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Soumik Kar
Grooming For Success: Students of the ‘Beauty and Hair Care’ course at LabourNet and HUL’s livelihood training centre in Silvassa
SOCIAL ENTERPRISE
Do-Gooders Inc
A new class of entrepreneurs are walking the tightrope between profit and social impact by forging strategic tie-ups with corporates, NGOs and the government. And they are here to stay
COMMENTS PRINT
catalist 2014
Six years ago, in an attempt to counter competition and present differentiated content, Outlook Business decided to highlight the stories of social entrepreneurs as part of an annual issue.
Outlook Business
catalist 2014
In a social enterprise you can see the impact of what you are doing in the face of your customer in a very short time.
Ajay Piramal
catalist
I have seen a variety of people with and without this guilt. Those who don’t have it really end up prospering. And those who have it invariably move out of the radar.
K Ramkumar
catalist 2014
If you don’t have character as a company, it is very difficult to move beyond satisfaction to trust.
D Shivakumar

Hidden behind the innocuous facade of a typical two-storeyed, small-town shopping arcade in Vapi is a classroom like no other and yet like any other: plastic chairs are arranged in rows surrounded by computer desks lining the whitewashed walls, the students rise in unison excitedly mouthing a sing-song ‘good morning’, their eyes shyly evasive, but these are not impressionable children waiting to be moulded into adults. In fact, many of them have children of their own considering a significant number are housewives clad in dazzling saris, emerging out of a lifetime spent serving the household, while others are young girls of marriageable age chancing a lasting shot at self-sufficiency. Most of them are school dropouts while a handful are graduates. But what binds all of them is the indomitable spirit that has brought them to LabourNet and Hindustan Unilever’s (HUL) livelihood training centre for National Skill Development Council-approved two-month courses in beautification, workplace skills and retailing. LabourNet runs two centres around Vapi, one downtown and the other around 20 km away at Silvassa, the capital of Dadra & Nagar Haveli. The Vapi centre opened a month ago, while the one at Silvassa has been around for a year.

The centre has around 75 students in total, more than half of them female. The centre’s employees have to counter socio-economic customs that often discourage female education beyond elementary school as under-educated grooms might be intimidated by educated girls. However, these are not demure women who take things as they come. Mital Kansagra, a plucky 33-year-old, represents the go-getting attitude of semi-urban India. She is enrolled in the ‘Beauty and Hair Care’ course at the centre and requests me to ask LabourNet to translate the curriculum in Hindi since most students have only studied English for one or two years and aren’t proficient in it. Many housewives in the course intend to become entrepreneurs and start their own salon or sewing business at home. “Around 70% of students from the tailoring course are gainfully employed either at home, at a clothing factory on a daily wage contract basis, or have opened their own shop,” says Yasmin Shaikh, the tailoring trainer, who is currently overseeing her 15th batch. The placement figure for the workplace skills course stands at 50%.

 
 
"Collaborative partnerships are the pillars of our model. The first pillar is the candidate himself"Gayathri Vasudevan, Founder, LabourNet
 
 
LabourNet, founded by Gayathri Vasudevan in 2006, represents a new breed of enterprise that proactively collaborates with companies, NGOs and the government in order to scale up and deliver significant social impact. While it has changed the lives of around 100,000 workers across 11 states through its livelihood training centres, LabourNet faced a host of challenges while trying to achieve this level of scale.

“Initially, we thought we’d just connect workers to employers but we eventually found out that vocational training outcomes aren’t properly defined. How would you define a good carpenter and how will you reflect that in your training methodology? We had to devise our own training methodologies since mere classroom training wasn’t enough; we had to have a work-related approach,” says Vasudevan.

As she partnered with companies such as Panasonic, Godrej and HUL, Vasudevan realised that many in her target group of labourers didn’t want to move. So, she began to focus on getting them employment close to their place of residence. “Collaborative partnerships are the pillars of our entire model. The first pillar is the candidate himself because it has to make economic sense to him. Also, we need patient corporates because these are life-changing decisions the labourers have to take. Often, the socio-cultural milieu may not allow them to take certain decisions. For instance, questions like ‘why should I move’ crop up. We need corporates who will work with us through all these problems,” explains Vasudevan. Clearly, the localised approach at Vapi is a result of the learning that Vasudevan went through earlier. Now, her company works with 110 corporate clients across 40 skill segments such as carpentry, construction, welding and painting, and around 70% of its trainees find employment.


