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ASCALA Group Sustainability Rocks Why Sustainability Rocks
ASCALA Group is bringing a new perspective to venture capital investment. Of course as a venture capitalist our aim is to secure the largest return on the capital we invest although the ASCALA group model is a little different. We call our investment model Sustainability Rocks. We aim to shift the paradigm according to which we now interpret the venture capital model towards a paradigm which will ensure the sustainability of our investment portfolio to produce capital returns for a longer period of time whilst positively impacting the social improvement of the communities our portfolio company’s service. Our model can be parodied to Islamic investment models, closed loop economic models or even aligned with models that promote a gift economy in order to improve economic relationships with businesses and the consumer. Internally we promote this closed loop economic model as Sustainability Rocks. We know the negative effects of some corporations' policies have on the world around us. Examples from devastating strip mining, non sustainable farming to profiting from conflict diamonds, the destructive search for profit in the short term without consideration to the long term implications is often referred to 'human nature', greed, and 'man's inhumanity to man'. However there are mechanisms that exist to facilitate profit from business activities without a destructive effect on the environment or social communities that those businesses serve. These methods both lend themselves to long term sustainability and positive social benefit and increased long term profitability. Such methods and mechanics in economics we refer to as the Sustainability Rocks model provide the following benefits:
The institutions and social structures that have been commonly promoted in business society have to date been based on market domination, non collaborative competition, and egotism. To truly understand and implement the sustainability rocks model the business must understand the concept of nurturing. When deploying the sustainability rocks model its important to understand the end to end supply chain and market influences related to the business and then to focus on the nurturing of those economic relationships. As a result our business focus is to service the communities we are involved with and assist in arts development, community interaction and cross cultural exchange by providing sustainable economic models for business within these communities. A core component to the sustainability rocks model is to look at components within a business that can be used to create associated supply chain benefit without the requirement for direct exchange. The benefit is indirect to a business, by providing “Gifts” or “benefits” to the components of the supply chain such as your customers or suppliers you effectively strengthen the demand or supply for your products and services by benefiting the community at large. A good example of an active gift economy is the Open Source software community. Programmers make their source code available, allowing anyone to copy and modify/improve the code. Individual programmers gain prestige and respect, and the community as a whole benefits from better software. The economic model supporting the developer is that they indirectly generate more requirements for the support and maintenance services by making the product freely available and that as people build on the software it becomes more robust and functional further increasing demand for the software and indirectly the developer’s services. Jordan Hubbard, writing in Queue magazine ("Open Source to the Core", p.24--31, May 2004) although referring to open source as a barter economy, describes it as a gift economy: "The volunteer software engineers in the open source software community are far more likely to help those who have demonstrated their commitment to the success of the overall open source software development process." [op. cit., p. 29] In other words, reciprocity is a broad community matter rather than explicit quid pro quo. It is this model of defining and delivering benefits to other components of the economic supply chain without the need for direct capital return in order to benefit indirectly from a more sustainable and active supply chain as a whole. This is sometimes defined as the third mode of production, this is sometimes called "commons-based peer-production," in software and in media its often referred to as “Creative Commons” The main characteristic is that the companies and individuals that are successfully collaborating on such projects often have a diverse number of motivations for doing so, but in general they are not based on short term price increase but on contributing to a sustainable economic environment rich in innovation that contributes to social & economic improvement as a whole. We define our Ascala sustainability rocks economy as an economic system in which goods and services are given to companies and individuals residing within a companies connected economic supply chain without any explicit agreement for immediate or future returns. We understand that the Sustainability Rocks model delivers social or intangible rewards for generosity. This can be honor, loyalty or other forms of gratitude that all generally contribute to benefit the following attributes of the donor business.
The sustainability rocks model at no point requires implicit expectation of the return of comparable goods or services, support, or recommendation. The possible benefits of a Sustainability Rocks model is that it can provide for the needs of some who have no current means with which to reciprocate so that they may benefit now and in the future. The base economic assumption is that the returning benefits acquired either through future direct engagement, recommendation, positive brand endorsement or even growth of the economy in the future will be greater than the than the current capital or resources required to deliver the benefit currently. Give now – receive later. However the key difference is that there is no security, promise or contractual commitment implicit in the gift – and that the gift is provided to benefit the community, economy or improve the supply chain environment. The responsibility for operating a commercially viable business on a day to day basis remains within the operating company. A gift creates a "feeling bond." where commodity exchange does not. The sustainability rocks model deployed within the Ascala portfolio companies defines a proportion of goods and services that must be offered as community based gifts and some that should offered on a commodity exchange commercial basis which is defined based on the supply chains relationships existent within each portfolio. The “Gifts” or “Contributions” made to the community by a business are written down as operating costs against a companies CSR (Corporate Social Responsibility) budget. A common failure with many businesses is to hold this CSR budget within the marketing department even though it is required to assist the company in its sustainability and growth which should be core to the business. Ascala portfolio companies have CSR at the core of the operations and we implement the sustainability rocks model as a core business attribute to all of our portfolio companies. Information, creative media and communication platforms are particularly suited to gift based economics. When you share information, music, film or entertainment for free you reduce the revenues that could be gained in the market economy from the intellectual property rights but improve access to the knowledge and entertainment to those that demand them so that society and corporations will benefit from sharing. By making these assets freely available free of charge you can also tag the asset with an advertisement or endorsement for your core business activities. A good example of a gift based business is Wikipedia. Wikipedia has engaged in fundraising activities, asking people to contribute funds toward operating expenses; these donated funds are gifts, albeit explicitly solicited ones. A tiny portion of Wikipedia's income comes from product sales, mostly T-shirts, mugs, and the like, with Wikipedia logos. Because Wikipedia exists within a money economy, some expenses must be met with money, such as paying for servers, domain registration, and for certain IT work involved in server maintenance. Therefore, the information in Wikipedia is a gift economy, but some operational aspects of its website and related entities are not. The key criticism of the sustainability rocks model is that gifts are provided to the community in order to solicit profits in the future. This is a fair comment should we define profit as pure financial return based on deployed capital. However this is not how we internally define profit within our organizations. In short the sustainability rocks model defines profit or success under the following criterion: 1) Is the business functional, can employees pay their monthly bills and is the business growing its revenues under traditional business models?
2) Is the business providing a positive community benefit and is the community benefit the business provides growing in relation to the business.
3) Are the employees within the business happy in their work, are they facilitated with opportunity to apply their passion and have personal growth within the constraints of a commercial business model.
4) Is the business providing a net positive community benefit or a net negative community benefit? Although we only invest in financially viable and high growth opportunities, we do not view monetary financial return it itself a significant enough motivation to drive an investment decision. Our investment criterion is based on the following balanced scorecard between profitability, sustainability and employee & customer value. A) The business has significant capability to provide a benefit for the community it services.
B) The business is driven primarily from the basis of passion, personal improvement and contribution commitment of its employees to succeed and positively affect the market a business operates within.
C) The business has a commercially viable and sustainable commercial model underpinning the business activities. For more information on the Sustainability rocks model or to implement the Sustainability rocks model within your business please contact us .
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