QUARTZ / SEPTEMBER 17, 2013
Two flags now fly over Mogadishu. There’s the Somali one, of course: white star, blue background. The other’s rise over the battered concrete sprawl is more recent. It flies over schools and hospitals, is stamped on trucks and painted on trash bins. The white-and-red emblem even shares the desk of the city’s mayor.
That year, Erdogan pledged $49 million to Somalia. In 2012, Turkey spent $70 million on full scholarships to over 1,200 Somali students to study in Turkish universities, making Turkey the largest non-OECD donor in Somalia. And private Turkish citizens donated $365 million on top.
Turkey claims its revamping an outmoded and inefficient aid system, and, in the process, improving more lives.
“Big western donors work through the UN agencies with bureaucracy and high administration costs,” says Kani Torun, Turkish Ambassador to Somalia. “But we use the money to directly support Somalis, and the government of Turkey covers all the administration fees.”
The Somali government says the difference is evident: just look at the results, says President Mohamud. “They are creating modern hospitals and establishing the education system. This cannot be delivered through NGOs and through UN agencies. Bilateral aid is what Somalia needs,” he said.
At his office, the Mayor of Mogadishu, Mohamed Nur, continued the argument.
Compare the Turkish approach to the UN approach, he said.
“If I request computers from the UN, they will take months and require a number of assessments. They will spend $50,000 to give me $7,000 of equipment. If I request computers from Turkey, they will show up next week.” At this crucial moment of transition from chaos to tentative stability, this immediate impact is what Somalia needs most, he said.
But not all are enamored with the bold new initiatives of the Turks. Some donors complain a lack of coordination with the rest of foreign aid institutions results at times in duplicating efforts.
“If the UN Agencies want to coordinate, then come to Mogadishu and we can coordinate,” Ambassador Torun responds. “But we can’t spend all of our time going to meetings in Nairobi when our work is here in Mogadishu.”
Most Western agencies continue to base their Somali operations out of Nairobi, Kenya, citing longstanding security concerns. Turkey knows the risks well; in July, six people died when US-designated terrorist groupal-Shabab attacked the Turkish embassy. The Turks stayed nonetheless.
Turkey stands to benefit from its more engaged approach here as the Somali government returns the favor. The Somali government recently awarded a Turkish company, Favori LLC, the contract to renovate, maintain and operate the Mogadishu airport for the next 20 years. And although the Somalia government signed its first new oil exploration deal with a British company, the minister of natural resources, Abdirisak Omar Mohamed, noted that he would have awarded it to the Turks “if Turkey was willing to sign a contract, but Turkey never came and asked for a contract.”
The new Turkish ties filter all the way down to Somalia’s famously entrepreneurial family businesses. Local contractor Abdunir Abukar works with a Turkish company rehabilitating properties across Mogadishu. His workers initially resisted working with the Turks, he said, due to communication barriers and a Somali work ethic that atrophied over two decades of conflict. “Our employees have adapted. They have learned discipline and technical skills from them.”
These small changes can multiply quickly. A more disciplined and skilled workforce encourages the diaspora to return and help rebuild, which in turn creates more stability, creating a self-reinforcing cycle of development.
Abdul Majeed Iman owned several shops prior to the civil war. His buildings and inventory were completely destroyed. He returned to Mogadishu in 2010 and re-opened a retail shop. Now, he sources some of his merchandise from Turkey.
“Turkish companies have requested to work together. They have offered to fly businessmen over to Turkey to discuss how they could cooperate,” he said. Despite his own entrepreneurial background, he adds: “We can learn from the Turkish expertise.”
Turkish business moving in to Somalia are in direct competition with other international companies operating in Somalia, at times resulting in a zero-sum game for key contracts. For instance, SKA, a company from Dubai, had a 10-year contract to operate the airport. But the Somali government abruptly cancelled the contract and gave it instead to a Turkish company, leaving some to question whether Turkey’s aid has created an unfair competitive advantage with the Somali government.
