Simon Nielsen 2/2/22 Simon Nielsen 2/2/22

Rhode Island Innovates 2.0

Rhode Island has achieved one of the biggest drops in unemployment rates in the U.S. More than 20 new policies and programs aligned to support this growth. Despite substantial progress, a new round of policy and practice innovation is needed to continue the trajectory. Urban scholars Luise Noring and Bruce Katz recommend three main areas of focus, with 17 tangible and feasible suggestions for change.

Rhode Island has achieved one of the biggest drops in unemployment rates in the U.S.—from
11.2% in 2010 to 3.5% today. More than 20 new policies and programs aligned to support this growth, encompassing tax and regulatory reform, workforce development and talent attraction, quality of place, innovation and R&D, and supplier and industry cluster networks.
Despite substantial progress, a new round of policy and practice innovation is needed to
continue the trajectory—both doubling down on programs that are succeeding and responding to new threats and embracing new opportunities. Urban scholars Luise Noring and Bruce Katz recommend three main areas of focus, with 17 tangible and feasible suggestions for change.

By Luise Noring, assistant professor at Copenhagen Business School, and Bruce Katz, founding director of the Nowak Metro Finance Lab at Drexel University

After a decade adrift, Rhode Island’s faltering economy is on the mend and expanding anew. Following the Great Recession, Rhode Island’s economic recovery lagged behind the rest of New England, but recent progress indicates that the state’s economy has passed an inflection
point. The Rhode Island economy is growing, unemployment levels are at historical lows, average productivity has reversed its decline although it remains below the 2010 level, and advanced industry sectors are expanding with positive, reverberating effects for small businesses across the state.

Rhode Island’s nascent comeback is creating visible signs in the state—along the Providence River at the new Innovation & Design District, at Innovate Newport’s new co-working space, at Electric Boat’s new submarine production facility in the Quonset Industrial Park, in the Offshore Wind Farm near Block Island, and at the new Fascitelli Center for Advanced Engineering at the University of Rhode Island. As important, but less visible, are the thousands of Rhode Islanders who now hold quality jobs with decent wages due to customized training and the scores of companies that have expanded their businesses due to strategic investment and support. The turnaround of the Rhode Island economy is, however, still in its early stages. The creation of a solid platform for long-term prosperity is a decade-long project at a minimum, which needs sustained focus and integrated action across all sectors, including but not limited to the state government. The Rhode Islanders we have engaged with urged us to recommend maintaining (if not expanding) the programs
to continue building upon the progress that was initiated only a few years ago. Declaring victory and “turning the page” too quickly would only limit the potential future growth from the groundwork that has been laid.

Rhode Islanders also implored us to focus on challenges that have become more pressing and apparent since 2016: in particular, the economic restructuring that is forcing many Rhode Islanders to work for wages that are insufficient to make ends meet and the rapid pace
of technological innovation (e.g., automation, artificial intelligence), which already threatens the future of work in particular industries. At the same time, there are new opportunities to be seized, starting with the dramatic demographic transition that has put the state on
the trajectory to be a majority minority state along with the rest of the country. These challenges and opportunities cut across advanced and non-advanced sectors and companies, requiring either new or revised policy responses.

Rhode Islanders finally advised us not to ignore traditional, mostly self-inflicted, challenges—the low quality of schools (in certain communities) and infrastructure (more broadly), an inadequate supply of quality and affordable housing options, the fragmentation of municipalities, the sense of opacity and cost of doing business—which have taken on new importance and urgency in the state. They also recommended that we connect the dots between economic prosperity and disparate parts of the state’s agenda (e.g., climate resiliency, reducing health disparities, and increasing quality of place) which are inextricably linked. Economic development is not an act that can occur in isolation, even when specific supports for businesses, workers, and places are well designed and delivered.

In the end, Rhode Island is a small state in a highly competitive region, nation, and world. Its size could be a strength in a fast-moving and rapidly changing world, allowing the state and its sectors, large companies, small businesses, and anchor institutions to move into closer alignment faster than would be possible for larger communities. But being small requires the state to be agile and nimble to leverage distinctive strengths and connect related assets (e.g., the procurement needs of large employers and the demand needs of small businesses) in deeper and more sustained ways. It also requires the state to focus and target its allocation
of scarce resources.

In summary, the state has shown its ability to design, finance, and deliver a series of meaningful projects that support businesses, workers, and communities. It now needs to move from individual transactions to structural transformation and to grow the distinctive
assets and capacities of this special place into a productive, sustainable, and inclusive economy. That will require a shared vision among multiple stakeholders and a collaborative, cross-sector approach to shaping and stewarding the economy.

Read full report

Simon Nielsen 1/23/22 Simon Nielsen 1/23/22

Strengthening Government And Community Through Genuine Partnerships

Local governments everywhere tend to think of their jurisdictions as places and people
with needs. They seek to address these needs by relying on tax revenues and bureaucratic
expertise. Such a top-down approach may be appropriate at times, but it is certainly not
sufficient. If government treats people as nothing more than customers, they think of
themselves as taxpayers rather than citizens.

Moreover, government and its partner agencies can’t address all of the needs on their
own. Needs are growing more rapidly than government resources. And, increasingly
complex social and environmental issues can’t be resolved by agencies in the absence of
community even if they have unlimited resources.

Some local governments are beginning to recognize that their communities have
untapped resources as well as unmet needs. They are empowering and partnering with
their communities through programs such as bottom-up planning, neighborhood matching
funds, and participatory budgeting. Consequently, people are starting to identify as
citizens and see the government as an extension of themselves. Not only are many more
resources available to address local needs, but the solutions tend to be more creative,
holistic and appropriate.

By Jim Diers, community activator

Steps to Effective Partnerships

Building true partnerships between government and community isn’t easy. Before they
can empower the community, agencies must first cease the harm that they inflict on
community and begin removing their own obstacles to engagement. Three major steps
need to be climbed in order to get to effective partnerships:

1. Do No Harm
Ironically, in their sincere effort to help the community, government and other institutions often do it a disservice. They impose their own agenda which distracts the community from its priorities. They don’t sufficiently value the time and contributions of the citizens who do get involved so that they are less likely to participate in the future. Most egregiously, institutions tend to violate the Iron Rule of community organizing: “Never do for people what they can do for themselves.” Agency leaders often speak for the community. They provide services that were formerly the community’s responsibility. They foster dependence by funding community leaders.

I’m not necessarily arguing for fewer or smaller institutions. There clearly are needs in communities that are best served by government and other agencies. And, most agencies
don’t have enough resources as it is to adequately address those needs. Institutions should focus on what they are uniquely capable of and allow communities to do what they do best.

2. Remove Obstacles

It is extremely difficult for the community to partner with institutions as they are currently constituted, because institutions aren’t accessible. Government offices are typically located far from where many people live and open during the same hours when most people work. Specialized language and bureaucratic procedures make it challenging for people to participate. Community volunteers can’t possibly be involved in the totality of their neighborhood, because every aspect of the neighborhood (e.g. public safety, parks and recreation, public health, housing, economic development, transportation, arts and culture, youth, seniors, etc.) is associated with a different agency, each with its own staff, meetings, plans and programs.

Government tends to be both too centralized and too segmented to relate to communities.
Top-down decision-making doesn’t accommodate the community’s voice and cookie cutter programs and regulations don’t respect unique neighborhood design or community culture. Professional experts often discount the wisdom of communities, and they work in silos that make it difficult for them to share the community’s more holistic perspective.

Perhaps the greatest obstacle is bureaucratic red tape. Rather than working through legitimate issues such as safety, liability, maintenance and labor agreements, too often these obstacles become a convenient excuse for government to say no to community initiatives.

3. Build Capacity

When agencies start to make room for community and to remove obstacles to partnership,
the next step is to assist community in rebuilding its capacity. Agencies must be careful
to do so in ways that empower the community and don’t lead to further dependence. Appropriate capacity-building roles for agencies include leadership development, assistance with outreach and networking, and programs such as those described below that encourage the community to identify and utilize its own assets.

Hallmarks of Effective Partnerships

There are three hallmarks of effective government-community partnerships. When they
are in place, they allow government to do what my former colleague, Henry Moore,
described as “leading by stepping back.”

1. Neighborhood/Community Focused

Effective partnerships are locally based rather then centralized. They are focused on whole neighborhoods or communities rather than on separate functions. Consequently, the community can easily participate and the resulting actions are both integrated and culturally appropriate. Following are some tools that have been used to help government move in this direction:

• Seattle, Sydney and many other cities have established little city halls in neighborhood business districts, shopping centers, libraries or other decentralized locations. Not only do these facilities enable citizens to access a wide range of city information and services in one convenient location, but the coordinator for each little city hall also serves as an overt double agent, helping both government and the community to accomplish their goals by working
together.