(Loo)crative: Mobile toilets installed by 3S at some schools can be used by people living nearby before and after school hours

The Right Fit

Every social enterprise has its own set of challenges depending on its business model and hence needs to collaborate accordingly to leap over hurdles. For instance, HeadHeldHigh Services (HHH), a rural livelihood training start-up co-founded by Madan Padaki, trains rural youth (mostly school and college dropouts) who can chart their own career course after completing their training. HHH has more than 20 Ruban Centres across the Gadag, Bidar, Tumkur, Raichur, Belgaum and Yadgir districts of north Karnataka, where rural youth are imparted English-language training and business skills and eventually find commission-based employment with corporates for selling their products in rural areas.

 
 
"My rural youth are technologically enabled and can communicate with the community"Madan Padaki, Co-founder, HeadHeldHigh Services
 
 
Padaki started out with his idea in 2007 by convincing six boys and two girls — four of whom had never been to school, four who had dropped out midway and none of whom could speak a word of English — and right away faced a whole host of unforeseeable challenges. “We put them up in a house in Bengaluru and gave them a monthly stipend of Rs 300 to compensate for the opportunity cost. We then naively hired a BPO trainer who vanished during lunchtime,” laughs Padaki.

So, he started developing curriculum on the fly to impart English training to the youth. “Initially, the programme was extremely intensive, with around 16 hours of course work each day and no holidays. In the night, we would keep the BBC on for trainees. At the end of seven months, we witnessed a virtual miracle when we saw that the trainees were able to write and converse in English,” says Padaki.

Today, HHH runs a six-month residential programme for high school dropouts, which costs around Rs 15,000 (not including food and accommodation). In addition, HHH runs a four-month non-residential programme catering to college dropouts and graduates, for which it charges Rs 10,000. HHH has collaborated with the government as well as not-for-profits in order to scale. It has received Rs 25 lakh from micro loan-NGO Rang De as a kitty for its trainees to dip into; the trainees repay the amount from the salaries they get. Padaki is also trying to tap into CSR funds after the new Companies Act has made it mandatory. He is planning to approach pharmaceutical companies who wish to launch awareness campaigns regarding diseases and products in rural areas. “My pitch to companies is that I have rural youths who are technologically enabled and can communicate with the community and can conduct awareness sessions for Rs 500 per day,” says Padaki. The unfortunate part is that while HHH wants to create rural jobs, most of its corporate recruiters, including ChaiPoint, FirstSource, FreshWorld and Portea, are based in metros such as Bengaluru, Mumbai or Chennai, which defeats the purpose of rural upliftment.


The 3nethra ophthalmology device was developed by Forus Health in collaboration with IIT-M

Meeting The Mainstream

Given the dearth of rural opportunities, though HHH doesn’t mind its trainees being absorbed in mainstream corporate India, the response on the other end is not as enthusiastic. Deepak Arora, CEO, Essar Foundation, for one, remains unconvinced regarding the efficacy of social enterprises, especially in the skill development sphere. “Most of these enterprises are in the low-hanging fruit categories such as IT and service sector skills. But there is a serious mismatch between highly skilled labour required for the manufacturing sector, particularly in the heavy equipment sector costing Rs 3 crore-5 crore and social enterprises. So, corporates have to provide the training themselves. I think the six-month training provided here is superficial, because of which I don’t have much conviction in these organisations,” he says. Rajender Singh, CEO, DLF Foundation, also says that the company is not collaborating much with social enterprises and there is certainly no business benefit for DLF in entering such collaborations.

 
 
"The challenge is that companies don’t collaborate with other firms; NGOs don’t talk to each other"Shankar Venkateswaran, Chief, Tata Sustainability Group
 
 
Even HUL doesn’t hire personnel from LabourNet’s Vapi centre, implying that the collaboration with the company is a means to fulfil the organisation’s social objectives and does not help it derive any competitive edge. The only win-win aspect of the collaboration seems to be the signboards of HUL brands such as Kwality Walls and Lakmé plastered all around the centre. “This helps build credibility for us and acts as a brand advertisement for HUL,” says a LabourNet employee.

