as well

Non-profit organizations

Non-profit firm, which serves one

target segment

I am not only studying this issue, but practicing it, too.

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To start a company that creates & ensures jobs

To ensure a job, so that donation would not be needed

To give anonymously to a stranger

To give anonymously to a friend

To give to a stranger

To give without/ before being asked to

To give when asked, suitably

To give deliberately, but not suitably

To give unintentionally

To provide jobs instead of charity – an innovation, alreadyinvented in the Middle Ages – which we further developed,adjusted to our times

Source: Orban, P. (2006). Employment – Rehabilitation – Integration. Napra Forgó Kht. Original source: Maimonides

The respect of dignity can best be realized by ensuring work – this is how rehabilitation becomes, beyond the existential aspect, a constructor of humanity as well.

To ensure a job, so that donation would not be needed

To give anonymously to a stranger

To give anonymously to a friend

To give to a stranger

To give without/ before being asked to

To give when asked, suitably

To give deliberately, but not suitably

To give unintentionally

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My not-for-profit (for-benefit) company, „Sunflower” strives foroffering sustainable jobs and rehabilitation

• Outsourcing based on “work teams” (unified outwards, supporting

inwards) for the sake of employment rehabilitation is a possible, tried

and tested way, acknowledged with the award “The Social

Entrepreneur of the Year 2007”, issued by the Schwab Foundation

(founding organizer of the World Economic Forum in Davos)

• Its goal is integrated employment rehabilitation. Sunflower

provides a positive “experience” of the disabled in order to reduce the

lack of knowledge, diminish prejudice and assist them in their

complete reintegration by experience. Thus the notion “disabled

persons” loses its significance, the individual selected through

experience becomes a sterling colleague.

• Its mission defined by the founders: To offer labor market services

for the disadvantaged (and especially the disabled or impaired)

people and thus assist them in finding employment in a certain

region. To work together with them and for their sake.

Source: Orban, P. and Hejj, T. (2008). Outsourcing based on “Work Teams” for the sake of employment rehabilitation

Employment rehabilitation: „Reintegrating those people into the society, who have lost their creative work, everyday activity, organizing principles for life, self-support, livelihood etc., through the tailor-made use of employment tools and through utilizing their available skills and developing their competences.”

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The company was set up at the Millenium and its 14-year trackrecord proves the idea

0

50 000

100 000

150 000

200 000

250 000

300 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

thousand HUF

Year

totalrevenues

revenuesfrom

outsourcing

employees(1/1000

person)

With the help of EU funds we could set up branch offices in 3 more cities last year

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Key performance indicators of Sunflower’s labour market services

(in 2013)

Disabled jobseeker contacts (pre-screening, testing skills, feedback

on career profile)254 persons

Disabled recruitment recommendations 214 persons

Successful employment cases 52 persons

Services to non-disabled (yet disadvantaged) jobseekers 589 persons

The importance and impact of the company is much more thanbeing a sustainable venture…

Providing jobs directly and indirectly for the people in need is the most important social

benefit these days!

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Do not forget: more and more people believe that corporationscan achieve the greatest impact on society instead ofgovernments!

In Europe the government (still) has the greatest impact as the participation of

individuals and companies is traditionally lower.

When the business sector activates itself and uses its resources for common

purpose as well, it will outperform governments.

Source: Deloitte, Societal Purpose – A journey in its early stages, 2012

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The real „common good” can only be permanent if value-driventhinking defines our other aspects!

Value-driven thinking

Science Economy

Responsibility!

We are only really humans, if we live like this! This is the only warranty for a sustainable future.

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You are our hope! According to a 2011 survey the typical so-called „millennium” (generation Y) person’s view differentiatesfrom the current managers’

• For business leaders the primary term is profit, other relevant factors only follow.

• According to the generation Y (born after1981):

• The purpose of business is far broader than the financial figures.

• Business has essential importance in societal development and innovation. Enterprises can pioneer societal progress and positive change.

• Business has the greatest potential to effect positive societal change.

• They are looking for inspirational and innovative business leaders who have a long-term view of the societal roIe of their business.

These young fellows choose their work place, consume products and select services

according to these aspects. Are you one of those?!

Source: Deloitte, The Millennial Survey 2011

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Finally about myself: I try to sustain a balanced life, that reflectsmy values and beliefs

Country Manager

International Vice President

MSc in electrical engineering,+ Specialist engineer in digital technology

MBA

Founded (in 1991)a foundation for the handicapped

Founder of a non-profit company,providing employment for about 50 handicapped annually, since 2000

Supervisory Boardmember

Homestart Foundation -Member of the BoardJudit

RitaDávid

KristófBalázs

Tibor Héjj

Owner - manager

Member of a spiritual movement

Founding vice president

Sophia University (Italy)PhD – in process …

Thank you for your attention –

and be responsible!

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