the role of social enterprises as market facilitation...
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THE ROLE OF SOCIAL ENTERPRISES AS MARKET FACILITATION
ORGANIZATIONS IN DEVELOPING NATIONS
Jesse S. Thomas
A Thesis Submitted to the
University of North Carolina Wilmington in Partial Fulfillment
of the Requirements for the Degree of
Master of Business Administration
Cameron Business School
University of North Carolina Wilmington
2012
Approved by
Advisory Committee
Petra Milde Christian Schuchardt
L. Vince Howe
Chair
Accepted by
Dean, Graduate School
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TABLE OF CONTENTS
ABSTRACT ................................................................................................................................................................................. v
ACKNOWLEDGMENTS ..................................................................................................................................................... vi
LIST OF TABLES .................................................................................................................................................................. vii
LIST OF FIGURES ............................................................................................................................................................... viii
CHAPTER 1. INTRODUCTION ........................................................................................................................................ 1
Rational For Study ............................................................................................................................................................... 2
CHAPTER 2. LITERATURE REVIEW ........................................................................................................................... 4
2.1. Biomimicry .................................................................................................................................................................... 4
2.1.1. Agro-ecology ........................................................................................................................................................ 5
2.1.2. Eco-energy design ............................................................................................................................................... 7
2.1.3. Natural business design ................................................................................................................................... 10
2.2. The Flooded Earth ..................................................................................................................................................... 13
2.3. Natural Capitalism ..................................................................................................................................................... 19
2.4. Green to Gold .............................................................................................................................................................. 27
2.5. Review: Social Enterprise ....................................................................................................................................... 32
2.5.1. Social enterprise and environment ............................................................................................................... 32
2.5.2 Social entrepreneurship research ................................................................................................................... 36
2.6. Review: Market Facilitation Organizations ....................................................................................................... 39
CHAPTER 3. RESEARCH QUESTION & METHODOLOGY ............................................................................. 43
3.1. Research Question .................................................................................................................................................... 43
3.2. Methodology ............................................................................................................................................................... 43
CHAPTER 4. RESULTS ...................................................................................................................................................... 45
4.1 What is Sustainability and How Does it Relate to Business? ...................................................................... 45
4.2. Developing Nations Defined .................................................................................................................................. 47
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4.3 Why This Market Matters ........................................................................................................................................ 48
4.4. Social Enterprising in Developing Countries .................................................................................................... 49
4.5. Building a Market-based on Selling Efficiency of Processes ...................................................................... 51
4.6. China and India: Emerging Middle Class .......................................................................................................... 52
4.7. Sustainability as Education Paradigm ................................................................................................................. 53
4.8. Process Redesign ........................................................................................................................................................ 55
4.8.1 Eco-agriculture .................................................................................................................................................... 55
4.8.2. Eco-industrial manufacturing ......................................................................................................................... 57
4.8.3. Automobile redesign ......................................................................................................................................... 57
4.8.4. Transforming commercial/residential buildings ...................................................................................... 58
4.8.5. Recycling buildings, materials, and land.................................................................................................... 59
4.8.6. Appliances............................................................................................................................................................ 60
4.9. Renewable Energy Industry .................................................................................................................................... 61
4.9.1. Renewable market in developing countries ............................................................................................... 61
4.9.2. Infrastructure ....................................................................................................................................................... 62
4.10. Facilitating a Service-based Economy .............................................................................................................. 64
4.11. Regulations and Legal Framework .................................................................................................................... 67
4.11.1 Hybrid legal structure ..................................................................................................................................... 68
4.12. Barriers and Challenges ......................................................................................................................................... 70
4.12.1 Barriers................................................................................................................................................................. 70
4.12.2 Challenges ........................................................................................................................................................... 71
4.13. Scope: Exclusions and Limitations .................................................................................................................... 71
4.13.1. Exclusions .......................................................................................................................................................... 71
4.13.2. Limitations ......................................................................................................................................................... 72
CHAPTER 5. CONCLUSION – PARADIGM PROTOTYPE ................................................................................ 73
5.1. Business Model................................................................................................................................................................ 74
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5.2. Service-based Operating Platform ........................................................................................................................ 74
5.3. Distribution Strategy ................................................................................................................................................. 75
5.4. Corporate Culture ....................................................................................................................................................... 75
5.5. Legal Framework ....................................................................................................................................................... 76
5.6. Innovation Platform ................................................................................................................................................... 77
AREAS FOR FURTHER RESEARCH ........................................................................................................................... 78
REFERENCES ......................................................................................................................................................................... 80
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ABSTRACT
The purpose of this paper is to examine the relationships between social enterprises and
their ability to facilitate market creation in developing nations. The approach is qualitative and
involves data gathered from informal semi-structured interviews and independent research. The
analysis reveals a prediction that social enterprises can embody the ideal model to effectively
facilitate socio-ecological market creation. The social and environmental needs in developing
countries represent pertinent opportunities for such market expansion and maturation.
Limitations of the study include the 15-week time frame allotted to perform the research, and
inadequacies in methodology design. This study is one of the first studies to empirically research
social enterprising and an innovation platform that has the capacity to transcend each dimension
of industry. It is notable to include that future research focused towards the carbon trading
market is certain and will directly influence the expediency of the social enterprising paradigm
proposed by this study.
Keywords: Natural Capitalism, Sustainability, Biomimicry, Innovation, Social Enterprise, Social
Entrepreneur, Socio-ecological, Paradigm,
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ACKNOWLEDGMENTS
I wish to thank first and foremost, Jesus and my Heavenly Father: without divine
direction this thesis would have never been pursued. I would like to thank my thesis chair Petra
Milde, who introduced to me the social implications of global business affairs. Her guidance was
the foundation of my initial research towards social enterprises and their relationships to
sustainable redesign. This study attempts to provide a platform that will transcend global
economics and provide a new quest for our times.
This thesis would not have been possible if it were not for the participation of Jerr
Boschee, Sandra Williams, and Alex Hammonds. I would like to thank Robert Cassanova for his
personal guidance and succinct insight throughout the thesis process. In addition, a special
thanks to Cory Ammons for providing a preface to relevant information that was included in my
dissertation.
I dedicate this thesis to my parents who unremittingly supported me during my years of
study. They made this work possible.
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LIST OF TABLES
Table Page
1. Interviewee Sample .......................................................................................................44
2. Characteristics of Developing Nations .........................................................................47
3. Demand and Supply Drivers Within the Renewable Energy Industry .........................63
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LIST OF FIGURES
Figure Page
1. Sustainable Development Triangle ...............................................................................46
2. Innovation Platform for Sustainable Design ................................................................55
3. Renewable Energy Market in Developing Nations .....................................................62
4. Eco Innovation Design .................................................................................................77
CHAPTER 1. INTRODUCTION
The unprecedented rise in globalization has recently begun to depict the true negative
retroactions associated with our global hydrocarbon energy driven socio-economic framework. A
significant majority of the globe is now reaching peak oil production, also known as the
maximum rate level at which oil producers can extract oil. It is estimated that the world now
consumes 86 million barrels of oil per day, 40,000 gallons per second. If this rate of fossil fuel
consumption is accurate, it will be impossible to replenish natural resources to dynamic
equilibrium. The scale of adjustment needed to break away from oil dependence exhibits
extraordinary challenges, yet is inevitable, if life on this planet is to be sustained.
Global dependence on oil has lead to inefficient and wasteful industry design. The mass
production of high quality cheap products have left holes in global commerce and substituted
cost cutting initiatives for sustainable methods. Simply put, in the current global economic
paradigm product sustainability has directly become inverse to economic growth because is
slows cyclical consumption. A natural capital paradigm is emerging that conflicts neoclassical
economics and advocates resource optimization over production maximization. Natural
capitalism is based on objectives that holistically integrate environmental sustainability into
every aspect of manufacturing and contests economic principles suggesting that creation of need
will create profit. The natural capital model advocates a whole systems approach that instead
proposes the alleviation of need will create profit. Natural capital refers to Earths resources and
the strategic preservation of the synergistic ecological framework in which they are embedded.
Emerging economies set in the developing world and their social deficiencies are having an
increased impact on global trade. As developing nations continue to expand, they will hold
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substantial influence on the global economy and the finite capacity of planet Earth. The needs
driven by social inadequacies in developing nations synonymously overlap with natural capital
principles and present an innovation platform that has the capacity to redefine global socio-
economic structures. Social enterprises actualize the hybrid business model that can effectively
utilize such a diverse innovation platform. These organizations exhibit the most effective
paradigm to galvanize a socio-ecological market in developing nations and through social and
environmental initiatives successfully advocate sustainability.
A metaphor that can describe the coming transformation is ―a lack of stones did not end the
Stone Age, just as lack of oil will not end the oil age. The issue instead rests with abundant signs
exhorting a lack of further growth that will be followed by gradual then steep decline‖
(Economist, 2003). From the plow of the agricultural revolution to the power machine of the
industrial revolution, labor optimization through technology is at the bottom of every social
transformation. The current information age presents cloud database and enterprise software
technologies, which will serve as dissemination tools for social entrepreneurs. This technology in
conjunction with clean energy and sustainable process design will provide the innovation
platforms now demanded for international competitiveness. Social enterprises and their
individual entrepreneurs have the ability to serve as the change agents needed to create holistic
business solutions able to engineer responsible commerce methods that simultaneously mitigate
climate change and social inadequacies.
Rational For Study
To perform this study it was necessary to understand the unsustainable habits of human
evolution and the challenges humanity will face while transitioning to sustainable green
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economies. More importantly asking the question: How can we trade goods and services on our
home planet without destroying it. This qualitative multiple case study is important and needed
for several reasons. First, the primary goal of the study is distinguish and raise awareness to the
disparities that exist between current business practice and sustainable business practice. Driven
by increasing prices and scarcity of natural resources, global market conditions are ripe for
transformation. The available literature has focused on inefficient processes and possible
solutions that may mitigate inadequacies in a global business context. The scholarship has failed
to distinguish any business model or organizational structure that is explicitly tailored to address
these market inefficiencies. Also the majority of the existing research is quantitative. Thus, the
second goal of this study is to focus on the qualitative findings in order to gain in-depth
knowledge of the diverse roles social enterprises will embody in developing nations in the global
transformation to sustainable processes. Third, natural capital processes are an emerging
phenomenon in the green sector. Recent changes in private and public sector paradigms now
recognize that optimizing resource efficiency and energy usage will provide a platform for
innovations to improve environmental performance and create new industries. Fourth, this study
will add new knowledge to the field of social enterprising and its operation in developing
nations, and also provide plausible examples of working paradigms that may be replicated in the
shift to a greener global economy. Fifth, no study has attempted to pose social entrepreneurs as
the change agents needed in emerging economies of the developing world. Finally, this study
will provide information for future researchers and social entrepreneurs who wish to target the
emerging markets of developing nations.
CHAPTER 2. LITERATURE REVIEW
2.1. Biomimicry
American Naturalist Janine M. Benyus formalized the biomimicry movement with her book
Biomimicry, in which she conducts six studies (three of which will be discussed) investigating
the science of sustainable innovation inspired by nature. Benyus posited models taking the best
designs from nature‘s storehouse of invention and applying them to the challenge of building a
creative sustainable future. The very motif of biomimicry instructs to follow life‘s principles:
build from the bottom up, self-assemble, optimize rather than maximize, use free energy, cross-
pollinate, embrace diversity, adapt and evolve, use life-friendly materials and processes, engage
in symbiotic relationships, and enhance the bio-sphere. The biomimicry theory suggests that
products and processes can be created to promote sustainable adaptation to life on earth.
Humanity has been working against natural processes for the last ten thousand years
beginning with the Agriculture Revolution. Benyus (1997) describes that the destruction of
Earth‘s natural processes can be attributed to human hubris, and that in reality we are not the
apex of evolution, articulating:
―Now that we can synthesize what we need and rearrange the genetic alphabet to our
liking, we have gained what we think of as autonomy. Strapped to our juggernaut of
technology, we fancy ourselves as gods, very far from home indeed. In reality, we
haven‘t escaped the gravity of life at all. We are still beholden to ecological laws, the
same as any other life form, the most irrevocable of these laws says that a species cannot
occupy a niche that appropriates all resources—there has to be some sharing‖ (p. 5).
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As humanity reaches its limits, the question remains: how much human expansion and
environmental degradation can earth accommodate? Yet, as crisis breed‘s creativity, a system far
from stable is a system ripe for change. Benyus (1997) suggests, ―that it is now time for us to
leap to a new phase of coping, in which we adapt to Earth rather than the other way around‖ (p.
5).
2.1.1. Agro-ecology
The first study Benyus conducted was focused towards mimicking nature in the way we farm
and feed ourselves. In this study Benyus consulted The Land Institute, and its director, botanist
Wes Jackson on creating sustainable agriculture (agro-ecology) i.e. farming to fit the land.
Benyus (1997) divulges into unsustainable farming practices that have lead to the loss of ―up to
one-third of American topsoil, and up to 50 percent of its original fertility‖ (p. 16), stating:
―In our quest for ever increasing production, we have removed our plants inborn
defenses, we have isolated them from mixed species groupings, narrowed their genetic
diversity, and gutted the health of their soil‖ (p. 15).
Wes Jackson refers to these current agriculture practices as a ‗treadmill of vigilance‘ (as
cited in Benyus, 1997, p.14), implying that humans have tamed and sheltered crops, so that they
now completely depend on petrochemical fertilizer and pesticide. Chasing economies of scale,
experts of conglomerate agro corporations have advised farmers to maximize or get out. The
agricultural systems of industrialized nations have evolved from growing food to sustain the
people to growing so much food it became a surplus—an export item and political tool.
Industrial agriculture (cash crop farming) that is based on use of fertilizers and pesticides is
unsustainable, and will soon become an outdated system. Benyus (1997) examined the oil
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dependent U.S. agriculture system based on 1996 statistics stating, ―since 1945, pesticide use has
risen 3,300 percent, but overall crop loss to pest has not gone down. In fact, despite our pounding
the United States with 2.2 billion pounds of pesticides annually, crop losses have increased 20
percent‖ (p.18). Due to mass production and human greed farms have essentially become
factories, and ―pesticide residues have made agriculture the number one polluting industry in
North America in 1996‖ (p.19) Each day that the corporate municipalities control the agriculture
sector, the soil, the crops and the people will become more vulnerable.
