green@work : Magazine : Back Issues : July/Aug 2003 : New Perspectives

New Perspectives

How Much Can We Give for All We Get?
Regenerative commerce and the new entrepreneurial spirit.

by William McDonough and Michael Braungart

“In America, there are powerful marketing devices to sell products like Coca-Cola and hamburgers. All I want to sell is good eyesight, and there are millions of people who need it.”
— Dr. Govindappa Venkataswamy

Commerce can be a powerful catalyst for social change. While many in the social sector still “shun trading” like the aristocrats of old, an emerging group of innovators are developing exciting new business models that use the mechanisms of the marketplace to serve the greater good.

Employing the speed and vitality of capitalism, these social entrepreneurs are building enterprises that effectively deliver positive change. They are delivering high quality health services to the greatest number of people at the lowest possible cost, while serving needy children and elders virtually for free. They are providing loans to entrepreneurs too poor to qualify for traditional credit, allowing them to start small businesses. They are tapping into local renewable energy sources—sun, wind and water—to generate inexpensive power, support self-sufficient communities and spur sustainable economic growth.

The practitioners of these new business models are transforming conventional notions of profit, value and wealth. Instead of old-school capitalism’s narrow focus on the bottom line, which typically shrinks business activity into short-term profit making, social entrepreneurs are cost-effectively creating ecological, social and economic revenue, both in the short-term and for future generations. In doing so, they are beginning the work of building a truly regenerative economy whose benefits are shared by all.

How Much Can We Give?

When the legacy of an enterprise—its long-term value to the world—drives the business agenda, it unleashes the power of commerce to create a wide spectrum of positive effects. This is perhaps best understood by the new social entrepreneurs, whose value proposition is not “How much can I get for how little I give?”—the mantra of the old capitalism—but instead, “How much can we give for all we get?” Rather than focusing on the quarterly bottom line, this new question suggests a rich, inspiring pursuit of life-affirming wealth and productivity.

“How much can we give for all we get?” is fundamentally a design question. When asked throughout the design process it guides entrepreneurs toward products, facilities and business models that grow ecological and social revenue while generating economic health. The goal is good growth for all. Instead of simply seeking to reduce the negative impacts of economic activity—the reductivist’s attempt to be “less bad”—we can develop businesses built on a wholly positive agenda that aims to enhance the human footprint, leaving behind wetlands and clean water, prosperity and nutrition, fertile farmland and healthy children.

This is not just wishful thinking. Enhancing the positive effects of business is a fundamental outcome of our ongoing work with our commercial clients, and it’s also one of the key goals driving the successful ventures of today’s social entrepreneurs.

Consider the business model developed by the Indian ophthalmologist, Dr. Govindappa Venkataswamy. At age 55, after a distinguished career as one of the most admired cataract surgeons in India, Dr. V, as he is known, began to wonder how he could deliver sight-restoring operations to many more of those in need.

“In America, there are powerful marketing devices to sell products like Coca-Cola and hamburgers,” Dr. V told Fast Company’s Harriet Rubin. “All I want to sell is good eyesight, and there are millions of people who need it.”

Indeed, 20 million people in India are without sight, most of whom suffer from cataracts. To serve them, Dr. V opened Aravind Eye Hospital, a 12-bed clinic in his brother’s home in Madurai, India, and offered cataract surgery for free. Today, Dr. V runs five hospitals that perform more than 200,000 operations each year. Since opening his first hospital in 1976, the Aravind clinics have given sight to more than one million people.

If you think free surgery sounds like a bad business proposition, well, think again. At Aravind, a cataract operation costs about $10; the same operation in the United States costs nearly $1,700. Aravind keeps costs low, writes Rubin, with specially designed equipment that allows surgeons “to perform one 10- to 20-minute operation, then swivel around to work on the next patient—who is already in the room, prepped, ready and waiting.”

Using this effective system, Dr V’s hospitals give sight to more than 500 people each day. Roughly one-third of the patients pay nothing; one third pay 65 percent of cost; and about 30 percent seek out Dr. V and pay market rate for his services “because the quality of his work is world class.” After nearly 30 years of operation, Aravind has a gross margin of 40 percent and has never depended on donations. It has done so, writes Rubin, by inventing “a service so perfect that it created its own market . . . without any significant resources, and with a paying clientele that represented far less than half of its customer base.”

“We were not thinking of amassing money as our goal,” says Dr. V. Instead he asks, “How can my work make me a better human being and make a better world?”

Spreading the Aravind Model

Not everyone has Dr. V’s gift for eye surgery, but the business model he created allows his vision to be applied worldwide. That’s exactly what social entrepreneur David Green is doing. After helping Dr. V expand the Aravind model for eye hospitals, Green asked himself what he could give to the world, and decided to offer affordable medical products and services to developing countries. Working with Dr. V, Green started Aurolab, which pioneered the manufacture of high-quality, low cost intraocular lenses to serve Aravind’s needs and is today the second largest provider of intraocular lenses in the world.