• Many cities have established interdepartmental teams with a neighborhood focus. The City of Toronto, for example, has organized 13 Neighborhood Action Teams “to support integrated City service planning and delivery from a neighborhood perspective.”

2. Strength-Based

Effective partnerships begin by focusing on a neighborhood/community’s strengths rather
than its needs. These underutilized resources include the gifts of every individual, voluntary associations, the built and natural environment, economy, and culture.

• Seattle developed the Neighborhood Matching Fund as a powerful incentive for communities to mobilize their strengths. The City provides cash for community-initiated projects when matched by an equal community contribution of cash, volunteer labor, and/or donated goods and services. Over the past 25 years, the City’s $60 million investment has leveraged $85 million worth of community resources, more than 5000 projects have been completed, and tens of thousands of citizens have worked together to make these projects possible. The program has since been replicated by towns and cities throughout the world.

• Involving All Neighbors is a Seattle Department of Neighborhoods program that involves persons with developmental disabilities in community life by focusing on their gifts and connecting them to existing community initiatives.

3. Community-Driven

Finally, and most importantly, effective partnerships should be led by those who will live with the outcomes – the community. It is not enough to decentralize services or to mobilize underutilized resources. The community must have a voice in deciding how those resources can best be used.

• In the late 1990s, Seattle gave communities the power to create their own neighborhood plans. The community could define the scope of work and use city funds to hire a planner who was accountable to them. In return, the city insisted that all stakeholders be involved in the effort, that outreach be targeted at labeled groups, and that the entire community be given the opportunity to vote on the final plan. The 38 neighborhood planning efforts involved 30,000 people and resulted in over 5000 recommendations. Broad-based community ownership of the plans meant that the city was held accountable for implementation. Equally important, the community took responsibility for those recommendations that it could best implement.

• Following amalgamation in rural Golden Plains, Australia, farmers were picketing Town Hall to protest inadequate services. Local officials had very few resources, so they turned to the only untapped resource they could find – their community members. In 2000, they involved one quarter of the municipality’s 16,000 residents in the creation of 23 community plans. The plans resulted in the identification of 120 priorities; 600 citizens volunteered to manage the implementation of these recommendations. Thanks to broad ownership, the
community and government together found ways to implement 96% of the plans’ priorities. The Golden Plains Council subsequently received the highest citizen satisfaction rating of any local government in the State of Victoria.

• Other cities give communities a strong voice in developing the government’s budget. In St. Paul, Minnesota, neighborhood representatives draft the city’s capital budget. The city budget of Puerto Allegro, Brazil is based on widespread neighborhood-level discussions.
Of course, the community’s voice must be broad-based. Too often, self-appointed leaders, whose mouths are bigger than their constituencies, claim to speak for the community. Government has a role in insisting that the associations with which it partners be democratic and inclusive. Government should also provide associations with the training, technical assistance, and other support they need in order to adequately represent the community.

• In Taiwan, the federal government supports Community Empowerment Centers throughout the country and a Young Community Planners Program that provides
in-depth training for aspiring activists.

• In the United Kingdom, the coalition government is training 5000 community
organizers.

It’s amazing what is possible when government takes as much interest in its democratic
infrastructure as it does in its streets, parks, and regulations.

Simon Nielsen 1/21/22 Simon Nielsen 1/21/22

La Comunal

The architectural collective of Lacol examines the power of community. The collective’s new office is siuated on top of La Comunal, a project designed by Lacol in Barcelona’s neighbourhood of Sants. Underneath the offices lies La Ciutat Invisible (The Invisible City), a bookshop and cultural project exploring new ideas of working and living in communities and in resistance to the capitalist system. La Comunal came to life as an examination of buildings from the early 20th century used for the manufacture of sailing textiles. Today, the project stands as a vision of a future based on social cohesion and human bonds.

By Lacol, a cooperative of architects

*Photo: Baku Akazawa/info@bakuakazawa.com*

1 IMPLEMENTATION STRATEGY

La Comunal occupies half of the block between the streets of En Blanco, Tenor Masini and Riera d’Escuder. It is a cataloged building by the town hall, and urbanistically it is misaligned with the urban fabric of the place. In 1926, it was three years before Barcelona received the 1929 Universal Exposition. That same year, line 1 of the metro was inaugurated. These are the years leading up to an important time for a city in its way to be infrastructured. This is the context in which La Comunal was built, first to be a warehouse and later, a textile industry.

1 SUBTRACTION AND RECOVERY OF ORIGINAL GEOMETRY

The volumetry prior to the work had blurred the original shape. What is now a courtyard, walkways and accesses was a fully built and enclosed ground floor. The first phase of the intervention was to recover the initial geometry.

2 MITGERA EQUIPADA

The party walls of the neighboring building become a façade when the common spaces are built at its end shaping the patio.

3 REHABILITATIONT OF SPACES

The warehouses, except for the restaurant and the concert hall, receive a minimum treatment where the priority is to consolidate the whole structurally and to make flexible the possible ways of occupying them with modular and adaptable facilities. On the outside, it has been important to study the original composition of the façades to intervene respectfully.

4 PATIO AND CIRCULATIONS

The new work gives up an optimal floor plan to achieve a courtyard and circulations that follow the original alignment of the complex. The courtyard, with the multipurpose room that forms a unit, is understood as the stage of a theater where the walkways, which act as balconies, surround it.

2 USE PROGRAM

La Comunal has always been a place of labor, before manufacturing and storage and now services, it has never ceased to be a professional facility in its 95-year history.

USES

The uses for which the original buildings were designed were housing, shop and warehouse and the uses for those who have been rehabilitated are store, offices, concert hall, restaurant and common areas. The flexibility afforded by such a clear separation of the spaces served by the servers has been key to accommodating a greater number of uses. The creation of a third strip of server spaces that arises from the north corner organizes the courtyard, the new building and makes the circulations follow a rhythm with server spaces between spaces served.

3 HERITAGE STRATEGY

It is a small size factory of which very few remain standing. We extend its life cycle and reconvert the manufacturing industry into cooperative culture linked to the neighborhood.

VOLUMETRY
It is necessary to respect the original shape of the warehouses in the same way that it is necessary to apply an energy criterion to the heritage. The result of this debate has been the greenhouses located on the interstitial spaces where the accesses and the server spaces are located. While blurring the outline achieve emphasize the sequence of three parts separated them using bioclimatic elements.

Emptying the courtyard is another fact that allows us to recover and recognize what the warehouse were like in the past. In addition to allowing ventilation and good light conditions of all the spaces that surround it, it provides an element of centrality and versatility where we can meet and where everything that is beyond work can happen.

ACCES

The main façades remind us that the principal street, still in the 1920s, was En Blanco street. Today, motorized transport has made the animal disappear and the slopes of the streets are no longer a problem, so the main access is through Sants street. However, the urban fabric has changed and the buildings, out of alignment, cause widening of the street marking the accesses to the complex.

FACADES

Composed as an eclectic ornament in times of political darkness, we have found facades with two superimposed stuccoes from 1926, the first and the 1940s, the second. Advised by restoration specialists, we have chosen to recover the first style, with a palette of colors and shapes closer to modernism. This process is called facade impoverishment.

ROOFS

After removing the fiber cement pieces with asbestos and with the intention of obtaining a light roof, we placed corrugated galvanized steel sheet and thus differentiate those materials added in the project from the existing ones. On the other hand and with the desire to reuse those materials that were in good condition, we have been able to reuse more than 1,200 linear meters of the beams that supported the ceiling in order to grow the 15 cm of insulation on the decking cover.

4 CLIMATE, ECOLOGICAL AND URBAN PLANNING STRATEGY

We have divided the sustainability strategy of the project into different axis related to material and climatic issues directly affecting energy demands and consumption.

AIR

Greenhouses and the reduction of heated square meters have been the lines of action that have structured this axis.

Renewal air is pre-treated in greenhouses before entering offices, preheating it in the winter and cooling it in the summer.

The server spaces have been left outside the heated enclosures. Circulations, office, toilets and accesses do not receive thermal comfort treatment and in some cases there is not even protection from the rain.

Building less in all those places considered transitory has been the result of a debate that sought to minimize impacts at all levels.

WATER (blue and green)

Given the dichotomy of using drinking water for irrigation or cleaning of spaces, the use of rainwater seemed the best option to address this second axis. Under the courtyard we will find a tank of 5,000 liters of water that is filled with water collected from the roofs of the building. In a second phase, the new building and the courtyard will receive a greening process with climbing vegetation and automatic irrigation systems connected to the tank.

