By Melissa Carrier
Last year, I asked our Smith School Faculty Committee a simple question, “What does social value creation look like in your field of study?” They looked at each other, intrigued by the question. So, the challenge was born to define social value creation across business disciplines. Each faculty member took the next 6 months to craft a story around social value creation in their field: finance, marketing, strategy, supply chain, entrepreneurship and economics. At the same time, I reflected on the genesis of our name and the Center’s mission to create a better world through business principles. Why did we create the Center for Social Value Creation in 2009 and not the Center for Social Responsibility, or the Center for Sustainable Business or the Center for Social Entrepreneurship? We chose the name because we wanted to redefine value creation in a new 21st century way. We believe the perfect storm is brewing for a fundamental shift in the role of business in society that will enable a more inclusive form of value creation ‒ one that embraces shareholders, employees, customers, communities, and our environment.
Under the 20th century model of industrialization, the prevailing notion is that governments have the responsibility to create and protect social value, and the nonprofit sector exists to fill any remaining gaps. Government sets the rules and regulations that define the business landscape, and companies assumingly play by these rules, operating under ethical standards, to maximize profits. This framework makes it possible also for business to externalize many types of risk and cost; though of course, this was not always the intent. In the late 1700s, the privilege of incorporation was granted by states for specific purposes that benefited the public ‒ such as construction of bridges, roads, schools, and canals. Corporate charters had limited lifespan and the company was restricted to activities that directly fulfilled their purpose. The ability to profit was widely seen as an effective way to organize capital, and achieve public goals. In the late 1800s, another critical shift occurred when corporations were granted “personhood” through the court system. According to historian Brian Murphy, the intent of free incorporation was actually “to limit the power of corporations by democratizing the corporate form through dilution.” The intention was to level the playing field over the practice of choosing among rival charter-seekers. What resulted is the free marketplace of the 20th century, with its genius and imperfections alike, and the unremitting emphasis on shareholder wealth creation.
By Darius Graham
When starting a new venture, entrepreneurs face a number of choices. These range from picking the right name to selecting the right talent to join the team. These questions are critical and should be addressed with the utmost care and deliberation, as they can make or break a business. One other choice faced by an entrepreneur that wants to offer a product or service and make a difference is whether to create a non-profit or for-profit. This is a choice especially difficult for social entrepreneurs – people that want to combine profit and purpose.
While it’s worth thinking about because of the legal distinctions and consequences of selecting either, the choice between for-profit and non-profit is not as important as it used to be as more non-profits generate income from business activities that go back to support the core charitable programs, and for-profits build giving back into their corporate mission.
Two local examples illustrate how a non-profit organization can blend in aspects of a traditional for-profit business.
By Drew Bewick
Advice is particularly valuable for would-be entrepreneurs, innovators, business professionals, and future leaders when developing a business plan, attracting capital, or expanding services into new markets. One leadership challenge, however, which is often underestimated, involves improving workforce engagement and motivation, especially to sustain creativity, performance, and problem-solving capacity to think “outside-the-box.”
Engagement and motivation
Contrary to conventional wisdom, recent social science research, including research by the Federal Reserve Bank of Boston (FRB) in 2005, suggests traditional incentives – such as goals set by managers or rewards in the form of monetary bonuses – actually dull employee creativity and problem-solving. They are not effective motivators alone for newer 21st century tasks often associated with knowledge work.
By Ryan Steinbach
Two weeks ago, I took this question for granted: Should social finance be incorporated into the business curriculum? To me, the answer was yes! Social finance is an emerging approach to managing money that delivers a social and/or environmental return in addition to an economic return. Why wouldn’t we include such an offering in the curriculum? After spending two weeks talking with professors and industry professionals as to why social finance isn’t more prominently featured in college education, I’ve come up against some serious reality checks.
Here’s what I learned:
The majority isn’t convinced
When you get as caught up in the hype surrounding social finance like I have, you tend to forget it actually represents a tiny piece of the total finance market. The most optimistic reports estimate the near-term market potential of social finance at $650 billion which is 2.5 percent of the $26 trillion investment management industry in the U.S.
When I asked the Director of the Masters Program in Finance here at the Smith School, Michael Faulkender, if social finance is a topic of discussion in graduate level classes, he explained that it’s brought up anecdotally when discussing unique investor needs, but the simple fact is that an understanding of financial markets based on maximizing long-term shareholder value is what is required for an overwhelming majority of finance.
By Peter Berger
Thousands of heat records were broken over the past few months in one of the hottest summers in recent history. Thankfully, this heat wave has reengaged the public’s interest in climate change and what can be done to curb the emission of greenhouse gases. The fact of the matter is that consensus has shifted. At the turn of the 21st century, skepticism with regard to climate change was acceptable; this is no longer the case.