Green’s current project is aimed at providing affordable, state-of-the-art hearing aids. Hearing impairment is the world’s most common birth defect, affecting some 250 million people in the developing world. According to the World Health Organization, half of those with hearing impairments would benefit from hearing aids, which creates a need for 32 million hearing aids annually. Hearing aid companies only produce six million annually, of which only 12 percent are shipped to developing countries. Clearly, there is a pressing need for an affordable alternative.

Green’s strategy is to manufacture high quality, programmable digital hearing aids for $40 and sell them with a multi-tiered pricing model similar to Aravind’s for up to $200, about $1,300 less than the current market rate. He is putting this strategy to work by:

• hiring the former head of R&D at the largest hearing aid company;
• finding high quality generic hearing aid chips on the market and adapting them for particular hearing aid designs;
• manufacturing at Aurolab in India, where overhead and labor costs are low;
• and negotiating discounts with component manufacturers equivalent to those normally offered on purchases of 500,000 units or more

In effect, Green is developing a business model for ethical globalization. It offers affordable pricing, local ownership of distribution and sales, and the training required to establish a multi-tiered pricing scheme, test patients for hearing loss and provide treatment, fitting, installation and maintenance of hearing aids. It is a model that not only offers hearing to the world, but also builds the capacity of many locales for developing sustaining enterprises.

Creating a Local Energy Industry

Anil Chitrakar has made an art of creating opportunities out of pressing social needs. A tireless social entrepreneur, he is helping to develop enterprises in his native Nepal that build the nation’s capacity for sustainable, self-sufficient economic growth.

In the 1990s, for example, Chitrakar and four other Nepalis led an effort to redirect into local initiatives a $1 billion World Bank loan targeted for a huge dam on the Arun Koshi River. For seven years they asked the World Bank a fundamental, often overlooked question: Is borrowing $1 billion and then paying it to contractors from the developed world to build a dam that generates only 200 MW of energy really meeting Nepal’s needs?

The answer, made obvious by Chitrakar and his colleagues, was a resounding “no.” Instead of building the dam, the World Bank loaned the money to Nepal to support an alternate approach that would build the country’s industrial capacity and a more locally based energy infrastructure.

Chitrakar’s approach was built on three basic principles:

• Invest in local capacity. Hiring Western firms to build a huge dam would take the place of smaller hydroelectric projects that Nepalese firms could build, bypassing and ultimately destroying Nepal’s existing industrial capacity.

• Maximize linkages to the local economy. Making borrowed funds work both backward and forward, the influx of capital builds existing local capacity to generate power and creates new capacity for economic growth. Small local firms build capacity as they grow.

• Use natural resources wisely. In a mountainous country with year-long runoff, energy needs can be effectively met with smaller, less invasive hydroelectric systems.

Following these principles, local- and government-owned firms, along with international companies, have built small and medium-sized projects throughout the country, which created twice the energy output of the originally planned dam for half the cost in half the time. The re-directed loan was also used to establish a power development fund for local companies. As Chitrakar has said, the world needs a bank, but we must be able to direct the bank’s capital to projects that truly meet a nation’s needs.

Doing What Only You Can Do

Dr. V, David Green and Anil Chitrakar are making a difference because each is doing what only he can do. On a visit to California to meet with other social entrepreneurs, Dr. V said he was not going to apply his business model to distributing hearing aids because that’s not what he does—restoring sight is what he does. David Green, on the other hand, does hearing aids and he’s decided to take up the challenge of providing hearing to the world. Anil Chitrakar, meanwhile, is showing nations rich and poor how to build sustainable enterprises—that’s his calling and his unique gift to the world.

Jerry Garcia, who has perhaps not been given the credit he deserves for giving sharp business advice, captured this confluence of calling, vision and leadership quite well when he reportedly said, “You don’t have to be the best of the best. Just do what only you can do.”

What do you do? There are literally millions of answers to that question. No single vision or leader can possibly build a truly sustaining world. It is going to take all of us.

It will take thousands of affordable hospitals, an idea taken up by Lions Aravind Institute of Community Ophthalmology, which is offering the Aravind model to other eyecare organizations throughout the world.

It will take institutions like the Grameen Bank, which extends loans to entrepreneurs too poor to qualify for traditional credit—$1 billion lent to 2.4 million borrowers, 95 percent of whom are women—and thereby offers an empowering catalyst for community economic development.

It will take groups like Associacion ANAI, an NGO helping Costa Ricans integrate people-centered conservation and development initiatives that strengthen local communities capacity to be economically self-reliant while preserving the biological wealth of their remarkable rain forests.

Ultimately, that is what we are all working for: commercial activity that is economically profitable, ecologically regenerative and socially empowering—a regenerative economy whose benefits are shared by all. And when we ask . . .

“What do I do?”

“How can my work make a better world?”

“How much can I give for all I get?”

. . . we can begin to become powerful catalysts for change and take the first small steps toward creating a world of fairness, hope and sustaining abundance.