MATERIALS (grey)

Materially, the intervention of the warehouses has focused, above all, on their structural consolidation and on the improvement of their energy and bioclimatic behavior. The possibility of insulating the walls on the outside, avoiding thermal bridges and achieving the highest thermal inertia on the inside has been possible thanks to lime and cork mortars. The beams that supported the reed ceiling have been reused as rakes with which to grow 15 cm where the roof insulation is placed. Floors and other elements in contact with the ground have been insulated with rigid foams from the sandwich panel industry.

URBANISM

Advised by the team of sustainability consultants and with the climate shelters (green, blue and gray) as references, the courtyard of La Comunal, after the second phase of greening, will become a safe space in terms of urban planning and climate change. Proper disposal of the lights, humid shade when it is hot, security, accessibility and human attention are some of the characteristics with which the space has been designed.

Simon Nielsen 1/20/22 Simon Nielsen 1/20/22

La Borda - Communal Living For The 21st Century

Lacol worked closely with the future residents of La Borda in Barcelona. The community’s 28 residential units were completed in October 2018 after a participatory process. La Borda sits on the edge of Can Batlló, a former industrial zone. The first discussions of La Borda emerged in 2012 as residents and activists began discussing Barcelona’s housing crisis and sought for novel ways of living communally. Here’s an architectural blueprint of the project.

By Lacol, a cooperative of architects

La Borda housing cooperative is a development self-organized by its users to access decent, non-speculative housing that places its use value in the center, through a collective structure. The idea of a housing cooperative was born in 2012 as a project of Can Batlló driven by the community in the process of recovery of the industrial premises, and the neighborhood and cooperative fabric of the Sants neighborhood of Barcelona.

The project is located on a public land of social housing, with a leasehold of 75 years. Located in Constitució Street, in a bordering position of the industrial area of Can Batlló with a facade to the existing neighborhood of La Bordeta.

There are three fundamental and cross-sectional principles of the project,

(1) redefine the collective housing program

The building program proposes 28 units (40, 60 and 75m²) and community spaces that allow stretching the fact of living, from the private space to the public space to enhance the community life. These spaces are: kitchen-dining room, laundry, multipurpose space, space for guests, health and care space, storage in each plant, and exterior and semi-exterior spaces such as the patio and roofs. All of them articulated around a central courtyard, a large relationship space reminiscent of the "corralas", a typology of popular housing in central and southern parts of Spain.

(2) sustainability and environmental quality

The objective is to build with the lowest environmental impact possible, both in the construction work and during its life and, above all, achieve comfort in homes with minimum consumption, to reduce the overall costs of access to housing and eliminate the possibility of energy poverty among users. We started from the conviction that the best strategy is to reduce the initial demand of all the environmental vectors of the building (energy, water, materials and waste), especially at the energy level, where we prioritized passive strategies to achieve maximum use of existing resources.

(3) user participation

Self-promotion and subsequent collective management implies that the participation of future users in the process (design, construction and use) is the most important and differential variable of the project, generating an opportunity to meet and project with them and their specific needs.

Visit the project page

*Photo: Institut Municipal de l’Habitatge i Rehabilitació de Barcelona*

Simon Nielsen 1/15/22 Simon Nielsen 1/15/22

Financing The Inclusive City: A Case Study Of The Danish Model Of Affordable and Social Housing

As affordable and social housing rarely yield high returns, the task of providing it falls on municipalities; however, these are often strained for public finances and face a multitude of conflicting investment demands. The question is then: How can cities provide affordable and social housing with a shortage of fiscal resources and a multitude of conflicting political demands?

Normally, the task of providing affordable and social housing falls to local governments and their administrations. Municipalities must single-handedly work out how to deliver and finance affordable and social housing in a city context that is often dominated by a free market paradigm. However, cities operating in free market economies often prioritise attracting talent and investment, which often contradicts efforts to provide affordable and social housing, as the capital gains achievable from these are diminutive in comparison with the gains from other, more profitable development and infrastructure investments. The logic follows that private capital always chooses the investments with the highest returns. As affordable and social housing rarely yield high returns, the task of providing it falls on municipalities; however, these are often strained for public finances and face a multitude of conflicting investment demands. The question is then: How can cities provide affordable and social housing with a shortage of fiscal resources and a multitude of conflicting political demands?

By Luise Noring, assistant professor at Copenhagen Business School

In an era of increasing economic inequality and decreasing economic mobility, housing segregation can make bad conditions worse. We know that housing segregation impedes economic mobility and thereby reinforces economic inequality. In addition, by not providing affordable housing in cities, effective medium and lower wages decrease, as medium- and low-paid employees (e.g., nurses, teachers, policemen) spend added costs and time commuting to and from work, for which they are not compensated in monetary terms.

If we want to successfully tackle social inclusion in cities, we have to rethink the political and economic infrastructures tying our cities together. By providing the basis for a diverse city, economic growth in the city is enhanced, as the economy thrives with access to employees with multiple skill sets and salary ranges. We must rethink the institutions tasked with delivering and financing affordable and social housing. In an attempt to find new and better institutional and finance models, this report explores the Danish model of affordable and social housing.

Three components characterise the Danish model of affordable and social housing:

• Non-Profit. This characteristic provides the basis of a model that is cost-efficient and where all cost savings are translated into reductions in rental prices. In this way, profits are not withdrawn to serve the owners; rather, profits are translated into price reductions for a population segment that is highly price sensitive. As an added benefit, this set-up provides the tenants with a sense of ownership, as all tenants contribute to and harvest the benefits of cost-efficiency. As follows, the model encourages the tenants to cherish their property – both through their sense of ownership and through the direct link between costs and savings.

• Self-Governance and Self-Organisation. In light of the current intense debate about citizenship and citizens’ empowerment, presenting a model based on self-governance and self-organisation is powerful. The concept of a “housing democracy” underpins this model, where self-governance and self-organisation guide every housing estate and cooperative. In this scenario, the tenants elect leaders for individual estates and for the cooperative as a whole. They help make important decisions on behalf of all the tenants. Housing democracy works as a conduit for tenants into the housing cooperative management and board of directors, who help manage the accumulated wealth of the cooperatives.

• Tenant Self-Financing. Built into this financial model is the accumulation of collective savings. Savings are accumulated within each affordable and social housing estate, cooperative, and across the industry, with all savings paid into private non-profit cooperatives by the tenants. This provides the basis for self-financing of the entire industry. In addition, it also creates a strong sense of solidarity, which means every tenant’s contributions go towards collective building renovations, energy infrastructure, green recreational areas, cycling and walking pathways, and social activities.

In short, this model can be used by any city wanting to empower citizens and give the city back to the citizens. This report presents a new model for urban development that is free of fiscal constraints, political demands, and prioritisations. As a self-governing and self-financing model, it generates almost all of the necessary funds and offers ample opportunities for citizen-driven, citizen-empowered urban development.

Read the full report

Simon Nielsen 1/5/22 Simon Nielsen 1/5/22

Partnerships For Improved Sustainability: A Case Study Method Applied To Partnerships In The Transport Industry

Across the world, governments are grappling with climate change and crafting solutions that aim to reduce carbon emissions and advance sustainable growth. In this report, urban scholars Luise Noring and Julie Jo Nygaard seek to understand how multiple public, private and civic stakeholders collaborate to deliver large-scale transformative projects in sustainable transport.

Across the world, governments are grappling with climate change and crafting solutions that aim to reduce carbon emissions and advance sustainable growth. In this report urban scholars, Luise Noring and Julie Jo Nygaard, seek to understand how multiple public, private and civic stakeholders collaborate to deliver large-scale transformative projects in sustainable transport.

By Luise Noring, assistant professor at Copenhagen Business School, and Julie Jo Nygaard,

*Photo: Hugues de Buyer-Mimeure/Unsplash*

National governments are the signatories to international agreements such as the Sustainable Development Goals (SDGs), New Urban Agenda and Paris Agreement. Successful implementation of these agendas will depend on the successful delivery of infrastructure projects across multiple sectors, such as buildings, energy, transport and waste. However, national governments cannot single-handedly implement such projects at the necessary pace and scale. The realisation of global goals will therefore depend on a constellation of different actors including governments, businesses and civil society.

Across the world, governments are grappling with climate change and crafting solutions that aim to reduce carbon emissions and advance sustainable growth. This report seeks to understand how multiple public, private and civic stakeholders collaborate to deliver large-scale transformative projects in sustainable transport.