The divide is not just because of perception but also due to the differing objectives of the partners involved. “Forging partnerships is a complex affair. A for-profit corporate and a social enterprise will have different agendas, which have to match,” says Ronnie Screwvala, founder of Swades. While collaboration on an equal footing may be harped about in theory, it isn’t as easily achieved in reality. “The challenge is that companies don’t collaborate with other companies; NGOs don’t talk to each other. I might be exaggerating to make a point here but the first target is to recognise that we can’t do it all by ourselves and we need collaborations. When we don’t feel threatened by partnerships, it’ll start to happen,” says Shankar Venkateswaran, chief of Tata Sustainability Group. Collaborations between social enterprises and corporates can be of various kinds. “One type is the partnerships that are based on technology. Similarly, Unilever or Pepsi can give huge inputs to social enterprises in rural marketing. Supply chain management is another area of collaboration,” adds Ajit Mahadevan, India director of Acumen Fund.

Harsha Angeri, strategy head, Bosch India, though, is convinced that social enterprises can contribute substantially even in a collaborative model. “Social enterprises provide access to distribution networks to reach out to segments like BoP. Companies can thus avoid reinventing the wheel and leverage their network. Bosch is planning to use the reach and agility of social enterprises in new business models like selling eye-care solutions. Most companies today are restrained by their existing systems and procedures,” points out Angeri.

Success Stories

To Angeri’s delight, Forus Health, with its intelligent pre-screening ophthalmology device called 3nethra, is a social enterprise that has immensely benefited from technical collaboration. “Forus developed the device in collaboration with the Healthcare Technology Innovation Centre (HTIC), a joint initiative of IIT Madras and the department of biotechnology, which assisted Forus with image processing,” says K Chandrasekhar, co-founder of Forus along with Shyam Vasudeva Rao. In addition, Forus has partnered with Cognizant Foundation, the CSR arm of Cognizant. “Some deserving hospitals that can’t afford 3nethra are connected to the Cognizant Foundation. After due diligence, the foundation selects some of the hospitals and provides them with the machines,” says Chandrasekhar.

 
 
The quest towards scaling up leads to an outcome out of sync with the idea of a social enterprise
 
 
The revenue stream for Forus includes the sale of devices and annual maintenance contracts (AMC). “One unit costs around Rs 5 lakh. We have bought 40 units so far and plan to add 60-70 more over the next year. Using these machines, the patient will be able to get a screening at 1/3rd the usual cost, which is especially more important in remote areas with no medical facilities,” says Dr Senthil, who runs Welcare Health Systems, an affordable eye-care start-up, which is the biggest buyer of 3nethra and is using it at 40 locations, from Udaipur to Erode.

Chandrasekhar wants to develop an ecosystem for eye treatment. His strategy is to first target ophthalmologists and then diabetes specialists, and once people start taking the cost of not adhering to the diagnoses seriously, to launch the product in strategic public spaces such as railway stations and general hospitals. “The success of a product like 3nethra hinges on access, affordability and awareness. We are supplying the product at an affordable price and making it accessible to ophthalmologists. The guy who has access is the one who can create awareness, which will bring in a multiplication effect. As a start-up, we cannot afford to conduct awareness campaigns on our own,” says Chandrasekhar. While Chandrasekhar is keen that Forus outgrows its start-up status, as experienced elsewhere, this quest towards faster scaling up is inadvertently leading to an outcome that may seem out of sync with the idea of a social enterprise.

Tough Climb Up

As Vipin Kumar Rai, student mobiliser at LabourNet’s Vapi Centre has realised, the pursuit of scale brings along its own pressure. Rai is a man on a mission, tasked with distributing pamphlets in neighbouring households and convincing prospective students to enroll at LabourNet. He typically visits 35-40 households every day and asks them to think of this training as skill insurance against any unfortunate event and not just as a job opportunity.