Richard Muller, a University of California physicist and self-proclaimed skeptic of man’s effect on global warming, stated in a New York Times article that “Humans are almost entirely the cause.” This change in viewpoint was the result of a systematic and objective analysis dubbed the Berkeley Earth Surface Temperature Project, performed under the gaze of the Novim Group, an objective auditor. This study analyzed data dating back 250 years (1753-2003), comparing global temperature trends to a variety of factors. Scientists from this study say that there is a “clear agreement between global land-temperature rise and human-caused greenhouse gases.” Despite evidence suggesting that global warming is largely due to human activity, significant policies encouraging corporate responsibility for greenhouse gas emissions have not been introduced.
By Amadou M. Cissé
I am sure by now that most of you have heard about if not already seen the video that went viral on YouTube entitled Kony 2012, a documentary asking to put an end to the abhorrent activities to the International Criminal Court’s most wanted criminal, Joseph Kony. A Ugandan national, Kony is the leader of the Lord’s Resistance Army and is infamously known to have abducted over 30,000 children as recruits to his army. What I found most tragic about the video was the fact that children soldiers have become the norm in conflict areas in Africa and sadly there seems to be a very lethargic reaction to this outrage.
I commend Invisible Children for having the courage to discuss a very difficult and even controversial subject using social media. To raise awareness of an unspoken situation, you have to engage people and initiate the discussion. Kony 2012 generated a lot of debates for and against the movement. Opponents of the video have stated that releasing the video has not helped the situation since Kony is still free, somewhere in central Africa, still abducting children and engaged in a senseless rebellion. The same opponents will add that this video is again exploiting the misfortune of Africans to profit Westerners. I totally disagree with these views for two reasons. First, I have not seen any of these opponents do something themselves to help stop Kony besides criticizing. Second, not talking about Kony means that we are not giving a voice to those who have no means to advocate for themselves.
By Amadou M. Cissé
Mt. Everest or Sagarmatha is “so high that no bird can fly [above it]” as the saying goes in Nepal. It takes a great amount of training and finances to make it to the peak of the highest mountain in the world. During a recent course in ethics, we Professor Lele discussed the famous HBR case study parable of the sadhu. In it, the author discussed the months he spent hiking through Nepal where he encountered an Indian holy man, or sadhu. The sadhu was left in poor health conditions to fend for himself while the group continued their way up the slope. What happened to the sadhu? Nobody knows, but what has happened to Sagarmatha is very clear or I should say very dirty.
Sagarmatha is prized for its beauty but stories about the litter problem are all too common. In 2007 there were 110, 000 pounds of garbage on Sagarmatha. The good news is that since 2000, there have been several initiatives attempting to restore the mountain while educating locals as well as tourists.
A few days ago, on my way home I was listening to NPR and I heard about yet another chemical spill in a river in China. It turns out that seven people had been detained in connection with the toxic metal (cadmium) spill in a tributary of the Pearl River in the Guangxi province. The spill threatens the livelihood of 1.5 million people in the city of Liujiang. As China continues to enjoy its economic prosperity – being the second largest economy in the world – how can it also become a leader in environmental stewardship?
China has an estimated population of 1.3 billion people according to the latest report from the CIA. A spill impacting 1.5 million people or 0.1% of the Chinese population would have been impacting almost the entire population of the state of Idaho! Such a spill would be considered a major crisis in the US, especially when one understands the dangers associated with cadmium like kidney failure and cancer. Cadmium is an extremely toxic metal commonly found in industrial workplaces, particularly where any ore is being processed or smelted.
By Eric Flamer
The US Green Building Council reports that as of March 3, 2011, 91 hotel properties have achieved LEED certification, with an additional 1100 projects registering with LEED and working towards certification.
From my employment experience in the Washington, DC convention hotel market, the truth is that most of the buildings dedicated to hospitality were constructed in the era preceding the green revolution, and are sorely lacking in any type of energy efficiency. What are some ways the industry can align guest satisfaction, bottom-line reduction, and green values successfully?
Recently I came across a LEED gold-certified property during some volunteer work in East Baltimore, MD: Marriot’s Fairfield Inn and Suites takes pride in being Baltimore’s first green hotel.
After examining the Fairfield’s greening strategies, there are some points to consider in examining the overall trend towards a greener hospitality industry:
By Stephen Huie, MBA 2012
In recent years, organizations have developed increasingly creative and large scale supply chain initiatives to deal with increasing energy costs, a recessionary environment, and consumer demand for sustainable processes.
