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Changing the Face of Business by Doing Good

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By Jim Hatch & Fengli Mu

Critics have long looked at the impact of business on society and found it wanting. American economist Milton Friedman didn't help when he insisted in Capitalism and Freedom that "there is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

But what it means to be a responsible corporate citizen has clearly evolved since that book was published in the late 1960s. Indeed, as pointed out in a 2014 Ivey Business Journal feature, "improving society" was the most frequent answer in a Deloitte survey that asked millennials to name the primary purpose of business. So nobody should be surprised by the fact that the leaders of today's social enterprise movement include MBAs who are passionate about upgrading the face of business.

Take the case of serial Canadian entrepreneur Jason Inch. After pursuing Asian studies as an undergraduate, Inch studied business at Western University's Ivey Business School and the China Europe International Business School (CEIBS). In 1995, he founded a Japanese trading company. In 1997, he launched an Internet marketing venture. Other highlights on his resume include stints working as a consultant, as a project manager and as an executive coach. Inch wrote the 2012 book China's Economic Supertrends and co-wrote the 2008 book Supertrends of Future China. From his current base in Shanghai, he writes a newspaper column about business. He blogs about business. He teaches business.

Inch clearly loves capitalist pursuits. Nevertheless, he likes "doing business by doing good." One of his most interesting ventures, for example, is a real estate play in Shanghai that isn't about making anybody rich. Instead, it exists to help China manage urban density while also empowering people to "work, meet, socialize, create, exercise, eat, drink and live multi-faceted lives" all in one place, and do so in healthy, environmentally-friendly and socially responsible ways.

Known as LOHAUS (Loft and a Lifestyle of Heath and Urban Sustainability), the venture's raison d'être is a mash up of the LOHAS (Lifestyles of Health and Sustainability) movement and the philosophy behind German architect Walter Gropius' Bauhaus School, which focused on the integration of architecture with art, practical use and accessibility.

LOHAUS generates cash flow renting flexible co-working and meeting space in a comfortable five-level building designed to promote community and sustainability. Clients can book a desk, office, meeting venue or training room for long periods or just an hour. The firm provides free space for community events such as art shows. Start-ups in the social enterprise space can apply for free space until they get on their feet. Other clients, ranging from the self-employed to corporate customers, happily pay market rates because LOHAUS provides sustainable services in a healthy and welcoming environment (something that can't be said about all conference facilities).

At LOHAUS, air is purified and worm farms turn raw waste into fertilizer for the building's many plants. Recycling is an art. Stairs are well used because elevators don't exist, saving both electricity and space. Catering isn't exclusively vegetarian, but fast food is banned and supplies are obtained from local small businesses. To help out on the environmental front, the building uses LED lighting and generates power using solar panels. It is also well insulated (which alone makes it unique in Shanghai). As noted by the Creation Catalogue website, the "intention is to prove how easy, small adjustments to our living and working spaces, such as insulation, triple-pane windows, solar panels, aquaponics and LED lightbulbs, can save energy and a make a greater impact on the world."

Inch financed LOHAUS by finding like-minded investors, who understand they will not receive equity like returns. That wasn't easy. Convincing Chinese regulators to approve his business concept was also a challenge. Promoting and scaling the business will require more hard work. But Inch is willing to work hard to make a difference. And he will soon be joined in the market by other socially-minded business grads, many of whom are now studying social enterprise business models as part of their education.

As part of a social enterprise course at Ivey, for example, HBA students recently lent their business expertise to a group of start-up social ventures, ranging from a Kenya-based coffee producer to a youth drop-in centre that sells youth-produced artwork. Working in teams, the students met with the social entrepreneurs to learn about challenges they faced and then made recommendations on how best to overcome them. "I think it's very inspiring that you can start a social enterprise if you have the passion and will to do so and it can be very successful," said HBA student Jasmine Kassam in an article on the Ivey program. "I've been very passionate about volunteering and the social aspect of businesses so this was the perfect course. It combines business knowledge with my passion to give back to the community."

As noted in a Guardian article on the growing hostility faced by many NGOs, the emerging social enterprise sector has the potential to do far more than traditional forms of development ever could. Time will tell. Nevertheless, anyone who still believes Milton Friedman's version of capitalism rules the market should think again.

Jim Hatch is a Professor of Finance at Western University's Ivey Business School in London, Ont., who recently completed a study of the Chinese use of the case method in business education with Fengli Mu. A book on this topic will be published by Peking University Publishing House in 2015. Hatch and Mu are currently conducting research aimed at understanding the skill and knowledge gaps of Chinese managers. Jim can be reached at jhatch@ivey.uwo.ca.

Fengli Mu is a Professor of Human Resources at the Chinese University of Politics Science and Law in Beijing and a former visiting scholar at Western University's Ivey Business School. In addition to her academic work, she consults on a wide range of projects for Chinese companies.