In a world where companies prioritize profit and have historically let the broader interests of stakeholders take a back seat, a remarkable shift is under way due to the growing global movement of social innovation and social entrepreneurship.
Thanks to a first-of-its-kind piece of research published earlier this month, we now have the data to quantify the scope of this market. The State of Social Enterprise 2024 estimates that there are approximately 10 million social enterprises operating worldwide — and that collectively, they are generating $2 trillion in annual revenues and creating over 200 million jobs.
Private sector engagement in this space is not only good for the world at large, but also for the long-term success and relevance of corporations themselves. A new report from Schwab Foundation, the Global Alliance for Social Entrepreneurship, and Deloitte, “Corporate Social Innovation Compass: Accelerating Impact through Social Enterprise Partnerships,” offers practical guidance for corporate leaders about both why this space is worth investing in, and how to go about it. Find a breakdown of key takeaways from the full 42-page report in our summary below:
The “Why”: Building the Business Case for Social Enterprise Engagement
Engaging with social enterprises isn’t just the right thing to do, it’s the smart thing to do from a bottom-line perspective. We’ve published a lot on this topic, and the report outlines a number of these practical advantages. These include the ability to:
While social enterprises lack the abundant resources of their corporate counterparts, they also lack the institutional inertia – making them uniquely good at carving out competitive niches in a way that is lean, agile, and maximizes the use of scarce resources.
This ability to innovate while maintaining profitability in a competitive niche is what makes engaging social enterprises so compelling: according to the report, 50% of companies engaging in social innovation have seen employees take a different perspective on their work and therefore more innovative approaches to doing business.
Expand into New Markets
With their extensive knowledge, innovative business models, and local networks, social entrepreneurs can help companies gain insights and access into difficult-to-reach markets.
Social enterprises have a unique advantage here because of their close ties to local communities. As partners, they can provide vital on-the-ground insights and market data that can be challenging for corporations to access otherwise.
Generate Financial and Social Returns
For many years, engagements with social enterprises have been initiated and managed by the CSR function, with little involvement in core business. But that’s changing: more and more, corporations are aligning their business goals with their social impact ambitions along thematic, industry, business and non-material lines. Partnering with social enterprises increases corporations’ social return on investment, while building resilience and sustainability into their value chains and core business activities.
Achieve Social Impact Goals & Improve Brand Perception
Increased regulatory requirements coupled with a broader push for corporate transparency have made sustainable development reporting a strategic priority. Corporations can use social enterprise engagements to meet both their social impact targets and mandated compliance goals.
The “How”: Methods of Engagement
To guide the discussion around how best to engage with these social innovators, the report includes a tool called the Corporate Social Innovation Compass. This tool links common engagement strategies with their business benefits, and offers practical advice to help companies choose the best mechanisms for their current stage of involvement with the sector.
The compass groups the various engagement mechanisms into three main categories: direct, ecosystem, and integration into core business. Let’s take a closer look at each:
This is the most prevalent form of engagement, and typically occurs on a bilateral basis. Here are different forms that can take:
Product and Distribution Partnerships
One of the most advanced forms of direct partnerships is engagement between companies and social enterprises to co-create new products, services, and market approaches. It involves working hand in hand with social enterprise partners on the ground to adapt based on local conditions.
Real-world example: Through TRANSFORM, Unilever partnered with Kasha, an eCommerce platform focused on helping women meet their everyday needs in low and middle income countries, to exclusively launch Lifebuoy soap in Rwanda. Kasha released handwashing campaigns and collaborated with Unilever to create and implement a new bundling and pricing strategy – which led to Lifebuoy becoming a product leader.
Through distribution partnerships, social entrepreneurs enable companies to access hard to-reach areas or populations.
Real-world example: mPharma, a healthcare social enterprise, works with large pharmaceutical companies and buys drugs on behalf of local pharmacies to sell to low- and middle-income patients. Pfizer, Bayer and Novartis are some of the providers from which mPharma makes purchases. Through this partnership, the pharmaceutical companies track, streamline and guarantee the accessibility of medicine.