In this agro-ecology study Benyus suggests that global economies must design domestic
plant communities that mimic that of a prairie, yet be predictable enough in terms of seed yield
to be feasible for agriculture. Complexity researcher Stuart Kaufman suggests, ―there exists a
sweet spot between chaos (wildness of the prairie) and order (controlled rigidity of the wheat
field), there lies the powerful creative force of self-organization, or order-for-free‖ (as cited in
Benyus, 1997, p. 24). The first thing to stand out about this farming technique is that ninety-nine
percent of the plants are perennials, meaning that they cover the ground throughout the year.
This is advantageous to farmers because perennials: hold the soil against the wind which
produces less runoff and contains more nutrients, act as sponges that are self fertilizing and self-
weeding, and add organic matter to the soil through annual death and decay of root systems.
Another glaring advantage of prairie farming is the variety of functionality it offers, diversifying
unforeseen natural risks as well as providing the cheapest and best form of pest control. With an
assorted offering pest attacks will die down before they become epidemics. Agro-ecologist Jon
Piper explains, ―Your best hedge against disaster is going to be variety, as a prairie teaches—lots
of plants in your palette so that no matter what the conditions, some species will still flourish‖
(as cited in Benyus, 1997, p.33).
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Permaculture (permanent agriculture) is a farming philosophy that aligns the way we feed
ourselves with nature‘s wisdom. Choosing synergistic planting arrangements to complement and
bring out the best in one another, allows each living component to have a multiple function that
cumulates to an edible harvest. Ecologist Bill Mollison believes that ―By mirroring nature‘s most
stable and productive communities, and then living right in the middle of them, human
communities can begin to participate in their beauty, harmony, and Earth-sheltering
productivity‖ (as cited in Benyus, 1997, p.39). In effect by mimicking nature‘s agrarian
processes, humans will create more efficient farming methods that will be synonymous with a
green global economy.
This study did not address the topic of business models that can utilize the permaculture
platform described in the text. Yet, it is definite that as more research and financing are allocated
to the green sector, agro-ecology start up ventures will be soon to follow.
2.1.2. Eco-energy design
The second study discussed in Biomimicry deals with how we harvest energy. In this study
Benyus takes on the issue of artificially synthesized photosynthesis and how to gather energy
like a leaf. Benyus (1997) argues that, ―The sun‘s fusion of hydrogen provides enough light
energy to easily supply all human energy needs without burning a drop of oil‖ (p. 61). The
problem with recreating photosynthesis is that the secret remains guarded. Its processes are
strictly molecular, composed of atoms that fly below the radar of even the strongest molecular
microscopes. So, how do we engineer artificial photosynthesis to drive human processes?
Benyus (1997) suggests that for now ―we infer the process, build theories, and hunt for proof‖ (p.
63).
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The key to harnessing how the sun turns light into life lies in the polarized positive and
negative charges of a cell membrane. Biochemist Tom Moore describes this phenomenon as
‗membrane potential‘ (as cited in Benyus, 1997, p.66). Membrane potential accomplishes a lot in
plants, most importantly the feeding and fueling of the entire planet, which is a salient factor in
the global transition to photovoltaic energy. Moore (as cited in Benyus, 1997) explains:
―Anytime you have a positive and negative charge separated like that, you essentially
have a battery, a battery powered by the sun… This battery power can be used in many
forms: 1) Hook wires to the ends of the molecular string to get an electric current, 2) use
it to split water and produce clean-burning hydrogen gas, 3) use it as a power pack for
solar based manufacturing, or even 4) use it as a switch for computing near the speed of
light‖ (p.68).
Photosynthesis sleuths investigate this natural phenomenon by pulling out individual pieces
of the DNA sequence in order to see how it affects the whole. Using this trial and error
methodology biochemists are attempting to understand the energy separation and yields
prevalent in photosynthesis. Benyus (1997) articulates that through harnessing the ―miracle of
membrane polarization… humans will be able to create: disposable tiny batteries powered by
light, hydrogen efficient fuel-cell technology, and computers firing on signals encoded on light
waves‖ (p. 86).
Benyus focuses this study towards harvesting energy from biomass in aquatic habitats. In
this instance duckweed provides the best energy transduction to emulate, due to its conversion
efficiency and the inputs needed: stagnant water and sunlight. Mimicking this biological
technology proves to be effective and efficient. Biochemist Jim Guillet successfully reached a
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ninety-five percent energy conversion rate of synthetic photosynthesis. This conversion rate
rivals natural photosynthesis and could provide a plausible platform for clean energy adoption.
Guillet explains,
―by using anthracene in water solvent we have created the perfect renewable basin
needed to harvest the energy captured in solaron beads…. When these translucent
plastic disks are put into a liquid they absorb it the way an absorbent diaper would,
allowing us to harness the photosynthesis effect of solar energy… It costs us about fifty
cents to cover a square meter with these tiny solar-chemistry labs, in contrast to
something like photovoltaic cells which cost fifty, to two hundred dollars per square
meter‖ (as cited in Benyus, 1997, p. 92,93)
There are abundant man-made uses for an energy process as prominent and efficient as
photosynthesis. Inexpensive production of hydrogen fueling for jet engines and automobiles
merely scratches the surface for this energy potential. The blueprint for this novel artificial leaf is
still in the research and developmental stage. Yet, the results of this research illustrate the
advantages of designing functional devices and an infrastructure that can harness the energy
generating potential of this biological paradigm.
This study fails to discuss specifics of how such an infrastructure can be realized, and
therefore only gives theoretical notions of how this technology can directly be integrated into
society. Yet, as further research and investment are permeated into this technology, innovation
and practical applications will follow.
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2.1.3. Natural business design
The third study discussed from Biomimicry deals with how business can be conducted
synonymous to nature‘s design. This study suggests that the transformation to sustainable
commerce lies in creating economies similar to ecosystems. Benyus (1997) clarifies inadequate
waste practices with this analogy:
―We‘re like the juggler who takes a set of bowling pins, tosses them in the air once, then
throws them out, reaching for a new set. Life on the other hand juggles one set of pins
and cycles them continually‖ (p.242).
This personification illustrates the fundamental premise of industrial ecology. Where nothing
is wasted and the entire embedded process in run on ambient solar energy. Environmental
scientist Bob Laudise explains how industry managers are beginning to green around the edges,
and how ―conscious emulation of natural systems is becoming the hottest shibboleth since Total
Quality Management‖ (as cited in Benyus, 1997, p.243). TQM teaches business leaders to look
for and fix the root causes of problems. Benyus argues that pollution is not the root cause of our
economical and environmental crisis, delusion is. Benyus (1997) articulates this man-made
misconception stating, ―the Earth, put here for our use, is a limitless provider of resources and
will clean up our messes for free‖ (p.243).
It‘s simple enough to say that the operation of industry has become unsustainable.
Misconceptions about natural resource capacity continue to drive unsustainable practice and
have lead to the over-use of finite resources, in the name of profit. Benyus (1997) ascribes, that
this plundering and polluting attitude has lead to governmental ―command and control laws,
which have directed industry to muzzle their smokestacks and green up their business activities‖
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(p.246). Dynamic tacit knowledge advocates that companies need to not only accept the
greening of industry, but also embrace it using it as a competitive advantage. Undoubtedly the
overconsumption of natural resources, negligence of environmentally respectful waste practices,
and combustion of fossil fuels have taken mankind to the threshold of Earth‘s resilience. Insight
into mitigation of current global challenges can be found within Einstein‘s conclusion, ―The
significant problems we face cannot be solved by the same level of thinking that created them‖
(as cited in Benyus, 1997, p. 247).
Commence natural capitalism where industry abides by natural guidelines as to ensure
sustainable practices and local self-renewing ideals. The first and perhaps most salient of these
guidelines, as Benyus (1997) describes, is to ―use waste as a resource… then watch as the mature
community becomes more and more self contained, it circulates what it needs within its pool of
sprouting, dying, and decaying matter. A diverse assembly of producers, consumers, and
decomposers close the holes in the organizational chart‖ (p.254). The only input that will be
imported is the energy from sunlight, with the only export being the byproduct of energy use,
heat. Benyus (1997) describes, ―The first examples of this no-waste economy as collections of
companies clustered in an eco-park and connected in a food chain, with each firm‘s offal going
next door to become the other firm‘s raw material or fuel‖ (p.255).
Benyus (1997) explains natural capital principles as the ―tried and true approaches of the
mystery of surviving in place‖ (p.253). These parameters are tantamount with nature‘s design
and should become the fundamental normality for industry to emulate. According to Benyus
(1997), the rules include the following:
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1. Use waster as a resource
2. Diversify and cooperate to fully use the habitat
3. Gather and use energy efficiently
4. Optimize rather than maximize
5. Use materials sparingly
6. Don‘t foul the nest
7. Down draw down resources
8. Remain in balance with the biosphere
9. Run on information
10. Shop locally (p.253)
These natural guidelines promote the stewarding of nature‘s genius and diversity. If humans
are to create a sustainable society these guidelines must be integrated into every business strategy
without exception. This new perception of value can be appraised using tools such as the Life
Cycle Analysis (LCA), in which managers build environmental friendliness into every step of the
production process, using the cradle-to-cradle accounting technique. Accountable utilization of
assessment techniques such as LCA will drive: continuous improvement of processes, support
policies, and provide a sound basis for informed decisions regarding innovation in sustainable
industry practices.
Biomimicry encompasses several economic and biological trends that already are in place
and setting out to redefine industry. The recently identified inadequacies of the industrial
revolution have propelled scholars and scientists alike to investigate new means for driving the
global social economy. Resource productivity and responsible waste management are at the
forefront of this planet preservation movement. Benyus (1997) poetically articulates, ―in a world
as interconnected as ours protection of self and protection of planet are indistinguishable, which
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is why ecologists say ‗The world is our body‘, if we act on our ability to mimic life‘s genius, we
have a chance to protect both our world and body‖ (p. 296).
The recent emergence of college curriculums such as ―biology taught functionally‖ along
with business ventures like the Biomimicry Ventures Group, prove that the biomimicry model is
much more than an abstract concept of bringing sustainability to the planet. It is an ideology that
will shape the future. Benyus (1997) reminds us that, ―We don‘t need to invent a sustainable
world—that‘s been done already‖ (p. 249). Instead, we simply need to learn from nature‘s
success specifically its ability to achieve maximum wealth with minimum material flow.
2.2. The Flooded Earth
In recent years there has been substantial debate and research into the subject of global
warming and sea level rise. This literature undertakes a review of available scientific research
regarding anthropogenic climate change and socio-economic implications that can come as a
result. The theme of The Flooded Earth revolves around the impending and ever accelerating
rise of oceans due to global warming. Paleontologist Peter Ward (2010) explains in his non-
fiction literature that, ―neither the sea level rise nor its cause can be doubted any longer. The only
question is how high will the sea levels rise, and how fast‖ (p.5). This imminent sea level rise
according to Ward can be attributed to the worldwide population increase and the indoctrination
of overconsumption in developed nations. Unsustainable population growth along with
hydrocarbon energy utilization significantly affects the accumulation of carbon dioxide in the
atmosphere, thus contributing to global climate change and the rise in global temperatures. Ward
(2010) insinuates, ―There is every reason to believe that we are on the cusp of the most rapid rate
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of sea level rise ever recorded, ice is and will continue to melt faster than any other time in
Earth‘s history‖ (p.10).
Ward opens The Flooded Earth by noting that the highest estimated sea level rise expected
to take place this century by the Intergovernmental Panel on Climate Change‘s (IPCC) 2007
Fourth Annual Report--less than 1 meter--is based on conservative predictions regarding the
future rise in emissions of CO2. This is an astounding and frightening prediction when
considering consequences if actual sea level rise is higher than the IPCC forecast. Ward (2010)
explains, ―A 3-4 meter rise in prevailing sea levels in the near term would be entirely disastrous
for much of currently existing humanity‖ (p.32). Catastrophic sea level rise would mean critical
implications for human life on planet Earth, especially in densely populated developing
countries. These unprecedented changes would consist of: desertification of large portions of
Earths land mass, saltwater intrusion of aquifers otherwise used to sustain agriculture, oceans
production of hydrogen sulfide, and mass inundation.
Ward describes one of the main obstacles prohibiting corrective action in regards to sea-
level rise is scientific reticence towards the subject of climate change. NASA climatologist
James Hansen sees the current climate change situation as ―causing many scientists to be more
worried about crying wolf than fiddling while Rome burn‖ (as cited in Ward, p.36). Hansen
confronts this issue further when he goes on to speak about scientific cowardice in the face of an
overwhelming crisis:
―I suspect the existence of what I call the ―John Mercer effect.‖ Mercer (1978) suggested
that global warming from burning fossil fuels could lead to disastrous disintegration of
the West Antarctic ice sheet, with a sea level rise of several meters worldwide. This was
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during an era when global warming was beginning to get the attention from the United
States Department of Energy and other scientific agencies. I noticed that the scientists
who disputed Mercer, suggesting that his paper was alarmist, were treated as being more
authoritative. It was obvious who was right on the science, but it seemed to me, and I
believe to most scientists, that the scientists preaching caution and downplaying the
dangers of climate have fared better in the receipt of research funding‖ (as cited in Ward,
p.37).
The evidence of the atmospheric rise in CO2 over the past decade cannot be discounted any
longer. Ward (2010) clarifies the urgency of this phenomena stating, ―By 1900, the level was 295
parts per million (ppm), a rise of about 15 ppm over a century. From 1900 to 2000, CO2 levels
went from 295 all the way up to the current level of about 385—a 90 parts ppm rise in just one
hundred years. The rise will continue as China and India join Europe and the Americas in putting
two cars in every garage and heating millions of new homes with natural gas and oil‖ (p.57).