Local governments control less than 20% of their carbon emission-producing assets.1 Thus, if cities want to achieve their sustainability goals, they have to look towards other public, private and civic actors for support. This report finds that by engaging in collaboration across sectors, we are able to implement novel initiatives that improve efficiency, competitiveness and help reduce CO2 emissions as well as water, air and soil pollution. The success of these initiatives depends largely on the success of these collaborative relationships. This reports investigates how initiatives for improved sustainability within the transport industry are delivered through various types of collaborative relationships.

We have selected a small group of case study sites: Site 1: Hamburg (Germany), Site 2: Örebro (Sweden), Site 3: Greater Copenhagen Region (Denmark), and Site 4: Region Skåne (Sweden) that we believe are first-movers in their regions for sustainable transport. We have identified a series of projects and collaborative relationships that each positively impacted sustainable transport. Thus, we have investigated the different stakeholders engaged in collaborations for improved sustainability in the transport industry. Such an inquiry provides, for the first time, an understanding of how stakeholders interact on project delivery for improved sustainability in the transport industry.

Sub-national agencies hold important powers over land use planning and waste management, and (to varying extents) buildings and transport systems. Many city governments have accordingly established ambitious environmental targets and programmes, learning from and working with other city governments and other stakeholders in the city to do so.

However, the scope for municipal authorities to directly pursue sustainability agendas is debatable. First, a substantial proportion of the environmental impacts attributable to cities are actually generated outside city boundaries from, for instance, leaching from landfills and emissions from power stations and the transport industry. Second, many local governments lack the legal authority, resources or capacity to address key drivers of environmental degradation. For example, few have the capacity to regulate energy supply, finance private transport or set building codes.

These barriers to local action have inspired widespread attention to the national governance of sustainability. National frameworks influence the powers and competencies of sub-national governments, thereby structuring the opportunities for environmental action. A narrow focus on governments therefore conceals the fact that central governments need to create policies, regulation and legislation that clearly articulate the rights and responsibilities of sub-national governments and then provide the information, resources and lessons to enable the transition to more sustainable development across wider societies and multiple public, private and civic actors. The interrelationships between these different actors is significant.

Participation and partnerships can unlock complementary capabilities to enable the planning and delivery of more complex projects and enhance the uptake and lifespan of those projects. These modi operandi can create avenues for information sharing, capacity building and empowerment. However, they can also create tensions where ways of working are not compatible and incentives are not aligned.

To achieve the SDGs, New Urban Agenda and Paris Agreement, public agencies must find ways to direct and coordinate diverse actors and initiatives. Understanding these local modi operandi is a precondition for advancing sustainability goals. By understanding existing network and actor structures, it is possible to identify who needs to be influenced or incentivised to drive change. By understanding existing capabilities, it is possible to identify capacity deficits that constrain action or collaborations that could enable it.

This research shows that there are enormous differences in the choice of the projects, partners and type of collaboration across the case sites. We believe that these findings should spark harder thinking about how we actually organise ourselves, individually and collectively, to deliver sustainability projects.

Read full report

Simon Nielsen 11/23/21 Simon Nielsen 11/23/21

A Case For Bringing Creatives To The Governance Table

“We need to look again at the roads on which we had been travelling and ask if they are the right ones. One aspect of this might be looking at the role of boards to govern businesses. While we rightly talk about addressing imbalances when it comes to age, ethnicity and gender, what might happen if we also focused on divergent thinking that comes from having creatives involved?” Lawyer and podcaster Steven Moe explores the ways that creativity can play a new role in the stewardship of businesses.

By Steven Moe

The Covid-19 crisis has shown us that we need new paradigms of thinking. We have all been impacted by the pandemic which has challenged us to think and act more creatively than ever before. Businesses need blue skies thinkers and creatives might help find new solutions.

We need to look again at the roads on which we had been travelling and ask if they are the right ones. One aspect of this might be looking at the role of boards to govern businesses. While we rightly talk about addressing imbalances when it comes to age, ethnicity and gender, what might happen if we also focused on divergent thinking that comes from having creatives involved?

In our 30-page report, “Tomorrow’s Board Diversity: The role of creatives,” we consider the unique skills that creatives might bring to governance tables. Would boardroom discussions be enhanced and activated if they had the added perspective of film producers, designers, artists, poets and curators? We think so.

But what do we actually mean by the term “creative”? Well, as an adjective it refers to “having the ability or power to create… characterised by originality of thought or inventiveness; tending to stimulate the imagination or invention”. As a noun it is “having or showing an ability to make new things or think of new ideas”. Those sound like valuable attributes to include in any boardroom. We use the word to emphasise that these individuals are characterised by bringing an originality of thought and inventiveness. As social-entrepreneur Jacob Lennheden said: “Creativity can play a vital role in enhancing all aspects of business performance and is in many ways considered the raw material of innovation.”

And for the purpose of the paper, we acknowledge that “creatives” most often have their foundations in the arts. This could be from the visual, performing and literary arts – and are guided and driven by an originality of thought. As the writer Jeff Goins explains: “The truth is that we need more creatives in positions of influence – to colour the world with beauty and life. Creatives craft poetry in a world that is otherwise content with prose. They bring art to areas where there is only architecture. Creatives help us see life in a new light – to perceive a new dimension, a deeper way of encountering what we know. And we need more of those kinds of leaders.”

In preparing this paper we were surprised at how little has been written on this point. There was a lot on other forms of diversity, but not on creatives. We think Aotearoa has the chance to lead the way here. Certainly we know there is a need for greater diversity of thought at board level, and creative arts are both acknowledged and valued. Let’s join the dots and connect up these points.

Already our paper has been well-received, with Kirsten Patterson, chief executive of the New Zealand Institute of Directors saying it “brings to light a topic which is often neglected: the role that creatives can play on boards. In our experience, directors who have a range of diverse and creative talent, capabilities and knowledge bring different perspectives to decision-making, planning and board culture – that will likely enhance an organisation’s performance, as well as better represent the stakeholders.”

In the end we conclude that one of the key elements is not just having creatives at the table: it’s also about developing an environment that invites and welcomes diverse perspectives. So as well as board composition it is also all about board culture. Some of our conclusions argue that boards should begin to review and discuss their composition, rebalancing the accountants, lawyers and business minds with those who can bring a different type of thinking to the table.

We should all seek to raise awareness about diversity of thought and the role creatives can bring, identify pathways for creatives to join boards and provide training when they do. If this can be done it will help our businesses to be more ready to face the challenges that are coming up as the true impact of Covid-19 starts to play out.

Published in Spinoff on June 22, 2020.

Simon Nielsen 11/16/21 Simon Nielsen 11/16/21

Structuring For Impact

“The world is changing. Businesses that exist for profit and purpose are now commonplace. Social enterprises prioritise people and the environment, ensuring they are looked after through business – rather than as collateral of profit-making.” The authors examine the potential for unlocking innovation and entrepreneurship while creating greater wellbeing.

By Steven Moe, Dr Jane Horan, Amber Hosking, Jackson Rowland, and Phillippa Wilkie

The Introduction

Social enterprise is about prioritising impact as well as profit. While New Zealand has legal structures which enable organisations who prioritise one or the other (i.e. charity or traditional business), Social enterprise does not fit neatly within these models, and often has only a passing resemblance to them. Instead, social enterprises operate with a different logic. The social entrepreneurs behind social enterprise pursue a different set of values from traditional business, with profit being only one factor in the mix, and often only as a means to achieving more impact. Based on the growth and contributions of social enterprise to New Zealand to date, it is clear that organisations who prioritise more than profit have significant potential to positively grow New Zealand’s economy in a broad sense, solving significant societal challenges along the way. Because of this, New Zealand needs a legal and policy environment that enables and encourages businesses that are trading for impact.

For the most part, however, operating a social enterprise in this country is more challenging than running a purely profit driven business. This report finds that the legal structures currently available in New Zealand are acting as barriers for, and disadvantage to, social enterprises. The array of issues and challenges social enterprises face using limited liabilitycompany structures, or any other legal structure in New Zealand, stems from the reality that these structures developed from a perspective that ‘doing good’ is separate from ‘doing business’. The distinction between doing good as charity on the one hand and doing business on the other is cemented in the prevailing attitudes of what charity as a way of doing good is allowed to be, and what doing business is required to be. This context makes doing business with impact far more difficult than standard for-profit business.

This report sets out evidence from social enterprises about the perceived challenges associated with the current legal structures and argues that evolving legal structures to remove some of those challenges will unlock the potential of business to generate social and environmental impact at scale that grows the wellbeing of New Zealand. Doing so would also support organisations underpinned by Te Ao Māori in a way that really honours Te Tiriti o Waitangi.

