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Supporting social enterprise solutions
Dear Fernand,
NESsT: 10 years, 10 countries
NESsT celebrated ten years of operation last year. Since it now works to support social enterprises in 10 emerging market countries and has a budget of US$2 million, it's easy to overlook the fact that, at its founding, it looked something of a risky proposition. NESsT co-founders and joint CEOs explain why they set it up and why the journey from there to here hasn't always been an easy one.
by Lee Davis and Nicole Etchart
(excerpted from an article first published by the European Venture Philanthropy Association - EVPA)
2008 marks the beginning of our second decade of operations at NESsT. 'Ten years, ten countries' was our ambitious mantra in 2007 as we focused our efforts to expand our work in supporting social enterprises from five to ten countries across Central and Eastern Europe (CEE) and Latin America. We weren't always that ambitious. Not very long ago, it seems, NESsT still felt like a start-up, caught between a non-profit sector hostile to the marketplace and a for-profit sector self-absorbed with financial returns. But what once seemed formidable now appears quite plausible: social enterprises can contribute to the solution of critical social problems in emerging market countries, and they can do so in a financially viable and sustainable way. Ten years ago we couldn't say that without a hint of hubris.
In 1997, discussions of social enterprise and venture philanthropy had yet to gain any considerable traction in North America and western Europe. Neither in CEE nor Latin America was there yet a champion for the cause. This was the niche NESsT aimed to fill. Now, ten years on, it seems only fitting to reflect on its development with the return of our newsletter after many years of absence as we continue to promote this 'revolutionary' approach to philanthropy across emerging market countries.
During one of the events we hosted in 2007 to celebrate our tenth anniversary, Richard Cook, first NESsT Board Chairman, now Emeritus, shared three observations about the evolution of NESsT:
First '...an idea becomes audacious when it faces formidable odds. This certainly was the case with NESsT... My second observation is that courage of conviction is a critical ingredient necessary to overcome the formidable odds... the kind of courage where you put your lives, and the lives of those you love and your fortunes behind your idea... My third observation is that conviction and action against formidable odds is not enough. You have to prove and sustain your idea in the face of those odds. As Peter Drucker said, "You are not unique in what you are doing. There are many social entrepreneurs with great ideas, but so many don't survive. ...What will make you unique is sustainability, the ability to develop and resource your organizations for growth and longevity."'
Ten years later, NESsT has evolved into an international organization with a widening global reach: an outstanding international staff of 25 determined and talented business and non-profit professionals (and 12 nationalities); a dedicated and visionary international board; committed and generous donors; and an impressive volunteer network of business leaders. It has certainly not been an easy journey. We took a tremendous risk in 1997 by entering the largely uncharted territory of supporting the planning, start-up, and development of social enterprises in emerging markets.
So it may not seem surprising that we celebrate the mere fact that we're still here after ten years, since, in a market as uncertain and unreliable as the social capital market, survival alone is grounds for celebration. This was a capital market that starved non-profit organizations, created dependence and disallowed long-term sustainability. It was this very uncertain and unreliable market that first motivated us to create NESsT in 1997.
Sustaining relevance
In 1997, we completed our first study, The NGO-Business Hybrid, which led to the creation of NESsT. In the report, we explored social enterprises, a little known concept at the time in 13 countries. At the time it wasn't easy to find the 15 examples of NGOs that we needed for our research, particularly in an emerging market context which was (and remains today) our focus. The concept of an NGO-business-like approach seemed revolutionary (if not sacrilegious) to many at the time and was not always well received. But although terminology has evolved over the last decade, we believe our raison d'être - stimulating a new perspective on philanthropy and non-profit financing - is as relevant today as when we stated it then:
'Adopting a self-financing approach involves re-examining prejudices and entrenched beliefs among NGOs as well as public and private donors themselves. Stimulating self-financing requires a forward-thinking attitude among donors who must work to develop more long-term, strategic partnerships with NGOs by investing in their institutional development and offering flexible resources for building management, resource generation, and programmatic capacities.'