To capitalize on this evolution in practice, academic institutions must also make a conscious effort to train the next generation of supply chain managers to build upon these best practices and identify further opportunities to improve.
Part of the reason why I love the summertime is that I’m so happy and carefree. I can bask in sunshine all day long and play outside surrounded by growing things. However, it would be silly to overlook the contribution that food brings to my happy, healthy mentality. In the summer, my consumption of fresh fruit and produce gets alarmingly large. I am fortunate to have food security and have access to high quality food.
The Food Security Assessment of the USDA (measuring food security in developing countries for the coming decade) estimates that approximately 882 million people are classified as “food insecure,” a designation that refers to an inability to access food that would fulfill adequate nutritional value. “Food security” encompasses “the ready availability of nutritionally adequate and safe foods” as well as “an assured ability to acquire acceptable foods in socially acceptable ways.” The study predicts that the current level of food insecurity will only decrease by an aggregate 1% over the course of the decade, and that the situation in sub-Saharan Africa is particularly dire.
However, food insecurity is hardly an issue confined to the developing world. Prosperity in the United States itself is far from evenly distributed, and over 50 million people in the U.S. are food insecure. In the Smith School’s own backyard, the District of Columbia experiences food insecurity at a significantly higher rate than the national average, with most recent average values of 11.1% of households food insecure in D.C. versus 9.7% nationally.
By Kathryn Cai
As a reader I cherish the complete experience of reading a book: the weight of it in my hands, the smell of the pages, the permanence of the words, and most especially, because every good book claims a little part of me, the knowledge that I can reopen the same pages and return to the self I was when I was first so captured by its words. Even in light of my (creepy?) love affair with print books, the advent of e-book readers made me briefly wonder if I should abandon paper and ink for a more sustainable way to feed my literary habit. As it turns out, however, there there’s a sustainability alternative: many booksellers are begining to integrate both social and environmental concerns into their business models.
By Becky Eisen, MBA Student at the University of Maryland, Smith School of Business; President, Smith Net Impact Chapter
As Leslie Lammers put the finishing touches on Organic Eggs Not Created Equal, Says New Scorecard, I spent the day at the Just Means Certification, Consumption and Change Conference at the National Press Club in Washington DC, listening to certification veterans like Fair Trade USA, Equal Exchange and the Forest Stewardship Council discuss the current state of the certification industry with a host of newer organizations that have recently formed or joined the certification movement and a smattering of USDA and other federal representatives.
I hate starting with a complaint, but I have to report that the speakers were overly polite and skipped around the hot button topics. While some made the occasional, well-cloaked jab at particular labeling scheme, most speakers overwhelmingly read from the same script: “What is a best practice now will not be one in five years. Standards are always changing, the bar is getting higher. You need independent monitoring of compliance with standards. We should all work better together.” It was as if during a pre-conference convention they brainstormed winning campaign slogans and peer pressured each other to stick to the talking points, regardless of the panel topic or audience question.
By Stephen Huie
This past Friday, I visited Community Wealth Ventures and Share Our Strength as part of the Smith Net Impact Club’s Executive Shadowing Program. Other students visited Noblis, a non-profit scientific and engineering research center.
I learned a lot, especially about the role of mission in circumscribing the limits of earned income social ventures.
Community Wealth Ventures
Community Wealth Ventures is a for-profit firm that provides management and strategy consulting for non-profits. CWV was created as a social enterprise by Share Our Strength to assist other non-profits in developing earned income ventures. Examples include homeless shelters providing gardening services, Goodwill creating a janitorial service firm, and environmental groups creating wood certification and verification. These social ventures must deal with the competition and managerial challenges of running a business.
By Guillermo Olivos
Yesterday I had the honor of joining a select group of ambassadors and corporate executives to get a sneak preview of the EPA’s National Sustainability Design Expo and P3 Competition. The event is designed as an annual event for (directly from the brochure) “teams of graduate and undergraduate students to design solutions for environmental and sustainability challenges worldwide. P3 stands for People, Prosperity, and the Planet. Fifty five of the best and brightest teams of students will showcase their work to create a greener future.
There is some pretty amazing stuff to be seen, and if you are in the DC area this weekend I encourage you to attend (yes, it’s rainy, but it’s in a tent!) You might take a look at the Rowan University team’s steel-based model of a machine that turns peanut shells into briquettes for burning— an idea that might be especially helpful for a country like Gambia that is lacking in natural forestry but can claim 8.9% of its GDP from its peanut production. Reusing waste to solve heating problems, save individuals time searching for scarce firewood, and improving quality of life? Yes sir.