Oct

28

Socially Responsible Investments: Creative Capitalism and the Jewish World

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UBUNTU: I am because we are

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Socially responsible investments (SRI) have gained much prominence in the last decade. Businesses and corporations are recognizing their capacity and responsibility to social wellbeing and have chosen to invest where they see a social return. Recently, a more equalized investment scenario has emerged: “creative capitalism” (as coined by Bill Gates), which merges profit generation and maximization with social issue improvement. Creative capitalism is being recognized as THE way to tackle global problems such as climate change, water, disease, terrorism, and hunger.

Yet the Jewish world is still severely under-utilizing SRIs and businesses’ involvement to address our internal needs. Nor does it utilize creative capitalism. Particularly in the current financial climate, the concepts of SRI and creative capitalism should be increasingly examined as new methods for addressing the Jewish world’s growing needs.

Global Corporate Social Responsibility

Corporate socially responsible investments on the ACTIVE level point to the fact that companies have responsibility not only to shareholders but also to stakeholders, as well as the wide array of parties interested in the companies’ actions. These include owners, investors, employees, suppliers, clients, consumers, and the general public. A company has three levels of accountability – financial, social, and environmental.

SRIs are the method by which many businesses look to improve social and environment problems that impact all stakeholders, while also being fiscally responsible. It can range from responsible production, like Nike’s commitment to achieving or exceeding baseline sustainability from the design stage through to the manufacturing stage for all its footwear, to Community Development Venture Capitalist Funds which look to invest in underprivileged areas, generating profit while raising the quality of the neighborhoods (and presumably the standard of living).

Not only has interest in SRIs increased, but so have actual investments due to a growing number of institutional investors now supporting shareholder resolutions on social, environmental, and corporate governance issues, new products, fund styles etc. In the US, for example, SRI assets have risen more than 324% from $639 billion in 1995 to $2.71 trillion in 2007. There, one out of every nine dollars invested is invested in SRIs.

In this era of SRIs playing a key role in a company’s competitive strategy, two new models have emerged which combine corporate financial goals with social ones. The first model, Corporate Social Entrepreneurship, is the transformation of socially and environmentally responsible ideas into products and services (Bill Gates’s “creative capitalism“). It was under this model that Muhammad Yunus created the concept of microcredit, which won him the Nobel Peace Prize in 2006. The second model, Global Corporate Citizenship, has a much wider global perspective. It declares that corporations have a civic duty to cooperate with governments and civil society to contribute to sustaining the world’s well being and addressing its largest issues.

SRIs and the Jewish World:

In the Jewish world, we have traditionally looked to engage philanthropy and government to address our needs. With the decline in the traditional type of philanthropy, particularly amongst younger givers, and combined with the current and foreseeable financial climate, we must engage businesses as a third partner, use new models of philanthropy, and demonstrate that businesses’ financial interests can be addressed at the same time as internal needs.

The question remains: Can the global business concept of SRIs be integrated into the Jewish world, and if so, how? This is our challenge.

Bringing a sense of corporate social responsibility into this traditionally philanthropic realm is new for the Jewish world. Government intervention has been strongly rejected (except for amongst the Orthodox) due to the strong desire to maintain separation of religion and state in the US. Involvement by the Israeli government in broader Jewish issues is obviously in play in Israel and is just starting to emerge in terms of reverse philanthropy to the US. Now, we must engage the critical inclusion of businesses -not solely Jewish businesses and/or Jewish businessmen/women – that have their own strategic interests for addressing needs facing the Jewish community (ies) and engaging them.

Jewish education has been identified as THE key to addressing the biggest issues in the Jewish world such as decreased identity, knowledge, and sense of connectedness. Yet providing universal Jewish education and day school education for those outside of Israel is expensive, sometimes prohibitively so. Providing affordable Jewish education to every Jewish youngster can only happen with the involvement of businesses, particularly those businesses that have a strategic interest in building day schools and their enrollment. Major publishers of Jewish and Hebrew textbooks and educational software, such as Milon, have a strategic financial incentive to work with the Jewish community to increase the number of pupils in day schools. Despite huge incentives, what is still missing throughout this equation is business involvement. Globally, businesses represent the newest, most innovative powers in the quest to tackle major issues, yet the Jewish world has not yet harnessed their power effectively.

In these philanthropically transformative, financially uncertain times, how do we best integrate the business element into the social equation and make them real partners in our effort to tackle the largest needs in the Jewish world?

Ahava Zarembski is Founder and President of Yesod: Strategic Consulting Group and the Yesod-Masad Initiative, providing strategic on Jewish communities in Israel and around the world. For more information contact yesodcenter@gmail.com

Aug

31

The Modern World of Social Change

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The world of social change is in transition. Globally, national governments are no longer fulfilling the role of social change facilitator. In its stead, local and municipal governments are becoming increasingly powerful and effective. We see that in the response to Hurricane Katrina in New Orleans as well as with the forest fires in California in the last few years. In short, this transition is the definition of glocalization’ – the more globalized we become, the more localized we become.

