Mark Kramer is the founder and managing director of FSG Social Impact Advisors, a non-profit organization that works with other companies "to accelerate the pace of social progress." He is also a Senior Fellow in the Corporate Social Responsibility Initiative of the Mossavar-Rahmani Center for Business in Government at Harvard's Kennedy School of Government. He has written many articles on philanthropy for Harvard Business Review. Kramer matriculated at Brandeis University for his bachelor's degree; he received his M.B.A. from The Wharton School and his J.D. from the University of Pennsylvania. He thinks the bifurcation between non-profit and for-profit companies is crumbling.
Topic: Problems in the developing world.
Mark Kramer: I’m not sure we’re in a position to morally demand that of any country when we haven’t done it ourselves. There’s a little bit of an analogy in my mind to cell phone use in Africa. The use of cell phones in Africa is the highest per capita in the world because they sort of skipped the step of landlines because once cell phone technology is available, the tremendous cost of installing landlines everywhere no longer is necessary. I think there’s an element in developing country business enterprises that’s similar. Now that we’re aware of issues like greenhouse gases, like solid waste disposal, et cetera, we actually have the opportunity to build businesses and economies that address those issues from the outset rather than trying to retrofit them later. So I think there’s an opportunity there but I think you’re right, it’s not something we’re in a position to demand of others.
Question: Who does sustainability well?
Mark Kramer: You look at the tsunami rescue effort and of the 18 major international organizations that brought in relief, only three or four actually had logistics software and capacity to manage the inflow of funds efficiently. There are an awful lot of companies out there that could’ve provided direct relief much more effectively than many of the nonprofits they wrote checks to because they understand how to manage materials, because they have the planes and the trucks and the resources to actually deliver the materials where they’re needed effectively. Companies are really good at doing all kinds of things and many of those things are the answers to a lot of our social problems. Above all, companies have a real performance mandate built in to how they think and how they operate. What they care about are results and they will do what it takes to achieve the results they need to achieve and if people aren’t achieving results, they’re out of there.
That culture is really not prevalent in the nonprofit sector, where people are making great sacrifices to work in the sector, they’re trying hard, they care, but they’re not always in organizations that are enabling them to truly be effective and deliver results.
Topic: For Profit vs. Non-profit
Mark Kramer: I think there are a lot of differences between the for-profit and nonprofit sectors and certainly tremendous differences around access to capital. Whether a nonprofit can achieve the kind of growth and success that a for-profit can, I think gets at a number of issues. But there is an interesting category that’s sort of in between that’s emerging, of social entrepreneurs and hybrid organizations. They really are leveraging for-profit capabilities to address social issues. So I don’t think there’s anything inherent in the social issues that prevents you from addressing it in similar ways. I’ll give you an example. There’s a company called Waste Concern in Bangladesh and the issue they address is in the slums in Dhaka.
The government does not collect the garbage so it rots in the streets. It’s a horrible health hazard, it’s a horrible problem. Two engineers got together and said maybe we could hire some of the unemployed people in the slums to collect the garbage. We could recycle things but we could compost the rest. We could make organic fertilizer and we could sell the fertilizer. When they started out it was very hard for them to raise the initial money. Ultimately, the Lion’s Club and the United Nations Environmental Program were the ones that gave them the money to start out with a very small facility.
They weren’t quite making it economically until they found that they could actually sell carbon credits, because when the garbage was rotting in the streets, it released greenhouse gases and when they composted it, it didn’t. So when they factored the carbon credits in, they found they could collected a ton of garbage for 30 dollars and they could generate 60 dollars of revenue between the carbon emissions and the organic fertilizer so they were able to grow very rapidly. They’ve now done a deal with a major international corporation and they’re now handling, in less than seven years from a startup, the garbage from three million people. They’re franchising this in Vietnam, Sri Lanka and other regions around the country and it’s a very profitable business. It’s employing tens of thousands of people who’d be unemployed. It is reducing greenhouse gases. It is reducing health hazards. It’s creating organic fertilizer that’s increasing crop yields. And it’s a remarkable win-win solution.
Recorded June 4, 2008.