By Tamzin Ractliffe
One of the most powerful presentations on the nature and value of social enterprises that I ever attended – which I believe gives a strong clue to the huge potential of Social Impact Bonds – was a talk by Charles Leadbeater at the first Social Enterprise World Forum in September 2008.
The foundation of Leadbeater’s discussion was an understanding of the simple design principle that distinguishes the commonplace “world of to and for” within which mainstream private companies and public sector institutions tend to operate. Functioning from “the world of with” is perhaps the essential defining characteristic of social enterprises.
By operating within communities and alongside their beneficiaries, social enterprises are able to take account of diversity, tailor interventions to context and create ultra-local, highly specific solutions – something that, as Leadbeater points out, “nation state solutions are often ill suited to” and that the private sector views as “too risky, low margin and hard work”.
Leadbeater suggests that there are two vital components embedded in the DNA of social enterprises: “first, they say to society “this matters”. They identify issues that should be addressed [and] draw society’s attention to issues that would otherwise be marginal – the needs of the homeless, drug dependency, savings and borrowings for the poor and excluded. Secondly, they say “and something can be done about it”. They create new solutions to these problems which gives people a sense that a solution is available”.
As social service providers to often marginalised, poor or base of the pyramid consumers, social enterprises – businesses with a specific and explicit social purpose – are vital in creating new solutions to our most challenging problems. Indeed, social enterprises are an important component of what Leadbeater calls “the New Middle Ground” and are increasingly being seen, by both the public and private sectors, as important components through which the State can “get into the bloodstream of society to really bring about change”.
Nowhere is this more visible than in the nature and performance power of the increasingly popular Social Impact Bond (SIB). Whether the focus is to seek better outcomes in the rehabilitation of offenders, improve our education system, increase renewable energy consumption or enable better access to justice, SIBs hinge upon the belief that certain key services can be delivered more effectively and efficiently by social service providers – social enterprises as it were – rather than the public sector.
SIBs aim to align financial incentives (investment returns to private sector financiers of services financed by the public sector as a result of cost savings achieved in service delivery) with beneficial social outcomes (performance based results achieved at scale). Inferring from Charles Leadbeater’s conversation, I believe that the power of SIBs is likely to be inherent in their design: in the fact that the foundation upon which they are based represents precisely the “with” principle that Leadbeater talks about.
Whilst SIBs provide financing mechanisms to deliver services to specific communities or beneficiary groups needing bespoke and dedicated attention to address their key challenges, they have so far been considered as, and structured to be, Community – Public partnerships based on the assumption that the interventions they provide are the responsibility of the public sector and thus the savings achieved will be “repaid” to investors by Government.
Social enterprises typically devise solutions that respond to the needs of communities and in so doing aim to heal not only specific groups but also the ecosystems within which communities are located. Indeed, the challenges that SIBs are addressing typically have a much broader impact on societies and on economic growth and prosperity: as such, it is increasingly apparent that there is also, more often than not, a private sector benefit for efficient solutions to social and environmental challenges and, indeed, a private sector cost for the failure of service delivery.
How, therefore, can we design SIBs with commissioning from the private sector, either as distinct from, or in partnership with, the public sector. Such Community – Public – Private Partnerships could catalyse massive innovation that could be taken to scale through private sector capacities and support.
Nexii’s proposal for solar water heater roll-out in South Africa, financed by private sector organisations that suffered significant losses to their bottom-line as a result of energy outages, is such an example. Watch how it works below:
There have to be other ways SIBs can engage the private sector as commissioners, especially given that the ills of society affect the prosperity of communities, companies and countries. Maybe it is time to get more creative in this regard.
As Charles Leadbeater concludes: “It is not rocket science: just think with, not to and for. And it might sound simple, trite even. But in a world where so much of our lives as voters, workers, consumers seems to be bound up in things being done for us and to us, the idea of with has transformative potential”.