4 Pillars For A More Responsible Economy

A friend from Hungary was telling me about a new interesting bank based in Budapest. Magnet Bank, the bank in question, operates in a way that is both innovative and promising. I would like to detail some aspects of the business that should be known better, and I would also like to offer some ideas and tips for organizations wishing to go in the same direction.

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Strategic decisions at Magnet Bank are not made in secret at the last floor of an ivory tower. On the bank’s website, you can read: “we invented how to provide our clients with the right to have a say in the bank’s community activities”. The bank publishes the list of all projects in which it would like to invest and then lets its customers select the ones to fund. In addition, the bank gives 10% of its profits to projects that are chosen by the community; that’s how half a million dollars have already been given these past six years to initiatives that matter to its customers. The bank also hosts various initiatives which promote the activities of social organizations and offer opportunities to connect them with each other.

– Magnet’s profits give 10% of its profit to projects selected by the community –

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>>> How can organizations involve their community?

First off, frequently giving the opportunity to various stakeholders (clients, employees, partners) to have a voice on various issues is a way for organizations to understand better what people care about. They’ll be more likely to make decisions that will benefit everyone later on. To do so, businesses have to take the time to regularly meet community members for face to face conversations and ask for feedback and opinions. This would also entail identifying leaders among the community: these key people will be the first ones to participate, support the company’s efforts and spread the word among the other members. Organizations can also rely on online tools to facilitate the process: polls, forums, suggestion boxes and so on.

Many startups base their work on these collaborative models and Giffgaff, a UK-based online mobile company, is an excellent example of such a community-centric organization. Giffgaff lets its members collaborate with employees in various business activities and everyone can participate in the open innovation program and in the customer service operations (entirely run on an online forum). At the end of 2015, Giffgaff rewarded the community with an incredible $5 million donation, $60,000 of which were given to five charities that 25,000 community members elected, and the rest was shared among members according to their level of participation throughout the year.

– A Giffgaff ad –

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The world which develops around us is built on loans mostly” says Magnet Bank’s website. The Hungarian institution does not underestimate its potential to reshape a better world and only funds ethical projects; only the initiatives that have the potential to generate positive social or environmental impact are presented to the community:

– List of fields that are eligible to receive Magnet Bank’s loans –

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>>> How can organizations work more ethically?

It all starts with the simple question: “how does my organization contribute to reshaping a better world?” By defining a strong mission statement, a company can highlight their intentions and be more successful at engaging their stakeholders. Social enterprises are often great examples of organizations that make ethics one of their core values, such is the case of Nazava, a company I became aware of while volunteering in Indonesia and whose objective is to “provide safe drinking water for all citizens”.

Moreover, a responsible organization can also find ways to work with customers and partners that commit to fair business practices. Companies should also set up better ways to work by finding appropriate management styles, like the inverted pyramid or the holacracy models, that distribute power across all employees and promote work/life balance as well as flexible working hours.

The road toward more ethics can also be made by choosing to create new products in a responsible manner by using organic products and favoring local production to avoid unnecessary transportation. A good example to follow is 1083, the first business that manufactures organic jeans made in France.

– The brand name 1083 refers to the distance in km between the two farthest French towns: Menton at the Italian border and Porspoder in Brittany –

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Magnet Bank details all its spending and explains why managing an account costs 1.9 USD per month. Then each client is free to choose how much he or she wants to be charged by the bank for the services received. Not giving anything is an option and the bank calls its model a “pay as you like” system.

– Magnet Bank’s customers are free to choose how much they want to pay for their account –

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>>> How can organizations become more transparent?

Transparency is a fundamental foundation of any successful business culture; it leads to trust among community members. Organizations can start by openly sharing the list of all projects it wants to work on as well as making their vision and business roadmap clear to all community members.

To go further in that process, all the costs and revenues can be published and detailed, which would normally be correlated to a just income distribution. The San Francisco-based startup Buffer has set up a good example of a transparent business: the amount and the way to calculate wages are shared publicly and employees can participate in improving the formula so it represents their participation and efforts well.

And like Magnet Bank has done, a company may even let customers set the price they wish to pay. Another example is that of Alternative Urbaine in France, a company whose goal is to reinsert homeless people into society by hiring them as tourist guides. At the end of the tour, participants can give their guide the amount they think it’s fair for his services. If needed, an organization can also ask for minimum payment to cover the basic operational costs, and then let the customer decide if they want to add an extra amount.

– Alternative Urbaine gives visitors the chance to visit off the beaten track neighborhoods of Paris and lets them make a voluntary payment at the end of the tour –

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In addition to involving its community, Magnet Bank has decided to give its customers and employees the chance to be the main shareholders. In 2008, the community bought back a 30% portion that was owned by a foreign company; thus, becoming 100% Hungarian owned and then transitioning towards being a cooperative business.

– Magnet Bank organizes frequent meetings to update its owners about the last business activities –

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>>> How can organizations share equity?

Companies can let employees and customers own stocks, this can be carried out in two ways. In some cases, usually a common practice in the startup world, employees are simply given shares. Another way to proceed is to raise funds by launching a crowdfunding campaign and allowing community members to buy stocks. Online platforms like Indiegogo EquityCrowdfunding or CommunityShares.co.uk can help companies do this job easier.

This way of sharing equity isn’t unique to a particular field. This has been done in the area of sports with the best example being United of Manchester, a football club owned and democratically run by its 5381 members; in the area of renewable energy with French cooperative Eolien Citoyens, and in the startup world with Fairmondo (electronic commerce) in Germany and Stocksy (online photo library) in the UK. These cooperatives and community-owned companies create alternatives to traditional capitalism.

– United Of Manchester FC has been created from scratch by a community of football fans who were disillusioned by the excessive financialization of the city’s other teams –

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Businesses are the backbone of the economy and by improving their practices, they can become the engines for rebuilding a more responsible world; there are several ways to begin and each organization is free to choose which projects to start with according to its context and culture.

Can you think of other ways a company can be more responsible in its practices? Do you know examples of organizations that have set up great models and should be known better?

Looking forward to hearing from you.


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