Social Enterprises through Affirmative Action

Mr. Soumitro Chakraborty

CEO, fiinovation

Mentor of the Webinar

• A CSR based research consultancy working in areas of education, livelihood,environment and health since last seven years

• Assists businesses to support requirements of communities by designing andimplementation of sustainable projects

• Through practices such as CSR-CSO Partnership, Initiative Design, InitiativeManagement, Monitoring and Evaluation, Impact Assessment, SustainabilityReporting; Fiinovation facilitates corporations for promotion of social enterprises

About Fiinovation

Agenda of the Webinar

• Better understanding on Social Enterprise models (Indian & Global)

• Social Enterprise laws in India

• Understanding of Affirmative Action in India

• Promotion of Social Enterprise models among marginalised communities

• India Inc and Social Enterprise movement

• Top examples of Social Enterprise Models in India

• Conclusion

• Way forward

• A social enterprise (SEs) is an organization that applies commercialstrategies to maximize improvements in human and environmental well-being. This may include maximizing social impact rather than profits forexternal shareholders.

• SEs have a mixed and contested heritage due to philanthropic roots in theUnited States, and cooperative roots in the United Kingdom, EuropeanUnion and Asia.

What is a Social Enterprise?

• A SE could be engaged in any business activityfulfilling any need (Maslow’s need hierarchy)

– E.g. Entertainment, Nutrition, Sanitation,Communication, Livelihoods, Transportation,Education, Training, Financial Inclusion

• Asian Development Bank defines SEs asorganizations that have triple bottom line returnsnamely, addressing social and environmental needssuch as affordable health services and energy, andhave a financially sustainable revenue model (orplan to become sustainable in the near future).

Social Enterprise, the concept

Personal fulfillments

Self-esteem, status, reputation

Love, affection, family, culture & relationships

Shelter, protection, safety & stability

Air, sleep food, hunger, thirst, warmth

Social Needs

Basic Needs

Maslow’s need hierarchy

• 'Social Entrepreneurship' can be traced to Beechwood College near Leeds, England(from 1978) where Freer Spreckley used the term 'social enterprise' to describeworker and community co-operatives that used the 'social accounting and audit'system developed at Beechwood

• Ashoka: Innovators for the Public – a US foundation established by Bill Drayton was aprogram to support the development of social entrepreneurship

• In the US, the term is associated with 'doing charity by doing trade', rather than'doing charity while doing trade'. In other countries, there is a much strongeremphasis on community organising and democratic control of capital and mutualprinciples, rather than philanthropy

Social Enterprise – Global Context

• Public Services (Social Value) Act, 2012 (United Kingdom)

• NYU Fellowships in Entrepreneurship, Social Entrepreneurship, and Innovation

• Social Enterprise Summer Fellowship, Harvard Business School

• Amazing Grace, Rangoon, Myanmar

• Global Social Entrepreneurship Network, UK

• Schwab Foundation for Social Entrepreneurship

• Global Social Enterprise Initiative

• Yunus Social Business

• Rubicon Programs, California, USA

Social Entrepreneurship Development Initiatives

• Definition is not limited by legal structure. SEs may be registered as:

– Private limited companies

– Cooperatives

– Not-for-profits, trusts or any other legal entities

• In India, a non-profit can be registered as:

– A Society, under the Registrar of Societies

– or as a Trust, by making a Trust deed

– or as a Section 8 Company under the Companies Act, 2013

• Under Section 8 of the Companies Act, 2013, a limited company

– (a) has in its objects the promotion of commerce, art, science, sports, education, research, socialwelfare, religion, charity, protection of environment or any such other object;

– (b) intends to apply its profits, if any, or other income in promoting its objects; and

– (c) intends to prohibit the payment of any dividend to its members

• Impact investing in India has roots extending back to 1982, when the Ashoka Foundation providedgrants to Indian social entrepreneurs.

Social Enterprise – India Context

• Social enterprises are not just scaling up, they are scaling out

• Governments and international institutions have a huge role to play

• The bigger the enterprise, the greater the need for democratic accountability

• Potential to transform the socio-economics of poorer nations, but individuals require support

such as capital, infrastructure, market access etc.