 
 
"At this point, [the investors] are only giving inputs to help us scale and assist us wherever they feel we lack professionalism"Rajeev Kher, Founder, Sanitation Solutions Simplified
 
 
LabourNet — whose revenue has moved up from Rs 3 crore in FY13 to Rs 18 crore in FY14 and which is targeting Rs 50 crore-60 crore in FY15 — is under pressure to scale up rapidly, as a result of which, unreasonable enrolment targets are often assigned to mobilisers. “Our managers want to notch up 50 enrolments every day, but that’s not possible. Our student mobiliser is able to reach around 35-40 households in a day. Now, the management expects all outreach to be converted into enrolments. But that doesn’t happen, either; of the 35-40, around half will turn up in a couple of days to check out the centre, of whom only five eventually enrol for the course,” says sourcing executive of the Vapi centre, Yogesh Patil.

Vasudevan, on her part, refutes the organisational coercion charge. “Since our inception, there has been a certain amount of pressure on individual centres because you can’t do without pressure in the vocational sphere. It’s not like school education, where people come and sign up with you; here, you have to go out and convince people and mobilise enrolments,” she points out. She adds that this pressure largely comes from within the organisation, as investors aren’t involved in the day-to-day operations of LabourNet; in fact, investors such as the Michael & Susan Dell Foundation and the Acumen Fund only entered the picture last year. “Though investors generally do have a certain RoI expectation, the ones on board with us are impact investors and believe in the planning exercise we undergo.”

Then again, LabourNet helps its centres exercise the same democracy when it comes to their future targets. “We believe that a change in thinking regarding vocational education can only come with scale. Our revenue estimates are calculated using a bottom-up approach; we follow a kind of federation structure wherein individual centres are asked to come up with targets. We only insist that centres honour their commitments; those that feel pressured probably started out with unrealistic target figures to begin with,” quips Vasudevan.

 
 
"Forging partnerships is a complex affair. A for-profit corporate and a social enterprise will have different agendas, which have to match"Ronnie Screwvala, Founder, Swades
 
 
Such inconsistencies are only natural when an organisation sets out to achieve financial objectives along with social ones, an inherently incongruous combination that today has come to mean the imposition of a corporate structure on an organisation whose existential objective is to deliver social good. One way to minimise this is to have investors who are on the same page as the social enterprise. Hence, the quality of investors that you attract plays a big role, and Sanitation Solutions Simplified (3S) founded by Rajeev Kher, which provides mobile recyclable toilets to organisations, has been lucky so far in this regard. 3S is backed by Aavishkar and responsAbility, a Zurich-based fund, both of which Kher says haven’t pressured 3S to deliver financial returns. “Of course, revenue is extremely important during our board meetings, but no fixed return on investment (RoI) is mentioned. At this point, they are only giving inputs to help us scale and assist us wherever they feel we lack professionalism,” says Kher.

3S’ core activity is renting and maintenance of its mobile toilets. “Apart from rental income, we charge for cleaning and maintaining the toilet using deodorisers so that it doesn’t smell. We have been providing units directly to slums on a pay-and-use basis. We have also installed it in some schools. The model is such that the kids don’t pay for it but people who live outside the school can use it before and after school hours. We use only high-density polyethylene, which is 100% recyclable when the toilets get old. We also arrange for evacuation trucks, which arrive at regular intervals to suck out the waste and dispose it,” says Kher. 60% of the company’s staff belongs to the economically weaker sections of the society and 3S tries to afford dignity to a traditionally maligned and ‘impure’ profession.

Cleaning Up Their Acts

3S has also entered into contracts with the CSR arms of construction majors such as L&T and Lavasa to install and maintain toilets at their worksites. “Instead of companies building 100 toilets, we ask them to build 80 toilets and use the rest of the funds to monitor usage and impact. We offer impact measurement services to corporate CSR arms as well; we make sure people use the toilets, ensure the waste gets treated and provide the data to the corporation,” says Kher. The companies, on their part, are pleased with the services provided by 3S. HK Sinha, Delhi-based manager at L&T, says, “Our partnership with 3S over the past year has been successful. It has given us toilets on a hire basis, ensuring they remain hygienic and are cleaned on a daily basis.” Apart from CSR activities, L&T has collaborated with 3S to provide toilets for its regular construction sites, having installed 70-80 so far.

