Harvard Case - Fairphone: Organising for Sustained Social Impact
"Fairphone: Organising for Sustained Social Impact" Harvard business case study is written by Onajomo Akemu, Gail Whiteman. It deals with the challenges in the field of Social Enterprise. The case study is 24 page(s) long and it was first published on : Jan 11, 2016
At Fern Fort University, we recommend Fairphone adopt a hybrid organizational structure that leverages the strengths of both for-profit and non-profit models to achieve its ambitious social impact goals. This structure will allow Fairphone to:
- Scale its operations and reach a wider market while remaining true to its ethical and sustainable values.
- Attract diverse talent and resources from both the business and social impact sectors.
- Develop innovative solutions that address the challenges of the electronics industry while creating positive social and environmental change.
2. Background
Fairphone is a social enterprise that aims to create a more ethical and sustainable mobile phone industry. Founded in 2013, the company has gained recognition for its commitment to fair labor practices, ethical sourcing, and environmental sustainability. Fairphone's products are designed for modularity and repairability, promoting a circular economy and reducing e-waste.
The case study highlights the challenges Fairphone faces in scaling its operations while maintaining its social impact mission. The company needs to navigate the complexities of growth strategy, organizational structure, and funding to achieve its goals.
Main Protagonists:
- Eva Gouwens: CEO of Fairphone, tasked with leading the company's growth and ensuring its social impact remains central to its operations.
- The Fairphone team: Dedicated individuals committed to the company's mission, facing the challenge of balancing social impact with business growth.
- Investors and stakeholders: Individuals and organizations supporting Fairphone's mission, expecting a return on their investment and a tangible social impact.
3. Analysis of the Case Study
Framework:
This case study analysis utilizes the Stakeholder Theory framework, which emphasizes the importance of considering the interests of all stakeholders in decision-making. This framework is particularly relevant for Fairphone, as its success depends on balancing the needs of various stakeholders, including:
- Customers: Seeking ethical and sustainable products.
- Employees: Seeking fair wages and working conditions.
- Suppliers: Seeking fair trade practices and ethical sourcing.
- Investors: Seeking financial returns and social impact.
- The environment: Benefiting from Fairphone's commitment to sustainability.
Key Issues:
- Balancing Social Impact and Business Growth: Fairphone faces the challenge of scaling its operations without compromising its social impact mission. This requires a delicate balance between profitability and social responsibility.
- Organizational Structure and Governance: The current structure, with a board of directors overseeing both social and commercial objectives, may not be optimal for achieving both goals.
- Funding and Investment: Fairphone requires significant capital to scale its operations. Securing funding from investors while maintaining its social impact focus can be challenging.
- Marketing and Brand Strategy: Fairphone needs to reach a wider audience and differentiate itself from competitors in a crowded smartphone market.
4. Recommendations
1. Adopt a Hybrid Organizational Structure:
- Create a separate social impact entity: This entity will focus on driving social impact initiatives, research, and advocacy, while remaining independent from the for-profit arm.
- Establish a strong governance structure: A clear separation of responsibilities between the for-profit and non-profit entities will ensure transparency and accountability.
- Develop a clear social impact measurement framework: This framework will allow Fairphone to track and report on its social impact, demonstrating the value it creates for stakeholders.
2. Implement a 'Shared Value Creation' Strategy:
- Identify and leverage social impact opportunities: Fairphone can integrate social impact into its core business model, creating value for both the company and society.
- Develop innovative solutions: Fairphone can invest in research and development to create products and services that address social and environmental challenges, such as affordable mobile technology for underserved communities.
- Engage in strategic partnerships: Fairphone can collaborate with other organizations, NGOs, and governments to amplify its impact and reach a wider audience.
3. Secure Funding through Impact Investing:
- Target impact investors: These investors are specifically interested in companies that generate both financial returns and positive social impact.
- Develop a compelling impact investment thesis: Fairphone needs to clearly articulate its social impact goals, measurement framework, and expected returns to attract impact investors.
- Explore innovative financing models: Fairphone can consider alternative financing models such as social impact bonds, which provide financial returns based on the achievement of social impact goals.