All but one of the social enterprises we spoke with in this research found that their legal structure created hurdles for their organisation. These hurdles appear to be most commonly centred around the enterprises’ inability to convey and protect their mission, and the consequential challenges that any workarounds to this create. Funding was the other key disadvantage, with many social enterprises finding accessing funding very difficult because of their structures, a hurdle which is having significant implications on the ability of these organisations, and their impact, to scale.

The world is changing. Businesses that exist for profit and purpose are now commonplace. Social enterprises prioritise people and the environment, ensuring they are looked after through business – rather than as collateral of profit-making.

The way social enterprises operate has the potential to generate significant value for New Zealand and to deliver the Government’s social and environmental outcomes, and embodies the ethos of the Living Standards Framework. By making minor amendments to the Companies Act 1993, this report argues that New Zealand has the capacity to create a world first model for business that enables organisations to trade for impact. And in doing so catalyse the extraordinary entrepreneurship that is happening in the social enterprise sector in New Zealand to unlock innovation that will create greater wellbeing for generations of New Zealanders to come.

From the Conclusion

If New Zealand really does want to be “on the right side of history” (Prime Minister Jacinda Ardern, Davos, Feb, 2019), evolving the legal structures in this country to help foster and support social enterprise is imperative. The social enterprise sector has the potential to lead the way for all businesses in this country to increase financial capital and to provide for the wellbeing of the people and the environment of New Zealand for generations to come.

The current array of legal structures available to social enterprises in New Zealand are not helping the sector thrive. At best, these structures are neutral for social enterprises, but for most social enterprises, the legal structures available create an array of barriers, or reflect broader structural forces that deny the different ways that social enterprises operate in the business space, despite that way being for the greater good of New Zealand.

In line with the Living Standards Framework being developed by Treasury and the Government as a whole, Michelle Sharp of Kilmarnock said, “the tools of business are critical to solving some of our most challenging social and environmental issues.”

This is about combining financial, social, cultural, and environmental capital in a way that is sustainable and viable. In a way that enables the entrepreneurial spirit that is so strong in New Zealand to combine with the efficiencies of business to tackle some of our most pressing challenges. Social enterprise has created a model that demonstrates that this is possible, despite the challenges the current structures pose. The potential for New Zealand if a more enabling environment is created for organisations to pursue impact through business cannot be underestimated.

This is the introduction and conclusion of the paper: “Structuring for Impact: Evolving legal structures for business in New Zealand”. It was released in April 2019 and was co-written with some amazing people: Dr Jane Horan, Amber Hosking, Jackson Rowland and Phillippa Wilkie.

Simon Nielsen 11/16/21 Simon Nielsen 11/16/21

The Hard Questions We Need To Be Asking

“When asked to look at any organisation from an independent consultant perspective we often use the phrase of “flying in from Mars”. In other words, if I were flying in from Mars today and wanted to set up an organisation to address your particular cause with the most impact, would I set up your organisation? The authors ask hard questions and challenge us all to reconsider our impact.

“When asked to look at any organisation from an independent consultant perspective we often use the phrase of “flying in from Mars”. This helps to explain the approach that a good consulting professional will usually take and their absolute level of objectivity in looking at all aspects of an organisation. In other words, if I were flying in from Mars today and wanted to set up an organisation to address your particular cause with the most impact, would I set up your organisation? And would I set it up like you currently operate and are currently structured and organised?” The authors ask hard questions and challenge us all to reconsider our impact.

By Steven Moe and Craig Fisher

The legacy of the past and our investment in the current can hold us back from achieving the future. When one is in the trenches consumed by how much needs to be done and the busyness of today we don’t always stop and reflect objectively on our organisation as we perhaps should.

When asked to look at any organisation from an independent consultant perspective we often use the phrase of “flying in from Mars”. This helps to explain the approach that a good consulting professional will usually take and their absolute level of objectivity in looking at all aspects of an organisation. In other words, if I were flying in from Mars today and wanted to set up an organisation to address your particular cause with the most impact, would I set up your organisation? And would I set it up like you currently operate and are currently structured and organised?

Unsurprisingly the answer is usually no. And this is understandable and explainable as new innovations continue to occur. Sometimes this can be a result of sunk costs or legacy ways of operating or thinking that came from a different paradigm when the situation was different.

Take cloud computing versus an organisation set up in the past that had to buy expensive computer servers and software to run on these in-house machines. Yet for the organisation that already has deeply invested in the legacy system it can then be harder to justify writing off that past investment to change to something new and possibly more efficient.

Likewise, the national federation of separate incorporated society branches of the same organisation. This structure probably made sense when transport and communications were not as easy as they are today, and more people had more time to take on board and committee roles in their spare time. However today that structure can curse a national organisation with duplicated costs, organisational sustainability issues, and unnecessary petty politics – all things which detract from whatever the good cause the organisation exists to address. We know of other organisations which have structure charts that stretch like an octopus across the full range of legal forms: companies, charitable trusts, incorporated societies. There are often valid historical reasons for why they exist that way: But is it the best way?

And if we were designing the most effective, efficient and impactful organisation today; would we design it like that?

So, here are some hard questions that we think all boards and senior management need to be asking. We appreciate that some of these questions may result in an instant reaction in many people in the sector that is likely to border on outrage.

1. What is our purpose?

Some organisations have forgotten what the original purpose was that they were set up to try and solve. Not perpetuate the provision of ambulances at the bottom of the cliff, but actually solve the issues with fences at the top. We often see organisations who are surprised when reading the actual purpose to realise how far mission drift has led them. The current leaders need to be clear on what the purpose actually is before anything else.

Organisations with laser like clarity on their purpose are those that generally tend to achieve it.

2. Do we have a right to exist?

Quite simply; does the positive impact of our organisation justify the cost and effort of all the things necessary to operate the organisation? i.e. are we delivering enough positive impact? Or are we just taking up sector oxygen?

While we have impressively low barriers to entry for NFPs and charities and community organisations in Aotearoa that doesn’t mean that all have an automatic right to exist.

The pass mark should not be simply an intention to do good – we need to ask these questions in order to work out if this organisation is actually being effective. In our view, a sufficient level of positive impact must be the lens through which this hard question needs to be answered.

3. Do we still need to exist?

Many organisations have morphed over time in terms of what they do. Often to follow the available funding. Sometimes this has led organisations away from what they were really unique at and expert at, and into other areas where they may be competing with other better, more specialist organisations. And competing for the same limited funding and other resources pool.

Would the wider society be better served if resources were focused on those organisations that were really unique and expert in an area? Would a governing body and management be able to admit that? If it is a new organisation then is it trying to replicate what someone else already does – entrepreneurship is lifted up as a high value in our society, but even more admirable might be sacrificing your ego to get in behind and really support someone else’s dream which happens to match yours. And in doing this eliminate unnecessary administration duplication and resources being diverted from creating more impact.

4. Should we have an end date?

While this may not work for all charities – if you consider it deeply it should for many - if they are being truly honest and committed to their cause.

Arguably one of the most noble measures of success of any charity that exists to address a social or environmental need is that they should no longer be needed.

Because the job is done. We have a feeling there will always be other issues that need addressing – hopefully they can be solved as well but not continued and perpetuated with an eye on continuing a legacy of having existed in the past.

For example, if your charity were set up to eliminate avoidable blindness, or to eliminate all pests in Aotearoa’s forests, when could this be achieved by? Set that challenging and motivating date.

Having an end date target in your strategic plan can be a very powerful motivating force to focus attention on the most efficient means of achieving the aim. Interestingly, having such a target and a goal of society no longer needing your organisation can also make those involved much less precious about how they achieve the target. The alternative is the building of a strong NFP/charity brand. Without clear focus on getting the job done, this can unfortunately (and often almost unconsciously) lead to more focus on the brand and protecting the ongoing nature of it - rather than why the brand actually exists in the first place. This is just human nature to protect what we have built. To be proud of our organisation doing good and our legacy. But are we being truly objectively honest towards our cause?

5. Should we continue to try and go it alone?

By any relative measure compared to many other countries we have a large number of charities and NFP’s in Aotearoa.

However, we are a small country with a small population and as a result by having a large number it means that the vast majority of these charities and NFP’s are also very small.

We are not saying that big is beautiful. However, we cannot ignore the fact that the existence of many very small entities results in a lot of duplication and administration that detracts from the amount of impact that can be achieved. As one example, think about governance boards and how many volunteers are needed to help operate so many entities. In any organisation there are critical size points below which even basic administration can seriously detract from the positive impact that can be created.

Do a search of the Charities Register or have a look on the internet and you will also quickly find that there are many NFP’s and charities existing to address the same or a similar issue and often even in a similar geographic area. As such they are usually competing for the limited resources available.