By accepting the risks here when nobody else was willing to, Turkey more than any other country, is poised to cash in on the rise of a stable Somalia. It’s a unique soft power strategy: more direct than Western nations, more cooperative and willing to transfer skills than China.
Since 2005, Turkey has significantly increased its presence in Africa, going from 12 embassies in 2005 to 34 today. Its aggressive expansion demonstrates a desire to fight for influence on the continent that is poised to be the fastest growing over the next few decades, adding 1.3 billion people by 2050. The general narrative is that China is the most important partner to Africa, but if Somalia is any indication, Turkey might be a real contender.
THE WALLSTREET JOURNAL / AUGUST 30, 2013
The most enduring social and environmentally responsible brands lead with product and follow with story. Nobody cares about how much good your company is doing if they don’t love your product.
In a recent conversation with Adam Lowery, Chief Greenskeeper at Method, for my upcoming book Profit & Purpose, he gave his perspective on making products that consumers love.
In 2002, Method set out to disrupt the cleaning products industry with style and substance. They thought, rather than hiding your cleaning products under the sink, they would make a product that people would want to showcase as a piece of art on their counter. So, even though they were a very young company, they invested heavily in recruiting one of the best product designers in the world, Karim Rashid, to design their bottle. Method brought high design to the soap aisle.
But the interesting thing about Method is that they stand for something much bigger. Method exists to make cleaning less dirty. They use only natural ingredients in their products, significantly reduce water usage in manufacturing, cut down on packaging as well as offset their carbon footprint.
Method calls this their Trojan Horse. This powerful combination of style and substance, is a sort of one-two punch for good – differentiating their product from the competition and creating loyal customers.
This tactic seems to be working quite well. They hit the $100 million in revenues milestone quickly.
I’ve spent most of my career in the social enterprise sector, both as a social entrepreneur and an attorney counseling them, so I’ve had hundreds of conversations with aspiring social entrepreneurs who earnestly believe in changing the world through business. That is to be applauded, and incidentally, I happen to believe it too.
The problem is that many lead with an inspirational story and create sub-par products. Some social entrepreneurs believe, wrongly, that consumers will forgive a poor quality product if there is a good story behind it. But if you are creating a company that stands for something, you should hold yourself to the highest standards of excellence in product development, not cut corners.
So, take a lesson from Method: lead with product, follow with story.
THE GUARDIAN / AUGUST 14, 2013
The benefit corporation is a new class of corporation in the US, which mandates that entrepreneurs take into consideration their social and environmental impact, potentially at the cost of returns to shareholders. An essential question for entrepreneurs who are creating a sustainable business but also need investment is: what do investors think about the benefit corporation?
Shift from technological to social innovation
As a partner at Union Square Ventures (USV), Albert Wenger has invested in some of the most successful tech companies, including Twitter and Tumblr. He considers himself a pure tech venture capitalist, not an impact investor, yet he is strongly in favour of the benefit corporation.
Wenger believes that the current version of capitalism has been incredibly efficient at creating and distributing a high volume of stuff at an increasingly cheaper price. Technical innovation has ensured that everything from computers to clothing is getting cheaper and much more widely available.
“The problem of technological innovation is not the primary problem that we still need to solve. The primary problems are the very large-scale problems: giving people access to good education, quality healthcare, poverty alleviation and not destroying our planet.” Wenger believes we have to usher in a new version of capitalism that will shift the focus from technological innovation to social innovation and the benefit corporation is a great vehicle to do that because it moves beyond a narrow view of shareholder maximisation-centered version of capitalism
Protection from short-termism
There is a fundamental disconnect between the incentives for short-term profit maximisation and long-term value creation. “A company could exist for decades or longer, but individual managers may work at a company for only five years or 10 years; investors may be looking to exit even more quickly. So you have very different time horizons,” notes Wenger.