Evidence continues to surface concerning the correlation between anthropogenic carbon dioxide
emissions and global temperature rise, Ward suggests that with each day passing humans are
losing control of what the future of Earth will look like. Climate change professionals attempt to
construct forecasting models focused on the actual amounts of CO2 currently being emitted into
the atmosphere. According to Ward (2010) ―The latest projections have emissions rising from
28.1 billion metric tons in 2005 to 34.3 billion metric tons in 2015 and 42.3 billion metric tons in
2030. Not good news‖ (p.64).
One discerning driver of increased CO2 production is the ever-increasing human population.
Ward (2010) remarks, ―Every new human mouth to feed, or transport, or simply keep alive,
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warms the planet, which melts the ice, which causes the sea to rise‖ (p.74). It is important to note
that socio-economic factors are salient elements that significantly affect the energy needs of
diverse sovereign entities. The U.S. Energy Information Administration (EIA) states, ―energy
needs for industrialized countries are expected to increase 25 percent from 2005 by 2030—while
energy for non-industrialized nations (where human population growth will be greatest) will
essentially double… with emissions in developing countries exceeding those of the current
industrial powers by about 70 percent‖ (as cited in Ward, p.78).
India and China represent two developing Asian powerhouses set to explode economically,
which as Ward (2010) predicts, ―will lead to a huge escalation in the ownership of private cars,
and carbon emissions‖ (p.86). Burgeoning nations such as Brazil, Thailand, Indonesia, Russian,
Mexico and Iran, to a lesser extent will soon experience this same phenomena. Ward explains
that automobile manufacturers are well aware of these potential markets and are devising large-
scale penetration strategies to exploit this new demand. Ward (2010) clarifies the environmental
risk associated with automotive industry stating, ―car emissions account for one-tenth of
greenhouse gases worldwide‖ (p.86). What remains unclear, however, are the type of
automobiles that will be delivered and what their negative retroactions will be.
As developing countries industrialize and become more prosperous, their citizens will
desire unsustainable western luxuries, typifying the substantial environmental and social
challenges that lie ahead. The bottom line is that the Earth is pushed to its limits with regards to
the remaining extractable finite resources. Ward (2010) suggests that the world is either entering,
or even concluding, the period of peak oil, stating, ―over 245 million barrels burned per day in
2009‖(p.80). This time of peak oil will be followed by an irreversible decline exactly when
17
world population is forecasted to explode. This population increase and its inevitable demand for
energy will extend the capacity to raise living standards in developing countries while
maintaining living standards in developed nations. Ward explains that both oil supply and
demand will require attention, and that governmental intervention will be required to propose
mitigation efforts that will take substantial time and effort to put into place. His three possible
scenarios are as follows: ―
1. A twenty-year transition to other energy sources, there will be little impact on world
economies.
2. A ten-year rush transition that would cause moderate impacts, which would create
shortages, but is still possible with extraordinary effort from governments, industry,
and consumers.
3. A sudden transition, or late initiation of mitigation that might cause severe
consequences (Ward 2010, p.81).
Due to the heterogeneity of global economies, diverse approaches will be necessary to
strategically plan mitigation schemes. Emerging and developing economies currently are facing a
quasi-faceted energy challenge: meeting the needs of billions of people who still lack access to
basic energy services, feeding over-populated regions amidst an environmental crisis, while
simultaneously participating in the global transition to low carbon energy systems. Ward (2010)
illustrates the future distinction between developed and developing countries, stating, ―the
ultimate result being that rich countries get fatter as poor ones go hungry‖ (p.104).
If Ward is correct then saltwater intrusion from inundation will be the single largest
contributor of worldwide hunger in the 21st century, especially in developing nations. Ward
(2010) explains the ice caps that will be directly responsible for this catastrophic sea-level
fluctuation as follows:
18
―The difference between sea-level gains and losses is called the mass balance; a negative
balance contributes to global sea-level rise and a positive balance keeps the water levels
closer to normal. About half the discharge from the ice sheet is through twelve fast
flowing outlet glaciers in Greenland and Antarctica, most of which are no more than 6 to
12 miles across their seaward margin, and each fed from a large interior basin of about
19,000 to 39,000 square miles. The behavior of these dozen glaciers dictate the ultimate
mass balance, and their sensitivity to global warming is what is pertinent‖ (p.130).
Ward (2010) estimates the ―tipping point‖ (p.136) of these glaciers to be at a CO2 level of
450 ppm, stating ―the inevitable atmospheric level of 450 ppm will result in the loss of
Greenland‘s ice after a millennium passes‖ (p.136). Ward‘s message being that humans must act
with an alacritous urgency in favor of carbon cutting technologies and renewable energy systems
in order to never let the carbon dioxide levels rise to this point. Ward (2010) defines the worst-
case scenario as Greenland and Antarctica becoming ice-free, stating, ―what began as industrial
revolution in the 1800s and progressed to an oil economy in the 1900s, only to end as a coal
economy in the 2100s and 2200s, will offer us a recipe for potential human extinction‖ (p.147).
Ward ends the literature with several technocratic solutions that he declares could bring
about this necessary revolution. None of which, it should be noted, involve the abolition of
capitalism. Ward (2010) suggests, ―Perhaps the most powerful of all proposed geo-engineering
methods involves biology… as much as three billion tons of carbon are removed each year from
the atmosphere through the living processes of forests, yields, and other non-oceanic
ecosystems‖ (p. 205). In any case, the human race must bring together its brightest minds in a
19
holistic effort to address this climate change issue. Otherwise, it could spell the death of billions
and possibly human extinction.
Exclusions of Ward‘s research include: a lack of addressing systemic solutions on exactly
how revolutionary change can take place and what needs to be done in the short term to act
responsibly toward the environmental crisis. Neither does Ward provide the environmental
business ―blueprint‖ that will be needed for environmental concerns to be considered on a
capitalistic enterprise agenda. Therefore Ward fails to construct an image of what economy may
look like under the technocratic regime he indirectly proposes. Ward further neglects to speak on
the anti-global warming counter argument and its associated research.
2.3. Natural Capitalism
Having been translated into twelve languages and being the subject of the Harvard Business
Review, Natural Capitalism is fast becoming the paradigm for sustainable industrial and societal
practices. Hawken, Lovins and Lovins argue that most of earths capital has not been accounted
for under traditional neoclassical economic standards. Hawken et al (1999) articulate that the
preservation and optimization of ―resources used by humankind that include: water, minerals,
trees, fish, oil, soil et cetera‖ (p. 2), represent a new business approach not only salient for
protecting the biosphere but also for improving competitiveness and profits. Hawken et al outline
simple changes to the way businesses operate, that will be built on advanced techniques for
making resources more productive, with potential to yield benefits both for today‘s shareholders
and for future generations. Hawken et al (1999) define this approach as natural capitalism, ―it‘s
what capitalism should become if its principal category of capital—the ―natural capital‖ of
ecosystem services—were properly valued‖ (p. 4). The complicity of human knowledge
20
concerning anthropogenic planet degradation can no longer be accepted. Blueprints such as
Natural Capitalism can serve as navigation tools for the entrepreneurial action needed to address
amalgamated environmental and societal inequities.
Hawken et al (1999) opens the narrative discussing the evolution of modern capitalism and
the material development of humankind, explaining that this exponential growth came at a severe
price:
―It is not our supplies of oil or copper that are beginning to limit our development but life
itself. Today, our continuing program is restricted not by the number of fishing boats but
by the decreasing numbers of fish; not by the power of pumps but by the depletion of
aquifers; not by the number of chainsaws but by the disappearance of primary forests‖ (p.
3).
Recognition of the critical interdependency between the use and production of human-made
capital in conjunction with supply and maintenance of the natural environment is the motif of
natural capitalism. Hawken et al (1999) argue that the natural capital revolution can replace the
unsustainable aberration neo-classical economics has become. ―What might be called ‗industrial
capitalism‘ does not fully conform to its own accounting principles. It neglects to assign any
value to the largest stocks of capital it employs—natural resources and living systems, as well as
social and cultural systems that are the basis of human capital‖ (p. 5). Definitively, a pragmatic
whole-systems approach will drive the continuous flow of value and services, improving
efficiency and ultimately leading to sustainability. Hawken et al (1999) introduce the concept of
service and flow stating that it would close exposed loops and become a ―cradle-to-cradle‖ (p.17)
process. An example of this could be found at the end of a product life cycle, instead of being
21
disposed of, the product would be returned to the manufacturer for continuous reuse and
remanufacturing. Hawken et al ascribe that such resource efficiency could lead to a productivity
revolution that will ―transcend the marginal gains in performance that industry constantly seeks
as part of its evolution… with all resources returning to either an industrial or biological cycle
after their useful life is complete‖ (p. 12).
Natural Capitalism is the realization of scarcity and depletion of environmental assets that
provide vital life support functions to society and all living things. The wasteful use of these
natural assets (all of which have no known substitute) caused by degradation and liquidation of
energy, water, topsoil etc., in the name of profit is not sustainable business practice. Natural
capitalism promotes a new business model that will empower companies to fully realize the
dynamic opportunities presented by outdated, extremely wasteful, and inefficient resource avails.
The course to natural capitalism encompasses four vitally interlinked, major shifts in business
practices. Hawken et al (1999) outline them as follows:
Resource radical productivity
Biomimicry
Service and flow economy
Investing in natural capital (p.10).
Utilization of these four principles will lead to solutions that are intertwined and synergetic.
For instance, firms that downsize material input and kilowatt-hours will be able to retain more
employees, who then may advance innovation driving future optimization and sustainability.
Emerging economies such as China and India provide exciting new frontiers for natural
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capitalist. As the middle class grows in developing nations social innovations frame huge profit
potential. Achievable, realistic means to improve these lives will stimulate innovation, as
Hawken et al (1999) suggest ―the world‘s growing population cannot attain a western standard of
living by following traditional industrial paths to development, for resources required are to vast,
too expensive and too damaging to local and global systems‖ (p.14).
In the second chapter reengineering the wheel, Hawken et al acquaint readers with the
Hypercar. A Hypercar is an energy efficient automobile run on hydrogen fueled engine cells that
will stimulate efficient use of resources, thus reengineering the automotive industries ―empty
calories‖ (p.14). Hawken et al (1999) argue that the marketization of transportation innovations
such as the Hypercar will:
―Embody the four different elements of natural capitalism. Their design reflects many
forms of advanced resource productivity. Their materials would flow in closed loops,
with toxicity carefully confined or designed out and longevity designed in‖ (p.27)
The ultra-light composite auto body that is prevalent in Hypercar design is a direct
representation of whole systems engineering. Due to less power usage, and exploitation of idle
capacity in electricity distribution systems, production of the Hypercar will eventually become
cost effective to manufacturers. The automotive industry represents a significant sector of
commerce that if, transformed into an industry that is more responsible with material input and
less harmful to the biosphere, will lead the total industrial shift to natural capitalism and
responsible business practice.
Hawken et al further develop the innate wastefulness within current industrial systems in
chapters 3 and 7. Issues such as: the hidden life cycles of products and optimization of one
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element in isolation of others, are discussed in detail with practical solutions presented.
Utilization of toxicity elimination techniques will redefine systems of service and flow for
businesses and municipalities. Hawken et al (1999) propose, ―the true bottom line: a system that
wastes its resources wastes its people and vice versa, and both kinds of wastes are expensive‖ (p.
55). The authors then fully develop the benefits of waste reduction, specifically defining
proficient examples and their value added.
Chapters 6, 8, and 13 call attention to the importance of resource productivity and its impact
on the redesign of capitalistic business strategies. The author‘s emphasize restructuring
investment towards human capital, environmental capital, and innovative simplicity. Whole
systems thinking to optimize resource productivity as Hawken et al (1999) explains, ―is the trick
to, wring out friction and waste of every kind, downstream and upstream, end to end…Every
input and result is measured, nothing is guessed. Energy is used frugally, then recaptured and
reused until almost nothing is left… Simplicity and elegant frugality are nature partners‖ (p.123).
Hawken et al (1999) articulate that the key to whole systems thinking is solving for pattern
through finding solutions that are ―good in all aspects‖ (p.123).
Design principles referenced by Hawken et al (1999) that achieve large gains in resource
productivity include leasing services that offer ―continuous, customized, decreased-cost solutions
to individual customer problems, that is compelling because the provider and the customer both
make money in the same way – by increasing resource productivity‖ (p.136). The logic behind
this cost saving approach is that by leasing their services the provider can capture operational
savings and accommodate its customers with expert supplier management. Hawken et al (1999)
articulate that the leasing of services, ―support the natural capital goal of protecting vital
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ecosystems, for example it fits perfectly with the manufacturers life cycle responsibility for
ultimate remanufacturing as a technical nutrient for industrial metabolism‖ (p.138). This
example is cited in order to substantiate a customer focused, resource productive approach that
will drive any industry to transcend the gap between product and service.
The content of chapters 9, 10, and 11 are focused towards applying biologically inspired
redesign (biomimicy) towards different environmental assets: forestry, agriculture, and water
respectively. Hawken et al (1999) advocate the pertinent maintenance of the equilibrium of
natural systems, stating, ―think in terms of the integrity of systems, because we cannot interrupt
or replace the complex interrelationships in ecosystems with good results‖ (p.138). An example
of the systematic saving principles discussed in these chapters is applicable to the forestry
industry. Detailed analysis of each step will be the prominent factor for savings to emerge. The
formula for this analysis is as follows:
Human population x Affluence x Un-substituted fiber x New materials dependence
Field efficiency x Conversion efficiency x End-Use efficiency x Functional efficiency (Hawken,
Lovins, Lovins 1999, p.179)
This formula becomes a helpful approach for finding and exploiting savings opportunities, by
combining the various factors that cause extraction of natural assets from their environmental
ecosystem. Pragmatic approaches such as the above forestry formula can provide specific
paradigms for capturing what Hawken et al (1999) refers to as ―downstream-to-upstream‖
(p.180) opportunities in natural processes. Hawken et al continue to exemplify saving solutions
throughout their narrative on agriculture reform and aqueous solutions. From organic farming to
efficient sinks and showers the sequential data presented in Natural Capitalism spearheads
25
reform towards sustainable development. Hawken et al (1999) specify how clean energy
entrepreneurs can redefine the energy sector, and ―not only help ‗offset the risks of climate
change‘, but also offer ‗greater growth prospects than the carbon fuel industry‘…renewables
could become so competitive a commodity that they‘d grow to supply at least half the world‘s
energy‖ (p.247).