The evolution of the NESsT strategy
In 1998, with the financial support of a group of private foundations and trusts, NESsT launched its first initiative - the Sustainable NGO Financing Project (SNFP) - with partners in the Czech Republic, Hungary, Poland, Slovakia and Slovenia. The purpose of the SNFP was to learn from existing experience with ‘NGO self-financing' (that is, social enterprise) and to develop an appropriate response to foster such activities in CEE. In 1999, NESsT started a similar process for Latin America, with an initial focus on Chile. We are often asked why NESsT chose to work in these two parts of the world since, at first glance, CEE and Latin America seem worlds apart. The response is both a personal and strategic one. Personally, we had long-standing ties with both regions. Nicole was born in Chile and both of us have lived and/or worked in both regions prior to founding NESsT. Strategically, both regions were going through rapid and difficult change, respectively, from their communist and dictatorial pasts. The shifts to an open market were having profound (and not always positive) effects on the non-profit/NGO sector. International aid and philanthropy began to evaporate as foundations and aid agencies shifted support to other ‘more critical' areas and priorities. As a result, the local NGOs, still dependent on international donors, found themselves in a funding quagmire.
Much of NESsT's early work, including the SNFP, was focused on demonstrating the potential of self-financing/social enterprise in CEE and Latin America in three ways: action research to document the use of self-financing among NGOs and assess the wider legal and regulatory environment and infrastructure of support for NGO self-financing; development of tools and services to support NGO self-financing activities and practitioners; and development and pilot-test of a financing and capacity-building strategy to support a group of NGOs starting up and/or expanding self-financing activities.
Ten years later, these three elements remain a part of NESsT's strategy. We still see an important role for NESsT as a social enterprise investor (through the NESsT Venture Fund), as well as a leader in furthering the field on a global scale (through the NESsT University, sharing of lessons learned, research, legal/regulatory change, tools development and experimentation). In our tenth anniversary year, our attention shifted deliberately from a focus on demonstration and piloting our work on a small scale with a select number of social enterprises, to a new emphasis on scaling our impact - deepening our work in existing locations while also replicating our model in additional communities and countries.
NESsT 10th Anniversary key accomplishments
- events: in 2007 we celebrated our 10th anniversary with a series of events culminating in the NESsT Social Enterprise Symposium in Budapest which brought together 150 social enterprises, philanthropists and business leaders;
- social enterprise competitions: in 2007 we sponsored national social enterprise competitions in 7 countries in CEE and Latin America. The response was unprecedented, with over 250 applications submitted. 2008 social enterprise competitions are currently being held in 4 new countries;
- expanding our geographic reach: in 2007 we responded to the growing demand for our support by expanding our work from 5 to 10 countries, now covering Argentina, Brazil, Chile, Croatia, Czech Republic, Ecuador, Hungary, Peru, Romania and Slovakia;
- practicing what we preach: in 2007 NESsT generated nearly a quarter of our operating budget through our own social enterprise - NESsT Consulting - providing services for foundations, corporate clients, and international organizations;
- annual budget: our budget nearly doubled from US$ 1.2M in 2007 to US$ 1.9M in 2008;
- new partnerships: in 2007, NESsT began several major new partnerships, among them with the Charities Aid Foundation (CAF), Citi, ABN Amro, IFC, Inter-American Development Bank, and the Lemelson Foundation;
- expanded team: we are now a team of 25 professionals, representing 12 nationalities;
- new publications: continuing our commitment to document and share what we learn, in 2007 NESsT published more than 25 new books, case studies, legal guides, and surveys on social enterprise and venture philanthropy.
Looking forward: from proving to scaling
As we reflect on our accomplishments and challenges of the last decade and look toward new ambitious goals for the future, our priority has shifted from proving our strategy to scaling it. But the rapid growth and emphasis on expansion in 2007 will be followed by a year of consolidation. As both the size of our portfolio and our staff has grown exponentially, 2008 will require a great deal of attention to strengthening our internal systems and capacity. By leveraging what we've achieved thus far, and now working as a part of a growing global network of colleagues and peers, we're on a trajectory to create a truly global social capital marketplace, to support a wider number of social enterprises, and to affect positive change in marginalised communities around the world.
Lee Davis and Nicole Etchart are co-founders and CEOs of NESsT.
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NESsT supports Kava to fight social problems in Hungary
"This social enterprise changed our lives"
[Budapest, Hungary] NESsT is supporting Dramatrening, the social enterprise of Budapest-based nonprofit Kava Cultural Group, to bring theater techniques to businesses in an effort to change attitudes and behaviors of employees towards critical social issues in Hungary.