• Entry of big businesses to the market

• Social enterprise leaders do not often come from traditional business backgrounds, hence lack

expertise

• Genuine need and desire for collaboration across sectors and geographies

• Need of donor support

• Progress on large social impact investments had been slow due to multiple hurdles

• Need for better infrastructures to support the sector

Challenges – Social Enterprises

Few Social Enterprises

Global India

•Anand Milk Federation Union Limited (Gujarat Co-operative Milk Marketing Federation Ltd)•Godavari Women Weaver’s Services Producer Company•Nyayika, Leaps & Bounds•Sukhibhava•Frontier Markets•m.Paani•Innovative Financial Advisors •Samhita Social Ventures•Make A Difference

•Samasource•Community Shop•Textbooks for Change•ArtZoco•eBatuta•Water Health International•Kiva•Edgar and Joe’s•Bio Lite

Global

Understanding Affirmative Action

Known as:

• Employment Equity in Canada

Requires employers to engage in proactive employment practices to increasethe representation of four designated groups: women, people with disabilities,Aboriginal peoples, and visible minorities

• Affirmative Action in USA

Focus on issues such as education and employment, specifically granting specialconsideration to racial minorities and women who have been historicallyexcluded groups

• Positive Action in UK

Promotion of people based on belonging to non majority identity groups in theworkplace, educational institutions and positions in society

Contd…

• Affirmative Action in India

Known locally as “reservation” policy it is an elaborate quota system for publicjobs, places in publicly funded colleges and in most elected assemblies

• An action favouring those who tend to suffer from discrimination; positivediscrimination

• AA reverses longstanding discriminatory tendencies in the society

For people of a certain caste, gender, sexual orientation, race, or ethnicbackground

• AA provides supposedly fairer conditions and corrects past injustices

Different Approaches to AA

Affirmative action Through CSR

•Implementing CSR Activities as per Schedule VII of The Companies Act, 2013

•Targeting SC/ST communities

•Recruiting employees or providing opportunities in the recruitment process for SC/ST communities

•Procuring from SC/ST Vendors

•Offering solutions to address the needs and challenges of the SC/ST communities

Affirmative Action

Poverty Among SCs and STs

• As per the erstwhile Planning Commission, ST population below poverty line came down from 47.4% in 2009-10 to 45.3% in 2011-12 in rural areas.

• In urban areas, it declined from 30.4% in 2009-10 to 24.1% in 2011-12.

• Census 2011 revealed that the situation of non-workers among total ST population (i.e. 42.0%) was not dismal as compared to SC (i.e. 52.2%) and all other social groups (53.3%).

Contd…

• Percentage of ST non- workers declined from 50.9% in 2001 (Census 2001) to 42% in 2011 (Census 2011) at all India level.

• According to SECC, 133.5 mn households (74.5% of the total; 84% for SC and 87% for ST households) have a monthly income where the highest earning household member earns less than Rs 5,000, whereas households with any one of the seven deprivations is only 86.9 million.

• As per NSS, 34% of SCs and 46% of STs households were in self-employment in 2004-05 in rural areas as compared to urban proportions with 29% and 26% respectively.

Contd…

• There are 46, 844 villages in the country having greater than 50 per cent SC population

• The SECC covered 24.39 crorehouseholds across the country — 17.91 crore are rural households

• 21.53 per cent of rural households belong to the Scheduled Caste/Scheduled Tribes

Unemployment Rate (%)

Maharashtra governmenton the issue of suicidesamong cotton farmers inthe state suggests that“suicide incidences areslightly higher among SCsand STs across caste groupsand for marginal and smallfarmers across size-class ofland.”

Year ST SC OBC Others Total

Rural Male

2011-12 1.3 2.0 1.7 1.8 1.7

2009-10 1.7 1.7 1.4 2.0 1.6

2004-05 1.1 1.7 1.5 2.0 1.6

Rural Female

2011-12 1.1 1.4 1.7 2.4 1.7

2009-10 0.9 1.5 1.4 2.5 1.6

2004-05 0.4 1.4 1.9 2.9 1.8

Urban Male

2011-12 3.4 3.2 2.5 3.4 3.0

2009-10 4.4 3.1 2.8 2.7 2.8

2004-05 2.9 5.5 3.3 3.7 3.8

Urban Female

2011-12 4.8 4.5 4.7 6.3 5.2

2009-10 4.3 4.2 6.2 6.2 5.7

2004-05 3.4 4.6 6.7 8.5 6.9

Social Entrepreneurship & Affirmative Action

• Allocation of Rs 200 crore in the Budget Estimates 2014-15 for setting up Venture Capital Fundfor SCs

• Earmarking of Plan Outlay under Tribal Sub-Plan at 24.71% under Indira Awas Yojna & 20.59%for NRLM/ Aajeevika

• Specific provisions made in the guidelines of programmes such as MGNREGA, PMGSY andNSAP for the benefit of SCs/STs