Again, if we are truly seeking to create the most positive impact for society at large, is this a sensible approach? Merging like organisations is at the extreme end of the spectrum to addressing this issue. We are not advocating that it always represents an appropriate solution because it has its own complexities. That can also be a bridge too far for many to contemplate, unless they are forced to by funders or legislation.

However, we are starting to see, and expect to see more of, an increasing pressure from funders wanting groups to work better together and for there to be better collaboration to achieve greater positive impact with the limited available resources. Hence even if a merger may be just too hard, there is still significant positive potential to be gained by closer collaborations. One example of this could be creating hubs where many entities can access and share common resources rather than needing to duplicate all – that can be a very effective option.

6. Are we thinking broadly enough about who we can collaborate with?

We believe we are headed into a much more global and interconnected future. It will be one where more and more businesses are waking up to for-purpose and social licence, and more enlightened Governments are waking up to holistically measuring wellbeing rather than just economic busy-ness. For your charity or NFP to remain relevant and impactful in such an environment are you thinking widely enough about who you could partner and collaborate with to create more impact?

Sometimes 1+1 can equal 3 if you get the mix right. But this takes inspired leadership skills to leave ego behind, to truly think openly and creatively, to expand your networks into perhaps surprising areas, to put yourselves in someone else’s shoes to understand how it can help them as well as wider society, to explore the unusual and untested.

7. Can we reimagine the future?

In the midst of uncertainty, people are re-evaluating what they support, so we suggest it may be time to look at our messaging and how we convey why our organisations exist. This is a time to have stronger communication to our stakeholders and the general public around what we do, and why.

Is this an opportunity to reimagine how we fulfil our purpose in order to be successful and as impactful as possible?

Those that can imagine the future can create it.

Extract from the white paper “Charting the Future: A Framework for thinking about Change” co-written with Craig Fisher in July 2020. While written with charities and NFPs in mind the principles apply to all. Thank you Craig for the chance to collaborate on this.

Simon Nielsen 11/15/21 Simon Nielsen 11/15/21

What Social Enterprises in Aotearoa Can Learn From Māoritanga

“While the term ‘social enterprise’ itself is relatively new, the fundamental concepts behind it are not. We are still at the early stages of the growth of the social enterprise sector here in Aotearoa. What better time to think about how Māoritanga – Māori culture, practices and beliefs and way of life – can help flavour our particular recipe?” The authors dive into a country’s past to find a way forward.

By Steven Moe and Wayne Tukiri

Until recently, not many people knew what a social enterprise even was. But in the last few years there’s been a growing awareness of companies that pursue “for purpose” objectives beyond the traditional profit motive. Often, these companies are able to reinforce and grow the communities they operate in, often meeting social needs which might otherwise have resulted in state-sponsored intervention or social programmes. Simply put, they do good.

While the term ‘social enterprise’ itself is relatively new, the fundamental concepts behind it are not. We are still at the early stages of the growth of the social enterprise sector here in Aotearoa. What better time to think about how Māoritanga – Māori culture, practices and beliefs and way of life – can help flavour our particular recipe?

By examining some of the key principles of Māoritanga, we can better understand what social enterprises are – and what they could be. Here are some examples:

Kaitiakitanga

Kaitiakitanga is the guarding of treasures and the concept of reciprocity and giving back. When creating a social enterprise it is vital that the purpose is well defined, understood and articulated for others. That purpose then needs to be closely guarded so that there is not a slow creep away from the core values in the midst of either success or failure – either extreme lends itself to a reframing of what the entity stands for. Keeping a sharp focus on the purpose of a social enterprise is a discipline: guarding the treasure.

Mōhiotanga

Mōhiotanga is the sharing of information, the building up of knowledge, and the provision of new information and strategies. In order for a business to succeed there is a lot of information which needs to be absorbed – and this is particularly true of social enterprise, which challenges the traditional way of doing things. The early days of a social enterprise are critical as the right structures are chosen, the team is assembled and the vision cast.

Tuakana/Teina

Tuakana/teina refers to relationships between older and younger people, and in particular the experienced helping those who are less experienced. This is reflected in many social enterprises with community elements where more experienced people work alongside – and support the career growth of – those who have less experience.

Manaakitanga

Hospitality, kindness, generosity and support. The process of showing respect and care for others directly relates to the altruistic and community focus of social enterprises. Often these social enterprises exist to meet some need in society through the business operation itself – for example, the type of person who is employed or the kind of product made.

Wairua

Wairua is spiritual well-being that involves a connection to our whenua (land), ngahere (forests), moana (sea), maunga (mountains) and awa (rivers). Many social enterprises consider natural resources and how they use them (or don’t). From the first, they focus on their impact on the environment and how they can operate in a sustainable way.

Mātātoa

Mātātoa is the Māori concept of being fearless, courageous and energetic. In a similar way, social enterprises need to be open to embracing new and innovative ideas that generally go against an established way of doing things. They often challenge the inbuilt assumption that a business is all about making a profit as they strive to also fulfil their purpose, which is usually the real driver.

Social enterprises have a unique opportunity to do something different here in Aotearoa; embracing the perspectives of Māoritanga and understanding their full breadth and impact could help us achieve just that. Instead of doing things the same way as every other country, we should try a new way of operating. The result could be a truly homegrown version of social enterprise which acknowledges and learns from our own rich cultural heritage and embraces it fully as a means to explain what we do and why we do it.

Tihei mauri ora!

Published as Opinion piece in Spinoff on 21 August 2018 co-written with Wayne Tukiri of RSM. Thank you Wayne for collaborating on this piece with me.

Simon Nielsen 11/12/21 Simon Nielsen 11/12/21

Purpose-Driven Structures For Impact Entrepreneurs In Aotearoa New Zealand: Considering Kaitiakitanga And Steward Ownership

“Put simply: business of the past has often had a focus on being extractive rather than being regenerative. In response, a growing movement of impact entrepreneurs and investors are taking up the challenge of rethinking, redesigning and reorienting available legal structures of ownership and finance to ensure ‘purpose primacy’.” The authors propose an intergenerational and sustainable approach to business ownership.

By Steven Moe, Susan Gary, Jan Hania, Natalie Reitman-White, Murray Whyte, and Phillippa Wilkie

There is a paradigm shift occurring in how we think about the role of business. Impact-driven entrepreneurs launch businesses for a purpose and generate profits so they are sustainable while they also deliver products or services that add value to society.

These entrepreneurs often have an intergenerational perspective on the role that their ventures will play in solving social or environmental issues. They may frame their purpose by looking through the lens of the impact on some combination of the environment, society, their employees, customers, suppliers and other stakeholders over the long term.

While they embrace the private enterprise as a powerful vehicle to deliver and scale impact, they measure success not in maximising profits, but in maximising the advance towards the purpose. At the same time, they recognise that financial sustainability is a necessity to ensure long term viability of a private enterprise.

But what is the best structure for these future-looking entrepreneurs to adopt? The challenge faced by impact entrepreneurs is that conventional corporate vehicles, governance systems, shareholder agreements, term sheets, liquidity horizons and return expectations are framed around the presupposition of shareholder primacy. This focus means they can be misaligned with the entrepreneurs’ operating models and value systems. As a result, these structures can pull the business in directions that are more suited to the needs of the investors rather than a focus on delivering maximum value and impact to the purpose.

Put simply: business of the past has often had a focus on being extractive rather than being regenerative. In response, a growing movement of impact entrepreneurs and investors are taking up the challenge of rethinking, redesigning and reorienting available legal structures of ownership and finance to ensure “purpose primacy”. Some have referred to these new ideas as the “fourth sector” or “steward ownership”.

Emerging models are innovating in the areas of:

• impact investor terms that focus on sustainable versus extractive returns, and creation of broader stakeholder benefit;

• multi-stakeholder inclusion in governance and/or economic rewards; and

• governance mechanisms that ensure economic viability, along with results towards, and protection of, the business purpose.

Impact-driven entrepreneurs wanting to set up business in Aotearoa New Zealand have a range of legal structures to choose from, albeit a more narrow range than in other jurisdictions. In this short White Paper we will focus on the available legal structures in New Zealand as well as indigenous concepts of Te Ao Māori (the Māori worldview) and approaches. We will also chart some developments in thinking and legislation overseas on “steward ownership”. Our kaupapa (purpose) is that by explaining the options available in New Zealand in the context of the indigenous and stewardship models, entrepreneurs will be empowered to be creative and experiment in their choice of structure and surpass the for-purpose vs for-profit dichotomy.

We welcome your comments and feedback on this White Paper and look forward to an ongoing dialogue about the concepts and options. We also welcome your engagement around advocating for possible changes to New Zealand law that could incentivise and further catalyse the addition of more purpose primacy models. We are excited and enthusiastic about what the future could hold.