Markets exist around the globe for renewable, environmentally friendly alternatives to coal
and oil. As opportunity costs of finite resource usage become too great for governments not to
shift to carbon abatement programs, many opportunities for green entrepreneurs will emerge to
find inefficiencies in the energy sector and profit from them. Hawken et al (1999) articulate this
opportune rationale:
―Every form of resource depletion and prevented pollution is a potential candidate for an
entrepreneur to find and exploit inefficiencies… Making markets in saving resources and
avoiding pollution can support powerful entrepreneurial innovations that turn each
obstacle to resource productivity and loop-closing opportunities‖ (p. 280).
Hawken et al (1999) further discuss why green initiatives and investment thereafter will
continue to evolve due to the ―double dividend—high returns and reduced insurance risks‖
(p.284), accompanied with each strategic green action. Whole systems thinking and innovation
inspired by simplicity will demonstrate the capacity to create synergies and revolutionary
redesign within the energy sector. Hawken et al (1999) describe whole systems thinking in depth,
26
and emphasize that, ―single solution approaches do work, but often, optimizing one element in
isolation jeopardizes the efficiency of the entire system‖ (p. 285).
Social entrepreneurs and the hybrid organizations they embody will lead the shift to a
sustainable economy and society, ―arguably they have now become the world‘s real capitalists.
By addressing such issues as greenhouse gases, social equity, chemical contamination, loss of
fisheries, wildlife corridors, and primary forests, they are doing more to preserve a viable
business future than all the world‘s chambers of commerce put together‖ (Hawken, Lovins,
Lovins 1999, p.315). Initially leadership will be substituted for management to sufficiently
harness clean energy markets. Frameworks of responsible globalization practices, tax shift
regulations, and dynamic governmental policies must be forecasted using practical solutions that
flow from green whole-systems design. Business must be re-indoctrinated to transcend industrial
boundaries and implore collaboration from competitors and adversaries alike, to create a
platform for sustainable innovation.
The authors end the narrative with an inquisitive challenge to their readers, posing this
question, ―How is it that we have created an economic system that tells us it is cheaper to destroy
the earth and exhaust its people than to nurture them both‖ (Hawken, Lovins, Lovins 1999,
p.321)? The theme of natural capitalism is actually quite common sense, based on the simplistic
suggestion that ALL capital be valued. Advocates of natural capital believe that sustainability
can be reached, through mimicking ecology in coalition with a service-centered economy
focused towards eliminating waste and reinvesting in natural living ecosystems. ―While there
may be no ‗right‘ way to value a forest, a river, or a child, the wrong way is to give no value at
all. If there are doubts about how to value a seven-hundred-year-old tree, ask how much it would
27
cost to make a new one‖ (Hawken, Lovins, Lovins, 1999, p.321).
Natural capitalism provides the grounded theory from which green social enterprises will
create their organizational mission and vision: also this research will supply the blueprint and
benchmark needed to avoid fruitless business practices focused towards achieving societal
impact.
2.4. Green to Gold
Proactive environmental planning is now essential to effective business strategy. Auspicious
business leaders are now acknowledging that environmental efforts represent the sustainable
revolution of business practice. Throughout the Green to Gold narrative Esty and Winston
encourage readers to rethink current business models; they introduce the unprecedented
ecological challenges that the inevitable ―green wave‖ (Esty & Winston 2006, p.8) will have on
business as usual, concluding that every municipality and organization will be affected.
Acknowledgment of the green wave is just the beginning according authors Esty and Winston
who suggest, a new playing field is emerging that redefines traditional elements of competitive
advantage, and ―on this playing field, going green offers a vital new path to innovation and
creation of enduring value and competitive advantage‖ (Esty & Winston 2006, p.11).
Throughout the research Esty and Winston have identified and researched companies who
have integrated natural capitalist thinking into their business strategies. The findings of their
work yield a valuable framework along with a set of characteristics that will influence the
strategic development of environmentally responsible companies. The discussion begins with
case study examples of BP and Sony comparing the downside risks and upside benefits of
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integrating environmental initiatives into a working business model. The authors specifically
identify favorable characteristic of green wave leaders citing that ―their business strategies
provide added degrees of freedom to operate, profit and grow‖ (Esty & Winston 2006, p.13). The
acronym ―TINA—There Is No other Alternative‖ (Esty & Winston 2006, p.12) is introduced to
describe how climate change and responsible stakeholder management is no longer an option.
The galvanization of environmental strategy is inextricably linked to social issues that present a
wide range of execution strategies for small and large businesses alike. Esty and Winston suggest
the paradox, ―that the business case for taking up the social agenda is very hard to establish…yet,
companies cannot succeed in societies that fail‖ (Esty & Winston 2006, p.22). The challenge of
successful implementation of a societal agenda, mixed with establishment of environmental
issues as priority provide opportunities for entrepreneurial businesses who move quickly to
exploit changing market conditions to meet niche demands.
Following their synopsis of background information, Esty and Winston discuss natural
drivers of sustainable innovation and the top ten salient environmental factors that will impact
the ―Green Wave‖ (Esty & Winston 2006, p.30) revolution. Reiterating the importance of ―Eco-
Advantage‖ (Esty & Winston 2006, p.67) accompanied with analysis techniques i.e. eco-tracking
tools serve as themes throughout the narrative. The purpose of life cycle analysis such as the
AUDIO technique is, ―to help businesses ‗listen‘, up and down the value chain, for issues and
opportunities‖ (Esty & Winston 2006, p.60). The authors specifically point out that even if a
point in question is not central to ones business, what if it is critical to suppliers? This question
denotes now more than ever, that businesses especially conspicuous well known brands must pay
close attention to the auditing of their value chains on terms of eco-friendly efficiency, or
otherwise suffer scrutiny from NGO‘s and environmentally conscious consumers alike.
29
Esty and Winston indicate who the principal stakeholders will be in the green revolution and
the specific roles of each. The authors define five categories of environmentally oriented
stakeholders that businesses will need to manage and map in order to successfully implement
eco-advantage. The stakeholders annotated as follows:
Rule-Makers and Watchdogs such as government regulators and environmental group
Idea Generators and Opinion Leaders including think tanks and academics
Business Partners and Competitors as wells as suppliers and B2B customers
Consumers and Community including local officials and the general public
Investor and Risk Assessors such as stock market analysts and bankers (Esty & Winston
2006, p.67)
It is important to note the emphasis placed by the authors on the localization of strategy and
effort. They convey that ―it is vital for companies to engage local communities before, during,
and after opening or expanding operations in a region…conversations with local leaders and
groups are not just a good practice, they are now business imperative…local support or
opposition can make or break even the best eco-friendly plans‖ (Esty & Winston 2006, p.90).
Therefore, a focus on localization delineates eco-advantage, while simultaneously supporting the
fiduciary duty of assessment and minimization of risk. The green-to-gold playbook distinguishes
eight proficiencies to reduce downside cost and risk, and increase upside resource efficiency and
profit maximization. The collective order of the major areas focused upon to integrate into
strategic management includes: eco-efficiency, eco-risk control, eco-design, and eco-defined
new market space.
30
With respect to eco-efficiency, Esty and Winston (2006) ascertain that pollution prevention
pays, ―green wave-runners get the same output with less input, improving resource productivity
will stand out as the classic win-win environmental strategy… furthermore, anything that
increases an ecological footprint—emissions, solid waste, energy or water use—is a sign of
inefficiency‖ (p.107). The authors further acknowledge that an eminent tool to spur resource
efficiency lies within industrial ecology, where firm‘s recapture byproducts and sell part of their
waste streams. Internal auditing and dynamic information systems have now made resource
productivity plausible to follow and benchmark. Esty and Winston describe this process within
whole systems design, stating, ―comparative analysis of raw materials consumed, energy
required and waste generated will simplify the process of spotting best practices and capturing
potential energy gains‖ (Esty and Winston 2006, p.109).
Eco-expense reduction encompasses the regulatory burden associated with cutting
environmental costs. The authors describe the subject matter of this green-to-gold initiative as
―centering on the time and money consumed by pollution control and environmental risk
management‖ (Esty & Winston 2006, p.111). The prominent research throughout this section is
dedicated to: the money spent on pollution control equipment, the crippling costs of
mismanagement of environmental issues and work lag associated with regulatory barriers. The
authors place importance on identifying environmental business risk before it can manifest,
along with going beyond compliance of regulatory frameworks to gain relative advantage in the
marketplace.
Eco-design presents abundant opportunities for innovative thinking and re-creation of
business processes. The author‘s outline three lessons learned on galvanizing growth through
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reengineered eco-design: ―meet needs that actually exist, don‘t ignore non-environmental needs
of the customer, and pay attention to ones own costs‖ (Esty & Winston 2006, p.125). With
environmentally friendly re-design a firm must remember to make the business case, not to
assume what is good for the company is best for the customer. For eco-design to be effective the
holistic product life cycle must be viewed from an integrated synergetic perspective starting with
advanced development through end-user consumption.
Value innovation along with breakthrough products and services are the answer to
environmental oriented market forces, and allow businesses to capture novel eco-defined market
niches. Energy supply that outputs low carbon emissions serve as an example of a newly defined
market niche. Esty and Winston argue that ―value innovation, where a product is so new,
different and unique that customers believe there is no substitute‖ (Esty & Winston 2006, p.133)
will create differentiating competitive advantage in volatile markets that are difficult to forecast.
Also by developing incentives for highly energy efficient systems create another form of
competitive advantage for opportunists to exploit. The authors offer, ―servicizing‖ (Esty &
Winston 2006, p.134) as the new service paradigm that can re-structure sustainable business
practice. Servicizing is characterized as a value-adding layer that should be inherent to product
responsibility. The authors suggest that, ―‘servicizing‘ is the holy grail of environmental
innovation‖ (Esty & Winston 2006, p. 134), and can lead to a greener economy because it creates
potential for service to displace products altogether, changing the way products are
manufactured, used and disposed of.
Environmental accountability serves as the driving force behind the green wave, for this
purpose business practice has become much more transparent in the 21st century. Green-to-Gold
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suggests a positive outlook on environmentally focused business strategy and places emphasis on
the value of joining the green wave. The authors do not ignore the fact that some environmental
policies will fail, identifying thirteen primary sources of failure in eco-strategy. Tools and
solutions are presented to help avoid shortcomings and equip green businesses and their
employees with the knowledge needed to create sustainable economic practices. Esty and
Winston make clear that, ―some of the elements in the framework provided will fit an
organization perfectly, while others may not…while each has an independent logic, the major
elements do work together‖ (Esty & Winston 2006, p.303). The authors of Green-to-Gold have
presented a foundation of proactive environmental applications that outline the role businesses
can play in creating a sustainable society by matching needs to sustainable goods and services.
Esty and Winston‘s research excludes renewable energy sources as a viable substitute for
fossil fuels in the day-to-day business activities of an environmentally responsible organization.
Also the research excludes corporate partnerships with social enterprises that employ for
example: a service subsidization model, a market linkage model, or an organizational support
model. All of which as hybrid organizations have potential to bypass regulatory frameworks to
reach different market segments than a traditional for profit.
2.5. Review: Social Enterprise
2.5.1. Social enterprise and environment
The widely accepted definition of a social enterprise is a business that balances
mission/values (social programs) with profit goals. Defining social enterprises has been a caveat
in recent years with respect to a paradigm that can be applied across the board to encompass the
dynamic multi-dimensional nature of its not-for-profit organizational structure. A further
33
complicating factor hindering a ‗true‘ definition of social enterprise is that these ―socially and
environmentally motivated ventures take place under a wide variety of organizational forms,
including within and/or spanning private and public sectors.‖ (Vickers 2010, p. 3). The opaque
nature of environmental politics and social innovation also play salient roles in understanding the
framework of which a green social enterprise may operate. However, what is not in question is
that ―entrepreneurial actors, with their propensity for innovation, experimentation and risk
taking, are seen by some authors as the driving force of a sustainable society‖ (Vickers 2010,
p.3).
The local focus and cross sector nature inherent to social enterprises provide diverse
operating contexts that allow these hybrid organizations to operate outside of regulatory
frameworks that traditional organizations in the first and second sectors must strictly comply
with, ―hybrid organizations are particularly associated with what some commentators are
defining as the fourth sector‖ (Vickers 2010, p.5). The scale and scope of the environmental
sector is ill defined and heavily related to unsustainable consumption patterns that create
opportunities for social entrepreneurs to exploit through innovative solutions. Vickers describes
social enterprise potential and the technologies involved, ―include renewable energy,
autonomous eco-housing and communities, co-operative workshops, organic food production
and distribution, and small-scale infrastructures for water‖ (Vickers 2010, p.9).
Governments and municipalities around the globe are forming alliances and multi-level
policy reforms in a collective steering movement to support and galvanize sustainability. These
efforts are aimed to increase the role of third and fourth sector participation in addressing
accumulating ecological debt and ―particularly aim to reduce the obligations of the state by
34
expanding the role of social (and private) enterprise in a mixed economy of public service
provision‖ (Vickers 2010, p.10). These initiatives represent the future scenario of sovereign
interaction with environmental policy. The mantra of the green movement to ―‘think globally and
act locally‘ reflects the drive to encourage people to consider the health of the entire planet and
global economic inequalities while taking action in their own communities‖ (Vickers 2010,
p.14). The mechanism of governmental expenditure along with disseminated attentiveness to
environmental issues will yield way to the community level involvement and localized operation
principles inherent to the social enterprise multi-dimensional business model.
