We are entering an era where most conventional companies agree that business as usual is no longer an option. In order to accelerate their shift towards more sustainable and inclusive business practices, more companies are realising the potential of a new type of coalition: the coalition between a company and its corporate social investors.
The global pandemic has certainly changed the role of business in society forever. Even business leaders who may have questioned the responsibilities of companies in driving societal progress in the past must now acknowledge that “business as usual” is no longer an option. Companies are therefore increasingly looking to transition towards more sustainable and inclusive business practices.
To help companies accelerate on this path, we find that one particular type of coalition is gaining more momentum among European companies: the coalition between a company and its corporate social investors.
Corporate social investors are legal or organisational structures related to a company with the primary objective of creating societal impact, such as corporate foundations, corporate impact funds, corporate impact accelerators or corporate social businesses. They do so by providing social purpose organisations (e.g. NGOs, social enterprises) with capital in the form of grants, debt and equity, alongside expertise and non-financial support.
With a corporate social investor’s deep expertise on societal challenges and close relationship to the business, they can be a valuable partner for companies to advise them on societal needs, help scale inclusive business solutions, and build a learning lab for new innovations. Here is why:
(1) Societal needs:
On the one hand, corporate social investors work closely with disadvantaged communities, civil society organisations, NGOs, governmental institutions and other stakeholders. They therefore deeply understand the broader socio-economic context of low-income populations and society’s needs. These insights can be a valuable asset for companies that are trying to understand how to develop more inclusive services and products that respond to people’s needs and preferences. Take the example of Schneider Electric, the French electrical equipment company that also created an inclusive business to develop sustainable and affordable energy products for low income populations. The company can thereby also build on the expertise and insights of Schneider Electric Foundation and the Schneider Electric impact funds to understand the communities’ needs to develop more relevant and meaningful products (for more information, take a look at the case study here).
(2) Scaling inclusive business solutions:
Corporate social investors can also test and incubate novel solutions to pressing societal issues. As they do not (or not primarily) seek financial returns, CSIs can provide risk-tolerant and patient capital to early-stage social enterprises and innovations until they can demonstrate proof of concept and are mature enough to partner with big companies. Take the example of Dutch cooperative bank Rabobank, Rabo Foundation and the Rabo Rural Fund that collectively support farmer-based organisations and cooperatives. Rabo Foundation supports early-stage smallholder farmer cooperatives in developing countries, while the Rabo Rural Fund can provide them with the next step financing during their pre-commercial phase. During the last development stage, Rabobank can offer their experience around making agricultural value chains more effective and sustainable, or facilitate introductions with clients, such as retailers or food producers that could become buyers from farmer cooperatives (for more information, take a look at the case study here).
(3) Learning lab for innovation:
Finally, corporate social investors can also act as an important learning lab for the company. Corporate social investors are often more willing to invest in and support transformative and bold solutions to societal challenges, while companies may tend to invest more in incremental initiatives that are close to their own value chain. This means that corporate social investors can provide an important compass for the company to learn from and be inspired by the latest developments in inclusive and sustainable products and services. For example, Renault, the international car manufacturer, founded Renault Mobilize, a social impact fund dedicated to developing inclusive and social businesses that give disadvantaged people access to mobility. By supporting social businesses that develop innovative mobility solutions for low-income segments, the fund’s learnings could potentially inspire the company to explore new inclusive business solutions in the long-term (for more information, take a look at the Renault Mobilize case study here).
The points above are just some of the many opportunities that practitioners shared with us. For that reason, we believe that coalitions with corporate social investors, e.g. corporate foundations or corporate impact funds, are a great opportunity for companies looking to set loftier impact ambitions for themselves and accelerate their transition towards more inclusive and sustainable business practices.