Ask any social entrepreneur (or entrepreneur for that matter) what they need in order to grow and create impact, and you will probably hear this response: “I need to raise money.” Traditionally, that involves either raising investment capital and/or submitting for grants. Both of these options take a lot of time, can lead to dead-ends without meaningful feedback, and pull entrepreneurs from their core business.
But there’s another option that many social entrepreneurs haven’t capitalized on: growth through revenue-based partnerships with the private sector. More than ever before, corporations are committing significant portions of their budgets to partnering with and procuring goods and services from social enterprises. As just a few examples: SAP is committing 5% of its procurement budget to diverse and social enterprises, Unilever has committed to spending $2B per year with diverse suppliers, and Google has committed to spend $20 million. The result is a huge opportunity for social enterprises to scale their revenues and their impact through sustainable, repeatable, earned revenue streams – without taking on debt or sacrificing equity to investors.
Although the concept of growth through partnerships isn’t new, the size of this opportunity is unprecedented – but why now? To answer that question, we spoke with some of the biggest players in the social enterprise acceleration space – including Acumen, Miller Center for Social Entrepreneurship, and Agora Partnerships – and combined that with our insights from supporting social enterprises in the TRANSFORM Support Hub. Continue reading to learn more about the factors contributing to the growth of this exciting trend, and in the next installment, we’ll share tips to help you take advantage of it!
Trend 1: Corporations are seeking social enterprise partners to build more resilient and sustainable value chains
It has become increasingly clear – particularly in the wake of the pandemic – that our world’s toughest challenges can not be solved in isolation. By working together across sectors, we can compound the impact of our individual contributions to affect change at the systems level. As Agora Partnerships’ Chief Executive Officer, Cecilia Foxworthy, shared with us, “the pandemic made it acutely clear that existing supply chains, while efficient, were not very resilient or sustainable. We now recognize that if we don’t build up the abilities of small and growing businesses we work with in Latin America to be able to work with these multinational corporations, we would be missing a huge opportunity to make value chains throughout the region more sustainable, resilient, and inclusive – after all, more than 95% of businesses in Latin America are small and growing enterprises, and their inclusion is key to stable communities.”
Yasmina Zaidman, Chief Development & Partnerships Officer at Acumen, echoed this systems thinking approach being adopted by corporations. She explained, “Our approach has evolved over the years from a singular focus on the social enterprise to an ecosystem approach – thinking about all the stakeholders that really need to be involved to create a more inclusive economy. Social enterprises are a critical part of that, but it’s also clear that large corporations also have a huge role to play in terms of diversifying sources of capital from philanthropic to commercial.”
Social enterprises are not the only ones benefiting from these partnerships. As Jeri Jensen, Director of Partnerships for Social Justice at the Miller Center for Social Entrepreneurship, shared with us, “this is a moment when the value propositions for corporations to work with social enterprises, and for social enterprises to work with corporations, are aligned. I think for the first time we’re seeing corporations needing social enterprises to satisfy the demand of their customers for a more sustainable future, and that is multidimensional.”
Trend 2: Corporations are prioritizing diversity and accountability
The shift from shareholder capitalism to stakeholder capitalism has been building for years, but the pandemic accelerated it even further. Consumers, investors, employees, and even governments are demanding more accountability from corporations, and social enterprises are uniquely positioned to help companies achieve their ESG and social impact commitments.
As Yasmina explained, “changing views within the corporate world about their role in society has created new opportunities for social enterprises to be part of those corporate transformation efforts. Corporations are investing in addressing their lack of diversity – not only in terms of their workforces, but also in terms of their suppliers and approach to procurement. Corporations are also paying more attention to the “S” in ESG – social impact is not as easily defined or measured as environmental and governance factors, but we see that changing in the next five to ten years. Corporations will need to provide a lot more transparency about how their products are produced, and the positive and negative impacts involved along the supply chain. Consumers are demanding more transparency along this dimension, and holding corporations accountable.”
Trend 3: Increased Overlap Between CSR and Business Strategy
Gone are the days when CSR was merely a PR play. Conscious consumers, employees, and investors are forcing social responsibility to the forefront, and CSR has moved from a ‘nice to have’ to a strategic imperative.
As Jeff Pilisuk, Associate Director of Partnerships at Miller Center for Social Entrepreneurship, shared, “With the increased prominence of the SDGs at the global level, organizations have to ask themselves how to build them into corporate strategy. If they aren’t doing it now, they will be – because they have to. After the last financial crisis in 2009, CSR was really thrown away by many companies because they cut anything “non-essential” from their budgets to survive. But that was a mistake. Thankfully, the response to the pandemic has been almost the polar opposite: corporations are scrambling to do more with the SDGs and actually integrate them into their core businesses, and are going further in the direction of impact rather than away from it. And the companies that are in fact integrating diversity and social responsibility into their core strategies are outperforming those who are not.”
In our work at MovingWorlds, we have seen more change in the last two years than in the last ten as it relates to integrating social enterprises into core business strategy at corporations. Businesses are investing heavily for sustainability, regenerative business models, and circular products, and partnerships with social enterprises give corporations a competitive edge in these activities.
Taken together, these factors have created a meaningful opening for social enterprises to become embedded into global value chains – in turn making the entire economic system around them more equitable and sustainable. These partnerships are truly a win-win for both parties, and it’s a trend that will only continue to grow in coming years. As Acumen explains in its Corporate-Ready Report, “These business partnerships are doing more than addressing a business need, they are creating positive and measurable social impact…This demonstrates the value that social enterprises are delivering to their corporate customers, and our research shows that the social enterprises are benefitting from these partnerships as well. More than 75% of SEs surveyed state that corporations were important to their growth and profitability, and every social enterprise reported that selling to corporations strengthened their business overall.”
Stay tuned for Part II of this series, where we will share specific tips from these thought leaders about how social enterprises can take advantage of this opening for sustainable growth. Ready to start connecting with corporations that can help you grow your revenue and impact? Apply to the TRANSFORM Support Hub to network with potential corporate partners and investors looking for innovative partners like you.