The benefit corporation empowers management, directors and shareholders to set a long-term vision for the health of their company without the interference of short-term focused shareholders forcing them to extract value too soon. A good example of this, according to Wenger, is the Myspace acquisition: “News Corp bought it and paid what they thought was a reasonably high price for it and then proceeded to want to recover that price very quickly. So they tried to monetise the network very, very heavily, ultimately contributing to its collapse.”
After a long career in investment, including serving as co-chairman for the $21bn asset management firm Genworth, Ron Cordes has shifted his focus from simply investing in great companies, to investing in great companies that have a positive social and environmental impact.
Most investment rounds include multiple investors and, more often than not, they have never met each other – the other investors are simply names on a capitalisation table. There is no way to understand the other investors’ motives for making the investment. Typically, the investor would have to rely on the CEO of the company to bring together a group of investors who are aligned around a common mission.
This works well so long as the company is meeting or exceeding their financial projections, but, Cordes notes, “growing a business is never a linear path. So it’s always two steps forward, one step back. Markets and economies are at play. Crashes like 2008 happen, and generally issues occur that were unexpected in a negative way.
“Investors sometimes react in unusual ways. They may say, ‘Wait a minute: that was great when we were performing well, but now we’re down here and you’re asking me to put extra money up, and you’re saying we still have this employee and stakeholder engagement policy.'” For individual investors to continue to support the social and environmental mission of a company even when the company is struggling financially is challenging.
Cordes says: “If the values are not codified, you’re going to be relying on the collective good intentions of the group, which is hard. So if I’m a shareholder and I truly don’t know the other shareholders, then the benefit corporation at least says, OK, I’m not going to have that issue come out of the left field here because everybody is signing up to the baseline goals baked into the articles, which gives you a recourse that you don’t have otherwise.”
It sounds lovely to pursue profit and purpose. But David S Rose, angel investor and entrepreneur who has founded or funded more than 75 companies, says that, when the rubber meets the road, you need to choose profit or purpose, but you can’t build a successful company trying to pursue both simultaneously.
Rose says: “It’s wonderful to think that one can have one’s cake and eat it, too; that one can benefit society, make a lot of money, make everybody happy, end wars, cure cancer. In the real world, however, things tend to optimise in one area. It is nearly impossible to try to truly optimise for a double bottom line. But, in the case of making money and creating social good, the underlying challenge is that starting a new venture is insanely tough. It’s really, really difficult. Given the fact that the majority of new businesses fail when entrepreneurs are busting their rear ends to try to make it succeed economically, to then overlay on top of that a secondary goal is really, really challenging.”
So, when it comes to the benefit corporation, which is designed for companies pursuing both profit and purpose simultaneously, he concludes: “I don’t think benefit corporations are evil. I just think that they are ultimately naïve because, in the real world, you have to choose. You can’t have your cake and eat it.”
In the end, it’s difficult to make a general statement for the entire investment community because every investor is different and driven by unique blend of motivations. But there seems to be openness from some leading investors to the new corporate structure. Wenger and his team at USV are looking forward to working with benefit corporations. “We are actively encouraging some portfolio companies to pursue the benefit corporation structure. It certainly would never stop us from investing.”
HUFFINGTON POST / AUGUST 11, 2013
We just saw it out of the corner of our eye as we were bombing down a dusty road in the district of Kamwenge. Out here in Western Uganda, it’s so normal, that you’d just pass by without thinking anything of it. It was merely a pipe sticking up out of the ground overgrown by weeds. Unremarkable in its ubiquity. We slammed on the breaks and threw it in reverse, then jumped out of the van to see yet another broken well.
In this district, 43% of wells are broken.
We take clean water for granted. We turn a faucet and clean water magically appears. That’s not the case for over a billion people around the globe. Their daily routine includes filling up five jerry cans – 20 liters each – of water everyday and hauling them back to their homes to drink, cook, wash and bath with. If a well breaks, they have to use the next best option, which is a “scoop hole” – an open water source, like a stream or unimproved spring, of contaminated water. At such a scoop hole, I witnessed a group of women dipping their jerry cans into water that had a layer of diesel fuel sitting on the surface. This is the water that they will be drink and give to the very infants strapped to their backs.
