Is Balancing Vision and Revenue in Social Enterprises a Virtual Reality?
One doesn’t get enough time to brood or reflect on what one is doing while being a practitioner. Over the past two decades of my working with not-for-profits (NFP), being one of the authors of Farming Futures was only the second opportunity that I got to be a part of a systematic study/research on organisations. This engagement of close to a year during 2018-2019 enabled me to compare notes, introspect, and learn from others’ work.
Since the late ‘90s I have been associated with various NPOs (Non Profit Organisations) across the country – in both farm and off-farm sectors - implementing Income Generation Programs (IGP) and promoting collective businesses of the communities by interfacing with the market while aiming to provide sustainable livelihoods to poor small producers. Although operating profits are expected, there is a large component of grants in IGPs.
I was interested in knowing if Social Enterprises (SE) have some similarities and differences with these. The discussions in the workshops with the study team held periodically during the course of the research were lively and insightful, and provided useful ideas to explore about the SE and strengthen the case study.
Our brainstorming before we undertook the study began with trying to understand what is an SE and how to fix criteria for inclusion and exclusion in the study?
To me an SE is a sustainable business that focuses on realizing its Vision (related to a social cause or an unmet need of the society) by having a profitable Revenue model. But is this balancing of V & R amount to Virtual Reality!!
Among the SEs shortlisted for the study, I chose Safe Harvest Private Ltd. (SHPL) – an enterprise that is working on two serious issues related to safety of food and agrarian distress simultaneously. I was all the more interested because this SE has its origins in NPOs, and the learnings from the story of its growth and management challenges could be used elsewhere while promoting similar ventures.
SHPL actively serves about 19,000 small and marginal NPM (Non-Pesticidal Management, meaning not necessarily fully organic but certified not using pesticides) farmers by partnering with 30 Farmer Producer Organisations (FPOs), and has enabled farmers realise a 20% increase in their incomes. SHPL deals in 53 products across 5 categories of cereals, pulses, spices, flavourings, and millets.
Its sales revenues in 2018-19 were nearly Rs 18 crores and have been rising continuously for the past 6 years. Its major markets are in Bengaluru, Hyderabad, Chennai, and Delhi-NCR and has recently enabled direct purchase from its website as well. The study enabled me to gain firsthand knowledge of the operations of SHPL by visiting their storage and processing hub in Hyderabad, a partner NGO/CBO in Devadurg block in Raichur district in Karnataka, and the head office in Bengaluru. I had detailed conversations with its former Chairperson of the Board, heads of two founding NGOs, young professional managers and the CEO so as to understand the genesis of SHPL and learn from their experiences while running the organisation.
At the outset, SHPL seemed to have some things in its favour at its early stage; an international philanthropic organisation providing a grant to an NGO for implementing an idea in the form of a project. In this case, it was a group of like-minded civil society organisations with proven track record of working with small farmers in rain-fed areas who wished to get their produce certified (‘devoid of pesticide residues’) thus enabling them to obtain better and possibly sustainable returns from the market. Usually such projects run their course and are quietly closed after demonstrating the ‘model’ or continue on a small scale.
The initial years of SHPL, like any other initiative, involved a lot of trial and error and venturing into uncertain territories. A significant difference though is the faith put in by its former grant maker (in his individual capacity) and angel investors who shared the vision, as well as the goodwill leveraged by the founding NGOs.
My interaction with various significant stakeholders of the enterprise, who are either still playing a major role in running it or had steered it at some point in the past had thrown up two levels of issues. At the institutional level are issues such as relevant domain expertise of entrepreneurs, the role of the Board, access to financial resources, the need of a business plan and a strategy, and the primacy of the share of primary stakeholders. There are also issues that relate to the ecosystem and enabling environment for SEs etc that include challenges and costs of marketing and competing with big and existing market players.
Balancing Vision and Revenue – the SHPL way
Recently I heard a pioneer in Micro Finance in our country say that a social entrepreneur needs to have the heart of an NGO (perhaps he meant compassion) and the mind of a businessman (perhaps, a goal-oriented focused approach). I have seen this in SHPL in its:
Scaling up without compromising on efficiency of operations while serving the cause of small NPM farmers based in scattered locations.
Flexibility in dealing with small farmers and their institutions (tolerance of variance in criteria of quality and not just procuring a single grade like many agribusiness companies), but ensuring quality to the consumer (by using modern technology in testing, processing and storage)
Use of qualified professionals as well as providing regular employment to semi-skilled manual labour.
Unlike the purely tech and app based SEs, studying and learning from the interactions with the founders and partner NGOs of SHPL was immensely heartwarming, as they are directly involved with the end-users of their enterprise, rainfed small farmers, and are genuinely concerned about their welfare. While SHFL is growing, it is yet to become fully profitable.
Through the case study I have realized that the intent to balance vision and revenue though desirable is still a work in progress. There is a need to have more detailed discussion on what is required to make this happen and many issues are outside the immediate scope of an individual organization. I have through the case developed a richer and more nuanced understanding of SEs and believe that those interested in the future of farming have a lot to learn from these 15 case studies. Farming Futures, the book and the conversations by the editors beyond the publication has helped us revisit the debate and the time-frame. Hopefully, some of these might be addressed by the SE Stock Exchange that is being planned by the government of India.
Anil R. K. is CEO of National Mineral Development Corporation CSR Foundation. He has worked in the rural and community development sector for the past two decades in various organizations across the country.