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hello I'm Katherine Klein I'm the vice Dean for social impact at Wharton and a
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professor in the management department and I am delighted to be here interviewing Our Guest Jonathan
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greenblat uh who has an extraordinary career in the social impact space every every uh venue within that space
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Jonathan you are a senior fellow at Wharton and we love having you here you are a Serial social entrepreneur with
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lots of experience in the business SE you built uh several successful Brands including ethos water which many of us
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may know from buying ethos water when we're not buying coffee at Starbucks so
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you've had successful exits uh you're an experienced corporate executive you
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worked at Starbucks you've worked with Google you've been in politics you were
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a member of the White House a director of the office of Social Innovation and civic participation at the White House
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until quite recently uh and you will soon take the role as National director or CEO of the Anti-Defamation
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League so this is business government nonprofits uh and uh I I think today I want to focus on this this title we've
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we've said this your experience as a serial social entrepreneur and talk about the business of social impact sure
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you want to start with uh when you think of yourself and you get this you're
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obviously comfortable with a label serial social entrepreneur let's start with what's a social entrepreneur so I
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think about a social entrepreneur based on a definition that was laid out many years ago by Sally osberg of the skull
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foundation and Roger Martin who's the dean of the rotman School of Business uh
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up in Canada I think about a social entrepreneur is someone who tries to create change through a market-based
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approach that's about taking direct action so not necessarily lobbying or doing advocacy but Lally going in and
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creating something that is trying to do so in order to create or let's say fix a
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broken disequilibrium so it's not someone who's trying to do something on
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the outside that isn't causal but instead trying to create systems change and repair a difficult societal ill so
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the social entrepreneur creates direct action to fix a broken system for profit necessarily I think it can be both so I
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think you can see social entrepreneurs in the nonprofit space who use that sort of model to attack a particular issue in
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a field it could be healthare could be housing could be micro could be Finance I'm all I personally am more interested
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in what we've seen in terms of social entrepreneurship in the business Community okay so let's talk about that
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social entrepreneurship in the business community and let's start with uh with
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ethos water you were relatively early in this space we've seen a lot of evolution
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what what did you try to do in in ethos water talk brag a little bit what have been the successes and the the wisdom of
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what you created so ethos Water started with my business partner Peter Thum we were roommates in business school at
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Kellogg for two years which is a lesson for all the young Wharton students out there as they think about their
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classmates uh Peter had this idea of creating a bottle of water that would use part of its profits to fund
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humanitarian water projects as we initially thought about it he thought about it initially over time we we then
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started the company and over time our model evolved and when did you start the company we started Pete started working
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on it in 2002 and we came together in late 2002 m 2002 and when did you sell the company to Starbucks we sold it in
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April of 2005 so fast fast yeah pretty fast it's funny you see this pattern of
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starting scaling and selling on a pretty rapid time frame in Silicon Valley all the time right in cpg or in other kind
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of categories it's a little less common right nonetheless the model was predicated on this notion that we could
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connect consumption to the cause so if you look at the first generation of social Enterprises in the business world
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businesses like Ben and& Jerry's yeah or Body Shop yep or Stonyfield Farms here
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you had products and brands that were about ice cream or about yogurt or about you know uh
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hand like hand cream lotion personal care products right that were not necessarily tied to the causes they
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sought to address they were organic healthier may have had better supply chain more that's right right that's
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right they they they aimed in that like I think you know Ben and Jerry's didn't
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use recombinant Bine growth hormone right right but now consumers didn't understand that and the body shop
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aspired to do things with better sourced inputs from the Amazon but again consumers didn't understand that we
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thought consumers would understand this basic idea of bottled water which is kind of an irrational category to begin
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with connecting its consumption to clean water issues it's a huge Global problem
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so what's gotten more familiar and there is a a one for one model so so people
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may have heard from of a one for one model we see that in Tom shoes perhaps most famously you know and and I know
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they've evolved their model but it was hey hey consumers you know buy a cool
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pair of these shoes and we will donate a pair of shoes right so ethos water it's
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a little bit of a different it wasn't hey hey hey uh buy a buy a bottle of water from Starbucks previously you and
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we will donate a bottle of water elsewhere what what was it so our notion was if you buy this bottle of water we
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initially aspired to donate up to 50% of our profits to fund humanitarian water programs around the world now I say
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programs because it wasn't just a project or that kind of Hardware like a like a new
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latrine instead or or a new uh like well and that matters but the hardware is no
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good without software so we also sought to do hygiene education and to create sort of economic schemes that would make
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the water system sustainable yeah so that approach is really different than saying I'm going to invest in a
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community here in order to create an ecosystem around water is very different than saying we'll give somebody a pair
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of shoes but there it seems like it's different in at least two ways one is right it's a commitment that's around
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we're going to donate 50% of our profits not uh you know it's not it's not tied
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to we're each one of our products we're selling it's tied to our products and um
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it's not tied to a particular solution I'm going to give away a bottle of water
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you had more flexibility more ability to change the an ecosystem yeah I think our
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approach so let's take those two things starting with the latter I think our
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approach was more strategic and the one for one model is often more tactical right so we were investing strategically
