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Okay, it's class time. You are a student at Harvard Business School, and we're studying entrepreneurship. Here are the two cases I want you to analyze today: First, there is Extend Fertility, a Boston-based outfit that "harvests" eggs from women in their twenties and most likely to bear healthy children, the idea being that clients will be able to use them when they are in their thirties and forties and, as is often the case these days, often more inclined to have children. As the company puts it, the service it offers "bridges the gap between a woman's readiness to have children and the fundamental biology of aging eggs."
Next there is SunEdison, an Arlington, Va., company that has committed itself to "drive solar electricity" by financing solar projects in the range of $300,000 and $3 million. Its "ultimate goal" is "to become the solar financing and operating company of first resort."
RICH REWARDS. The question for discussion: Which of these companies is more "socially responsible"?
Having trouble coming up with an answer? Well, I'll give you the answer before our classroom discussion moves into full gear: It's SunEdison.
I made up the "class," but the answer to the question comes direct from Harvard Business School, which has just selected SunEdison as the winner of its 2004 business plan contest in the "social enterprise track." Extend Fertility was the winner in the "traditional track."
This is the time of year when $10,000-plus prizes are being awarded in dozens of university business-plan contests around the country. One of the curiosities about some of these contests is the growing influence of the so-called social-enterprise category. This is a category recently added to some of the contests to separate out businesses and nonprofit organizations that profess to devote themselves to improving society.
FLAVOR OF THE WEEK. One of the pioneers in this new arena is the Harvard Business School Business Plan Contest, which introduced a "social enterprise" category in 2001, and says that entries in that category now comprise 25% of all the business plans in the contest. Another pioneer is the Global Social Venture Competition, a collaboration between the University of California at Berkeley's School of Business, Columbia Business School, and London Business School. The trend is powerful enough that other schools are latching on.
Duke University's student entrepreneurship competition, one of the richest business-plan competitions with more than $100,000 in prize money, this year created a social-enterprise track and threw more than $10,000 for prizes its way. More than a quarter of the 47 organizations listed on Duke's Web site as final competitors overall were in this new category.
For all the interest in social enterprises, and the nice feelings of caring they encourage, I must admit to discomfort about the concept. I don't have a problem with providing a special category for nonprofit organizations. But to begin segregating businesses according to which ones do the most to help society is troublesome for any number of reasons.
The first problem I have is trying to figure out what is meant by social enterprise. The key question Harvard Business School poses on its Web site for students to determine if their venture qualifies for the designation is: "What is the social value created by the organization and what is the plan to measure it either from the beginning or as the organization matures?"
GARDEN-VARIETY VIRTUE. But what exactly is "social value"? Does it mean contributing to charity? If so, then McDonald's (MCD
), with its Ronald McDonald House shelters around the country for relatives of seriously ill hospital patients, might qualify. Or Altria Group (MO
), because of its Philip Morris Finest Selection Foundation, which provides financial support to promising students in the arts, might also qualify.
Does it mean simply being in a business area that is understood by organizations like National Public Radio to be progressive -- solar energy, for example? But why isn't improving the health-care choices for women, as Extended Fertility promises, equally progressive? More to the point, when does a business stop being "traditional" and become a "social enterprise"?
Another problem I have is the implication that if one entrepreneur is designated a social entrepreneur, all others are money-grubbing jerks. But what about companies in basic manufacturing or wholesaling that try hard to be compassionate employers, give their employees time off to work on charitable projects, or provide incentives for employees to advance their educations? Indeed, forget the window dressing. What about "just" creating good, clean, well-paying jobs? Sounds socially beneficial to me, especially in this day and age of outsourcing and contract workers.
WORDS AND DEEDS. I think my biggest problem with the new designation is this: In real life, no matter how committed the entrepreneurs, social value may conflict with making a buck. We see it in even the most supposedly socially committed companies; for example, the unwillingness of Whole Foods (WFMI
), the organic-foods grocer, to allow its workers to unionize. What happens if, at some point in the future, SunEdison execs are faced with a choice of funding a costly solar project or a authorizing a bonus program for themselves? Will they always do "the right thing"? If they don't, will HBS strip them of their social-enterprise label?
One of the primary benefits and goals of professional schools is to help shape students' values for their professional careers in ways that will make them strive for excellence throughout their careers. Students themselves may apply derogatory labels to certain areas of their profession, as some medical students have long done to psychiatry. For schools to apply labels that suggest that one area is more important to society than others isn't the best way to shape values. Let businesses earn that social-enterprise label via acts and deeds, rather than checking a box on business-plan contest application.
David E. Gumpert is the author of Burn Your Business Plan: What Investors Really Want from Entrepreneurs and How to Really Start Your Own Business. Readers can e-mail him at david@davidgumpert.com
David E. Gumpert is the author of Burn Your Business Plan: What Investors Really Want from Entrepreneurs and How to Really Start Your Own Business. Readers can e-mail him at david@davidgumpert.com
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