NEWSIMPACT ASSESSMENT

I recently spent two days at the Opportunity Green Conference in LA where I was immersed in conversations about sustainable business. One panel, Accelerating Green Product Innovation, provided interesting examples of innovation in businesses from entrepreneurs in various stages: from pre-launch (Replenish), to firmly-footed (Rickshaw Bagworks) to household name (Coca-Cola).

Innovation Principle #1: Limitation Inspires Innovation
Jason Foster, founder and CEO of Replenish had a crazy idea: "Let's build products that are designed for re-use." In a consumer society where items are purposely manufactured for a short life-span, this is an innovation. (Side note, if you haven't seen The Story of Stuff, it's well-worth 20 minutes of your time.) Foster's innovative design for cleaning products reduces plastic by 90% and costs 50% less than competitors. They knew they could reach that goal but in designing their product, they encountered some challenges to their ideals. Making their product in PET (easily recycled material), proved a challenge within the existing manufacturing infrastructure. But they stuck to their principles and in the end, Foster was grateful for the limited options that gave some direction to their design--the limitations actually inspired greater innovation.

Innovation Principle #2: Good Ideas Spread
Panelist Mark Dwight, Founder and CEO of Rickshaw Bagworks, started the company with old-fashioned values that made the now-moguls what they are decades ago: pay attention to form, function, and footprint. As a small business, Rickshaw's innovations have even attracted mega companies to adopt some of their practices. For example, Rickshaw's practice of shipping their products to customers in bags that can be re-used for returns if needed caught the attention of ebay. It's encouraging to see larger companies asking start-ups how to innovate and to see start-ups sharing those ideas for the greater good.

Innovation Principle #3: Maybe Recycling is Better than Re-Creation
When big companies do take the lead with innovation, their investment in research can have immense impact. Panelist Gopal Kishnan, Senior Director of Global Marketing Innovation and New Categories for The Coca-Cola Company talked about Coke's new PlantBottle. It's made with up to 30% plant-based material (sugar cane) and can be recycled just like any PET material.  I would like to see more research on this, but Gopal explained that they created the PlantBottle as a material that can be recycled rather than composted because the energy required to create a new bottle is less than is required to recycle the bottle in to new material. I want to see a PlantBottle that could go either way but in the meantime, this is challenging me to rethink some of my assumptions.

The idealist in me was reminded of an important underlying idea key to innovation. During the Q and A, a participant asked, “Do you wait until the design is perfect?” and Dwight answered, “Iteration is the key to innovation, and perfection is the enemy of progress. Sustainability is a journey. Don’t wait for perfection. There is no 'perfect' product.”

Photo credit: opportunitygreen

One of the most fundamental yet usually-unspoken assumptions of the philanthropy world is that if we get better about measuring social impact, donors will all of a sudden start to prioritize impact metrics as a motivating factor for their donation decisions. This is an "If you build it, they will come" belief, and I just don't buy it.

Sean Stannard-Stockton brought this question up most recently with his post "Do Donors Care Whether Nonprofits Are Any Good?" His question was sparked by a recent UK survey that suggested, among other things, that only 40% of average donors would be interested in independent charity ratings, a full 68% do not think such a rating system would impact their decisions, and only 25% would be more likely to give.

Uh oh. That's some pretty damning evidence that donors don't care.

But at this point, it's useful to parse out classes of donors. There are fundamental differences among a private foundation with an endowment and a board of trustees, a family foundation or donor advised fund, and your average citizen philanthropist. The most important difference is not about magnitude but about motivation.

I believe that the further the apparatus of giving is from the person whose money is being used, the more likely to be interested in impact metrics a certain class of money will be. What I mean is that a group like the Ford Foundation has a mandate to address a particular set of issues. For them, their raison d'etre is their impact.

For your average personal donor, it's something much different. Most people give because they feel a longing to be a part of something bigger than themselves.

A few months ago, the much-ballyhooed Social Innovation Fund released a Notice of Funding Availability (NOFA) to solicit public comment. Many of us chose to make our comments public, with common themes including questions of how accessible the money would be and concerns about stringent impact measurement requirements. Now, the NOFA has been updated -- incorporating many of the public's comments -- and the Social Innovation Fund is open for business.

For the last two years, the Social Innovation Fund has been one of the most talked-about subjects in social entrepreneurship. The $50 million in funding was approved as part of the Edward M. Kennedy Serve America Act, and the goal was to use that money to match dollars put in by intermediary organizations, who would be charged with the responsibility of investing it in excellent social ventures.

When the original NOFA was released by the Corporation for National and Community Service (CNCS) for public comment, there was both excitement and concern. Excitement, of course, that the government was increasingly aiming to be a partner for social ventures. Concern that the processes for allocating the government dollars would end up being more burdensome and trouble than the project was worth.

One of the concerns was regarding the minimum 1-to-1 matching requirements. In the draft NOPA, only intermediaries who were able to match $5 million or more would be able to participate. Some noted that this would put participation out of the reach of many foundation intermediaries -- even large community foundations who otherwise would be great partners. Based on public comments, CNCS has revised the restrictions and now any groups who can match $1 million or more can apply to be intermediaries.

