Of the 17 Sustainable Development Goals, the 17th is the odd one out. As “Partnerships for the Goals”, it is a goal that helps you get to the other 16 goals. For most businesses committed to sustainable development, however, this 17th goal may be the most essential – and challenging — one to accomplish.
Consider a company such as Unilever , routinely considered among the most sought-after of employers. According to CEO, Paul Polman, Unilever is so in-demand because it is perceived to be a “place of purpose.”It turns out, much of the company’s “purposeful” activity is done in collaboration with employees of organizations outside Unilever. In addition to the extensive list of partners and consortia cited on its website, it steadily continues to add new partners with a variety of specialist areas of expertise — a consultancy,2degrees, to achieve zero-waste in its supply chain, International Flavors & Fragrances Inc. to enhance the livelihoods of Haitian smallholder vetiver farmers, the environmental charity, the Hubbub Foundation, and food waste specialist, Wrap, to help cut food waste in the UK, to pick three very recent examples.
It cannot not be easy for large globally dispersed corporations, such as Unilever, to work with such a disparate network of partners ranging from businesses, large and small, to NGOs, foundations and governmental organizations. Each has very different goals, structures, incentives and cultures. Unilever is exceptional in its management of an extensive partner network, a hard act to follow. As we learned from ourInclusion Inc. research initiative, for most companies with more limited resources, the key to success would be to invest deeply in fewer partnerships to focus on strategic relationships, establishing trust and building bridges across natural organizational chasms. Dan Henkle, Senior Vice President of Social Responsibility atGap GPS -0.11%, Inc., spoke of the benefits of consolidating their supplier base, for example – increasing leverage, the ability to share knowledge and conduct more thorough monitoring. “Back when we had 3,500 factories and thousands of vendors, we had less of a partnership,” he said.
Our research reveals five principal criteria to strategically select partners based on how they can create value for companies investing in sustainable development:
As companies expand into disadvantaged and underserved market segments, they confront significant gaps in the value chain. Partners with specialized local expertise are, often, essential for closing the gaps.
According to Rodney Hines, Director of Community Investments at Starbucks SBUX +1.67%, the company planned to open “new stores in economically challenged communities where [Starbucks] will be a part of the continued economic development of those communities, but not in an effort to move those communities further along towards gentrification.” The company contributes to economic development by hiring locally and sourcing local products. To this end, Starbucks has a partnership with YouthBuild USA, an NGO that helps low-income youth gain the skills they need for employment, and the Shultz Family Foundation, to create a career development program for at-risk youth.
For a strategic partnership to work, the benefits must run in both directions. Sangeeta Tyagi, President of YouthBuild USA, explained that the partnership is valuable to them because “One of the elements of all our corporate partnerships, including with Starbucks, is that the companies have workforce needs. They need workers who […] have the skills and training coming into the company.”
Extending Reach into Local Contexts:
While a company’s vision for sustainable development might be set at the center, the execution happens at a hyper-local level. Large companies do not have natural advantages in serving disparate communities that require a highly customized on-the-ground presence. This explains why Barclays partners with local NGOs with a better understanding of the needs of customers in its inclusive business activities. Rural farmers, for example, are not the natural clientele for Barclays. Moreover, there is plenty of skepticism to overcome – of an international bank interested in making a profit, rather than investing in social impact for its own sake. Barclays’ strategic partnerships with NGOs are useful in confronting this perception problem as well, because if NGOs are trusted in the communities in which they operate that trust is extended to Barclays, as well.
The partnerships may be jeopardized as Barclays consolidates its global operations and reduces its activities in key developing regions, such as Africa, to re-focus in the near-term on more immediate imperatives. On the other hand, if it wishes to retain an option expand in the future, sustaining the partnerships could prove to be an essential vehicle.