Discrimination, social insertion, and drug abuse are some of the problems facing Hungarian youth. This is the underlying motivation behind Kava's mission. Kava Cultural Group, a civil society organization located in Budapest, has used theater as a teaching tool through their social enterprise, not only for disadvantaged youth, but also for business professionals.
Since 1996, Kava has run different theater workshops with a team of specialists who expressed an interest in taking on new challenges such as working with adults to cultivate new skills and practices. The broader goal of Kava's social enterprise is to attain greater self-sustainability in order to further its social mission.
Over the past three years, NESsT has actively participated in this process and accompanied Kava in the development of its social enterprise. Kava is now a part of the later-stage portfolio of the NESsT Venture Fund in Central Europe, after having successfully passed through the pre-feasibility, feasibility and business plan stages.
Dramatrening
Kava's social enterprise, Dramatrening, offers training to private businesses, foundations and the general public, using theater as a learning tool to address issues such as employee burnout, tension in the workplace, conflict resolution, commitment, mission and vision. An example of this was training provided to the Salva Vita Foundation on human resources issues. The Salva Vita Foundation hired Kava to work with human resources managers of companies using a new set of tools for selecting and hiring people with disabilities.
Another noteworthy example of Kava's training services includes a series of courses given to the Institute of Public Administration. Kava provided around 100 training sessions to close to 2000 upper-level employees in 20 different cities. Trainings centered on corruption among public officials.
Adam Cziboly, director of Dramatrening and responsible for Kava's social enterprise and development, is pleased with the results to date and values NESsT's involvement: "the business planning process is difficult and painful, but we learned a great deal from NESsT's capacity-building and financial support. In addition to helping us to launch our social enterprise, this support has also helped us to launch our Website."
Mission and social enterprise: two inextricably related tasks
"This social enterprise really changed our lives," expresses Adam Cziboly. "We now have a separate structure; it is not done within the NGO. We have a business plan and a strategy for contacting companies that are potential clients. The activity is much more planned and deliberate, whereas earlier it was just responding to ad hoc opportunities. It is now an integral part of the activities of Kava."
The social enterprise serves a dual purpose: it furthers the mission by tackling critical social issues, such as corruption, in training sessions, and has an indirect impact by generating revenue to help finance Kava's core operating costs. Kava faces challenges in improving organizational management and finances: income from enterprise development is a new and significant source of income for Kava. Kava has set the ambitious financial goal for 2008 of generating 15% of its revenue through self-financing.
Download NESsT's investment brief for Kava or for other later-stage organizations in Latin America and Central Europe.
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NESsT University
NESsT Publications now available in new languages
NESsT has released several new publications and new language versions of its current publications in our series for social enterprise managers and social investors.
The NESsT Publications Series is aimed at strengthening civil society organizations (CSOs) and providing practical tools for social enterprise managers, as well as at engaging potential donors and social investors in supporting social enterprise.
New language versions released
NESsT's popular primer on engaged philanthropy, All in the Same Boat: An Introduction to Engaged Philanthropy, is now available in Spanish as well as Czech, Danish, French, German, Hungarian, Norwegian, Romanian and Slovak. This tool is a resource for donors and social investors who are interested in learning about or implementing a more engaged approach to philanthropy. NESsT has cooperated with venture philanthropy partners, including the Forum for Active Philanthropy in Berlin, the PhiTrust in Paris and Romboll Management in Scandanavia to offer All in the Same Boat to a wider international audience.
NESsT has also expanded its language offering of Get Ready, Get Set: Starting Down the Road to Self-financing, a beginner-level handbook for determining the feasibility of starting up or expanding a social enterprise. In addition to English, Get Ready, Get Set is now available in Croatian, Czech, Hungarian, Portuguese, Romanian, Slovak and Spanish.
New publications
- Central Europe: NESsT published a Social Enterprise Legal Guide and Social Enterprise Country Assessment for Romania, which provide an overview of the opportunities and challenges for social enterprise development in Romania. NESsT also published Case Studies, where Romanian CSOs share their self-financing strategies, recommendations, and lessons learned.