This is the process of purchasing goods and services from a social enterprise, as opposed to a traditional business. According to the report, estimates of the market opportunity for social procurement range as high as $506 billion. Social procurement is a powerful way for companies to advance social and environmental targets throughout their value chains while making them more resilient in the process.
Real-world example: The sustainable sneaker company VEJA engages with Groupe Ares to procure logistics services for its warehouses and integrate people with disabilities into its value chain.
Corporate Impact Funding
Perhaps the most obvious need and form of engagement is to invest financially in social enterprises, also known as “impact investing.” In 2022, the global impact investing market reached $1.64 trillion, in large part as a result of increased corporate impact investing. These types of transactions mirror those of startup investment, such as stocks, bonds, venture capital, private equity, or loans to social enterprises.
Real-world example: Johnson & Johnson Impact Ventures is an investment fund within the Johnson & Johnson Foundation. The fund invests in early-stage companies and supports social entrepreneurs advancing global health equity and access to quality, affordable healthcare. Financial returns from its investments are recycled and reinvested into additional social enterprises, providing additional opportunities to create sustainable impact. So far, its portfolio has already reached more than 2.8 million patients and supported 61,000 healthcare workers around the world.
Mentoring, Pro Bono, & Accelerator Programs
Often seen through the promotion of skills-based volunteering, this type of engagement provides an opportunity for companies to support a social enterprise with expertise while engaging its employees in impactful ways. In addition to helping social enterprises lower their costs and accelerate their growth, corporate employees who volunteer are exposed to new forms of innovation, learn future-forward skills, and support the delivery of their sponsoring companies’ ESG and social impact goals.
Real-world example: SAP partnered with the TRANSFORM Support Hub, powered by MovingWorlds, to scale its employee skills based volunteering initiative globally. In its first 6 months of pilots, SAP was able to engage over 200 volunteers across six continents at all levels of the company, while integrating ESG, CSR, and social innovation in a way that supported – rather than detracted from – the existing strategic goals of other departments like Procurement, Learning & Development, Executives, Leadership Development, HR and Partnerships.
Resource and Communications Support
This involves companies using their media platforms and assets to provide resources and communication support to help expand social enterprises.
Real-world example: Microsoft’s Entrepreneurship for Positive Impact program has assisted more than 1,000 entrepreneurs across 70 countries by providing access to its technology and customer/employee networks. As a result, Microsoft has been able to explore and support various applications of its technology products to support more entrepreneurs at scale.
Another opportunity to scale social innovation initiatives is to identify ways in which a company can create network effects by engaging in collective action. While corporations may be working directly with only one or two social enterprises, wider ecosystem mechanisms often involve collaborating with intermediary organizations and other parts of civil society. Here are different forms that can take:
Collaborating with other companies and organizations is a major step towards scaling. Networks such as the World Economic Forum’s Global Alliance for Social Entrepreneurship create opportunities to rapidly share knowledge, specialize and reuse best practices, and they also generate new opportunities for collaboration.
Real-world example: SAP and Unilever partnered with MovingWorlds to launch the cross-sector TRANSFORM Support Hub, a global platform offering free, ongoing and bespoke nonfinancial support for social enterprises. This platform helps corporations educate and engage employees at scale through pro bono consulting so that they can embed social and environmental impact throughout their core businesses, leading to higher employee engagement and retention, and spurring the formation of innovative new social enterprise partnerships throughout their value chains.
Policy and Advocacy
Legal and regulatory systems are not always set up to support social entrepreneurs’ structure of work. Companies can highlight successful partnerships and support policies that create more favorable conditions in the market for those partnerships to become the new normal.
Real-world example: A group of corporate members in the Global Alliance for Social Entrepreneurship issued an Open Letter voicing its support for social innovators and encouraging the UN Inter-Agency Task Force for Social and Solidarity Economy to engage with the private sector in the implementation of the UN Resolution on the Social and Solidarity Economy.