Barron's came out recently with a list of the 25 best philanthropists. The interesting thing about the list is that they actually ranked people. The blogosphere has had mixed reactions to the list, and it begs the question, can there be a "best" philanthropist?

First, what I liked about Barron's list:

• Serious love for the social entrepreneurship investors. #1 and #2 on the list are eBay fortune's Pierre Omidyar - whose Omidyar Network behaves like a socially-minded venture capital firm - and Jeff Skoll, whose eponymous foundation is one of the leading drivers of social entrepreneurship today.
• There are some entries that don't make headlines but are doing incredible work. Howard G. Buffett's foundation is quietly becoming one of the most important actors in global agriculture and development, for example.
• The idea of ranking based on how much good can be leveraged from each dollar of input is intellectually fascinating

Hot on the heels of yesterday's post about the importance of GiveWell and the critical voice in the social sector, a consortium of major nonprofit review groups today issued a press release called "The Worst (And Best) Way to Pick A Charity This Year." The press release officially calls overhead ratios and executive salaries as a "red herring" in determining how effective an organization is.

The overhead ratio is one of the most persistent measures of supposed quality in charities. The premise is basically that the less money is spent on staff salaries, the more can go "directly to the problem." Of course the fallacy here is that overhead ratio is a measure of inputs - not outputs, and what really matters is whether a nonprofit can deliver on its mission and improve lives.

The thing that makes this press release particularly significant is the role of Charity Navigator - for a long time the leading advocate of the overhead ratio style metrics. Last year, they hired a new CEO in Ken Berger who promised to lead the charge to a better measurement system for a better nonprofit sector.

Sean at Tactical Philanthropy provides particularly good context, and in the process leads the "standing ovation" for the shift. One important piece that almost gets buried in his post is that this press release not only indicates a new direction for the big guys, but indicates their embracing of GiveWell, GreatNonprofits and Philanropedia as important parts of the nonprofit review ecosystem.

When I wrote my "Last Word on the Kiva Controversy," many people emailed or Tweeted at me sharing their thanks for trying to put a final stamp on the issue. One notable exception was one of the founders of GiveWell, who courteously emailed to let me know that he would be publicly and profoundly disagreeing with my assessment that it was "time to move on."

In the last year, I've become more and more convinced that GiveWell, and more over the type of critical voice that they represent, is one of the most vital voices for the growth and well-being of our sector.

The premise animating GiveWell - that intentions aren't enough and that we need higher performing social problem solving organizations - is a commonly held belief in the nonprofit sector. That said, the implications of that belief, namely that some organizations may not deserve our support, has made it somewhat difficult to embrace in practice.

While there have been organizations like Guidestar to review charities for years, and expert organizations like Mission Measurement that help organizations figure out how to improve their impact, GiveWell is important because of both its striving towards analytical rigor and because of its willingness to piss people off with its assessments.

Imagine you're in a store looking for shampoo. Your remember hearing something somewhere about a harmful additive in one of the brands, but can't remember which is which. In need of better information, you whip out your iPhone, scan the barcode of your favorite brand, and get a full independent assessment of the product in terms of health, environmental impact, and the company's social commitment.

With the release of the new GoodGuide application for iPhone, this scenario has become a reality. The application comes in tandem with the public announcement of a $5.5 million Series B funding round from Physic Ventures, New Enterprise Associates, Draper Fisher Jurvetson, and New Island Capital. 

GoodGuide has been around for a while, providing impartial reviews of companies and products based on health, environmental and social factors. They've even had an iPhone application for on-the-go lookups.

Still, the difference in convenience of a consumer having to type in a product name and wade through possible matches vs. scanning a barcode and having it all there is night and day. This shift could significantly increase the usage of GoodGuide's tools.

One of the recurring themes of speakers at Pop!Tech, whether stated as such or not, is the notion that success in the future means re-learning to think beyond transactions.

First, a framework. In the commercial world, transactions are the way we do businesses. One party has one type of value that another wants, and that other person has an ability to trade a different type of value to the first party. Money becomes the proxy for this exchange. The value of the two items exchanged is determined immediately. This sort of transaction is the way that a huge number of our material, consumptive relationships progress.

Community is a bit different. Participants in communities of all kinds expect that the community is a source of strength, or value, for them. But to derive value from most communities, participants have to give in a way that is not transactional. You contribute to people within a community without knowing exactly how that value is going to come back to you. The currency is trust - or to use a more wonky term, social capital.

Two interesting places today where the notion of transaction has come up are YouTube and our Food System.

Kansas State University researcher Michael Wesch talked about how the community on YouTube responds to vulnerability and openness. But YouTube is fundamentally a-commercial for most content producers, at least in the sense that they're not being rewarded financially in a transaction based system. Of course, they are still deriving an immense amount of value - however they define it.

Michael Pollan, food researcher and author of "The Omnivore's Dilemma," and "In Defense of Food," gave an amazing overview of the food system. Perhaps the most profound observation was his assessment that people view themselves in a zero-sum relationship with nature; that when we take, nature is deleteriously impacted. That's the transaction thinking, except that nature has no say in the value it derives. Instead, Pollan urged us to think of ourselves in an ongoing, complex, and give and take relationship with nature that extends over time.

