This article is based on knowledge insights presented at the EVPA’s annual conference of European investors for impact in The Hague in November 2019.
According to the European Venture Philanthropy Association (EVPA), “Investing for impact means supporting and co-developing innovative solutions to pressing social issues, taking on risks that no other stakeholder in the market can take – or is willing to take.”
One of the 10 principles for impact investors in the EVPA’s new charter for impact – number 2 – states the following: put the final beneficiaries at the centre of the solutions.
EVPA's 10 principles for impact investors:
First of all, I would like to challenge the term beneficiary. I think it is rather patronising as it sounds like the people benefiting from social innovation are merely passive recipients of a form of charity from a benefactor.
Perhaps, as investors for impact, we should think of a better term that is more in line with what this principle represents. If we want to put beneficiaries at the centre of the solutions, we should entrust them with more agency, perhaps calling them agents of social change?
I would like to illustrate the principle with two common business models used in social entrepreneurship that are often supported by investors for impact. Placing the beneficiaries at the centre of the solution means treating them as real customers – or employees – depending on the business model.
Investors for impact invest in social purpose organisations that have the potential to become financially sustainable
Investors for impact invest in social purpose organisations that have the potential to become financially sustainable. For the first business model, that means that customers should value the product or service provided and be willing to pay something to receive it. A social purpose organisation must profoundly understand the needs of its customers and design solutions accordingly in order for that to happen.
Problems arise when customers, although they value the product or service, don’t have the financial means to pay – because we then lose the natural feedback loop and need to create other ways of making sure the impact is happening and is valued.
An example of how to place a beneficiary at the centre of the solution is when an entrepreneur is a member of the target population. For instance, migrant entrepreneurs develop solutions for the specific immigrant population to which they also belong.
Patient entrepreneurs develop solutions to alleviate medical and health issues they suffer from themselves. My sister, Karin Hehenberger, has developed the concept of “patient entrepreneurs” at her organisation called Lyfebulb. As someone who suffers from chronic disease herself, she understood the need to include patients in the solutions developed not just by pharmaceutical companies but also by entrepreneurs setting up companies.
Patient entrepreneurs develop solutions to alleviate medical and health issues they suffer from themselves
In this way, they understand the problem first-hand and can also quickly gain the confidence of the target population. A great example of this is Batec Mobility, a social enterprise where the entrepreneur Pau Bach is tetraplegic and he developed a handbike to attach to his manual wheelchair. He clearly saw the need for greater mobility for people confined to wheelchairs who do not want to choose between either manual or electric versions.
For the second business model, when the beneficiaries are the employees, jobs need to be real jobs. A social enterprise that strives to achieve financial sustainability cannot afford to hire employees who do not do their share – doing so would remove the dignity of the job and defeat its purpose.
Let me give you an example: There is a social enterprise in Catalonia called Moltacte that hires people with mental health issues who find themselves outside the regular job market to run outlet stores selling excess stock, mostly from Inditex brands.
Investors for impact need to keep beneficiaries at the centre of the solutions
The founders explained that they aim to understand the needs and potential capabilities of each employee and find the right position where they can grow and develop. Employees feel empowered because they can do a job they didn’t think they could manage. However, if they allow employees to stay in a position they cannot or do not want to do, they are treating them as charity cases and that strips the job of its dignity for the employee.
Investors for impact should never forget why they are in business. They need to keep beneficiaries at the centre of the solutions by supporting social enterprises that are aligned with this principle. The objective should be to achieve social change - and that can only be done by involving "beneficiaries" as agents of their own change.
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