Low carbon development and alternative energy technologies provide a platform on which
social innovation must occur. These dynamic and increasingly competitive markets are now
becoming the playing field of the eco-industrial revolution, and depict the emerging playing field
on which fourth sector organizations will compete. Social enterprises are in a keen position to
deliver innovative products and services because they have the flexibility to operate without
significant regulatory obstacles, based on their social programs and organizational structure. The
difficulty to measure returns on social investment represent a significant obstacle facing social
enterprises. Cost benefit analysis helps bring clarity to the ambiguous nature of the socially
defined investment, ―recent efforts to develop a standardized approach have centered on Social
Return on Investment (SROI), a tool for translating social objectives into financial measures on
the most important sources of value as defined by stakeholders‖ (Vickers 2010, p.19).
Impediments are fundamental to any worthwhile endeavor, cooperative and logical whole-
systems thinking will stimulate the eco-innovation solutions needed to mitigate such challenges.
35
Sustainability driven entrepreneurship is the catalyst towards a green social economy,
―contributing a holistic net benefit to the economy, community and natural environment‖
(Vickers 2010, p.21). Socio-technical systems innovation will come about from the green
sustainability wave. Axiological changes to consumption patterns will drive and confirm the key
role social entrepreneurs must play in the transition to a greener planet.
―This is challenging in the extreme to realize in practice because many of the elements
are at best theoretical. However entrepreneurs have the ideal characteristics required to
experiment, take risks and put into practice these elements of the model and move
towards sustainability entrepreneurship. Hence, entrepreneurs should not only be
considered as contributors to a successful economy, but the driving force of a sustainable
society‖ (Vickers et al 2010, p.21).
Expectations and development of future green niches will have a substantial impact on the
broad network of stakeholders that are supportive of each respective new practice. Vickers
characterizes green niche accessions as, ―involving the exploration of existing problem framings
and the search for more sustainable solutions, as opposed to the mainstream where innovation
more often involves the application of ‗technical‘ solutions to problems which have been to
narrowly defined‖ (Vickers 2010, p.25), meaning that green niche regimes will be interlinked
and defined by distinguishable ecological problems that warrant synergetic solutions. Vickers
emphasizes that the unconventional business model of a social enterprise can only bring about
sustainability through ―virtuous cycles of innovation‖ (Vickers 2010, p.26), that will close the
gaps of an inefficient society.
36
The importance of support contexts cannot be overlooked as green social enterprises face
issues and challenges that include: ―dynamic and competitive markets involved, a loss of local
focus, and managerial challenges in terms of acumen and specialist skill‖ (Vickers 2010, p.28).
Governments along with private and public sector institutions will play a significant role in green
social enterprises succeeding and thriving and will contribute to: ―cost effective business models
routinely priced in a margin for long term organizational development, externally verified quality
assurance accreditation, long-term relationships with their public sector customers, and diverse
income streams‖ (Vickers 2010, p.28).
2.5.2 Social entrepreneurship research
This article sets out to elucidate the meaning of social entrepreneurship in order to define
distinctive characteristics of a working socially centered organization, in an effort towards a
unifying archetype. The paradigm of entrepreneurship and it‘s profit making potential has just
recently been accepted with respect to adopting social progress, ―Social entrepreneurship
research is still largely phenomenon-driven, existing studies are typically based on anecdotal
evidence or case studies, applying diverse research designs and methods introducing insights
from other disciplines‖ (Mair & Marti 2006, p.1).
In an attempt to disprove the dichotomy of differentiation between ‗social‘ entrepreneurship
and entrepreneurship the authors argue that in the business sector entrepreneurial actors
inherently serve a social purpose. Mair et al articulate that, ―entrepreneurship is particularly
productive from a social welfare perspective, when in the process of pursuing selfish ends,
entrepreneurs also enhance social wealth by creating new markets, new industries, new
37
technology, new institutional forms, new jobs and net increases in real productivity‖ (Mair &
Marti 2006, p.2).
Many experts in the social enterprise field argue that the not-for-profit business model is a
unique feature of social entrepreneurship. Mair et al (2006) however, believe ―that social
entrepreneurship can take place equally well on a for-profit basis‖ (p.3). The not-for-profit
versus for-profit debate explicitly depends on the social needs being addressed, and the business
model being used. In fact creating economic value is a catalyst to social change. ―In social
entrepreneurship, social wealth creation is the primary objective, while economic value creation,
in the form of earned income, is necessary to ensure the sustainability of the initiative and
financial self-sufficiency‖ (Mair & Marti 2006 p. 4).
Numerous perspectives on the definition of social entrepreneurship present both
opportunities and risks for those involved. The authors therefore examine several theoretical
perspectives including: ―structuration theory, institutional entrepreneurship, social capital, and
social movements‖ (Mair & Marti 2006, p.5), in order to fully understand the diverse
relationship contexts of the agent (social enterprises), to the structure (community, society, etc.)
and what factors influence social change to occur. The authors convincingly discuss that inherent
to social entrepreneurship is the leveraging of resources to change norms i.e. ―money cannot be
loaned without collateral, much less to the poor‖ (Mair & Marti 2006, p.5). The entrepreneur
support model is an embedded social enterprise paradigm that contradicts this norm, it‘s self-
financing mission centers on facilitating the financial security of its impoverished clients by
supporting their entrepreneurial activities. Mair et al (2006) argue that, ―Less embedded actors
38
are more likely to engage in social ventures that challenge rules and norms, as they are not
‗locked‘ into the existing structure‖ (p.5).
The importance of networks and support structures cannot be overstated for the success of
social entrepreneurs. The authors suggest that the structural dimension of social capital ―is one of
the factors that will determine whether and to what extent social entrepreneurs are able to solve
and alleviate social problems, and elevate them to the public sphere‖ (Mair & Marti 2006, p.6).
Mutual trust and shared responsibility heavily impact the quality of relationships between
stakeholders. Especially for social enterprises ―it is important to understand how trust is created
among different members of the group, but even more so how trust is sustained‖ (Mair & Marti
2006, p.6). Social capital is more often than not associated with positive consequences however
risks and threats are synonymous with any business endeavor. Mair et al (2006) suggest that in
some circumstances strict social initiatives can backfire constricting open innovation, ―thus
resulting in overembeddedness, which reduces the flow of new ideas into a group and can result
in parochialism and inertia‖ (p.6).
Education and continuity within the social enterprise setting is salient to the final outcome of
social initiatives. The authors suggest ―caution when evaluating initiatives in terms of success or
failure… instead measuring degrees of success and failure and whether entrepreneurs learn from
those failures and change their behavior accordingly‖ (Mair & Marti 2006, p.7). For social
entrepreneurs to succeed in creating social, economic, and environmental value, ―it is necessary
to understand the context and purpose of the system which they are embedded‖ (Mair & Marti
2006, p.8). The author‘s emphasis on the multiple forms social entrepreneurs can embody further
verifies that there is no one replicable paradigm that can be established for every social venture.
39
The authors end the article with questions for further research such as: ―How does social
entrepreneurship differ in developed and developing countries? Can we observe geographical
clusters with higher levels of social entrepreneurial activity? Are there isomorphic forces within
and across clusters? What is the link between social entrepreneurship and sustainable
development, and how can social entrepreneurs contribute to sustainable development‖ (Mair &
Marti 2006, p.8)?
2.6. Review: Market Facilitation Organizations
Systems change in the areas of resource efficiency and eco-systems management is a no
small task due to the complexity of the non-linear system component inherent to each. Chaotic
market dynamics that stem from these non-linear factors make it practically impossible to
structure a replicable cross-cultural paradigm of sustainability. The innate ability of social
entrepreneurs that allow them to go beyond narrowly structured mainstream solutions and apply
local focus towards innovative design, make them an integral part of the advancement of the
environmental and social innovation required to support sustainability. Social change initiatives
accompanied with an altruistic local focus, make social enterprises prime candidates for market
facilitation organizations in the global transition to sustainable systems.
Social enterprises as market facilitation organizations (MFO) embody the utilization of
private-public partnerships developed specifically to promote sustainable markets. The focal
point of Masaki Hori master‘s practicum presents an analysis of Ohisama-Shinpo-Energy‘s
project and the energy agencies role as an MFO in the renewable energy market. Hori describes
that a MFO‘s explicit design is for competency in ―partner matching, information dissemination
and market research‖ (Hori, 2007), to promote the growth of a particular market. Hori also states
40
that a MFO is not simply exclusive to these functions with proficiencies in ―financing, consulting
services, awareness raising, training, and policy advice‖ (Hori, 2007). Hori‘s characterization of
responsibility areas of a MFO presumes that if properly structured, a MFO can serve as a
mediator entity for theoretically any market. Hori then denotes eight barriers MFO‘s will have to
overcome in order to successfully facilitate the renewable energy market.
―1. High cost and low pricing leading to low profitability
2. Lack of legal framework for independent power producers
3. Lack of credit and financing
4. Lack of manpower and skilled personal
5. Lack of information about renewable energy among critical players
6. Inadequate business models
7. Lack of appropriate business developer
8. Opposition from existing interest groups‖ (Hori 2007, p.8)
These barriers can directly relate to the entire sustainability market, and only by addressing
them proactively can they be turned into opportunities. Hori‘s case study depicts a renewable
energy company‘s (Ohisama-Shinpo-Energy (OSE)) quest to act as a MFO in the renewable
energy sector in Japan, and explains that realization of effective market facilitation begins with
positively influencing the essential sectors of markets: business, community and governments.
According to Hori, OSE initially structures its business plan and strategy in an attempt to outline
an effectively facilitated renewable energy market. OSE targeted the community sector with
three salient objectives: ―a.) Raising awareness of citizens about renewable energy through a
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variety of means, b.) Providing training opportunities for renewable energy entrepreneurs; and
c.) Disseminating information and know-how about Ohisma-Shinpo-Energy‘s project‖ (Hori
2007, p.16).
Hori describes the first stage of financing for MFOs as multidimensional, ―a subsidy granted
by the government for the first three years, a subsidy by municipalities, and contributions from
citizen groups… a few years after their establishment, most them become independent and can
finance themselves by profits gained from their own activities‖ (Hori 2007, p.20). This initial
investment structure suggests that MFO‘s must identify and develop strong local, regional,
national and international networks before they can even attempt to have a working business
model.
MFOs provide a business model catered towards open innovation. The challenges of the
MFO business model are opaque due to its novel nature, however, the ability of MFO‘s to pool
resources and share know-how creates immense opportunities. The unprecedented nature of
MFO‘s creates an ambiguous framework that presents obvious risk, but also an integrated
playing field in which to operate. Hori dissertates on the unique characteristics of a MFO
competency:
―This mixture of activities requiring technical and communication expertise provides an
unique characteristic to MFOs differentiating them from other existing organizations such
as consulting engineering companies and pure communication agencies‖ (Hori 2007,
p.23).
The combining of expertise towards a common purpose is contingent upon an effective
vision and congruent leadership. MFO activities integral with localized operational elements, and
42
the range of works of a MFO would categorize its responsibilities into several types: ―local
agencies for local municipalities, regional agencies for regional governments, and national
agencies for nations‖ (Hori, 2007). Effective networking that transcends socio-economic and
geo-political boundaries lowers the transaction costs of parties involved, and ensures efficient
dissemination of innovate ideas, information, and know-how. Hori explains furthermore a salient
attribute of MFOs is their ability ―to be independent of government aid in providing their service
with adequate financial resources and manpower‖ (Hori 2007, p.22).
The recommendations of the dissertation towards the roles of MFOs can be summarized as;
a.) Functions of the MFO can be broken down into three dimensions (business, community and
policy) with each dimension detailed and evaluated using indicators of success b.) Utilization
and cultivation of sustainable networks for open innovation c.) Creation of local technical
expertise within the MFO, therefore creating the interdependency preferable so that profits from
future projects benefit the local community d.) Assisting local and national authorities to develop
practical policies and projects.
Hori concludes with an explanation of viable replication properties stating that, ―some of the
activities of Ohisma-Shinpo-Energy could be effectively duplicated in other places by other
organizations. Of course, all the activities might not be completely replicable because the
functions and roles that an MFO can perform will differ depending on variety of factors: the type
of MFOs organization, need in their community, and maturity of the markets in which they
operate‖ (Hori 2007, p.75). Therefore implementation and strategic planning of MFO‘s must be
catered towards localized markets and customized socio-economic settings.
CHAPTER 3. RESEARCH QUESTION & METHODOLOGY
3.1. Research Question
The central research question that this study aimed to answer is, what is the role of social
enterprises as market facilitation organizations in developing countries. This study will also
address the following sub-questions:
1. What is sustainability and how does it relate to business?
2. Who are developing countries and what is their potential for sustainable process
redesign?
3. Can natural capital principles be used for social enterprise differentiation?
4. Can social enterprises build a market based on the efficiency of processes and can
they facilitate this market effectively?
5. Is there a precedent setting paradigm that social entrepreneurs may use when
operating in developing countries?
3.2. Methodology
The purpose of this qualitative study is to provide guidelines and examples that can be used
to construct a framework in which social enterprises may operate in developing nations. The
salient component of this research was the innovation platform that emerged available to social
entrepreneurs if they choose to utilize it. Qualitative research methods were used in order to
build a complex, holistic description of the role social enterprises can embody within developing
nations.
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The design technique applied to the qualitative study was a semi-structured interview
questionnaire, formulated with the intent to reinforce and evaluate findings over a broad scale.
Open-ended questions were used to identify relationships among previously discussed issues and
create connections relevant to the findings of the research question. Questions were formulated
to identify a holistic business paradigm that would encompass each dimension of social
enterprising in developing countries that will be considered before entering emerging markets.
Thus, context becomes the essential component of the research.
The research sample consisted of four social enterprise experts that either have experience as
a social entrepreneur or have been employed by a social entrepreneur. Qualitative data was
retrieved through a semi-structured questionnaire that used pre-defined relationships as the
pertinent inquiry elements. Post-defined relationships were then generated from sample
responses and integrated within the relationships already identified. Research informants are
listed in Table 1.