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versus techically giving someone something sure it's more like it's not teaching a man to fish it's creating an
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ecosystem around a fishery ecosystem better than giving someone a fish right but on the on the flip side look I will
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say that I think Toms and Warby Parker and these other businesses who are endeavoring to do this model I think
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it's admirable I think we should encourage them right I would simply say I think the model can continue to evolve
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in ways that create more enduring change and you know what else connect the consumers to the issue more effectively
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though I would argue that can when you you know the Simplicity of the hey buy a pair of shoes and we'll give a pair of
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shoes away uh may not be the right solution and I know Toms has has been criticized and has evolved their their
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model but from a consumer perspective it's it's very concrete very clear well
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now you're kiding something of the key so the consumer wants to understand hey
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I do this what happens yeah so our slogan was every bottle makes a difference helping children get clean
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water right simple I buy this water someone gets water but the fassil I buy this water we give someone a bottle of
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water that's crazy right and so we we thought it would be more respectful of
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the consumer's intelligence right to have a model that was honestly more intelligent and smarter with that said
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um I do believe that Toms and Warby are evolving their approaches absolutely to accommodate for what is the complexity
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of the issues and as a consumers as consumers awareness has increased their expectations have increased and they
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demand more from these Brands than just oh I buy it you give it away right right
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so you know you started this company by the way you know Tom's didn't start you
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know who started this model Nick Negron started this model remember the one laptop per child oh yeah sure the way he
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went to Market out of the digital Lab at MIT and he had a great partnership with
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companies who helped you buy a laptop initially he was going to give them away and then he realized you buy a laptop
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here we'll give one away over there yeah yeah very interesting so if that's the
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start of the one for one model and your your company was an early social Enterprise what are you seeing in the
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space as you look at the new ways that businesses and let's stick with that the
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business enterprises the new ways businesses are engaging in social impact whether you want to be thinking about
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social Enterprise or corporate social responsibility or the places they're they're blending what are you seeing
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that you think this is interesting and and there's potential here if we can grow this in the bus sector what's
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interesting I think is you certainly are seeing lots of innovation in the supply
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chain or the value chain more and more give us an example well more and more businesses are using um more sustainable
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Supply chains so think about a business like um oh I don't know like a so Tesla
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be an example right so it's a better battery and it's produced in a way that
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makes the car more efficient right we hear this a lot about about Nike for example exactly so there're interesting
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models where it could be the inputs if you will the materials it could be the labor force so there are businesses that
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are trying to use labor forces let's say overseas and give their workers better
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opportunity even here at home the company in Detroit The Watch Company in Detroit is doing this whose name I can't
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seem to remember now very unhelpfully one watch one I think it's got the word
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one in it but there but there but you're starting to see some interesting models
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like that so from it could be the labor force it could be the materials it could
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be the way you go to market right like using climate friendly vehicles to deliver your product if you will or
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something so that stuff the supply chain work is interesting and of course there
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are businesses who are doing interesting things on the back end V how they give away part of their profits right uh I
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think the interesting things are happening not in the value chain and in the profit distribution but on the front
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end and how these businesses are getting created and how these business are measuring
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their impact so great let's talk about so the first side you know we've seen
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we're here in Philadelphia which is the headquarters of blab right the organization that has developed this
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interesting model of certifying companies right um and you get that cert you take their audit and you get that
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certification and you get this B Corporation status right or there's actually right a distinction between the
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legal status of being a b Corporation a benefit Corporation and the certification process of of being bab
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certified and and the you know just to clarify the bab certification is assessing uh multiple aspects of the
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company right what is its Workforce what is its Mission what is its environmental
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impact and so on in all the ways this could be a mission driven company it's
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exactly right so their certification process is what's interesting to me because we're seeing all kinds of
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businesses start to adopt this businesses you might not expect consulting firms an example like or
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different companies who really don't fit the Ben and Jerry's Tom Sho ethos water
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model right um now as you were saying we're now starting to see policy catch
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up with this as different states are accommodating for and allowing businesses to incorporate as for benefit
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companies right using in many case some of the stuff of the B Corp um certification process so that's very
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interesting because as we see more and more businesses take those princip and put it into their Charter right make it
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part of the way they serve not just make it explicit part of their value proposition to serve stakeholders as
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well as shareholders that's really different and that flips Milton Freeman on its head right so that's neat and
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then kind of related to this becomes the way that we measure value so let's let's
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pause for a moment I want to get to there but I know one of the questions that that um you know that I've heard
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about this B certification is okay this B certification and if you believe in these social missions you believe
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businesses can do this this is good and yeah we kind of know that that consumers
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may be interested but the vast majority of these companies uh are are private companies a few of them have gone public
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um or been acquired uh but one of those question marks out there is what happens