- Latin America: NESsT has published the first Social Enterprise Country Assessment for Peru, as well as a Social Enterprise Legal Guide, and Case Studies for GEA, COPEME and SER. These publications are the result of research conducted by NESsT during 2007. The success of these publications has allowed NESsT to launch its second national Social Enterprise Competition in Peru, furthering its technical, financial, and capacity-building support to Peruvian social enterprises.
NESsT also published a Social Enterprise Country Assessment for Colombia in English and Spanish, providing Colombian CSOs with an overview of the current situation of civil society organizations interested in implementing social enterprises.
NESsT will publish results of similar country assessments for Argentina, Brazil and Ecuador later in 2008.
Forthcoming publications
With the support of COC Netherlands, NESsT will soon publish End of the Rainbow: Increasing the Sustainability of LGBT Organizations through Social Enterprise. The book examines the opportunities for social enterprises to increase the financial sustainability and impact of human rights organizations working with lesbian, gay, bisexual and transgender communities.
To read more about our publications, visit NESsT Publications or download our Publications Catalog.
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NESsT Consulting
Africa: NESsT supports social enterprises to keep girls playing sports
[Kampala, Uganda] Since 2007 NESsT Consulting is partnering with Nike to develop sports social enterprises in Eastern Africa and Brazil. This partnership includes training sessions, publications, and consulting to sports for social change organizations for the development of their entrepreneurial activities.
In many parts of Eastern Africa, adolescent girls and women do not have access or simply cannot afford feminine hygiene products, causing many girls to have low class attendance, drop out of school, or minimal participation in community activities, especially sports. NESsT is helping to respond to this problem by providing capacity building, technical assistance, and funding to sports for social change organizations assessing the commercial feasibility of producing MakaPads - affordable, high quality and environmentally sustainable sanitary pads. MakaPads are manufactured from papyrus and recycled paper and were developed by Professor Musaazi at Makerere University in Kampala, Uganda.
NESsT Consulting held a two-day workshop in Kakagema, Kenya, for five organizations from the region (Kenya, Uganda and Tanzania) to explore the feasibility of Makapads in their own communities and the potential financial and social impact associated with this social enterprise. In addition to solving a critical social problem, and generating revenues for the sports for social organizations, the production of MakaPads can create employment for low-skilled women working from home.
With NESsT's support, organizations have implemented extensive market surveys in rural and semi-urban communities in Kenya and Uganda, providing insights on the types of sanitary products - or lack thereof - adolescent girls and women are currently using, their needs and ability to pay, and the potential to turn this local product into a large scale solution for thousands. Loic Comolli, Enterprise Development Director of NESsT Consulting, expresses that "we decided to support Makapads because this product has the potential to play an important role in the participation of adolescent girls in athletic programs on the continent."
About NESsT Consulting
Since 1997, NESsT Consulting has offered a variety of consulting services to nonprofit organizations, donors, and international organizations. We have provided group workshops and training sessions, individual consulting, and strategy assessment services to over 60 clients in over 35 countries around the world.
To retain NESsT Consulting services, please write to Loic Comolli.
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Coming soon...
Forthcoming activities & events
Following is a selection of forthcoming NESsT activities & events in 2008:
SEPTEMBER 2008
- TBA, Bratislava, Slovakia: NESsT-Citi Social Enterprise Competition Award Ceremony to be held for Slovak finalists and winners.
- 2-5 September, Edinburgh, Scotland: NESsT is a partner for the "Social Enterprise World Forum: Working Together for a Sustainable Future." NESsT's Lee Davis, Gonzalo San Martin and Nicole Etchart will lead panels on social enterprise in emerging markets.
OCTOBER 2008
- 8-10 October, London, England: NESsT partners with C5 for the CEE Private Equity Forum. Join NESsT's Lee Davis and Eva Varga for a session with private equity investors "Private Equity Shares: The Business Rationale for Private Equity Philanthropy in Central & Eastern Europe (CEE)."
NOVEMBER 2008
- TBA, Budapest, Hungary: NESsT announces the 2008-2009 Social Enterprise Competition for Czech Republic, Hungary and Slovakia, supported by the Citi Foundation.
For more information on forthcoming NESsT activities & events, please contact Carola Delgado.