Table 1. Interviewee Sample
Respondent ID # Respondent Name Received Date
1. Jerr Boschee 10/16/2011
2. Sandra Williams 10/31/2011
3. Robert Cassanova 11/3/2011
4. Alex Hammonds 10/25/2011
CHAPTER 4. RESULTS
4.1 What is Sustainability and How Does it Relate to Business?
The notion of sustainability transcends every industry, governmental sector, and process
known to man. The global economic crisis has spurred recent awareness and attention towards
the Earths finite natural resources and unsustainable business practices. The trend of sustainable
practice is now overwhelming business professionals across the globe. Emphasis on perpetual
processes has lead to the parlance of ―sustainability‖ as an ill-defined buzzword that is now void
of meaning and has a different definition depending on who is articulating. The United States
EPA defines sustainability as ―everything that we need for our survival and well-being depends,
directly or indirectly, on our national environment‖.
A more generic description of sustainability is defined to be a process or ideology that
creates and maintains the conditions under which nature and humans can co-exist in productive
harmony, fulfilling the social, economic and environmental requirements of current and future
generations. Recent unintended social, environmental, and economic consequences have been
spawned on by unprecedented population growth and consumption of natural resources. The
manifestation of these consequences has lead business professionals and the common citizen to
question the validity of current societal frameworks and business operational guidelines. The
good news is that crisis breed‘s creativity and innovation focused towards eco-sustainability and
simplifying business processes represent plausible solutions for the future.
Governmental regulations have attempted to galvanize sustainable practices with respect to
intervention in the areas of: GHG emissions, building performance, water conservation, strategic
planning, procurement of energy efficient content, and environmental management. Leadership
46
within the (1st)
public sector of a governmental framework is simply just the beginning. In order
for sustainable natural capitalist processes to have societal impact, the (2nd)
private for-profit
sector, (3rd)
not-for-profit sector and the emerging (4th)
hybrid sector, must all have specific
localized objectives for achieving perpetual/sustainable processes.
Sri Lankan physicist and economist Mohan Munasinghe defines sustainability ―as the
perennial balance between the three cornerstones of the triple bottom line: social, economic and
environmental initiatives‖ (Munasinghe, 2002). Munasinghe‘s sustainable development triangle
model exemplifies a balanced triple bottom line (Figure 1)
Figure 1. Sustainable Development Triangle
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4.2. Developing Nations Defined
The world atlas accounts for between 192-196 independent countries across the globe today.
Many sources offer different answers on this approximation due to the dynamic geo-political
environment in which we live. Of these 192-196 independent countries, 129 of them are
considered to be developing nations. No single definition of the term developing nation is
recognized internationally, thus, levels of development will vary substantially between newly
industrialized countries.
To clarify the opaque definition of a developing nation, it may help to define the terms of
what constitutes a developed nation. Former Secretary General of the United Nations Kofi
Annan, defines a developed nation as, ―one that allows ALL its citizens to enjoy a free healthy
life in a safe environment‖. Thus the true classification of a developing country depends on its
national material wealth and the living standards of its citizens. Isometric factors do exist and are
prevalent across geographical clusters of developing nations, as evident in (Table 2).
Table 2. Characteristics of Developing Nations
Differences Similarities
Population and geographic size Low levels of living
Language and religion Low levels of productivity
Experiences in the colonial era High population growth and
dependency burdens
Levels of education Dependence on agriculture and primary
exports
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Table 2. Cont.
Natural resource endowment Imperfect markets and incomplete
information
Types of industry Dependence and vulnerability in
international relations
Role of government and degree of
democracy
Degree of dependency in international
economic political affairs
(Todaro, 2009)
4.3 Why This Market Matters
The market potential of developing nations represent a huge, mostly untapped opportunity
for entrepreneurs. Sixty-five percent of all the countries in the world are classified as developing
nations: nations, that desire western luxuries, yet are suppressed by varying levels of either
absolute or relative poverty. In the Wealth of Nations Adam Smith anticipated evolutionary
theory describing a phenomenon he calls the ―Race of Laborers‖, where he articulates that, ―In a
civilized society, it is only among the inferior ranks of people that the scantiness of subsistence
can set limits to the further multiplication of the human species; and it can do so in no other way
than destroying a great part of the children… The demand for men necessarily regulates the
production of men. If the supply greatly exceeds the demand, then one section of the workers
sinks into beggary and starvation‖ (Smith, 1776). Thus, to mitigate poverty and hunger, one must
create the demand for manpower. The alacrity associated with entrepreneurial endeavors will
stimulate job creation in areas where the population majority is contained within impoverished
financial frameworks, thus will have a significant societal effect on man power demand creation
in developing nations.
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China and India represent two developing nations on the verge of becoming global
governance actors due to their recent exponential economic expansion. High growth rates in the
respective countries have elevated millions out of poverty. It is important to note that this
economic growth is being realized in contrasting political environments that pose significant
consequences on the global economy. With the emergence of a global middle class, millions of
Chinese and Indian consumers can now afford, and demand western luxuries and the standard of
living associated with them. These two emerging giants will have significant impact on global
trade, distribution of income and production configuration within the global network.
As China and India expand industrially, it is imperative to the global economy that they do so
in a: responsible, resource efficient, and environmentally minded framework. As for other
developing nations, job creation and a mentality shift from surviving to thriving are essential for
elevating the standard of living. This mentality shift can only be realized through the education
of the impoverished and its congruent leadership. Social enterprises provide a platform through
their social programs to advocate sustainable initiatives to the masses. The socially motivated
vision and mission of these niche organizations can provide the charismatic leadership necessary
to both facilitate sustainable change and break the stifling mindset of impoverished all over the
globe.
4.4. Social Enterprising in Developing Countries
Sustainable development opportunities within developing nations represent an untapped
market that if properly exploited, will redefine global business. The local focus and dynamic
cross sector mentality inherent to social entrepreneurs allow them to operate in wide context
structures within the sustainable development market. The research suggests that the hybrid
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nature of social enterprises will prove as a salient attribute for bypassing stifling global, national,
and regional governmental regulations.
The research also reveals that social entrepreneurship and social enterprising are not one in
the same. Social entrepreneurship broadly encompasses such diverse players as B Corporation,
―for-benefit‖ ventures, Fourth sector organizations, CSR efforts, ―social innovators‖ and others.
While social enterprises instead directly address societal needs through their products, services,
or the disadvantaged citizens they employ. This difference is worth mentioning due to the
diverse frameworks in which a social enterprise may operate, and makes this business model an
intangible asset that can be integrated and subsidized within larger organizations.
Three types of social enterprises have emerged from the research that will present the most
effective business models for targeting citizens of developing countries. The first treats the target
market it serves as potential employees, a model ideal for job creation in developing countries
and embedded within each of the entrepreneurial support, market-intermediary, and employment
social enterprise frameworks. The second social enterprise type views their target market as
customers, which provides a perfect platform to target the emerging global middle class, the
complex model embodies such a social enterprise archetype. It is a paradigm engineered to
achieve sustainability equilibrium, particularly in instances where financial opportunity does not
symmetrically mesh with social needs. The third type combines the two approaches, in the form
of the mixed social enterprise model that allows for diversification among social services to
capitalize on new business within social market opportunities (Boschee, 2011).
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4.5. Building a Market-based on Selling Efficiency of Processes
Social enterprising as with any business venture implies a certain level of market risk. When
building a market within developing nations implied risk is even higher due to imperfect markets
and uncertain information. The research suggests that the high level of implied risk inherent to
social enterprises will make it difficult for social entities to compete within the green sector,
unless a specialized market is built and facilitated to create social capital through environmental
initiatives without significant government intervention.
An example of this specified market construction can be found within the MAC/PC
business models of the late 80‘s. No government incentives spurred the market expansion for
personal computer development; rather Steve Jobs and Bill Gates built the PC market on selling
the efficiency of processes through interactive microprocessors, creating an exclusively new
market. As personal computers became commercialized their production cost‘s declined rapidly,
expediting the development of a market infrastructure congenial for further growth and
advancement.
The research conveys that social enterprises can use the MAC/PC model as precedence for
how a market is to be stimulated and developed. Applying natural capitalism principles as
cornerstones for efficient process delineation could create the sustainable market infrastructure.
Market intelligence and collaboration among social enterprises would be facilitated by open
innovation platforms that allow for the sharing of innovative ideas and best practices within the
market framework. Customized business models focused towards social need specification and
the positioning of local champions would increase target population involvement and prove to be
the initial building blocks for creating a collaborative sustainable natural capitalistic marketplace.
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4.6. China and India: Emerging Middle Class
The diversity among developing nations creates a significant barrier for standardized
business models. Local customized business models and product offerings will be necessary to
capture and cultivate developing markets. Natural Capitalism energy principles such as whole
systems thinking and synergistic efficiency offer innovative design processes novel to the
burgeoning Chinese and Indian marketplace. The qualitative data proves that the Fee-For-Service
social enterprise model presents the ideal paradigm for selling natural capitalism consulting
services to the expanding commercial sector of China and India.
Such a social service-based operating platform could include consulting services such as:
cost segregation services, energy efficiency audits, synergetic redesign, resource efficiency
service, and green savings process services. The salient selling points of these services will be
increasing end-user value in areas of:
Reducing costs while improving profit and cash flow
Increasing revenues by creation of new markets, new customers and greater appeal
Boosting of brand equity through value chain and product differentiation
Energizing employee productivity by advocating home, family and peer engagement
within the framework of a responsible corporate culture.
A complex social enterprise business model is profit driven and exemplifies an
organizational structure that can disseminate the tacit knowledge needed to facilitate sustainable
process design. An example of targeting this specialized service to niche sustainability needs can
be found within the emerging middle class of Chinese and Indian economies. In this socio-
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ecologic niche the social category of Munasinghe‘s sustainable development triangle (Figure 1)
will be stressed less than the economic and environmental categories when developing strategy.
The societal benefit instead, will be indirectly linked to eliminating the negative retroactions
associated with practicing commerce, and will be fostered by the wave of future altruistic
business decisions within the burgeoning market place. China and India will continue to hold
vast implications on the global supply chain, so it becomes extremely imperative to establish
efficiency as a core competency within their commerce framework.
4.7. Sustainability as Education Paradigm
Developing nations represent approximately half of the world‘s countries; the citizens of
these nations are whom Adam Smith refers to as the ―Race of Laborers‖. In these markets,
education is highly demanded and personifies a platform for effective dissemination of
sustainable practice. Generally speaking, most developing countries struggle with long standing
challenges such as: sustainable expansion of higher education, reduction of access inequities and
improvement of educational quality and relevance. Each of these education obstacles in
developing nations represents an opportunity for social entrepreneurs to create and facilitate a
market.
Working paradigms and operational models for targeting the uneducated and illiterate
markets of the world are already prevalent in 3rd
and 4th
sectors of the global economy. The
mindset transition from surviving to thriving will be galvanized by responsible, adaptive,
educational infrastructures and lead by the social entities that founded them. The qualitative
research poses that a Market-Intermediary-Model could provide the organization design needed
to facilitate and lead the education of illiterates in developing countries.
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The target population consists of those eager to educate themselves in sustainable design,
renewable energy and its application, organic farming, and entrepreneurship. In similar fashion
to higher education institutions, once the education program is completed, the target
population/students will then be looked at as potential employees to social entrepreneurs. This
paradigm design adds socio-ecological value through creation of a virtuous cycle focused
towards sustainable education and application.
This research implies that in order to influence a people, their culture must have a positive
impact. Social entrepreneurial success hinges on its local adoption within diverse cultural
environments. Localized business models that utilize adaptive education techniques will be vital
to any social enterprise, because each specific culture must be respected and adhered to. Amil
Salmi a Moroccan education economist describes localized education models, citing,
―customized flexibility may be the one single characteristic most likely to determine higher
education institutions ability to contribute effectively to the capacity building needs of
developing countries‖ (Salmi, 2006). Educational needs present social entrepreneurs with
opportunities to embed sustainability initiatives within developing nations and have the potential
to change the global landscape on which business is practiced. ―Just as villages that never have
seen a telephone pole now never will because of cellular technology, others that have never seen
an electrical transmission line tower could be spared them in favor of solar panels‖ (Hawken,
1999).
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4.8. Process Redesign
(Figure 2) is included to serve as a replicable innovation paradigm to set precedence for how
social entrepreneurs may tailor specific strategic objectives (energy innovation in this instance)
in order to create a closed loop virtuous cycle where innovation is adopted as a core competency.
Figure 2. Innovation Platform for Sustainable Design
4.8.1 Eco-agriculture
The agricultural infrastructures of developing nations influence the standard of living for
billions around the globe. Farming techniques in developing countries are heterogeneous to the
scale and methods used in of large agrarian populations. Lack of capital hinders expansion of the
processing industries within developing nations needed to sustain growth: while lack of
knowledge on innovation stifles the optimization of current techniques. Responsible agricultural
development is critical for enhancing the standard of living for citizens in developing nations.
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GDP growth from agriculture benefits the incomes of poor people two to four times more than
GDP growth in other sectors of the economy (Asenso-Okyere, Davis, & Dejene, 2008).
A clear disparity exists between the nutrition needs of citizens in developing countries and
the horticulture process currently utilized to feed them. The research suggests that the crux of an
agriculture reformation will lie in a nations ability to desist from crop mass production and
pesticide usage. Rather developing nations should advocate knowledge and expertise on
innovation and sustainable farming techniques that mimic natural capital processes to grow their
agronomies. The social initiatives associated with capturing such a market would have
substantial influence on: agricultural trade imbalance (imports being higher than exports), and
migration of the rural population into over congested cities: both examples prove as significant
challenges in developing nations
The broad application of integrated social enterprise models such as the Service
Subsidization Model can provide a stream of unrestricted revenue into innovation development
and dissemination operations for bio-agriculture design. Specialized commercialization of
intangible assets as such as consulting, logistics and employment training initiate and foster local
relationships to earn the income needed to make the venture self-sufficient. In this specific
model farmers will be targeted as both customer and potential employee.