5. Basis of Recommendations
1. Core Competencies and Consistency with Mission:
- The hybrid organizational structure aligns with Fairphone's mission by ensuring its social impact remains central to its operations while allowing for growth and scalability.
- The shared value creation strategy leverages Fairphone's core competencies in ethical sourcing, sustainable manufacturing, and product design to create positive social impact.
- Impact investing aligns with Fairphone's commitment to transparency and accountability, as impact investors require detailed reporting on social impact performance.
2. External Customers and Internal Clients:
- The hybrid structure caters to both customers seeking ethical products and investors seeking social impact.
- The shared value creation strategy benefits customers by providing innovative and sustainable products while creating positive social change.
- Impact investing provides Fairphone with the necessary funding to scale its operations and reach a wider audience.
3. Competitors:
- The hybrid model differentiates Fairphone from competitors by highlighting its commitment to social impact.
- The shared value creation strategy allows Fairphone to compete in the smartphone market by offering unique value propositions based on sustainability and ethical sourcing.
4. Attractiveness ' Quantitative Measures:
- The hybrid structure and shared value creation strategy have the potential to increase profitability and market share.
- Impact investing can provide Fairphone with access to significant capital, enabling growth and expansion.
Assumptions:
- The market for ethical and sustainable products is growing.
- Impact investors are increasingly interested in companies that generate both financial returns and social impact.
- Fairphone can successfully implement its hybrid organizational structure and shared value creation strategy.
6. Conclusion
By adopting a hybrid organizational structure, implementing a shared value creation strategy, and securing funding through impact investing, Fairphone can achieve its ambitious goals of scaling its operations while maintaining its commitment to social impact. This approach will enable Fairphone to become a leading force in the movement towards a more ethical and sustainable electronics industry.
7. Discussion
Alternatives:
- Remaining solely a non-profit organization: This would limit Fairphone's growth potential and ability to compete in the market.
- Becoming a traditional for-profit company: This would risk compromising Fairphone's social impact mission.
Risks and Key Assumptions:
- Challenges in implementing the hybrid structure: Maintaining a balance between the for-profit and non-profit entities requires careful management and strong governance.
- Difficulty in attracting impact investors: Impact investors may have different expectations and require a strong track record of social impact performance.
- Market acceptance of Fairphone's products: The company needs to effectively communicate its value proposition and differentiate itself from competitors.
8. Next Steps
Timeline:
- Year 1: Develop and implement the hybrid organizational structure.
- Year 2: Launch a pilot program for the shared value creation strategy.
- Year 3: Secure impact investment funding and expand operations.
Key Milestones:
- Establish a clear governance structure for the hybrid organization.
- Develop a comprehensive social impact measurement framework.
- Identify and implement social impact initiatives aligned with the shared value creation strategy.
- Secure impact investment funding from reputable investors.
By taking these steps, Fairphone can position itself as a leader in the social enterprise movement and contribute to a more ethical and sustainable future for the electronics industry.
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Case Description
The Fairphone case examines the emergence of and challenges facing start-up social enterprise, Fairphone, based in Amsterdam, The Netherlands. Founded by industrial designer, Bas van Abel in January 2013, with a mission to "produce a seriously cool smartphone putting social values first," Fairphone aimed to: (1) produce a competitively-priced, aesthetically-appealing, mid-range smartphone that would rival any in its price category; and (2) to do so in a way that ameliorated the dark side of the mobile phone industry-use of conflict minerals, poor working conditions in East Asian factories, and electronic (e)-waste dumped in developing countries. At incorporation in January 2013, the company had no phone, no distribution network, and no customer; none of the founding employees had experience in the mobile phone industry. By February 2014, however, van Abel and the Fairphone staff had produced and delivered 25,000 "fair" smartphones to customers in 32 countries. Having taken its first steps, van Abel felt that Fairphone had to scale up production to become a "real" company in order to fulfill its dual mission. How should Fairphone reach a larger audience with its message and product? How should the organisation be designed in order to achieve this dual mission?
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