Verification and Certification
A primary concern for corporations is ensuring that potential social enterprise partners are legitimate and creating real impact. To achieve this confidence, corporations can encourage and support independent organizations to develop certifications and verification processes.
Real-world example: SAP is in the process of integrating certifications such as the Social Enterprise World Forum verification into the SAP Business Network, the biggest business-to-business (B2B) online marketplace worldwide, enabling companies to find potential social enterprise suppliers at the click of a button.
The final and the most aspirational measure of scaling social impact is the integration of successful social innovation principles into core business operations. This mechanism represents the ultimate form of partnership, in which a private organization encompasses all values of a social enterprise. Here are different forms that can take:
Aligning to Workforce Human Capital Needs
Company leaders can align their social enterprise engagements with their human capital approach by designing them to create a greater sense of purpose, promote collaboration with others, increase community engagement, and serve as safe spaces for the development of new perspectives and leadership skills. Beyond that, integrating successful social innovations into a company’s HR policies can yield direct effects on workforce engagement and diversity.
Real-world example: Greyston Bakery employs an innovative hiring model that uplifts marginalized and underemployed groups. Under its model, the employer does not ask employees for CVs or résumés, and does not conduct any interviews. Instead, candidates sign up to a waiting list and whenever a role opens up, the first candidate on the list is hired to prove themselves on the job. The approach has been successful in increasing staff availability, employee engagement, and employer trust. Greyston is now working with companies such as The Body Shop and IKEA to apply this open hiring concept.
Supply Chain Policies
Adopting supply-chain goals within an organization can create incentives for the use of social procurement, leading to the creation of internal impact and external business value.
Real-world example: Luxury car manufacturer, Audi, has created the Code of Conduct for Business Partners of the Volkswagen Group and outlined its Responsible Supply Chain Strategy. These policies were created to introduce mandatory requirements for partnerships. Since its implementation, Audi has been able to further its measures to participate in the circular economy, conduct human rights due diligence and create new technologies.
Integrating Social Innovation Principles into Business Strategy
To truly become forces for good, companies will ultimately need to adopt the core principles of social entrepreneurship – putting people and planet first – into their business practices. This involves the internalization of social innovation practices.
Real-world example: Yunus Social Business outlines eight functions for change in its transformation wheel that are based on a range of interviews with executives, academics and large-scale asset managers who have an interest in corporate transformation. It highlights three fundamental mindset shifts that are necessary to turn a company into a force for good: creating accountability for impact; establishing lasting, purpose-driven commitments; and engaging in collaborative systems thinking.
Choosing the Right Method of Engagement for Your Company
While there are many ways of engaging with social enterprises, there is no one-size-fits-all approach. As a starting point, the report recommends that companies first asses where they stand in their journey towards social innovation.
The report offers the framework below to help companies self-assess their position across four phases of that journey:
- Explore: Companies in this stage are just beginning to discover and develop relationships with social entrepreneurs. Leaders are typically interested in initiating or adding pilot programs that connect employees and business resources to social enterprises.
- Institute: Companies in this stage have gained some experience with social enterprises, and tend to have greater acceptance and enthusiasm among leadership. Pilot projects have matured into more significant business relationships.
- Champion: Companies in this stage have decided to holistically integrate social enterprise collaboration into their business through dedicated strategies, budgets and in some cases the creation of a separate group or department focused solely on social impact. They have several long-standing successful engagements, and are able to track progress towards collective goals through established KPIs.
- Transform: Companies in this stage have embarked on the journey towards internalizing social innovation principles across their core businesses, including the establishment of core product portfolios and social impact targets for all operational processes. They are held up as an example of best practice.
Regardless of where your company currently stands on its social innovation journey, engaging social enterprises presents a golden opportunity to not only expand your commercial prospects, but also amplify your impact.
Looking for a platform that can help you scale current initiatives, pilot new ones, and source innovative enterprises from over 100 countries to engage across these different methods? Partner with us on the TRANSFORM Support Hub!!