On April 12th, Acumen and the Skoll Centre for Social Entrepreneurship hosted a workshop in Oxford, England with representatives from large corporations and smaller social businesses from around the globe. At the workshop, entitled “Beyond Dialogue,” we asked: How can we build business models that truly serve the poor through collaboration among corporations and social enterprises? We wanted to see what large corporations and social enterprises could learn from each other to build businesses that are not only scalable and financially viable but also inclusive of poor and marginalized communities and environmentally sustainable.
Over the last three years, Acumen has made an effort to bring together these two types of businesses, and the interest in collaboration has been strong and growing. But there are still too few examples of successful, scaled collaborations between corporations and social enterprises. Right now, the examples that do exist are not well understood. More depth and honesty about the challenges involved are needed to illuminate what works and what doesn’t.
Why is it so hard for corporations to collaborate with social enterprises? We know that corporations and social enterprises are two different animals: one large and well resourced, often legally required to fulfill a fiduciary duty to investors but increasingly interested in combining social and financial objectives, and the other smaller and scrappier, but focused on becoming profitable while driving social impact.
The problem is what I call the “Alignment Trap.” Easy rhetoric about the need for corporations and their partners to align their goals sometimes masks a business-as-usual approach that can make partnerships focused on social impact impossible. Too often the goals of the corporation—maximizing short-term profit or growth— remain unchanged while the social enterprise’s goals are given second place in what should be a partnership of equals. The conversation needs to move beyond alignment and we need to redefine what “success” means, otherwise partnerships may be doomed to fail when the partnership requires not just that both parties agree, but that both parties evolve. In real-world partnerships between corporations and social enterprises, the higher risk and long-term nature of investment in business model innovation clashes with short-termism and low appetite for risk of most mainstream business operations, even if both parties started out believing their goals were aligned.
During my time as Acumen’s Director of Strategic Partnerships, I have been part of a number of discussions where social enterprises were told “You need to speak the language of the corporation,” “You need to show how you are helping the business in the short term” and “If you can’t show how this leads to a billion-dollar business, it’s not interesting.” I now believe this kind of language can be detrimental to new models of collaboration. But I have also heard a new language from both social enterprise leaders and many in the corporate world that speaks to the willingness to take risks, consider long-term issues, and integrate social and environmental values into decision-making. MARS Catalyst is one such example.
Over the last decade, Mars, Incorporated, through its internal think tank Catalyst, has undertaken research that led to some startling new ideas about the role of business beyond profitability. This work has in particular led to valuing other types of capital besides financial capital including social capital (the wellbeing of the community), human capital (the wellbeing of the person) and natural capital (the value of natural resources). The hypothesis that Mars is testing is that these non-financial assets actually provide the foundation for financial capital to flourish. Promising patterns have emerged from this pioneering research suggesting that businesses that look to ensure that all stakeholders are successful, can be more successful than businesses that focus on just their shareholders.
This interest in redefining the “right way” to do business suggests that alignment may be less important than vision and a willingness to change.
More and more corporate leaders are beginning to embrace the potential that large businesses have to drive positive social impacts. Unilever, for instance, has made a commitment to a fully sustainable agricultural supply chain that improves not just the yields but also the livelihoods of smallholder farmers. To achieve this goal by 2020, the company has partnered with Acumen and many others to work with smallholder farmers on issues of health, productivity and access to water and sanitation. Levi Strauss is teaming up with social enterprises in Bangladesh to find new ways to improve the lives of garment workers and has partnered with Business for Social Responsibility’s HERproject to make formal employment a pathway out of poverty for women. Through its Enterprise Growth Services, EY, the global consultancy, has sent its personnel to work with more than 30 social enterprises in Ghana, Liberia, India and beyond to tackle their biggest business challenges on the same terms as EY’s largest clients but at a 90 percent discount to make the projects affordable.
Each of these company’s initiatives represents a significant shift in standard business and continues to evolve to pursue greater impact through partnerships. Increasingly corporations are seeing social enterprises as key allies in their efforts to achieve social and sustainability objectives through their business. MARS, Unilever, Levi’s and EY have each identified social enterprises as a core part of their efforts to drive social impact into their business model, and you can be sure it is leading at times to tough conversations about how those partnerships align with traditional business goals. At Acumen, we are working to facilitate more engagement between our social enterprises and large corporations. Each of these engagements begins with an alignment of goals and a desire to work together to support both social and financial objectives, but also requires a long-term commitment to adjusting along the way.
Social enterprises and corporations need each other to achieve the social impact and growth they both seek. Social businesses face tremendous challenges due to their smaller scale, scarce resources and the low-income populations they are trying to reach, but these innovative companies know they need to be nimble, flexible and open to change as they learn from the people they serve. Their corporate counterparts are naturally less flexible but they can no longer use the constraints of traditional business as an excuse to resist change or allow their bottom-line business objectives to shape and define every partnership. Everyone needs to flex a little to make these partnerships work.
Collaboration is as hard as it is important. Vast differences in structure, available resources and timescales are daunting challenges that require both parties to be willing to step out of their comfort zone and embrace change. Later this year, Acumen and the Skoll Centre will publish a new report with support from the Levi Strauss Foundation to share what we’re learning so we can find better, more effective ways for social enterprises and corporations to collaborate.
Corporations are challenging the status quo, talking about ideas like inclusive business, shared value and sustainable capitalism. Where these ideas come to life is in the willingness to make day-to-day decisions in a new way, challenge the way business is done and face the risk of trying something that may never have been done before.
This is the moment to go beyond alignment—and start to talk about real change.