10 November 2016

Different World. Different Business. Different Life.

I've been writing quite a bit recently about the status quo of how we solve development challenges - and the stigmas that surround this industry. The world is changing (quickly) and it's becoming increasingly apparent that we need a different approach to live in it...

Charities, Citizens and Corporates

On the one hand, charities are under immense pressure - the imposed and traditional model of donor reliance is not sustainable. Many charities are not efficiently managed, either because they've never had to do the managing (being focused on solving the social problem was the genesis of the non-profit) or because they simply can't afford the resources to do the managing. Charity founders still seem to spend all their time solving problems for beneficiaries (kinda why the charity was founded in the first place if you think about it).

There are always exceptions, but my gut feeling is that this applies to at least 80% of the rumored 150k charities we have registered in South Africa.

On the other hand, neoliberalism and pure market driven capitalism isn't helping either. First off, they're big scary terms that our attention-deficit economy is only starting to bring into mainstream conversation. People don't understand them and certainly don't understand the broader socio-economic consequences. Then, to top it off, capitalism is most likely creating many of the problems the poor charities are trying to solve in the first place.

Finally, you have corporate CSI, which is meant to play a catalyst role, but doesn't seem to be able to effect systems change (yet). CSI is changing though - and I have a lot of hope for this space as technology, focus, better measurement and other innovations build up. With 1% Net Profit After Tax (2% in other developing countries, like India) at play... We can and will do more.

Enter the Social Enterprise

With the rise of the "social enterprise" buzzword, it seems we're faced with two options. Build better charities or try and change the game completely.

I'm not sure iterating on the charity model is going to move the needle. There's a company I met recently that fits the approach I'm more interested in - changing the game.

Meet Different Life. They're a life insurance company, with an important difference. The first monthly payment of every year goes into a wallet. Using their social impact arm, Different.org - you can donate 100% of that payment to any of their 20 or so curated charities and development projects.

Now, in case you hadn't noticed, insurance at scale is a fairly good business. For a fairly new product in the South Africa market, Different Life are already making sizable monetary contributions towards development challenges. What's even more attractive about the model is that the customer gets to choose where that first payment goes - a sense of involvement and empowerment is critical in the "giver" space.

And every year, customers get another opportunity to allocate funds, as long as you remain a Different Life customer. Premium philanthropists, if you will :)

That changes the game, no?

What did they do? They sacrificed a little bit of potential profit to build a business that has social purpose. They built a business, like I keep saying - that can make money and change the world at the same time.

A little bit of insider knowledge now.

This social mission goes a bit deeper into their company structure. If you're going to build something with purpose, you might as well go whole hog. What I found particularly fascinating is how Different Life have written their social enterprise "code" into their shareholder agreement and board mandate at a holding company level.

Different Group owns Different Life and the mandate to collaborate with  Different.org (non-profits don't have shareholders). Here are some of the guidelines they have signed - between founders and shareholders.

  • Shareholders get a "reasonable return" allowing for the risk of the investment. 
  • All additional return is reinvested in growth business (insurance), impact businesses (which are self-sustaining but focused on maximising impact metrics) and direct philanthropy. 
  • Dividends will be paid once there are no more opportunities for impact.
  • Board of Directors is explicitly mandated to maximise impact (in line with the mission statement) rather than profit.
  • Next step: all group companies will donate 10% of profit towards impact (rather than just 1% to CSI).

You get to define "reasonable return" yourself - this will open the space up for different risk appetites.

But think about this for a second... a business that is designed to return social and capital dividends. Sounds like the future?

Have a look at the Different Life insurance product

* This post was sponsored by Different Life. The views and opinion expressed are my own.