When one thinks of a “social enterprise,” what often comes to mind is a small, idealistic startup — for example, a business that helps artisans receive a living wage by bringing them new markets under favorable conditions. Indeed, there are many worthy organizations engaged in such a mission, including Same Sky, through which women earn their way out of extreme poverty by making jewelry.
But it’s not just the small startups that are taking on the mantle of social enterprise. Increasingly, mainstream businesses such as eyeglass designer and retailer Warby Parker are adopting governance structures and strategies that emphasize social good as well as financial goals. Even a few large legacy businesses have taken the plunge. Yogurt giant Danone was a pioneer, starting Danone Communities back in 2007. This initiative fostered local production of yogurt in ways designed to drive bottom-up economic development as well as market growth.
What is distinctive about megacorporations’ embrace of social enterprise is that along with catalyzing innovative thinking, it also represents a fundamental challenge to traditional corporate governance and operational models, which tend to emphasize the interests of shareholders over other stakeholders. These initiatives can raise uncomfortable questions about responsibility for social and environmental impact that executives ignore at their peril. For companies at the forefront, they also represent an opportunity to get ahead of a shift in expectations for corporate behavior: In a world that is growing more transparent and volatile in economic, social, and environmental terms, companies will not only be held accountable for their actions, but also be held to a higher standard than they were in the past.
The most recent company to launch a social enterprise initiative is beverage giant Coca-Cola. Muhtar Kent began articulating the need for a different way of doing business early in his tenure as CEO. Perhaps because of his global experience as president of Coca-Cola International, Kent was particularly attuned to the changing landscape. What he understood was that Coca-Cola is both one of the world’s most iconic brands and a frequent target of activists for issues such as its use of water and the impact of its flagship product on health. In recent years, the company has been developing a new business approach that addresses social impact along with its traditional pursuit of profit. Coca-Cola has set explicit goals to improve the well-being of communities in which it operates, achieve water neutrality in its products and production, and empower women entrepreneurs.
One of the tangible steps forward is the Ekocenter, an off-the-grid, modular “community market in a box,” which the company is rolling out now in Africa and Asia and planning to introduce in Latin America. Hendriksen, the executive in charge of this initiative, recently sat down with strategy+business to learn more.
S+B: What is the thinking behind the Ekocenter initiative?
HENDRICKSEN: Traditionally, Coca-Cola operated at two poles: running the core business and participating in charitable and philanthropic activities. This was the typical way companies operated. Under Muhtar Kent, we are bringing those separate activities together in what Muhtar calls the Golden Triangle: business, government, and civil society. What we believe now is that we can actually do better by knitting together the concepts of doing well and doing good. The Ekocenter is one of the first manifestations of this strategy.
Consider that more than half of the world lives on less than US$2 per day and that nearly 800 million people lack access to safe drinking water, resulting in as many as 4,000 children dying from waterborne illnesses every day. These are concerning statistics. The Ekocenter initiative is designed to help address some of these challenges in a sustainable way.
S+B: What exactly is an Ekocenter?
HENDRICKSEN: It is an off-the-grid, modular community market that is run by a local woman entrepreneur. It is designed to stimulate the local economy and provide communities with things many of us take for granted: safe drinking water, electric power, and Internet access, for example. And it can do it in some of the most remote and distressed areas of the world. The Ekocenter has solar panels, which provide consistent power and reduce the environmental footprint. It provides opportunities for customers to charge their mobile devices, send a fax, and explore the Web. It sells Coca-Cola products and also a range of other basic goods and necessities. It is a channel for disseminating educational materials on hygiene and other health issues. The refrigeration units that chill our products also enable vaccine storage. The list of opportunities is endless, and we’re packing in as much as we can.
S+B: Are all Ekocenters the same?
HENDRICKSEN: There currently are 25 Ekocenters, with a standard design prototype and certain characteristics we want them all to have: being self-contained and offering utilities, water purification, and commerce capability. However, Ekocenters can be tailored to the local issues we are working to address. No matter where we go, we try to understand the local context. In Africa, for example, many communities lack utilities, so providing power is an important feature. When we went to Vietnam, however, we found that most people have access to electricity, so providing that was less important. People there are eager for economic opportunity, so we are offering basic language and business classes at the Ekocenter as a way to amplify the economic development potential.
S+B: How does the Ekocenter filter water?