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when they go IPO right did you know will people look at this company and say wow
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we want to invest like crazy this has so much of a social Mission and an economic
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Mission or will they will they say H that's nice economic Mission probably just okay given the social what are the
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assumptions that investors may have in their heads about a company that's Mission driven you know B certified and
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is it worth investing so that's it's an interesting question I don't think we
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know the answer yet you know today as the day we're recording this Etsy just
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filed for they filed for the public offering 90 days ago they're going out today they'll start trading today we'll
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see how we'll have one case at least and there's another firm there's email
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marketing firm in North Carolina that I think is out but Etsy will be the most prominent public Equity with the B
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status yeah so that's fascinating see how it plays out when there are questions in the boardroom shareholders
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versus stakeholders when there are questions in the annual meeting shareholders versus stakeholders who
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wins right hard to say right um so I think we're going to work those things out on the other hand we do have lots of
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big companies who aspire to be better for the world and don't even have that
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status right so think about Google for example yeah sure Google's been very explicit with their don't be evil Mantra
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they don't have B certification and they are trying to maintain their line now
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the way they've done it right is with the different the different classes of
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stock and the the controlling stock if you will is owned by the founders Sergey and Larry I think maybe Eric Schmid but
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all of the shareholders the common shareholders don't have the controlling stock that they do right so they
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continue to make the Strategic decisions for the company because of these two classes of of equity right and Whole
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Foods would tell you I know we've been we were recent speaking with the co-ceo
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Walter Rob I mean he was very explicit hey our purpose comes first and our profits follow and very much sees the
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mission driven elements of of Whole Foods Howard Schultz would say the same thing as Starbucks right sure right um
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you know we see other corporate leaders beginning to adopt a similar Mantra you know Richard Branson has started his
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thing called the B team with corporate CEOs who are trying to Aspire to similar a dual mission where
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purpose theoretically comes before profit yeah now on the other hand if you don't have any
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profit got to be very right so so it's it'll be inter profit allows you you
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know in the ideal world what we hope we're seeing in this space is that the profit drive a virtuous cycle right
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that's right profit purpose drives profit drives purpose but we come back to this question that you raised earlier
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which is you know as we see companies go public and there are shareholders getting involved how does that actually
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play out what are the pressures upon those buses and then you wanted to talk about the
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other end of the spectrum oh measurement so I think ultimately and this may answer the first question as firms are
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beginning to develop integrated models to actually measure not just their financial performance but their sort of
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social environmental right Etc performance so out of that b certification process has come something
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called gears right which is a measurement system which is quite interesting um M gears it's the impact
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in global impact investing rating system right and that is being applied right now to funds yeah to evaluate their
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portfolio right and I think what's meaningful about that is it's creating
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the conditions in which these fund managers are looking at their portfolio of investment say how do we perform
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right and by the way that may be one of the most interesting things about blab is not the thousand plus companies who
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now have the certification right far more businesses have taken the self- audit right the fact that they've
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created the conditions in which entrepreneurs and Executives managers at all levels are thinking about these
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issues that alone is a contribution I think to the to the National conversation right yeah know i' I've
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heard the founders speak essentially it's like a checklist that says huh I'm
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not eating enough enough vegetables am I right you know they're they're reflecting on that yeah it's like a food
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plate of uh firm performance isn't it right and the impact measurement piece I
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think is is a really important piece to come to in this conversation because um you know as as you know when we've
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talked about this in the in the past there's such there's so much that's
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inspiring in this in this space but there are parts that are worrisome right that companies may come on board without
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a genuine commitment to social impact without careful evaluation of what they're doing and without uh
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accountability to create an impact and there's you know potential for abuse I I
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fear down the line as this as these kind of business become businesses become more and more common so the commitment
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to impact assessment and accountability and transparency about this is what we're doing this is what the real impact
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of our business is would seem to be a really important Safeguard it's absolutely crucial it's crucial for a
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couple reasons so number one although I think Millennials in particular maybe in
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part because of social media they can sniff out what isn't authentic um so brands that aren't
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really you know True to this are often exposed yes um so that is a bit qualitative but on the quantitative side
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if we ever really hope to bring Capital into this field at scale if we hope to do the kind of comparative analysis that
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makes gives us the ability to analyze those public equities like we were just talking about so you can compare whole
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foods' performance to superv value or to Kroger's or to Albertson's we need a set
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of common measures by which we can judge their performance on something other than EPS right um so I think it's
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important for that reason and then thirdly because because if we really hope to create change at scale we need a
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discipline and a rigor um around measuring you know quarter on quarter year on year how we're making progress
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on key metrics so you know you manage what you measure sure so the Advent of measurement systems I think augur well
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if we want managers to be focusing on this great Jonathan it's been fabulous
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talking with you we need to uh pull this to a close even though we could keep talking for hours I know so great do it
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again I hope so and great insights on the you know the business of social impact thanks thank you being with us
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[Music] thanks