 
 
"It usually takes very long for a company to achieve scale. But when it happens, it’s an absolute joy"Ajit Mahadevan, India director, Acumen Fund
 
 
After the amended Companies Act of 2013 — enforceable from April 1, 2014 — came into being, it is now mandatory for companies to spend 2% of their profits on CSR. The passing of the Act led to an increase in spending in FY13 by companies intent on projecting themselves as socially conscious. However, CSR funds are increasingly finding their way to the non-profit space and not to the for-profit social enterprise space. “While corporates can give grants to for-profit social enterprises, tax laws make it more convenient for them to channel their money to NGOs and Trusts. Only then can they avail of tax exemptions on expenditure,” says Soumitro Ghosh, CEO, Wadhwani Initiative for Sustainable Healthcare. Indeed, section 80G of the income tax Act mandates that donations to certain registered charitable institutions, funds and trusts are either 50% or 100% tax deductible, depending on the status accorded to the organisation. This means that corporations find it convenient to donate to these NGOs instead of investing in a social enterprise to scale them up, since the expenditure would not be tax deductible. While CSR money may help service-oriented social enterprises such as 3S in finding clients, it is doubtful whether CSR can be relied on to invest in social enterprises.

However, there is still hope: social enterprises can find success by aligning their objectives with the CSR cells of corporations. Right now, sanitation and hygiene seem to have captured everybody’s imagination. “Social enterprises can pitch to these CSR cells by reorienting themselves as a one-stop solution for their theme-based solutions. For example, water filtration for communities, including locally trained manpower, or comprehensive eye examination services/diabetic retinopathy packages, with all the necessary back-end specialist doctor connections,” says Angeri. Indeed, some corporations are planning on diverting their CSR funds to social enterprises. Shrikant Savangikar, director, quality and sustainability, SKF India, says that collaborations with social enterprises are in a preliminary stage but the company plans to move ahead.

Irrespective of the supposed fillip to social enterprises through CSR funds, scaling up a social business remains an uphill task that requires the concentrated efforts of multiple stakeholders and a sound business model. “It usually takes very long for a company to achieve scale. Sometimes, it doesn’t happen at all, but when it happens, it’s an absolute joy,” says Mahadevan. It remains to be seen if these differently motivated entities will find common ground and usher India into a golden age of impactful, professionally run social enterprises.

***

Profits At The Bottom Of The Pyramid

In India, the concept of social enterprise captured the popular imagination after management guru (late) CK Prahlad wrote about it in his book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Prahlad posed a question that doubled up as a provocative answer, “What if we mobilise the resources, scale and scope of large firms to co-create solutions to the problems at the bottom of the pyramid (BOP), these 4 to 5 billion people who live on less than a $2 a day?” He described the BOP as a potential market with immense ‘latent purchasing power’ that could be tapped into by combining the investment capacity and resource strength of MNCs with the grassroots presence and fierce commitment of NGOs. This collaborative approach has resulted in the birth of social enterprises, made up of a professionally run company with a board of directors combined and armed with the impact-oriented approach of NGOs. As Prahlad posited, collaborations, indeed, play a vital role in helping social enterprises scale up.

The existential foundation of a social enterprise is rooted in the idea of serving customers and enriching their lives, and not merely offering a product or service for sale. Or as Venkateswaran pithily puts it, “In a normal business, the customer is a means to an end. In a social enterprise, the customer is an end in itself.” In a country like India with poor educational and healthcare infrastructure, the scope for enterprises to be social is immense and Angeri is critical of the desire in the corporate collaborator to see quick results. “Large corporates need to understand that market creation is different from pure business development in an existing market; traditional marketing strategies might fail in such cases. For example, simple aspects such as market sizing maybe a challenge, as the market is still being created,” he says. Screwvala agrees, “Anybody doing business in India just can’t assume that there is a huge, ready market because we have 1.3 billion people. Most markets have to be created. This requires concept selling and focus on operations, execution and marketing.”

COMMENTS PRINT
catalist 2014
Six years ago, in an attempt to counter competition and present differentiated content, Outlook Business decided to highlight the stories of social entrepreneurs as part of an annual issue.
Outlook Business
catalist 2014
In a social enterprise you can see the impact of what you are doing in the face of your customer in a very short time.
Ajay Piramal
catalist
I have seen a variety of people with and without this guilt. Those who don’t have it really end up prospering. And those who have it invariably move out of the radar.
K Ramkumar
catalist 2014
If you don’t have character as a company, it is very difficult to move beyond satisfaction to trust.
D Shivakumar
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