On Social Ventures Budapest November 12 th 2012

On Social Ventures Budapest, November 12 th, 2012. Prepared and presented by Tibor Hejj Proactive Management Consulting ®

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement /8/2021 5: 21 PM True (corporate) responsibility is much more, than just a buzzword or „actions”, and is to be seen in its complexity In addition new, unknown buzzwords are emerging, such as we will see soon Proactive Management Consulting Ltd. 2

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement The organizations can be segmented according to the combination of their interests and their values VALUE + Foundation, organizations living on charity Altruistic (besides acting ethically and legally) „CSV” Ethical (besides acting legally) Company + CSR Local company, not optimizing, profit spent locally Tax optimizing multinational company, profit abroad Legal Selfinterest Illegal /8/2021 5: 21 PM - Offshore, tax evasion Tax fraud, corruption, Illegal employment Common good INTEREST True responsibility means close to common good and not just „legal correctness”! Proactive Management Consulting Ltd. 3

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement Capitalism can get to a higher level thanks to CSV and the economy and society will benefit from this process § CSV = Creating Shared Value § According to Michael Porter companies have three key ways to create shared value opportunities: 1. by reconceiving products and markets, 2. by redefining productivity in the value chain, 3. and by enabling local cluster development. § Results: /8/2021 5: 21 PM • • • Innovation Growth Societal profit § „Each of these is part of the virtuous circle of shared value; improving value in one area gives rise to opportunities in the others” § Real social entrepreneurships are also creating shared value besides social benefit. As a result boundaries are blurring between successful for-profits and nonprofits. Source: http: //hbr. org/2011/01/the-big-idea-creating-shared-value/ar/pr Proactive Management Consulting Ltd. 4

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement /8/2021 5: 21 PM Clusters have various depths and definitions used in the economy which defines their operation § Horizontally and/or vertically linked and operating in the same line of business (OECD local cluster) § Michael Porter’s (1998) definition: „A cluster is a geographically proximate group of interconnected companies and associated institutions (universities, agencies, vocational associations) in a particular field, linked by commonalities and complementarities. ” § „Clusters are group of interdependent companies and associated institutions that are collaborating and competing; geographically concentrated in one or several regions; specialized in a particular field, linked by common technologies and skills; either science-based or traditional; either institutionalized (with proper cluster manager) or non-institutionalized. ” (European Commission, Directorate-General for Enterprise and Industry on enterprise cluster ) According to Porter today’s global competition is not between separate companies. Clusters have become the basic units of the new division of labor and the global competition as well! Proactive Management Consulting Ltd. 5

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement It is difficult to define social entrepreneurships, there are various segmentations VALUE + Foundation, organizations living on charity Altruistic (besides acting ethically and legally) „Doing business for others” „CSV” Ethical „Social entrepreneurships” (besides acting legally) Company + CSR Local company, not optimizing, profit spent locally Tax optimizing multinational company, profit abroad Legal Selfinterest Illegal /8/2021 5: 21 PM - True responsibility Offshore, tax evasion Tax fraud, corruption, Illegal employment Common good Hibrid Forprofit INTEREST Nonprofit True responsibility means close to common good and not just „legal correctness”! Proactive Management Consulting Ltd. 6

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement Thus the traditional segmentation of companies and organizations became more complex for today… Based on content, activity, that is: „What does the organization do? ” For the common good E. g. environmental protection, private school, private hospital… E. g. a foundation for the disadvantaged people Traditional, general E. g. stock market companies, private companies E. g. a for-benefit company providing jobs for the handicapped For-profit, for the owner Non-profit/for-benefit, for a target segment Orientation, that is: /8/2021 5: 21 PM „For whom does the organization exist? Proactive Management Consulting Ltd. 7

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement …moreover the same activity (e. g. bank) can find its place in each class For the common good Banca Etica - For-profit bank of socially beneficial enterprises „What does the organization do? ” Traditonal, general Classic banks, e. g. : Erste Bank Grameen Bank from M. Yunus - Providing micro credit, without official structure and branches Bank-like operation, but with volunteers and CSR manner, e. g. : Zweite Sparkasse For-profit, for the owner Non-profit/for-benefit, for a target segment /8/2021 5: 21 PM „For whom does the organization exist? Few know that the owner of Erste and Zweite Bank is a foundation, which was established in 1819 in order to help the poor! Proactive Management Consulting Ltd. 8

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement I agree with the approach and definition of „social venture” as a for-benefit company Every organization, which is socially beneficial as well Non-profit organizations Non-profit firm, which serves one target segment /8/2021 5: 21 PM I am not only studying this issue, but practicing it, too. Proactive Management Consulting Ltd. 9

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement To provide jobs instead of charity – an innovation, already invented in the Middle Ages – which we further developed, adjusted to our times To start a company that creates & ensures jobs To ensure a job, so that donation would not be needed To give anonymously to a stranger To give anonymously to a friend To give to a stranger To give without/ before being asked to To give when asked, suitably To give deliberately, but not suitably /8/2021 5: 21 PM To give unintentionally The respect of dignity can best be realized by ensuring work – this is how rehabilitation becomes, beyond the existential aspect, a constructor of humanity as well. Source: Orban, P. (2006). Employment – Rehabilitation – Integration. Napra Forgó Kht. Original source: Maimonides Proactive Management Consulting Ltd. 10