Food for thought. Pun Intended.

(Photo: Muffet)

When I began blogging early last year, the blog that most people pointed me to was Sean Stannard-Stockton's Tactical Philanthropy. After a few years of being a tour de force of discussion and analysis in the philanthropic space, Sean is taking his ideas off the blog and starting a new philanthropic advisory firm: Tactical Philanthropy Advisors. This is the power of blogging in the 21st century.

The firm will work with clients with $1 to $50 million in philanthropic assets, and is meant to provide a more engaged approach to helping clients find meaningful giving opportunities with real impact. Sean's sense - one I share - is that people don't just want to check the box on their social responsibility and move on to other things. More and more, people (rich or otherwise) want to be active participants in the world and want to use their philanthropic activity to build bridges to real relationships and real impact.

I think Sean is spectacularly well-suited to help his clients achieve this mission, not only because his decade of experience with wealth management, but because as a high-profile blogger, he has literally had his fingers on the pulse of the industry for the last three years.

To be a successful blogger, one must read. A lot. Like, a lot. It's the only way anyone has anything interesting to say. The power of the Tactical Philanthropy blog has always been in it's ability to synthesize the most important conversations of the day into meaningful pieces that could invite not just experts but everyone into the conversation. As Sean has himself written, and I've certainly experience with this blog, that sort of discussion is one of the most amazing ways to learn about your field.

What's more, the blog has allowed Sean to grow relationships with leaders across the industry. I've talked to many friends in foundations who read his posts religiously as a benchmark of not only opinion on important issues, but what issues are important.

If this post reads like an infomercial, it is, in some ways. I think Sean has done an amazing good for the philanthropic space with his blog, and truly believe that it, combined with his professional experience and expertise, make this new firm an incredibly good bet for organizations and individuals who want to increase their philanthropic impact.

But it's also an infomercial for blogging. This new firm is in many ways shaped by opportunities that Sean created for himself by sharing his thoughts about the industry in public, and encouraging people to challenge him, provoke a conversation, and contribute their own ideas. This is the power of the internet in today's world, and I wish nothing but success for those who use new tools to push their fields, whatever they may be, to important new places.

Full press release after the jump.

Primarily profit seeking investors have a plethora of tools at their disposal designed to help them understand the opportunity and risk and success and failure of their investments. Yet for social investors - be they traditional philanthropists or the new group of socially-focused venture capitalist - the tools to understand the comparative opportunity of an enterprise in terms of each of the financial, social, and environmental bottom lines have been woefully lacking. That's about to change.

At this year's Social Capital Markets conference, a new rating system called the Global Impact Investing Rating System (GIIRS) will be unveiled. The system is designed to make it easier for investors with an impulse to use their capital for good understand the comparative advantages and opportunities of any social enterprise.

In a post explaining the new system and announcing it's unveiling, SoCap09 convener Kevin Jones uses the example of an investor who wants to create jobs in the developing world as part of their social impact to explain the system. "A job on a fair trade farm, for example, may only be seasonal, compared to a job in the city. But on the other hand, that rural job can help hold a rural community together rather than forcing wage earners to move to unsanitary and unhealthy slums in a major city."

The idea is that GIIRS gives an investor the power to think about these options in complex terms, and the goal is for the system to be pretty comprehensive, with investors being able to compare similar terms in fields as diverse as microfinance, health care, literacy...basically anything you see on Change.org.

I've been working out of the office where SoCap09 is being planned for the last couple weeks, and there's something palpable about the excitement around this initiative. Because while what has previously made news in the social entrepreneurship space is new grant awards and innovative new organizations, the implications of this system are much larger.

I believe that the tide is shifting dramatically towards a new moment in which people are looking to integrate their values across all of their interactions with the world, including investments. This movement is particularly strong among young people, where the Genie of doing good has been let out of the bottle, and is not going back any time soon.

If the GIIRS system is successful, it would be one of the most important infrastructural shifts in social enterprise to date. That said, there are of course significant challenges.

It's a tool that has come from the collaborative work of some of the best and most active minds of the space, but it still relies on a common taxonomy of terms that have tended more often to be debated than agreed upon. There will be kinks to be worked out as people get comfortable with a common language.

What's more, the recent conversations surrounding the Tactical Philanthropy blog about investing in high-performing vs. high-impact nonprofits demonstrates that when it comes to how an investor or philanthropist makes decisions about social and environmental impact, there is huge room for subjective assessment. We still have a long way to go before we have systems of measurement fully equipped to handle the huge array of human impact we're looking to achieve.

But this tool also comes at an amazing time. In some ways, I look at it and see an initiative which has a few years to work out the kinks before my generation has the sort of income where impact investing actually becomes a major part of how we contribute to the world.

To learn more about the initiative, check out Kevin Jones' post about it on the Social Capital Markets blog, or visit the Global Impact Investing Network website.

Photo: Leonardo da Vinci's Vitrvuvian man, an example of the Renaissance interest in better discovering and measuring the human body and the world in which it existed.