Part I: Ways of thinking

Before we dive into the detail of structuring options, in this part we want to set the scene by talking about foundations – we will do that by looking at different ways of thinking. This is important because the structure options that can be chosen are best understood in the light of these ways of thinking about business, wealth generation and generational thinking.

So much can be learned from the wisdom of Te Ao Māori (the Māori worldview) in approaching stewardship of land and the environment for future generations. Systemic long-term thinking is fundamental in Te Ao Māori, offering an intergenerational, sustainable and enduring approach to life, business and investment. For Māori and many other indigenous peoples, the cosmology and knowledge systems (matauranga) do not separate people from land, water and the environment (Te Taiao). A fundamental element of the Māori worldview is whakapapa; whakapapa in one sense is your genealogy, but the extension for Māori is that whakapapa includes lineage to your relevant mountain (maunga), river (awa), lake (moana) and land (whenua). This means that the land, water, mountains and creatures within your place are your direct relations or kin (whanaunga). And Māori have a teina/tuakana relationship with Te Taiao: we as people are the younger or junior sibling (teina) to the older or senior status of our tuakana, Te Taiao. The respect and value set of custodian or stewardship for land and water is one of caring for and nurturing our revered whānau as one of us – family, our elder, our ancient relative. This knowledge system is intergenerational, with ultimate respect for our ancestors – land and people – and for the future of those to come.

The concept of nature as an ancestor has been honoured and reflected in New Zealand law by according legal personality to nature. In 2014 the Tūhoe-Crown settlement legislation made Te Urewera, a former National Park of immeasurable value to Tūhoe, a legal person with its own identity. This personification was repeated for Te Awa Tupua (the Whanganui river) and most recently Taranaki Mounga (Mount Taranaki). In the cases of Te Urewera and Te Awa Tupua boards of persons are appointed to exercise kaitiakitanga (guardianship) over the land and water. They do not “own” it but actively act on its behalf and are responsible for promoting and protecting its health and wellbeing.

The notion of exercising guardianship of the environment and ensuring its wellbeing and regeneration for itself and future generations can (and we would say should) be broadly applied in today’s world. When constructing a board of guardians (kaitiaki) of purpose it would suggest having appointees whose role is to actively represent the environment (Te Taiao) and future generations (mokopuna). These representatives would be necessarily forward-thinking and proactive, assuring regenerative outcomes are achieved for both.

Te Ao Māori is directly relevant to the idea of “Steward ownership” which is an emerging term being used in the United States and Europe that refers to a different way (both old and new) of thinking about “ownership”. The foundational thinking is that ownership is not a commodity to simply be bought and sold, but as a responsibility to carry forward an enterprise that exists for a purpose. It derives from a constellation of principles and beliefs including shared prosperity, service and contribution, ecological regeneration, and responsibility for guardianship for the future. It can perhaps be summed up by this way of thinking: we are not inheritors of past wealth from our parents – instead, we are guardians of the future for our children.

In some respects this is a translation of the Māori spiritual concept of kaitiakitanga into a Western legal structure in that its stewards use the tangible rights attached to share ownership as the tools to vote and protect purpose. The specific legal structures can vary across organisations and countries. At their core, they embed the premise that corporations should contribute to some purpose beyond generating profits for shareholders and should consider holistic long-term impacts. Since conventional corporate and investment structures are more geared towards shorter term profit maximisation and shareholder primacy, it often involves thoughtful redesign of existing legal structures.

The “Structuring for Impact” report is worth reading for more details and depth on this area. See Horan, Rowland, Wilkie, Hosking and Moe, “Structuring for Impact: Evolving Legal Structures for Business in New Zealand”

To reset the goals and incentives that drive decision making in companies to guide them towards the inherent value of two key principles:

1. Profits Serve Purpose: Profits are used primarily as an engine to support a company’s purpose/mission. In other words, profits are not an end in themselves, but a means by which the purpose is furthered. Profits are needed to make the organisation sustainable but that is just one factor to be aware of. Practically, this means the profits are reinvested in the business, shared with stakeholders who are contributing to the purpose (e.g. employees, suppliers, community, customers), and/or donated to purpose-aligned charities. Both founders and investors are fairly compensated with capped or non-extractive returns/dividends.

2. Self-Governance: While investment can come and go over the company lifecycle, control of the company is not sold, it is kept with “stewards” – people who are actively engaged in, or connected to, the business and are responsible for ensuring it delivers impact to benefit and further the purpose. This typically begins with Founders and is then passed on through natural growth of the company culture and through formal governance structures that over time enhance the stewardship ethos. As such, the business is not seen as a manager for short-term private wealth generation, but as a living system of people working towards a shared purpose.

Social Enterprise: This is a label which has been helpful to distinguish purpose driven initiatives from traditional business. Ākina have been helping empower this ecosystem of purpose driven initiatives for many years and have many resources available. Back in February 2014 the Government statement still is accurate in summarising some of the key elements, where they said: “Social enterprises use commercial methods to support social or environmental goals. They principally reinvest surpluses in the social/ environmental purpose rather than maximising profit for shareholders and owners. Potential benefits of social enterprise include innovative responses to societal issues, new employment opportunities, and sustainable income generation.”

In our view, and the view of Ākina, the terminology is evolving very quickly and shifting towards the word “Impact” to best describe the concepts we are dealing with. We prefer the term ‘Impact Enterprise’ because that covers more than just the ‘social’ impact implied by the term social enterprise. For that reason we will mainly be talking about impact enterprises rather than social enterprises.

Introduction and the first part of a report published at the end of 2020 and this was co-written with some amazing people: Susan Gary, Jan Hania, Natalie Reitman-White, Murray Whyte, and Phillippa Wilkie. Thank you all for your insights and chance to collaborate together on this report and to Reggie Luedtke for your connecting pieces of the puzzle together too.

Simon Nielsen 11/6/21 Simon Nielsen 11/6/21

Proposed Changes To The Companies Act Mark The Beginning Of Positive Change

“For decades our rules have lacked clarity over the function of directors, their duties and what they should consider when making decisions. Our thinking has been influenced by the economist Milton Friedman who in 1970 declared that the primary function of a company is to generate wealth for its shareholders.” Lawyer and podcaster Steven Moe examines a new role for private companies in our communities.

By Steven Moe

Important change often goes unannounced and only with hindsight do we see the significance.

Last week a Member’s Bill was selected which has nothing to do with the headline-grabbing news on the status of vaccinations, house prices or the economy. Instead, it addresses a core belief that is commonly held about the role of directors of companies in New Zealand.

For decades our rules have lacked clarity over the function of directors, their duties and what they should consider when making decisions. Our thinking has been influenced by the economist Milton Friedman who in 1970 declared that the primary function of a company is to generate wealth for its shareholders.

The reasoning behind that theory has been showing more and more cracks recently. Considerations like climate change, fair practises for employees and the impact a company has on its community all give cause for reflection.

Could it remain right that the duties in the Companies Act remain silent on what directors consider when making decisions? With Labour caucus support the selection of Duncan Webb’s Member’s Bill in the ballot means change is on the way.

Webb explains, “The spark for this little bill was an urgent debate in Parliament on the letter of expectations that the Minister sends to Air NZ every year. It set out some climate expectations, good employer expectations etc. David Seymour thought this an outrage to divert Air NZ from a maximising profit motive. I thought it nonsensical that there was a debate at all – but thought if there is some suggestion that ‘the best interests of the company’ means ‘making as much profit as we can ...’, then we need to clear that up.”

The key amendment is to section 131 of the Companies Act and the introduction of additional “recognised environmental, social and governance factors”, which directors may bear in mind (we will come back to the use of the word “may”).

There are five factors listed: the principles of the Treaty of Waitangi; the environment; ethical behaviour, equitable employment practices and the interests of the wider community.

Before critics weigh in on how this is going too far, it is important to note that this is in line with developments overseas. For example, in the UK since 2006 the duty of directors to promote the success of the company has included a list of similar considerations which directors may have regard to such as the employees, customers, suppliers, the community and the environment.

There are recent proposals in the UK to make these duties more rigorous with a proposed “Better Business Act” that aims to put the balance of ‘”people, profit and planet” at the core for responsibilities of directors. The proposed amendments state that it must no longer be an option for directors to benefit wider stakeholders – instead it is proposed to be a requirement to consider them.

There may be tweaks to the New Zealand proposal which could incorporate some of these ideas and jump over a generation of thinking to where the debate eventually leads.

We could have that discussion here and now, including a robust discussion over moving from “may” consider, to “must” consider.