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement My not-for-profit (for-benefit) company, „Sunflower” strives for offering sustainable jobs and rehabilitation /8/2021 5: 21 PM Employment rehabilitation: „Reintegrating those people into the society, who have lost their creative work, everyday activity, organizing principles for life, selfsupport, livelihood etc. , through the tailor-made use of employment tools and through utilizing their available skills and developing their competences. ” § Outsourcing based on “work teams” (unified outwards, supporting inwards) for the sake of employment rehabilitation is a possible, tried and tested way, acknowledged with the award “The Social Entrepreneur of the Year 2007”, issued by the Schwab Foundation (founding organizer of the World Economic Forum in Davos) § Its goal is integrated employment rehabilitation. Sunflower provides a positive “experience” of the disabled in order to reduce the lack of knowledge, diminish prejudice and assist them in their complete reintegration by experience. Thus the notion “disabled persons” loses its significance, the individual selected through experience becomes a sterling colleague. § Its mission defined by the founders: To offer labor market services for the disadvantaged (and especially the disabled or impaired) people and thus assist them in finding employment in a certain region. To work together with them and for their sake. Source: Orban, P. and Hejj, T. (2008). Outsourcing based on “Work Teams” for the sake of employment rehabilitation Proactive Management Consulting Ltd. 11

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement The company was set up at the Millenium and its -year track record proves the idea 12 180, 000 160, 000 140, 000 120, 000 100, 000 80, 000 60, 000 40, 000 20, 000 0 /8/2021 5: 21 PM 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009. 2010. 2011. Proactive Management Consulting Ltd. 12

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement The importance and impact of the company is much more than being a sustainable venture… Key performance indicators of Sunflower’s labour market services (in 2011) Disabled jobseeker contacts (pre-screening, testing skills, feedback on career profile) Disabled recruitment recommendations Successful employment cases /8/2021 5: 21 PM Services to non-disabled jobseekers 352 persons 212 persons 67 persons 385 persons Providing jobs directly and indirectly for the people in need is the most important social benefit these days! Proactive Management Consulting Ltd. 13

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement We set up a social venture – AND considered it as a partner and have integrated into our network/cluster Invite into the cluster Commitment (for sustainability) To donate (time and money) regularly To give time (expertise) as well Ad-hoc donation (money) Sponsoring with a low-return, but still as an investment Sponsoring with a positive return /8/2021 5: 21 PM To keep the law Businessmen and their companies can add more value to the society by creating social ventures than just donating charity organizations! Proactive Management Consulting Ltd. 14

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement Do not forget: more and more people believe that corporations can achieve the greatest impact on society instead of governments! /8/2021 5: 21 PM In Europe the government (still) has the greatest impact as the participation of individuals and companies is traditionally lower. When the business sector activates itself and uses its resources for common purpose as well, it will outperform governments. Source: Deloitte, Societal Purpose – A journey in its early stages, 2012 Proactive Management Consulting Ltd. 15

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement /8/2021 5: 21 PM You are our hope! According to a 2011 survey the typical so-called „millennium” (generation Y) person’s view differentiates from the current managers’ § For business leaders the primary term is profit, other relevant factors only follow. § According to the generation Y (born after 1981): • The purpose of business is far broader than the financial figures. • Business has essential importance in societal development and innovation. Enterprises can pioneer societal progress and positive change. • Business has the greatest potential to effect positive societal change. • They are looking for inspirational and innovative business leaders who have a long-term view of the societal ro. Ie of their business. These young fellows choose their work place, consume products and select services according to these aspects. Are you one of those? ! Source: Deloitte, The Millennial Survey 2011 Proactive Management Consulting Ltd. 16

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement Finally about myself: I try to sustain a balanced life, that reflects my values and beliefs PROACTIVE International Vice President MBA MANAGEMENT CONSULTING Managing partner Country Manager Stu die s r Caree Co-Founder, Vice President MSc in electrical engineering, + Specialist engineer in digital technology Member of a Christian spiritual organization So ly mi Judit Fa Dávid Rita /8/2021 5: 21 PM Tibor Héjj Balázs Kristóf cia l Re sp on Member of the Board of „Homestart” sib ilit y President of the Board of a donation mgmt. Founded (in 1991) Founder of a non-profit company, foundation a foundation for about the handicapped providing employment Proactive Management Consulting annually 50 handicapped since 2000 Ltd. 17

Proactive Management Consulting © Strategic Innovation Excellence For Financial Improvement Thank you for your attention – and be responsible! Email: hejj. tibor@p-m-c. hu www. p-m-c. eu Proactive Management Consulting ® /8/2021 5: 21 PM 30 Szendrő St. , Budapest, H-1126 ISO 9001: 2008 Certificate Registration No. : 75 100 9946 The above information is intended to provide general guidance only. It should not be used as a substitute for professional advice or as the basis for decisions or actions without prior consultation with your advisors. While every care has been taken in the preparation of the publication, no liability is accepted for any statement, option, error or omission. Proactive Management Consulting Ltd. 18