When corporations and social enterprises work together, they can change the world

With the world reeling from the effects of COVID-19, climate change, and social inequality, and the risks of a global supply chain crisis mounting, business is feeling the pressure to set new commitments for operating in ways that respect human rights, promote environmental sustainability, and increase social impact—but they face an enormous set of challenges to get there.

The transformation from a shareholder-focused model to a stakeholder model requires innovation, adaptation, and new partnerships on an unprecedented scale. An untapped opportunity to achieve this shift is for corporations to team up with social entrepreneurs.

Over the past two decades, social entrepreneurs have demonstrated their capacity to lead with new ideas, new business models, and new ways of operating that can accelerate the transformation required. And in the past two years, as they have stepped up as first responders to the pandemic — often filling critical gaps left by overwhelmed formal services — the value they bring has become even more obvious.

Pioneering businesses are already harnessing the power of social entrepreneurs to drive innovation and change. Under the World Economic Forum’s COVID Response Alliance for Social Entrepreneurs (CRASE), Acumen, a non-profit impact investment fund, with the support of IKEA Social Entrepreneurship, launched a new report this week surveying more than 150 social enterprises to better understand what it takes for them to be ‘corporate-ready’ and the impact of these business partnerships. The report includes 100 inspiring examples of social enterprises doing business with corporations from across regions and industries to solve business challenges while driving major progress on sustainability and inclusion goals.

A companion report, The Social Procurement Manual, also launched this week by Yunus Social Business in partnership with Porticus, under CRASE, looks at the demand side of these partnerships: how to integrate social businesses into corporate supply chains. This practical guide brings together lessons from industry leaders who have successfully initiated social procurement projects within their organizations including Unilever, The Body Shop, Deloitte, and PwC and provides best practices, tools and frameworks for other corporations looking to initiate or scale these partnerships

These two unprecedented studies provide three key insights into the potential for social enterprise as an engine for change in corporate supply chains.

While the popular view of social entrepreneurs may be that they are more akin to civil society organizations than to business, across the world these organizations are demonstrating that they have a compelling solution or offering for corporate customers and the business capacity — including supply and demand management, access to capital, and access to the right capabilities and skills — needed to be reliable suppliers.

Over half of the respondents to the survey of the report ‘Corporate-Ready: How Corporations and Social Enterprises do Business Together to Drive Impact’ said that they have been selling to corporations for over three years and 72 percent have five or more corporate customers. Over 30 percent of the social enterprises had annual revenues over $1 million, with 50 percent or more of those revenues coming from corporate customers. The Yunus Social Business study meantime found that the majority of corporations interviewed found social businesses to be competitive with traditional suppliers especially on quality, supply assurance, and price.

Successful examples of collaboration between corporates and social enterprises yielding social impact are common. In addition to finding social enterprises to be competitive suppliers, Yunus Social Business found that 55 percent of corporations surveyed also reported an “impact premium” comprising non-financial spillover benefits such as business model innovations, improved brand equity and employee engagement.

In fact, the collaboration is usually beneficial for all parties. For example, when Brazilian urban mining social enterprise Green Mining was recruited to an accelerator programme by AB InBev, the world’s largest beer brewer, the partnership created a chain of positive impact. AB InBev was able to achieve their circular packaging goals, increase transparency in their supply chain, and demonstrate compliance with Brazil’s environmental regulations.

Green Mining meantime has expanded its corporate client base to two dozen clients and is exploring expansion into Europe. Since their first pilot in 2018 with AB InBev, Green Mining has collected over 2 million kilograms of trash for reuse and kept 330,000 kilograms of CO2 from being emitted into the atmosphere. And by working directly with corporations, the enterprise has been able to provide a much higher salary to the waste pickers that work for them.

Social enterprises are designed with social and environmental purposes at their core and are well placed to provide concrete evidence of progress on key corporate social and environmental indicators. One third of the social enterprises surveyed in Acumen’s report measure their impact every year, with over half measuring impact more frequently. Thirty six percent have third-party quantifiable evidence of impact (e.g. a research study). Furthermore, 75 percent of the social enterprises surveyed tie their impact metrics to the United Nations Sustainable Development Goals (SDGs) with poverty, gender equity and decent work as major areas of focus. By contrast, a 2021 study by the World Economic Forum, found that only 38 percent of mainstream companies were able to align their impact with the SDGs.

The relationship between corporations and social entrepreneurs – two very different entities – is not always smooth sailing. Seventy seven percent of social enterprises report challenges related to their corporate partnerships, especially in agreeing on pricing and payment and delivery terms. However, very few reported challenges related to product quality or compliance.

Some innovative ways that corporations in partnership with social enteprises have devised to address these typical barriers include paying in advance, supporting capacity building accelerators, and providing access to in-house expertise. For example, Promethean Power, a thermal-energy-powered agricultural company in India that provides much-needed refrigeration to smallholder milk producers, and sells their produce on to many of India’s largest dairies and food producers, negotiates discounted pricing with corporates in exchange for pre-financing.

The Social Procurement Manual provides valuable guidance for corporations that want to understand structural barriers within their institutions and embrace this opportunity. And, Yunus Social Business is looking to launch a support program in 2022 that facilitates commercial partnerships between companies and relevant social businesses.

The insights from our 100 corporate-ready social entrepreneurs and related research are showing us that there are diverse pathways to navigating partnerships between corporates and social enterprises, and that all of these have a unique ability to deliver against corporate impact and sustainability goals, reaching the people who need it the most.

The urgency of the moment dictates that we all have to step up and take action together. Alongside other ways that corporations are supporting the social entrepreneurship movement, including corporate philanthropy and employee engagement, our research shows the breadth of alignment and impact possible, when corporations use their spending, or procurement, to purchase goods or services from social enterprises.

And with an estimated $13 trillion annual global procurement spend, there is tremendous potential for scale, and a true transformation of business.