Opportunistic entrepreneurs will not only take advantage of the emerging eco-agriculture
market but also the innovative platform that becomes the foundation for an efficient whole-
systems approach to agriculture. The research suggests that as awareness and funding of agro-
ecologic engineering increases, this innovation platform is certain to emerge.
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4.8.2. Eco-industrial manufacturing
Raising efficiency in resource and energy usage is contingent upon high level design
integration that is able to cross traditional boundaries. Innovative planning that is careful to take
the right steps in the right order will create synergies that reduce costs and enhance performance.
Environmentally minded manufacturing techniques can drive societal impact through industry
and job creation. The research suggests that as GCG emissions rise and the global recession
continue, incremental improvement will not be enough. Industry must be restructured and
reengineered while existing and revolutionary technologies must be innovatively applied to
realize environmentally sustainable growth.
4.8.3. Automobile redesign
Growing demands for mobility in developing economies have spurred many eco-innovation
campaigns focused towards increasing the energy and waste efficiency of automobiles while re-
engineering the paradigm on which they are manufactured. Process and product modification in
the form of efficient fuel-injection technologies, improved power management, and energy
saving tires are just a few innovations undertaken by the automobile industry in recent years.
These modifications while innovative are very incremental and prove ineffective for a
stimulating a shift in the global auto-industry.
Systems innovation and an overhaul of current auto-manufacturing processes are needed to
influence change in the global auto-market. Driven by increasing prices and the scarcity of raw
materials, reductions of material flows into auto processing industries becomes imperative to
decrease resource inputs and create a sustainable auto-manufacturing industry. The blueprint for
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what an environmentally friendly, resource responsible automobile will look like can be found
within the design of the Hypercar. ―A Hypercar has a composite body that lightens its frame,
weighing two to three times less than a conventional car, would require about 92 percent less
iron and steel, one-third less aluminum, three-fifths less rubber, and up to four-fifths less
platinum‖ (Hawken, 1999).
If the Hypercar model was made marketable, each Hypercar could represent a total savings
of materials dozens of times its own weight, totaling billions of tons in savings per year. Rising
emission pressures and a newfound awareness towards scarcity of raw materials present
challenges that will create opportunities for system innovation to be adopted and commercialized
as the imperative for reaching sustainable manufacturing design in the global auto-industry.
4.8.4. Transforming commercial/residential buildings
Design standard improvements within the past decade have lead to many successful projects
that re-engineer commercial buildings in order to have them synergistically achieve multiple
goals. Design principles innovated towards simplicity integrate attributes such as: physical
shape, which direction the structure faces to deflect unwanted heat or wind, and which windows
take the greatest advantage of solar gain. Passive design of architectural structures can optimize:
thermal mass, shading, surface finishes and landscaping to create smart buildings that do not
waste energy, instead keeping their occupants comfortable without controls. Day-lighting and
PV solar panel utilization has also been proven to boost employee productivity. ―The variability
reflects the belief that people are healthier, happier, and more alert under subtly dynamic than
under constant conditions‖ (Hawken, 1999).
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Insolation techniques along with the solar features of advanced windows are now being
utilized to realize energy savings, and serve as an example of potential for ergonomically
designed office equipment. Another notable example is New York‘s, Four Times Square
building that integrates synergies such as insulation, thermal mass, super windows, passive
control functions, and photovoltaic power generation that puts electricity back into the structure
rather than drawing it out. In fact, many innovative buildings now have no fans at all to circulate
air; rather simulations like computational fluid dynamics are used to move air passively and
silently, almost eliminating cooling, air-handling and heating energy.
Residential buildings also represent an untapped market for potential energy savings.
Especially in developing nations where a majority of homes consist of drafty, poorly insulated
boxes at best. This inefficient, inadequate design of homes wastes both money and energy,
neither of which citizens in developing countries can afford to loss. Innovative advances in the
synergetic design of buildings and their new technologies represent a dynamic marketplace
within developing nations.
4.8.5. Recycling buildings, materials, and land
Eco-innovation design is not limited to new buildings. The emergence of green design will
slowly replace or retrofit old structures as well. Green retrofits have the capacity for creating:
energy savings, more fresh air, efficient recycling of toxic wastes, and reduction of toxic hazards.
The re-incarnation of buildings represent a loop-closing paradigm that reuses embodied energy
to save both energy and capital costs. Regional and local marketplaces are now in demand for
recycled building materials, thus, creating a new industry that generates revenue by recovering
materials and reducing landfilling.
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4.8.6. Appliances
As natural capitalism and eco-innovation techniques are adopted, a wide range of efficiently
redesigned appliances will complement heat-tight homes and commercial buildings. An example
of such an energy efficient appliance can be found in washing machines that utilize a new type of
motor that performs a high-speed spin to wring out all water, and then shake out wrinkles. Thus,
eliminating the energy and capital needed for hot air dryers. Appliance usage accounts for
substantial amounts of energy application all over the world. ―Traditional in-service refrigerators
use so much electricity that the coal burned to generate it, would almost fill up the whole
refrigerator each year‖ (Hawken, 1999). The technologies for combining efficiency with
practicality and convenience already exist in the appliance sector while the opportunities to
exploit these technologies are growing exponentially each year.
Dynamic innovation is inherent to the natural capitalist principles of process redesign. An
example of this process innovation can be found in the patent pending 3d printer known as
RepRap. ―RepRap is Self Replicating Machine (SRM) that can effectively print tangible three-
dimensional replicas of its own parts‖ (Zeitgeist, 2011). The data suggests that the design of
automated construction innovation is now technologically plausible. Meaning that automated
processes can now eliminate the waste of many manufacturing processes, including construction.
―Forty percent of all material used in the world goes towards construction‖ (Zeitgeist, 2011).
Social entrepreneurs can capitalize on machine-learning algorithms and the trend of
mechanization in order to provide revenue streams for their social programs while optimizing
energy and material productivity.
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Methods to increase energy and material productivity can be classified into six categories:
Design
New Technologies
Controls
Corporate Culture
New processes
Saving materials (Hawken, 2009)
Each of these categories exemplifies an opportunity for social enterprises to engage when
entering developing nations. Social enterprise paradigms that are feasible for targeting these
opportunities can be in the form of each the embedded, integrated, and external business models.
Localized variables such as need, market circumstance and political environment will determine
which prototype provides the best fit for affecting triple bottom line constraints. Eco-innovation
of process efficiency through social enterprising has the potential to lead to significant social,
economic, and environmental opportunity. In order to capture the opportunities of efficient
process design, social enterprise investors will need clear and credible price signals along with
short and long term targets that allow them to make appropriate investment decisions for a more
sustainable future.
4.9. Renewable Energy Industry
4.9.1. Renewable market in developing countries
The market for renewable energy innovation in developing countries is one that shows
tremendous opportunity for expansion. However, the need for: regulatory frameworks, technical
know-how, replicable business models, financing from power developers and market facilitation
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organizations, make this market ambiguous and risky. Renewable energy as a viable alternative
is still limited due to the private sector failing to take a leadership role in the expedition of
renewable development. Recent shifts in paradigm ideology signify the presence of revolutionary
tacit knowledge that is required to galvanize market expansion. (Figure 3) is the representation of
notable paradigm shifts that have occurred in the renewable sector in recent years.
Figure 3. Renewable Energy Market in Developing Nations
Martinat, 2002
4.9.2. Infrastructure
Many developing nations already have infrastructures in place to harness energy from
renewables such as: biomass, hydropower, wind power and solar power. Grid-based power
generation typifies a substantial portion of this infrastructure in developing nations yet ranges
from country to country. ―The proportions of rural populations served by electric power grids
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range from 98% in Thailand and 85% in Mexico to only 2%–5% in much of sub-Saharan Africa‖
(Martinot, 2002). The diverse maturation ranges of renewable energy sectors in developing
countries make application of a standardized replicable strategy implausible. Instead strategy
should be formulated based on specific renewable infrastructure needs of localized target
populations. Supply and demand side measures within the renewable energy sector that should
be considered before entering developing countries are as represented in Table 3.
Table 3. Demand and Supply Drivers within the Renewable Energy Industry
Sustainable Manufacturing and Eco-innovation, 2009
Each category within Table 3 exemplifies an opportunity that social enterprises may directly
or indirectly engage when entering developing nations. Localized variables such as market
circumstance, specific socio-ecologic need, and political environment will determine which
prototype provides the best fit for affecting triple bottom line constraints. Energy intensive
Supply Side
Demand Side
Equity support Regulations and standards
Pre-commercialization Public procurement
Education and training Technology transfer / open innovation platforms
Research and development End-user convenience services
Networks and partnerships
Information services
Energy generation
Energy transmission
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industries in developing nations represent the initial target market for natural capitalism
principles and renewable energy infrastructure development. The qualitative data suggests that
integrated and external business models such as the service subsidization model and the
organizational support model can provide the latitude needed for penetrating the dynamic
renewable energy sector within developing nations.
4.10. Facilitating a Service-based Economy
Astute industry leaders have begun to explore systematic innovations that will change the
way businesses fulfill consumer demands. Integrated product-service solutions are now
ubiquitous within the global marketplace. The shift from products to services is a prevalent trend
that will re-define the marketplace as a service-based economy. The bundling of services with
products represents dynamic relationships that can drive development of sustainable design. The
research of the World Bank Development Data Group (WBDDG) suggests that developing
nations are in the midst of this trend:
22.5 percent of GDP in developing countries comes from manufacturing
51.4 percent of GDP in developing countries comes from servicing
(World Bank Development Data Group, 2006)
The research of the WBDDG indicates that over half of a developing nation‘s GDP is derived
from service-based activities. This insinuates the notion that it is not the goods people want, it is
the purpose of that good, making the commodity only as useful as it‘s utility. Development of a
service-based economy will create business models that are environmentally beneficial, while
simultaneously eliminating the need for external restriction or ownership (Joseph, 2011).
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Success of a service-based economy will hinge on its ability to create continuous,
customized, and decreased-cost solutions for clients interested in leasing service. The positive
environmental impacts of a service-based economy can be evaluated using elements of natural
capitalism such as: cradle-to-cradle production and disposal, revenue creation through resource
efficiency, continuous flow of service to meet dynamic customer needs (mutual advantage
creation), and providing functionality rather than operating costs. The financial value added from
a service-based enterprise is synonymous with perceptive management techniques that foresee
creation of benign holistic solutions.
The elimination of ownership from seller to buyer will allow any service enterprise to realize
sustainable savings; the less energy and input they use, the less maintenance will be required,
thus the more money they will make. The social impact of removing ownership will decrease the
transaction costs associated with acculturation challenges: simultaneously affecting the psycho-
socio mentality of wealthy and poor citizens alike, creating equality among consumers. It is
notable to include that, ―Qualitative research proves that innovation is higher, in more equal
countries‖ (Joseph, 2011).
For green social entrepreneurs in developing countries, services should be focused towards
directly impacting environmental and social well-being. Service solutions such as: car sharing,
sustainable de-construction, and energy productivity consulting, already have working business
models. The research indicates that such service offerings are demanded in every developing
nation, and exhibits the beginning of service paradigm shift that is adapted to sustainable goals.
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Feasible social enterprise paradigms that will best facilitate service-based markets can be
either integrated (i.e. Market Linkage Model that functions as a broker to develop business
partnerships between commonly vested enterprises) or external (i.e. Mixed Model that combines
social organizations with business entities in order to capture new markets and social
opportunities) and will target socio-ecologic needs as market opportunities. Facilitation of such
a service-based economy would require transactions that encompass the following features:
1. The manufacturer sells its product‘s functionality, but not the product itself, to the
customer. (i.e. selling an energy efficient washing machine, solar panels, or any type of
sustainable driven service)
2. The manufacturer maintains ownership of the product it manufacturers. Ownership of the
asset never transfers to another party.
3. The customer pays a fee to the manufacturer based solely on product usage (i.e. pay per
use).
4. The manufacturer maintains and repairs its products at no additional cost to customer
(Toffel, 2002).
Customer incentives would shift from minimizing the initial purchase price of the product, to
optimizing the operational efficiency use of the product. Access distribution strategies would
have to be undertaken to meet the demand of the target population when they need it. The library
model exemplifies an operating context that will facilitate market creation through local,
regional, and specialized access centers that will disseminate service, education, and information.
Utilization of the current trend of cloud technology could provide an innovation platform built
for the dissemination of tacit knowledge and digital information throughout the service-based
network.
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4.11. Regulations and Legal Framework
The qualitative data suggests that as societal problems mount around the globe, any
government would be keen to expand and strengthen their social enterprise sector. The research
poses that responsible sovereign intervention is necessary for social enterprises to succeed within
developing countries. The three governmental activities identified within the study that can
enhance the influence of social entrepreneurs within developing nations can be classified as
incentives, subsidies, and tax-shifts.
Proper execution of governmental incentives can create financial innovation for a social
enterprise attempting to realize social and environmental dividends. Tax frameworks that create
incentives for investment within social and environmental programs would permeate every
sector in which social enterprises have influence. For instance, manufacturers of environmentally
friendly buildings would be able to realize incentive based savings, being rewarded for their
efficiency and what they save on the project. Fee-bates embody these novel incentive structures,
and are utilized to levy unsustainable business practice with fees, while rewarding sustainability
adherence through rebates. While fees are used to pay rebates, such an incentive system is a
financially neutral activity on any governing balance sheet.
Green tax-shifts and subsidies should be utilized to lead societies out of unsustainable living
standards. A tax-shift is not intended to re-define who is taxed, simply what is taxed. Natural
capitalistic principles propose that work and the income it generates should be freed from
taxation while waste, toxins, and resource usage make up the difference. While it is understood
that such a tax shift seems implausible and regressive, a more subtle approach to green tax
restructuring is not out of the question. For example, industries have traditionally addressed
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pollution concerns at the point of release. This end-of-pipeline approach is both costly and
ineffective. Rather, the qualitative data suggests that the levying of negative retroactions within
every activity of the value chain will greatly reduce waste and promote resource efficiency.