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In Hungary, Czech Republic
NESsT awards social enterprise competition winners
[Budapest, Hungary and Prague, Czech Republic] NESsT and Citi announced the winners of the NESsT-Citi Social Enterprise Competition 2007-2008 in Hungary and the Czech Republic. This initiative supports the creation of social enterprises in Hungary, Czech Republic, and Slovakia in order to increase self-sustainability of civil society organizations (CSOs). Thanks to this initiative sponsored by The Citi Foundation and launched in 2007, these organizations will be able to go to greater lengths in their struggle to effect social change in Central Europe and provide greater opportunities to their beneficiaries.
Hungary Social Enterprise Competition
In Hungary, 23 organizations participated in this competition and finalists received training and one-on-one mentoring from NESsT and presented their business plans. The NESsT team was joined by Citi employees and other local business advisers to assess social enterprise ideas and provide consulting as CSOs moved through the different stages of the development process.
First place for the strongest social enterprise business plan was awarded in the amount of US$10,000 to Bárka Foundation (Dunaharaszti), who will enter the NESsT Venture Fund Portfolio. Bárka Foundation works to promote the social integration and acceptance of people with intellectual and combined disabilities. Bárka will receive a grant and consulting support from NESsT to further develop its social enterprise designed to develop and market a high quality, designer product line of home decoration and gift items created by people with intellectual disabilities. The enterprise provides regular employment to the beneficiaries and displays their creative talents.
According to Aron Jakab of the Barka Foundation, "NESsT has provided essential assistance in teaching NGOs a kind of profit-oriented approach and how they can launch a profitable social enterprise. This approach is totally missing in our country; everyone (in civil society) is still counting on ever-decreasing government funding."
Zold Kor Association (Hajduboszormeny) was awarded runner-up and will receive US$8,000 from NESsT thanks to the generous support of the Trust for Civil Society in Central Eastern Europe, for the further development of its municipal paper waste selection and recycling system. Zold Kor works to establish a living, livable and sustainable future through environmental and nature conservation activities.
Czech Republic Social Enterprise Competition
Eleven organizations from the Czech Republic participated in this competition and also received training and one-on-one mentoring from NESsT and Citi employee volunteers as well as other local business advisers. NESsT has provided essential assistance in teaching NGOs a kind of profit-oriented approach and how they can launch a profitable social enterprise. This approach is notably absent in the Czech Republic; everyone (in civil society) is still counting on ever-decreasing government funding or on corporate philanthropy programs.
Kenneth E. Quinn, Citi Country Officer for Czech Republic said: "Supporting non-profit organizations is a key priority for us at Citi. This program is special particularly because our financial and human resources are not going directly in support of the organizations' operations and implementation of their social goals but to help them start their own enterprises that will create the basis for their long-term sustainable development. We know from feedback from the civil organizations taking part in our program how much they appreciated the professional advice and support they received from our Citi employee volunteers which we are very proud of."
First place for the strongest social enterprise business plan was awarded in the amount of US$10,000 to World Carfree Network Europe, who will enter the NESsT Venture Fund Portfolio. World Carfree Network Europe will use the mentioned grant and consulting support from NESsT and Citibank to professionalize a quarterly publication, Carbusters, which promotes topics like mobility and ecological alternatives for a reduction of inefficient car traffic.
Eva Varga, Enterprise Development Director for NESsT in Central Europe, commented that "Having a leading financial services firm like Citi as a partner has helped bring greater support and visibility to the field of social enterprise in the Czech Republic. Citi's financial and volunteer support has enabled us to establish links between business professionals and social entrepreneurs and reach out to more social enterprises, which generate much-needed financial resources for nonprofits while also creating employment and other opportunities for marginalized communities."
About Citi: Citi, the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Major brand names under the trademark red arc include: Citibank, CitiFinancial, Primerica, Citi Smith Barney and Banamex. Additional information may be found at
www.citi.com.About Citi Foundation: The Citi Foundation is committed to enhancing economic opportunities for underserved individuals and families in the communities where we work throughout the world. Globally, the Citi Foundation is focusing its giving on Microfinance and Microentrepreneurship, which helps individuals become economically self-sufficient; Small and Growing Businesses leading to economic expansion and job creation; Education, which prepares young people for personal and professional success; Financial Education, which helps individuals make informed financial decisions; and the Environment with a focus on sustainable enterprises that generate jobs and stimulate economic growth while preserving the environment. In the U.S. and Canada, the Citi Foundation supports Community Development programs that help build and revitalize neighborhoods and Education programs that prepare students for college and careers. Additional information can be found at
www.citigroupfoundation.com.For more information please contact NESsT: Eva Varga (Budapest) or Citi: Eva Hencz (Budapest) or Swati Patel (London).