Considerable thought on these issues is ready to inform that discussion, such as recent reports by the Aotearoa Circle’s Sustainable Finance Forum roadmap, the IOD paper on stakeholder governance and the Ākina Foundation structuring for impact report.

Even if no changes are made to the bill, this reform is the start of a positive reframing with increased scrutiny for companies and shows a roadmap for additional changes that may flow in the future.

For example, a natural extension of what is proposed here would be to require that all companies must have a constitution in which they clearly articulate their mission and purpose. Hand in hand with that could be a requirement that companies report on how they are going about achieving that purpose, to avoid social washing. In other words, the bottom line might no longer be enough.

An additional change that goes even further could be that those companies who are clearly advancing both profit goals and purpose goals could even be given special status and incentives as “impact companies” in recognition of their blending of traditional conceptions.

We have been fish in the bowl, not aware of the paradigms of thinking which we assume represent how things will always be. But our current system did not exist 100 years ago – it can be changed.

Generations to come might just look back at New Zealand as the place where moves were made first. That is why the proposed changes to these director duties are exciting.

They are the start of real change that will enable us to better conceive the place of companies in our society and positively frame the role and duties of directors. This will provide an ecosystem for the growth of the future that we want to see, where companies increasingly contribute positive impact.

Published as an Opinion piece in Stuff on 29 September 2021.

Simon Nielsen 11/5/21 Simon Nielsen 11/5/21

Impact Investing Presents Opportunity To Back A Better Future Beyond Just Financial Gain

“Rather than #buildbackbetter perhaps we need to question if we want to go “back” and return to how things have been. Perhaps this is a chance not just to return to old ways but to embrace new conceptions, and it will be a shame if we miss it.” Lawyer and podcaster Steven Moe challenges us to rethink the future we want.

By Steven Moe

A low interest rate environment gives the opportunity to question past assumptions about returns on investments.

Gone are the yields that came from passive term deposits and this can open up a door to new ways of thinking.

Impact investing is growing and represents a more holistic view of the world. The focus is on more than financial return as these investors are interested in additional measures as well.

A report by the Centre for Social Impact highlights the state of impact investing in Aotearoa.

In it, we set out the ingredients that set impact investing apart and also profile four real life examples to show this is not just theoretical – it’s happening now.

The examples show how real financial returns are sought by investors but are measured in more than interest rates – instead social, environmental, housing or other impacts are

critical as well.

Impact investing is growing and represents a more holistic view of the world. The focus is on more than financial return as these investors are interested in additional measures as well.

An example is the $100 million set aside for the Government’s New Zealand Green Investment Finance. Its remit is to accelerate investment in low emissions projects.

An example is The Tindall Foundation and their work in Northland with Amokura (a consortium of seven Taitokerau iwi chief executives) to help develop a model for bringing forward investment opportunities which are Māori-owned and led and underpinned by a tikanga framework.

These are the types of conversations we need to move from an extractive economy to a more regenerative one. Along these lines a series of four guides on “Tikanga-led impact investment” have also just been released by The Connective.

Still, others are coming to the table in a new way and not from parts of the finance sector you might expect.

Superannuation funds might be regarded as cautious investors. But for the right investment that could change too – recently Generate Kiwisaver invested $20 million via Community Finance to support the building of social housing by the Salvation Army.

The initial round for that has now finished with a total of $40 million raised. The appeal is simple, there is both financial return coupled with social impact.

The best description of impact investing I’ve heard is by Esther Park, the CEO of Cienega Capital. She describes capital being like heat - if we apply it to a kettle then the water inside is the project which gets activated and then transforms into something completely new that wasn’t there before.

In the same way impact investing is about applying capital to a project to transform the ecosystem itself into a new state of being.

What would really accelerate the growth of this sector? If the Government were to embrace the change that impact investment offers then there is the opportunity for real public/private collaboration to solve our most wicked problems.

For example, New Zealand could be a world leader in this if the Government were to stand behind and partially guarantee certain qualifying investment categories that provided both financial return and social or environmental impact. There would be other options too, like Government investing a small percentage in projects to give greater comfort for others to join.

Rather than #buildbackbetter perhaps we need to question if we want to go “back” and return to how things have been.

Perhaps this is a chance not just to return to old ways but to embrace new conceptions, and it will be a shame if we miss it.

Many are considering this offshore and talking about the need to take the chance to reinvent capitalism itself: We should wrestle with this question too.

New approaches will mean collaborating more and partnering to advance the agenda around critical issues that we all know would help across our society and lift us up together on the same tide. Impact investing is not the only solution for our recovery but it will play an increasingly important role as we question our old assumptions about how investments themselves work.

Published as Opinion piece in Stuff on 22nd November 2020.

Simon Nielsen 11/4/21 Simon Nielsen 11/4/21

The Bottom Line Is Not Enough, Companies Should Be Required To Have A Purpose

“We need to balance profit with purpose while incorporating new ways of thinking about ownership as stewards of what we have. Requiring the purpose to be clear will mean directors have a Northern Star to refer back to and guide them.” Steven Moe writes on the tyranny of the status quo.

By Steven Moe

The Institute of Directors’ recent report “Stakeholder Governance: A call to review directors’ duties” has caused some commentators to say that the institute is going too far by broadening who directors are accountable to.

This criticism is firmly stuck in the past. Arguing that duties for directors are fine and no other changes are needed is like standing in a house on fire while replacing the batteries in the smoke alarms.

There are too many pressing needs in society, the environment and the world to ignore this for much longer. If our house is on fire then we need to have a new understanding of the role we each play and that includes the role of companies.

While the report is a welcome move in the right direction, it doesn’t go far enough. Clarity of purpose for companies should be a requirement. We expect this of other entities, which shows it is possible.

To become a charity the “charitable purpose” needs to be clearly set out as one of the key criteria to gain that status. In New Zealand however, there is no requirement that companies articulate clearly what their purpose is, or even have a constitution at all.

Having the purpose clearly stated in such a founding document would be a major step towards providing a reference point for directors to navigate their duties by.

The report correctly notes that the constitution of a company can be altered to state what the purpose of the company is. So this is really just taking it to the next logical conclusion: what if we actually advanced the game by requiring it? An articulation of purpose would help directors to know what they are ultimately there for.

Director duties should not just come back to the Milton Friedman conception that the directors are there to guide the company to maximise profit and resulting shareholder wealth.

We need to go beyond discussing stakeholders even and get to the heart of the issue: what is the purpose of the company.

We need to balance profit with purpose while incorporating new ways of thinking about ownership as stewards of what we have. Requiring the purpose to be clear will mean directors have a Northern Star to refer back to and guide them.

Structures that enshrine purpose are growing worldwide and make good business sense.

Last year the biggest initial public offering in the United States was for mobile insurance tech start-up Lemonade which doubled its capitalisation to $3 billion in the first day of trading.

The difference? It is also a “public benefit corporation”, meaning it has requirements to balance the interests of many stakeholders and articulate its purposes clearly.

This form of entity is growing overseas, as is the B Corp movement which is already active here (certification to show a company has reached certain standards in how it conducts its business). Oxford Professor Colin Mayer’s book Prosperity dives deeper into this new way of thinking about business and it is flowing out into other areas too, like the rise of impact investing.

Not everyone will be ready for these ideas. But concepts like kaitiakitanga (in a company context, that ownership is about being stewards) that come from Te Ao Māori just might be a superpower for New Zealand.

*Photo: Eberhard Grossfasteiger/Unsplash*

If we are on a journey, then a starting point would be to provide for a new class of impact-led companies that have chosen to articulate their purposes.

If we made this change in New Zealand it would echo what’s already being done elsewhere and mean that sustainable businesses that articulate purpose are encouraged, as well as asking them to report on impact (to avoid social washing). That will then give directors a much clearer mandate about what to aim for as well.

Ultimately it would be good to see all companies move to set out their purpose rather than having a bespoke structure just for those willing to do so.

As we face tough issues we need to encourage solutions and provide the framework for companies to be clear on their impact. This would also ensure we are on the right side of history too - as so much crumbles around us we need to create the regulatory ecosystem where positive impact is emphasised instead of the old ways of thinking which focuses on shareholder returns.

Milton Friedman himself referred to the “rules of the game” when talking about companies focussing on generating profits.

Let’s crystallise how those rules have now changed by requiring purpose to be clearly set out in a constitution to give guidance to directors as they perform their duties.

There is a broader paradigm shift of thinking that is going on here. If we can embrace that then we can choose now to do better - the next generations demand that we plant seeds today of trees that we may not sit in the shade of. Being clear on purpose is at the heart of this shift.

There is enormous inertia - a tyranny of the status quo.

“Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

— Milton Friedman

Published as an Opinion piece in Stuff on 26 August 2021.

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