Who Will Change the World: Wal-Mart or Social Entrepreneurs?

Who's going to save the world -- Wal-Mart or the social entrepreneur toiling away with little fanfare?

Let's consider:

Wal-Mart, the world's largest company, sells slightly more than $400 billion a year.  The poorest two-thirds of the planet -- people living $4 a day or less -- spend about ten times that amount.

Each year, Wal-Mart serves 100-200 million customers.  At most, that's less than 3% of the world's population.

Wal-Mart's recent shift from focusing exclusively on everyday low prices to finding profit in acting in pro-social ways has been commendable.  It has committed to creating zero waste and obtaining all its energy from renewable sources.  It announced this week that it will open 300 stores to bring fresh food to inner-city "food deserts" in the next five years (on top of the more than 200 it already operates).  It has entered the low-income banking business in Latin America and, in the U.S., where it can't officially run a bank, it works through partners to offer unbanked Americans low-cost money orders, check cashing, and overseas remittances.

Despite Wal-Mart's heft and new found focus on creating business opportunities from addressing societal ills, it can't meet many of the most basic requirements of the needy. 

In the developing world, access to clean water is arguably the most fundamental need of the poor.  Protection against preventable diseases, including malaria and diarrhea, is close behind.  These are beyond the ambit of Wal-Mart's merchandising. 

Even Hindustan Unilever, with its more targeted efforts to address the needs of the poor, has been unable to respond effectively enough to these needs.  With revenue one percent of Wal-Mart's, Hindustan Unilever does reach deep into Indian rural life through efforts such as its Project Shakti, which creates door-to-door selling opportunities for poor, rural women. (Have you heard of Avon Ladies?)  It recently announced an altruistic effort to study the under-supply of water, and has made previous efforts to help renovate village ponds, manage watersheds, and promote improved water harvesting.  Despite these efforts, clean water remains in short supply, with more than 750,000 deaths occurring each year in India alone from water contamination.   

In the United States, basic needs are under-served, too.  Despite (or motivating) Wal-Mart's food efforts, food deserts exists throughout the country.  (See the USDA's interactive map.)  The consequences?  Poor people eating less nutritious, usually fattening food, or inconvenient and costly (in time and money) travel to obtain food of higher quality.  Likely, too: a higher incidence of serious illnesses and premature death.

Nor is the financial services picture rosy for the U.S. poor.  The FDIC estimates that over one-fourth of all households, accounting for 60 million adults, are unbanked or underbanked.  For blacks and Hispanics, the proportion is approximately 50 percent.  The alternative financial services that these un- and underbanked use -- non-bank money orders and check cashing, payday loans, pawn shops, and others -- are necessary, but costly, ways to live without formal banking.

So, where do social entrepreneurs come in?

Social entrepreneurs provide services where companies are absent, where they don't sell the right products, or where they sell products that are simply too expensive.

Social entrepreneurs (or non-profits) together with companies form a co-adaptive ecosystem.  What companies leave unattended -- in their "background" -- creates the foreground environment for social enterprises, shaping their opportunities .  In turn, social enterprises can serve as a type of free, and early, testing ground for companies.  The success of non-profit microfinance institutions in providing banking services for the poor, for instance, caught the notice of larger, for-profit banks, spurring their entry into the same market.

As
social entrepreneurs prove successful in reaching their constituents, for-profit companies take notice.  And, as companies change their focus, they affect social entrepreneurs.  This interplay has led nonprofit microfinance institutions to serve poorer, more rural customers as larger, for-profit providers use capital markets to offer more, and larger, loans to wealthier segments of the poor.

Today, we are seeing examples overseas of early-market activity among social enterprises in the field of water:  Naandi (water purification and delivery), Wello (water transport and business opportunity), and Sarvajal (a filtration and franchising model). 

In the U.S., healthful food is offered to the poor through a variety different kinds of social enterprises.  D.C. Central is a community kitchen that not only "recovers" and delivers good food headed for waste, but trains low-income individuals for jobs in the food services industry.   Peaches and Greens, a mobile produce market, makes scheduled delivery stops and home-deliveries in inner-city Detroit three seasons a year.  And even urban farming is proving viable, as organizations such as Growing Power, headquartered in Milwaukee, are proving. 

It waits to be seen whether such efforts in water and healthful food will one day be viewed as attractive opportunities for many large companies.

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So, who's going to save the world -- mega-corporations like Wal-Mart with their size, reach, and efficiency; or social entrepreneurs, who can attack deeply entrenched problems without a slavish focus on bottom-line results?

My answer: both -- by acting and adapting in response to each other even as they continue to do what they do best.

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About this Entry

This page contains a single entry by Michael Gordon published on August 4, 2011 12:49 PM.

Be Encouraged was the previous entry in this blog.

Growing Power -- Better Food to More People is the next entry in this blog.

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