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NESsT Venture Fund
NESsT expands portfolio through social enterprise competitions
NESsT hosted national Social Enterprise Competitions in seven countries in Latin America and Central Europe in 2007, benefiting over 200 new social enterprises and increasing awareness of the benefits and opportunities for social enterprise in emerging market countries.
Winners of the Hungary and Romania Competitions were recently announced and these civil society organizations (CSOs) will join over 35 organizations in the NESsT Venture Fund in Chile, Croatia, Czech Republic, Peru and Slovakia, and will receive continued support in launching or expanding their social enterprises, increasing their self-sustainability and maximizing their social impact.
The competitions were made possible thanks to the invaluable support of the ABN AMRO Foundation in Chile and Romania, Citi Foundation in the Czech Republic, Hungary, and Slovakia, and International Finance Corporation (IFC) Grassroots Business Initiative, Open Society Institute (OSI), CARE Enterprise Partners (CEP) and The Rohatyn Group in Peru. Further support was provided by the Charities Aid Foundation (CAF) and the Emerging Markets Charity Benefit (EMCB) on both continents.
In addition to receiving technical and financial support from NESsT, applicants to the Social Enterprise Competitions benefited from the pro bono advice from the NESsT Business Advisory Network and from volunteers from our corporate sponsors who assisted NESsT with the evaluation of applications and provided one-on-one mentoring to applicants on the development of their social enterprise business plans. In the words of one of the ABN AMRO Bank volunteers in Chile, Miguel Coddou:
"Our aim was to share our experience with the organizations. In addition to having added value, we have also come away with something very important: in getting to know the CSOs, we have been able to see our activity from a different standpoint and further sustainability, establishing a closer relationship with local communities and discovering realities and needs other than those traditionally associated with the private sector."
One recent competition winner in Europe is Bárka Foundation (Dunaharaszti, Hungary), which works to promote the social integration and acceptance of people with intellectual and combined disabilities. Bárka will receive a grant and consulting support from NESsT to further develop its social enterprise designed to develop and market a high quality, designer product line of home decoration and gift items created by people with intellectual disabilities. The enterprise provides regular employment to the beneficiaries and displays their creative talents.
Other recent competition winners who will be joining our later stage portfolio include: Zold Kor Association in Hungary; Cartea Calatoare, Romanian Angel Appeal Foundation (RAAF), Noi Orizonturi, Association for a United Community and Social Intervention (ACSIS), Alaturi de Voi in Romania; and Caritas Graciosas, Nexos Voluntarios, Red Uniendo Manos, and Sumbi in Peru.
Four Social Enterprise Competitions are currently underway in 2008 thanks to the generous support of Banco Real in Brazil, Inter-American Development Bank- Multilateral Investment Fund (IDB-MIF) in Argentina, Ecuador and Peru and the additional support of Peru Opportunities Fund (POF) and our ongoing sponsors in Peru. Follow this space for upcoming developments on these competitions.
About the NESsT Venture Fund
The NESsT Venture Fund (NVF) provides financial and capacity-building support and services to a select portfolio of nonprofit organizations in Central Europe and Latin America to develop social enterprises that strengthen their social missions and advance their financial sustainability.
The NVF only supports social enterprise activities which have been screened for their potential to both: (a) provide income in support of organizations addressing critical social issues in emerging markets, and (b) enable organizations to advance and expand their social impact benefiting marginalized communities.
Read more about the NESsT portfolio, our investment strategy, our supporters and our Business Advisory Network.
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NESsT
Carola Delgado, Development & Communications Associate
Jose Arrieta 89, Providencia, Santiago, RM, Chile
email:
nesst@nesst.org | phone: (56 2) 2225190 | fax: (56 2) 6342599
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Posté le 8/8/2008 10:21:42 (58 lecture(s))