Why are so many wells broken?
Imagine this scenario. Say you and your neighborhood of fifty households desperately needed transportation, but you didn’t have the money to buy a car. Then one day, out of the blue, somebody you don’t know comes from another country and gives you a car. There is great fanfare and people are taking your pictures. And then they’re gone, and you have a car. Which is great! You figure out how to use it and share it, and for the most part it works. Your lives are improved because you have access to transportation. But unfortunately, none of you have the knowhow or money to change the oil. So eventually, after a year or so, the engine seizes up and you can’t get it started again. So it just sits on the side of the road where it broke down. And you and your community are back to walking.
Digging a well is incredibly important (and more are needed), but it’s not enough. This sounds obvious, but is so often overlooked – wells need to be maintained, or, just like the car without an oil change, they will eventually break down.
The reality on the ground is that governments don’t have nearly enough resources to maintain all the wells, and NGOs have moved on to dig the next well. Digging wells is sexy. Donors get excited about that, but it’s way less sexy to ask donors support the maintenance of wells. So they just keep digging more wells. And they continue to break. The typical life for a well in this district is less than three years. The governments aren’t able to take ownership and the NGOs are unwilling. So the community must.
As a member of the board of The Adventure Project, a nonprofit focused on innovative solutions for poverty, I joined our team on this trip to search for the answer to one simple question… What does it take to ensure consistent, long-term access to clean water?
Enter Diana Keesiga.
Diana grew up in a small village in far Western Uganda close to the border of Democratic Republic of Congo. As a child, she, like so many others, had to resort to drinking from a scoop hole when her well broke. Due to her wit and hard work, she was able to attend great schools, where she rose to the top of her class. She earned a scholarship to the best university in Uganda where she graduated with a first-class degree in civil engineering. Rather than take a job in the capital city of Kampala, she chose to take a position with Water For People in rural Western Uganda to train and empower local entrepreneurs to take ownership and maintain wells.
Diana is working with the local district government to institute a “pay-as-you-fetch” system. Under this system, a water entrepreneur is granted responsibility for individual wells by the local government. He or she has the authority to charge a fee of 100 Ugandan Shilling (4 cents) per Jerry can, which is five percent of household income. The water entrepreneur has the responsibility to maintain and rehabilitate the well. Since a well needs to be completely rehabilitated about once a decade, half of the revenues are placed into a savings account that can only be tapped for this purpose.
A key aspect to the pay-as-you-fetch system is the installation of a low tech, but innovative piece of technology. Each of well is fitted with a tamperproof water meter that tracks the flow. This ensures that revenues are collected and the proper amount is set aside in an account for future repairs. Surprisingly, the transparent measurement of water flow at the source has never been done before.
The net result is consistent access to clean water. Last week one well broke down, but rather than being abandoned, it was up and running in a matter of hours. Wilson, a local resident commented, “when you transfer ownership from the government to a human being, he makes sure that the water keeps flowing, because if it doesn’t flow his family doesn’t eat.”
This approach creates jobs for the water entrepreneur catalyzing for upward social mobility for his or her family. Their children are healthy and stay in school and have better opportunities for the future. Most importantly, the community moves from dependence on NGOs or the government to independence.
The pay-as-you-fetch model is still in an early stage pilot, so, there is still a great deal to learn. As with any new innovation, there will be challenges along the way. But Diana is not content to sit idly by and watch her country return to the scoop hole. She is committed to charting a new course for sustainable access to clean water in Uganda for generations to come.
THE GUARDIAN / JULY 4, 2013
On Halloween of 2007 in Durham North Carolina, two people emerged at the front of a room dressed in bee costumes to make a secret, high-profile announcement that would alter the course of two companies.
As Clorox approached its centennial birthday, it decided it needed to change. The company had listened to its customers, who were saying they increasingly care about health and wellness, for their families, as well as the environment. They wanted products that are natural, safe and sustainable. Clorox realised it had to respond to that demand, but it needed expertise to do so. Enter Burt’s Bees.