HENDRICKSEN: We are currently pursuing a variety of methods to deliver water through each Ekocenter. This can be done either from within the Ekocenter itself, provided it has immediate access to water, or from a source in the surrounding community. What we are finding is that there is no one-size-fits-all approach and we need to be flexible in terms of the solution that fits the community best. For instance, one of our main partners in the water space right now is Pentair, and our engineers have worked with that company to retrofit a system that can fit inside an Ekocenter and that uses a combination of chlorination, carbon filters, and reverse osmosis to purify water. We are also looking to partner with existing water operators in Ekocenter communities to improve their water [filtration] solutions through a variety of methods.
S+B: What impact are you hoping for?
HENDRICKSEN: With only 25 Ekocenters in operation, we’re still discovering exactly what impact we’ll have. Ultimately, we’d like to demonstrate that we can empower communities both economically and socially. For example, we are teaching people how to run a business rather than just sell products. The business model calls for ongoing operations to be self-sustaining, so we are not treating this as a philanthropic effort. When we get to our 2015 goal of 150 units, we will have directly created 600 jobs, mostly for women entrepreneurs, and around 1,500 jobs will have been indirectly created through related economic activity.
“Women excel at setting up and running small businesses and return proceeds to their communities.”
These 150 Ekocenters will have the potential to provide half a billion liters of safe drinking water every year, and we hope this will in turn reduce waterborne illnesses and deaths, but we can’t quantify that yet.
An advantage of this early stage is the opportunity to make tweaks here and there to ensure optimal operation of these and future units. We are taking an open source approach and sharing some of our lessons learned with smaller social enterprises. Executing is harder than you’d think. It’s not business as usual, for sure. Our experiences can help others understand how to scale social enterprises.
S+B: How are you measuring success?
HENDRICKSEN: This is also evolving as we go, but we’re definitely embracing a holistic view of the well-being of the community, including physical, environmental, social, and economic aspects, so measurement will be comprehensive. We are working with academics and thought leaders to hone metrics and we’re beginning to set up dashboards. We are looking for long-term benefits, not immediate return.
We have gained traction with a range of stakeholders, including communities, NGOs, companies with relevant [ways] to support Ekocenters, and even potential investment partners, so this in itself is a measure of success. This initiative has also helped us connect the dots between the core business, NGO relations, and our sustainability goals.
Internally, we have received a lot of support as well. What we are learning with the Ekocenter initiative is affecting our operating model in a positive way, especially how we measure and support social impact.
S+B: Why the focus on women?
HENDRICKSEN: Women are at the heart of the program. We have learned through other initiatives that women excel at setting up and running small businesses and, just as important, they tend to return proceeds to their families and communities. The impact we have on overall community well-being is increased when we work with women entrepreneurs.
S+B: What were the challenges of developing the Ekocenter initiative — both for Coca-Cola as a company, and on the ground in the countries where you have started the rollout?
HENDRICKSEN: We are on a journey, and I think that is both the most exciting and the most difficult aspect of my job. We are not launching something we’ve done many times or something that is tried and tested, so it requires a great deal of selling in to the organization and a continuous reinforcement that we are on the right track. From an operational point of view, again, if this were easy, someone would have done it before. Challenges with regulations, customs, water access, local acceptance, and so on can all take a long time and are sometimes difficult to overcome, but our perseverance has paid off so far. I think sometimes, when working for any big organization, it’s easy to lose the entrepreneurial mind-set, so I’ve tried hard to cultivate that within my team. We also partner with a wide variety of organizations and people from different backgrounds, not all of whom may have the same way of working as we do, and that requires flexibility. As far as a new competitive model goes, we are developing trisector leadership skills that we believe are important in an interdependent world.
S+B: Have you considered deploying Ekocenters in markets in the developed world?
HENDRICKSEN: It certainly could work in Europe or North America, but we don’t want to try to boil the ocean. For now, we will go where the need is greatest.
S+B: What other benefits are you seeing?
HENDRICKSEN: We have had to collaborate with a different set of partners than we normally do, and that has exposed us to new ways of thinking about finding solutions. Organizations such as IBM, McCann Healthcare, Ericsson, the Inter-American Development Bank, and Pentair have all been involved in the Ekocenter program. These relationships spur creativity and innovation that can go beyond this initiative.
The social enterprise approach is a great way to connect with the next generation of customers and workers. I talk to a lot of them at conferences. They seek me out. The Ekocenter concept aligns with their world vision. They are inspirational. Their dynamism and passion help give me the courage and energy to carry this forward. This is not always an easy journey, but the end will be a really great place to be. When I listen to the upcoming generations, I really feel that this is an idea whose time has come.
- Eric J. McNulty is the director of research at the National Preparedness Leadership Initiative and writes frequently about leadership and resilience.