• MUDRA Bank will be financing 6 crore small vendors and businesses, 61 per cent of whom areSCs, STs, OBCs and minorities

• India Development Marketplace, a World Bank initiative, to fund & support social enterprises,announced grants worth $2 million to 20 social entrepreneurs in Jharkhand, Madhya Pradeshand Chhattisgarh

India Inc and Social Enterprise

• Tribal Farmers’ Producer Company Srikakulam, Andhra Pradesh (ALC & NABARD)

• NTFP (Gatherers' Self-Help Cooperative), Mayurbhanj, Odisha (ALC & SPARDA)

• Tata Social Enterprise Challenge (Tata Group, Acumen, Ankur Capital, Yunus SocialBusiness and Ennovent)

• On 21st May, 2012, SEBI notified the word ‘Social Venture Fund’

• Aavishkar, a venture capital firm, has been investing in social ventures for over adecade, catalyzing innovation at the bottom of the pyramid

CII & Social Enterprises

• CII-ITC Centre of Excellence for Sustainable Development mentors, advises, andprovides a platform to social entrepreneurs and enterprises

• Mentorship and advice is on business models, strategies, and partnerships

• Annual event 'Sustainable & Inclusive Solutions‘, a platform for social entrepreneurs andenterprises

• Social Enterprises that CII have worked with are in energy access, rural distribution andagricultural services

• Association with Selco Incubation Centre for creating conditions to deliver energyservices to low income families

• CII's sponsored Code of Conduct for affirmative action – Signed by 690 companies forcollecting data on SC/ST employees in 2010

Affirmative Action & India Inc.

0

5

10

15

20

25

30

35

40

45

SC ST OBC Others Not Recorded

7.835.76

41.94 43.56

0.9

Percentage Distribution of Enterprises by Social Group of Owner

As per MSME Report 2014-15,•7.83% of the enterprises were owned by Scheduled Caste entrepreneurs•5.76% by Scheduled Tribe entrepreneurs•41.94% by entrepreneurs of Other Backward Classes

Contd…

•All India Confederation of SC/ST Organization was created in 1997 under the flagshipof Dr. Udit Raj, who is the National Chairman of confederation that works for governmentreservations, ban on contract system, promotion among other things

•All India SC & ST Railway Employees Association

•Tribal Cooperative Marketing Development Federation of India Limited (TRIFED)

•The Narendra Modi government's 'Farm to Fork' programme over2,000 farmer organisations in Chhattisgarh, Jharkhand, Madhya Pradesh, AndhraPradesh and Telangana will be incubated to grow into a cooperative society, trust andultimately, a company, as part of the plan being implemented by the National Bank forAgriculture and Rural Development, the country's largest development lender.

Conclusion

• Need to promote Social Enterprises through social venture funds

• Establish platforms to highlight social innovators

• Create larger market space by addressing social issues through social businesses

• Government should adopt policies to reduce red-tapism and encourage individualsocial entrepreneurs

• Encouragement of co-operative movement as a social enterprise model

• Corporations can invest their CSR funds to establish social enterprises addressingsocial issues & also generating income for a particular community

Way forward…India Inc, Social Enterprises & Affirmative Action

Tripartite Model – Social Enterprise,

Affirmative Action & CSRIllustration

Corporation X’s total CSR expenditure:*

Rs 200 cr

Product: Handicrafts / Food Processing

Registration : The Companies Act, 2013

Organization Structure

Operations: Sourcing from community members, processing of finished products, marketing

Sharing of Revenues: Yearly dividends, remuneration of community members, salaries to staff, operational expenditure, expansion costs

*Utilization of funds as initial capital for a Social Enterprise

Board Members

Farmers/Artisans

(SC/ST)

Farmers/Artisans

(SC/ST)

Farmers/Artisans

(SC/ST)

Managers

Benefits of Tripartite Model

• Provide an opportunity to gain financial sustainability & independence for the SC/STcommunities

• CSR grant will allow corporations to spend money on social & environmental issues,and services not otherwise funded

• Assets of SEs belong to the community and cannot be sold off for private financial gain

• People, who are local stakeholders in the area of benefit, play a leading role in theenterprise ensuring inclusive development

• Local community are the shareholders who ensure accountability of the enterprise tothe community

• The SEs will be able to generate profits or a surplus that can be re-invested ordistributed for community benefits

The Way Forward

Soumitro ChakrabortyCEO, Fiinovation

Jaya SinhaDy. Director – Media &

Communication, Fiinovation

Rohit SrivastavaGraphics Designer, Fiinovation

Rahul ChoudhuryDy. Manager, Fiinovation

Contributors to the PPT