The underlying purpose of any tax-shift simply attempts to match price to cost. When an
objective scientific approach is taken towards identifying the costs of the current monetary-
market, wouldn‘t one recognize that activities with detrimental effects to the environment are
extremely costly? Why not mitigate these costs with innovative tax-shifts and governmental
subsidies designed for practical price control that is adaptable within any socio-economic
structure?
4.11.1 Hybrid legal structure
The qualitative data suggests that because of the slowly evolving legal definition of social
enterprising, it is still too early to definitively determine what will materialize from the hybrid
legal structure it embodies. Tax-exempt or taxable legal entity, the hybrid structure innate to
social enterprise models will utilize both. This becomes advantageous to investors as they are
allowed to attract both charitable contributions and grants, along with equity investments. What
is certain concerning social enterprise legality is that social entrepreneurs will demand high
levels of independence and autonomy, so a strong framework of accountability is sure to be
integrated within any plausible legal structure.
An example of this framework can be found within a Low-profit limited Liability Company
(L3C). A L3C presents a legal entity taxed as a partnership that has portions of it‘s income
labeled as tax-exempt. The salient purpose of the L3C is to establish organizations that are
exempt from much regulation and seeking to expand revenue generation activities. A regulation
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for such an organizational structure would be: ―No significant purpose of the company is the
production of income or the appreciation of property, however, the fact that person produces
significant income or capital appreciation shall not, in the absence of other factors, be conclusive
evidence of a significant purpose involving the production of income or the appreciation of
property‖ (Wexler, 2009). There are two perceived advantages of being an L3C; the first is its
ability to more easily attract program related investors from private foundations, the second is the
branding or marketing benefit that might open up access to funding and contracts that may not be
available to standard LLC
B Corporations also exemplify a social enterprise foundation, as it is a legal entity designed
to advocate social advancement. The for-profit nature of a B corporation does not allow
exemptions from certain taxes, however it is more powerful as revenue generating legal
structure. B corporations use the profit-earning potential of business to solve environmental and
social problems, and are unlike traditional socially minded for-profits because they:
Meet comprehensive social and environmental performance standards
Institutionalize stakeholder interests, building a collective voice through the power of a
unifying brand (Wexler, 2009).
L3C‘s and B corporations are designed to galvanize and contribute to positive social impact.
These legal structures represent just two models that social enterprises can utilize in their mission
to create social and environmental change. The legal formation of each social enterprise should
be customized for seamless integration into specific business plans and fundamental programs.
Successful entrepreneurs that operate within hybrid regulatory structures must take substantial
and procedural steps to ensure avoidance of excess benefits. As earlier stated it is still too early
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to generate any type of precedence for successful sustainable legal prototypes, yet with the
maturation and success of social entrepreneurs, hybrid legal paradigms will be tested and
developed for replication.
4.12. Barriers and Challenges
4.12.1 Barriers
The barriers to this study as defined from the research suggest the pertinent obstacles that
increase the socio-ecologic gradients (learning curves) in developing nations for social
entrepreneurs are:
Lack of legal framework
Lack of manpower and skilled personnel
Inadequate business models
Acculturation challenges
Initial Credit and financing needed to reach self-sustainability
Despite the existence of analogous barriers across cultural boundaries, social entrepreneurs
are still presented with an abundant upside for social and environmental initiatives in developing
countries. In order to successfully mitigate these barriers and avoid their potentially detrimental
impacts, social entrepreneurs must design adequate multidimensional contingency plans. More
importantly however, it is imperative that social entrepreneurs fully understand and respect the
culture in which they aspire to influence.
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4.12.2 Challenges
The diverse forms social enterprises embody and the contexts in which they may operate
make it difficult to define, analyze, and mitigate all potential challenges that hinder social
enterprise development. The qualitative data identified relationships between persistent
homogeneous challenges that will encumber each social entrepreneur intent on influencing
sustainable transformation. One such uniform challenge will be the responsibility of identifying
and creating innovative socio-ecologic servicizing models of high sustainability, then validating
the feasibility of the potential. A lack of confidence in the market also is a salient factor that can
prevent social entrepreneurs from assuming more risk and diversifying to operations that are
more challenging and profitable.
A distinguished homogeneous challenge that will be presented to social entrepreneurs is
the disengagement from patents and copyrights that shut out other social enterprises as potential
competition. Rather, creation of open-innovation platforms accessible throughout the social
enterprise sector must be pursued and cultivated. These salient challenges reside in the design of
social enterprises and their objective implementation. In order to mitigate above mentioned
challenges social entrepreneurs must be encouraged to foster market and regulatory
environments that will advocate sustainable practice as business as usual.
4.13. Scope: Exclusions and Limitations
4.13.1. Exclusions
The scope of this research is quite broad, however, its exclusions must be defined. The
study is not meant to depict expertise in any one area, rather it a general analysis focused in the
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context of providing examples for opportunities that socio-ecologic entrepreneurs may utilize
when operating in developing nations. Examples that were excluded from the study do not
represent any less potential for social entrepreneurs; rather they did not fall into the parameters
defined by the qualitative data. Capitalizing on the social challenge of fresh water shortages for
2.8 billion people across the globe exemplifies such exclusion. Also the political environments of
communistic nations were excluded from the study due to ill-defined innovation regulations that
may stifle social entrepreneurs in the region. A social entrepreneur profile presents a relevant
preface to the study but was excluded from the content.
4.13.2. Limitations
Limitations of this study include a lack of external validity for the results and the
generalizability implicit to such a broad research question. Other limitations of this study can be
found within the context of the 15-week timeframe set for research and data collection. The
depth and thorough nature innate to a semi-structured interview was a hindrance to the research,
directly affecting the sample size due to the geographical disparity of justifiable interviewees
targeted. Furthermore, the sample size and occupational time constraint of each candidate
precluded thorough completion of the questionnaire, as each candidate had to first meet their
occupational obligations. With each research participant being American, it must not be
overlooked that cultural bias exists within the study. Also it is noteworthy to include that while
the researcher preformed both the pre-test and post-tests of the empirical data, it is implied that a
certain level of subjectivity exists within the results and conclusion of the research. Each of these
methodology characteristics set the parameters in which this study may be applied and
interpreted.
CHAPTER 5. CONCLUSION – PARADIGM PROTOTYPE
There is a marked difference between social entrepreneur and entrepreneur. While the latter
is essential for profit generation and re-creating status quo: the social element creates an altruistic
vision focused towards environmental and social wellness and will drive the motor for
transformation. A social entrepreneur must continuously adapt in order to drive perpetual
improvement and to actualize a platform that will allow their target market to survive in a
prosperous optimized system. The research suggests that social entrepreneurs and the diverse
frameworks in which they may operate make them ideal facilitation agents to expedite
sustainable redesign.
The novel market presence of social enterprises along with the diverse range of social need
inherent to developing nations, make the role of social enterprises difficult to define in this
context. However, isomorphic factors with developing nations do illustrate homogeneous socio-
ecological frameworks for value creation. The emergence of social enterprising has brought on a
new altruistic In order to most effectively mitigate social and environmental need in a target
population; pursuit of revenue generation through the creation of social and environmental value.
Buyer side entry barriers will inhibit social enterprise development initially in developing
countries. As global green trade increases and localized strategy is formulated, social enterprises
will realize the opportunity for exponential growth within any socio-ecological market niche.
As this emerging market matures entrepreneurial success will depend on the individual
entrepreneur‘s ability to deliver a value proposition that will eventually move from social need to
market demand, creating a platform of sustained financial viability. Socio-ecologic enterprises
will be evaluated by their value proposition on their ability to create value through innovation in
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sustainable process efficiency. In order to most effectively mitigate social and environmental
need in a target population; the importance of consulting a social epidemiologist whom is an
expert in the target market cannot be overstated, as the social entrepreneur must be completely
aware of the amalgamated inadequacies of the local socio-economic environment.
A mock framework proposed by the study that sets precedence for realizing sustained
financial viability for social enterprises in developing countries is as follows:
5.1. Business Model
Customized business models explicitly focused towards the local need of its target market
represents the only successful operating context for social entrepreneurs. To achieve self-
sustainability social enterprises must operate within a hybrid framework of sovereign regulation
in order to combine the dichotomies of social and environmental value creation. Social enterprise
strategy as discussed by Sutia Kim Alter in the article ―Social enterprise models and their
mission and money relationship‖, provides replicable paradigms necessary to employ social
entrepreneurs with methodology design to improve performance and increase effectiveness. Yet,
should only be used as a benchmark for social enterprise operating contexts in the advent that
social enterprise models will perpetually evolve. Thus, social enterprise operating contexts are
purely circumstantial and absolutely defined by the local operating environment.
5.2. Service-based Operating Platform
The utilization of service-based transactions will create an incentive shift that is synonymous
with natural capitalist sustainability principles. Cradle-to-cradle production and disposal, revenue
creation through resource efficiency, continuous service flow, and provision of functionality
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rather than operating costs, all embody elements that will align buyer-seller incentives creating
opportunities for mutual gain. Open innovation contexts that mimic the library-operating model
will create a platform to effectively disseminate the tacit knowledge critical for market
facilitation and development. Framework components would be structured to foreshadow the
current trend of technological change and designed for synergistic element integration that is
easily updated and universally interchangeable.
5.3. Distribution Strategy
Simplification and scale will indefinitely remain intrinsic to social enterprise business
models. The ideology being that: multiplying product variety time‘s product complexity bears
heavier costs. Lean teaching suggests that right sizing is a systems attribute and should be
utilized as a core competency within every social enterprise. A proximity distribution strategy
will optimize such lean thinking and will localize production so that distribution is fast and will
reduce the travel of goods, using the logic that less distance equals less energy.
5.4. Corporate Culture
The research shows that people are not motivated by monetary reward when it comes to
ingenuity and innovation. The creation itself is the reward. Money is used rather as incentive for
repetitive mundane actions, by extension monetary incentive can be a hindrance interfering and
detracting from creative thought. The qualitative data implies that the salient function of
charismatic leadership is to provide an environment for revolutionary ideas. A replicable
paradigm for this innovative, autonomous environment can be found within the NASA Institute
for Advanced Concepts (NIAC). Founded in 1998, the NIAC was charged with the mission of
inspiring an atmosphere for innovation that stretched the imagination of the technical community
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and encouraged revolutionary creativity (NIAC, 2007). NIAC director Bob Cassanova describes
revolutionary as, ―a new idea that illuminates a pathway towards the expansion of knowledge
and wisdom…the genius lies in the generalities not in the details‖ (personal communication,
November 3, 2011). Simply put, rather than allowing someone to latch onto an idea and beat
themselves up with the details, one must be allowed the time to think freely, question the status
quo, and arrive at a conclusion of: here‘s how I intend to break this rule/model, and here‘s why.
Social entrepreneurs can use the NIAC model as precedence when creating an environmental
tailored towards innovation and continuous improvement. It is notable to include that the
evaluation paradigm used by the NIAC demonstrated little risk aversion with a benchmark set at
10 percent of everything funded being a success. The research suggests that the peer-to-peer
review process for such an environment is stifling and incestuous due to vested interests.
Therefore, a transparent review process will be critical for such an autonomous environment to
thrive. Open innovation discussion boards will provide the transparent platform needed to
investigate and examine revolutionary ideas.
5.5. Legal Framework
The research suggests that it is too early in the life cycle of social enterprising to accurately
forecast what legal frameworks will dominate the industry. However, precedent setting examples
such as low-limited liability and B Corporation frameworks provide working paradigms that
exemplify hybrid regulatory structures applicable to social enterprise operation in developing
countries.
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5.6. Innovation Platform
The cross-functional innovation platform embodied in (Figure 4) is an eco-innovation
platform that depicts the targets, mechanisms, and impacts that will galvanize transformation of
existing socio-cultural norms and institutional structures, and can be referenced when developing
a socio-ecologic innovation platform.
Figure 4. Eco-innovation Design
One can conclude that the future of social enterprising will fundamentally reside in the ability
of each entity to take care of humanity in the most sustainable, resource efficient way possible.
Three things are certain as social entrepreneurs saturate developing markets. First, social and
environmental innovation will grow exponentially as socio-ecological innovation platforms
mature. Second, customized entrepreneurial strategies exert the capacity to alleviate social and
environmental needs inherent to each developing nation. Third, it will take significant time and
effort to develop the social enterprise paradigms needed to facilitate a sustainable society. The
results of this study call attention to the fact that successful social enterprises always come down
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to the individual social entrepreneur(s). This study is not meant to provide a specific replicable
business model in which a social entrepreneur can successfully operate, rather it is meant as a
comprehensive paradigm that highlights successful operating frameworks that set precedence
and are customizable to meet the diverse demands of niche target markets in developing nations.
To conclude, social entrepreneurs and the enterprises in which they operate will add wealth and
value through sustainable initiatives to the poorest countries of the world.
AREAS FOR FURTHER RESEARCH
This study makes an attempt reveal the sustainability challenges and opportunities available
to social entrepreneurs in developing nations in both a social and environmental context. It was
argued that social enterprises would galvanize the platform needed to simultaneously create
social and environmental value in developing markets. However, with the field of social
enterprising being new, undefined, and circumstantial to market environments it becomes
difficult to cover all relevant factors. So, the hypothesis is stated as if social enterprises can
facilitate the market for sustainable redesign in developing countries. Thus, the research was
constructed to inquire the most suitable paradigm design and operational practice to facilitate
emerging sustainable market opportunities.
The recommendations for further research can be based on the contrast of material success of
our societies (unprecedented levels of wealth and social failings); coupled with the profit driven
enterprising framework that has contributed to social stratification (1 % of the population owns
40% of the world‘s wealth) in every nation. Developing countries should be analyzed and
evaluated for specific socio-ecologic needs, to identify disparities implicit to each socio-
economic construct where social entrepreneurs may find opportunities for transformation.
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Moreover, using historical data, research efforts should be tailored for investigation of
revolutionary change towards synergetic natural capital principles, which will redefine global
economies through the lens of an environmentally and socially minded business endeavor.
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