Considering the magnitude of the problems in the developing regions, the solutions that companies offer must be scalable – otherwise they are likely to remain purely token gestures. Essilor, for example, relies on a partner network to implement its inclusive business initiatives at scale. Greater awareness of vision-correction issues is essential to promoting Essilor’s eye-care products to new demographics; therefore, it works with NGOs and other multinationals to raise awareness of access to eye-care as a key health issue.
Essilor’s network includes NGOs with local expertise and access; advocacy organizations and multilateral organizations to promote the “vision” agenda; academic institutions, which provide useful research and talent; and private sector companies, governments, and development banks with shared interests, that can run programs and share costs. It even views cross-industry private-private partnerships as opportunities for scalability. For example, insurance, automobile, and eye-care companies could create joint initiatives to raise awareness of eye-care, as accidents could be avoided with good vision.
De-risking and Making the Business Model Work
Building a business in the developing world is particularly challenging for companies in industries where shareholders expect high margins. For example, bio-pharmaceuticals for developing world populations are limited by scarce R&D resources, where drugs have to be paid out-of-pocket by consumers. Given China’s improving healthcare system and increasing presence of payers, Genzyme, for instance, is looking for ways to engage in the market for the longer-term. It has partnerships with local entities to ensure treatment delivery and product affordability for patients. Genzyme Humanitarian Programs provides therapies free of charge, while simultaneously working with governments and other local entities to identify sustainable, long-term financial resources for treatments.
A key objective for Genzyme is to find ways to subsidize the cost of treatment for patients with the help of partners until the market develops. According to Genzyme CEO, David Meeker, “It’s not until a government, no matter how poor, how big, or how small, makes a commitment to these areas that you begin to move to sustainability. They begin to pay attention, the disease gets championed, and the right things begin to happen.”
Mitigating a Free-Rider Problem
One of the reasons why companies under-invest in sustainable development is because it creates a “public good”: even competitors in the industry can get to free-ride on benefits created (e.g. more robust supply chains, distribution systems to hard-to-reach consumers, substitutes that compensate for institutional voids). A possible approach to mitigating such concerns is to launch industry-wide initiatives that involve all beneficiaries to jointly make public commitments, which reduces the incentives to free-ride.
We learned about several such industry-wide efforts led by companies we interviewed: Gap Inc., BP and Olam, for example.
People stand and watch as rescue workers search for victims amongst the debris of the collapsed Rana Plaza building in Dhaka, Bangladesh, on Friday, April 26, 2013.Photographer: Jeff Holt/Bloomberg
Since the Rana Plaza factory collapse in Bangladesh, Gap Inc., Inditex and Primark have signed up to the The Bangladesh Accord on Fire and Building Safety and Alliance for Bangladesh Worker Safety, two multi-stakeholder groups set up to tackle health and safety in Bangladesh’s garment industry. For its part, BP is a sponsor of the Oil and Gas Climate Initiative, a collaborative industry initiative for best practices and information sharing to deliver practical solutions to climate risk. Olam helped coordinate the Building Sustainable Futures Forum in Singapore, where it brought its entire industry together to address the issue of investing sustainable development.
Companies have traditionally been optimized around business units that carry out contractual transactions with parties on the outside. The pursuit of SDG 17 raises the bar on what companies need to get better at: managing a diverse network of partners to accomplish sustainable development. Unilever’s Paul Polman said it best when he spoke to us: “We are creating a much stronger ecosystem that takes our risk away, but it also creates enormous opportunities to broaden our products. Because once you work in partnerships often with governments or with civil society, it creates other opportunities to grow your business.”
Others can follow Unilever’s lead. Even with more limited resources, if they focus and strategically invest in these partnerships, there are payoffs not only in terms of advancement of the sustainable development goals but also for the companies themselves.
Bhaskar Chakravorti is the Senior Associate Dean of International Business & Finance at The Fletcher School at Tufts University. He is also the founding Executive Director of Fletcher’s Institute for Business in the Global Context and author of the book, “The Slow Pace of Fast Change.” The research reported here was supported by Citi Foundation.