Word of the deal was met with scepticism in the sustainable business community. Was Burt’s, known for its natural products, selling out? Could it stay true to its sustainable roots once it was part of a chemical company?
Six years later, Burt’s Bees and Clorox have proved the sceptics wrong. The acquisition has catalysed positive change throughout the value chain, from R&D, to sourcing, to waste management.
Connecting salad dressings and skin lotions
After the acquisition, Burt’s was able to increase the size of its R&D budget by 50% and invest more in creating innovative products, not only with the additional cash, but by tapping into Clorox technology and expertise. Who would have thought Clorox’s salad dressing would hold the key to making better natural skin lotions?
It turns out that natural lotion is notoriously liquid, which inhibits its ability to moisturise. Liquid salad dressing technology allowed the Burt’s team to create a significantly improved lotion, which moisturises for 24 hours. Through the cross-pollination among the Clorox and Burt’s R&D teams, they are able transfer applicable technologies to enhance product development.
Collaboration between the Clorox and Burt’s R&D departments has also helped make Burt’s products more natural. Paula Alexander, director of sustainable business and innovation at Burt’s, reports: “From 2009 to 2012, we went from the average product being 97% natural to the average product being 99% natural.”
Burt’s has also brought expertise to Clorox, as hoped. As one of the few companies that launched with a sustainable supply chain and maintained it through rapid growth, Burt’s had a great deal to teach Clorox in that area.
Following the acquisition, Shannon Hess, Burt’s sourcing manager, was moved to senior manager of responsible for sourcing across the whole Clorox portfolio, including Burt’s. She acts as a sort of internal management consultant to help reshape the sustainable supply chain practices across the company. Under her guidance, Clorox now takes a more proactive approach to driving sustainability criteria into its purchasing processes. One step has been developing a scorecard for its top 100 suppliers to encourage them to measure, report on and reduce the environmental impacts of their own operations. Over the past five years, Clorox has made sustainability improvements to 35% of its product portfolio.
Such a change in operations is no easy task. It’s one thing for a single brand like Burt’s, with a relatively small product portfolio and a few dozen suppliers, to make this commitment. It’s a much more substantial task for a conglomerate, with scores of brands and thousands of suppliers, who have tens of thousands of sub-suppliers.
Another of Burt’s influence has been introducing Clorox to the Dumpster Dive, a venerable Burt’s tradition. At 9am on a recent Tuesday, the Clorox Fairfield Bleach plant, usually humming with activity, was silent. In the parking lot, the plant’s dumpsters were upended and their, nasty smelly contents strewn across the lot.
Clad in overalls, gloves and masks, employees sort through the trash by hand, removing and sorting the recycleable and compostable waste to determine how much can be diverted. Later the same day, they meet to devise action plans. Not only does the exercise lead to significant improvements, it also sensitises employees to look continuously for further improvement opportunities. In Fairfield, the employees identified the seven key locations where waste is generated and proposed that recycling bins be installed at each key location to divert the waste in the workflow, rather than at the end of the process.
Every Clorox factory that has implemented the Dumpster Dive has seen an immediate reduction of at least 50% in waste to landfills. Now Clorox has committed to operating a dozen plants at zero waste to landfill by 2020. Already half a dozen are close to that goal, and it seems likely the company will not only make the mark, but exceed it.
The Clorox acquisition of Burt’s has proven to be a surprisingly positive model for cross-pollinating sustainability practices, and that innovation has been good for business, too. Since the acquisition, Burt’s revenues have grown at a double digit pace every year, except for 2009. Altogether, Clorox’s sustainability efforts have translated into approximately $15m in annual cost savings. Large corporations should take note of the lessons learned about how to acquire and integrate emerging companies to drive innovation toward sustainability while driving profitability.
Clorox has a long road ahead of it to implement its goals fully, but it has made good strides toward creating sustainable business. This is only the beginning of the journey.