Within this new reality, the increasing force of local businesses and the third sector is front and center. Foreign Affairs recently published an article on “Global Corporate Citizenship,” which argues that “companies must not only be engaged with stakeholders but be stakeholders themselves alongside governments and civil society.” Bill Gates, in his “Creative Capitalism” article in Time Magazine August 11, 2008, calls for businesses to re-examine ways they can profit while simultaneously assisting the underprivileged and developing nations. “Government and non-profit groups have an irreplaceable role in helping [the underprivileged and 3rd world countries], but it will take too long if they try and do it alone. It is mainly corporations that have the skills to make the technological innovations work for the poor.”

This is what we call at Yesod Masad the “triangle of influence” – today governments, businesses, and the 3rd sector are working together to affect social change. The synergy between these forces is powerful enough to tackle some of the most looming problems in education, hunger, poverty, disease, and the environment, domestically and globally.

Jewish communities worldwide are all facing common Jewish issues: Jewish identity, Jewish education, demographics, lack of leadership, and anti-Semitism/anti-Israelism/fundamentalist Islam.

Examining and addressing these issues through the prism of the triangle of influence can not only increase resources, but our effectiveness as well.

The influence of each player within the triangle of influence is increasing in Israel.

Municipalities: With a void from the national government’s involvement in social issues, municipalities are becoming increasingly involved, empowered and effective. The role of municipalities’ social change was evident in the Second Lebanon War. Philanthropists and Federations need to partner with strong/solid municipalities and cultivate these relationships personally. Partnership 2000, which looks to bring Federations together with a sister city in Israel for social change, is a good outlet. Yet most philanthropic investments in Israel, whether geographical, sectoral, or issue based, should involve municipalities.

Individual Israeli Wealth and Israeli Businesses: Individual wealth is increasing, as is the success, wealth and influence of businesses. Businesses in Israel are becoming increasingly involved in social change, as are businessmen and women as they become increasingly successful. Take for example the transformation of Bat Yam, now considered the city of excellence. Ten years ago Bat Yam was one of the poorest, most neglected cities in Israel, with its population base deemed very low socio-economically. Aaron Castro, founder and creator of the Castro clothing store, who made aliyah from Saloniki in 1933 and opened his first tailor shop in Tel Aviv in the early 1950s (with the Bat Yam store opening in the early 1990’s), has been loyal to Bat Yam throughout the growth of Castro, with its headquarters in the city throughout its development. Less than a decade ago, Aaron Castro went to the mayor and demanded the city be transformed through massive investment in education. He put his own and his business’s money where his mouth was, in the form of philanthropic investment in education in Bat Yam. And he demanded that the municipality leverage with him. Today Bat Yam has been transformed into Israel’s “City of Excellence” and is growing in its impact.

Business models: Business’ involvement in social change in Israel also means the introduction of new philanthropic models of investment, such as the growth of community development venture capital funds (VC). VCs are investing in underprivileged areas, whether through small business development encouraging gentrification, or through technologies generated by the areas (such as green tech in the Negev). The lesson: Socially responsible investing (SRI) can bring a return on the dollar in terms of profit – strategic philanthropic investments means business concepts and often models are pulled in to the investment.

3rd sector: Non-profits organized to tackle social issues are a major force. So too are individual philanthropists. Due to these changes, new organizations and forums have been created such as:

  • Sheatufim: Established in 2006, it brings together Israeli businesses and the 3rd sector for social change. Its first conference was held in June 2008, and it received much attention including a closing speech by Prime Minister Ehud Olmert.
  • The Jewish Funders Network: The first conference was held in 2008, and dealt with Jewish issues, bringing together Israeli philanthropists with international Jewish philanthropists. The network’s Israel office is slated to open in 2008/9.
  • Center for Philanthropy – Hebrew University of Jerusalem: Opened in 2007, with a PhD student examining the role of philanthropists influencing policy, such as the Gaydamak phenomenon and the Knesset’s Gaydamak law.

Reverse philanthropy is now flowing from Israel to the Diaspora to address global Jewish issues occurring abroad. In the end, the wellbeing of the Diaspora has an impact on the strength of the State of Israel.

Yesod Masad’s raison d’etre is to enable social change in the Jewish world via the triangle of influence. As strategic advisors to all three elements, we see first- hand that the most effective change occurs when all three elements work together.

For the readership of this blog, whether you are the head of a non-profit, a grass roots activist, or come from the philanthropic side of the 3rd sector, Federations, or foundations – know that your power can be reinforced and increased many times over. Nonprofits should look for partnering with the business sector and even consider working THROUGH the business sector. Projects can be sculpted to involve business departments/concepts/and players.

Philanthropists should understand that there is a difference between tzedaka and philanthropic investment. The former does not consider strategic value, return on the dollar, and impact. The latter does. Consider the new kinds of models which will allow you to invest, to see your money returned both socially and financially, and to make your philanthropic dollar go further. SRIs – concepts and players – can allow us to tackle the biggest of problems and to multiply our reach and effeciveness.

Ahava Zarembski is Founder and President of The Yesod Masad Initiative, a strategic consulting group on Jewish communities in Israel and around the world.