Davos Agenda

This is why the private sector just came out in support of the social economy

From employee ownership to outcome-based funding, solutions in the social economy abound.

From employee ownership to outcome-based funding, solutions in the social economy abound. Image: Unsplash/Kenny Eliason

Alexandra van der Ploeg
Senior Vice-President, Corporate Social Responsibility, SAP
Jonathan Wong
Chief of Innovation, Enterprise and Investment, United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)
Daniel Nowack
Head, Global Alliance for Social Entrepreneurship, World Economic Forum
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Davos Agenda

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  • The United Nations General Assembly adopted a resolution recognizing the contribution of the social and solidarity economy towards sustainable development.
  • Private sector representatives presented an open letter to the United Nations Inter-agency Taskforce on the Social and Solidarity Economy, offering their support to advance the social economy.
  • Scaling social economy solutions requires collaboration across industry leaders and the public and private sectors. Tested models of collaboration include social procurement, outcomes-based funding and employee ownership.

In April 2023, the UN General Assembly took a significant step toward shaping a more inclusive global economic structure by adopting a resolution on “Promoting the social and solidarity economy for sustainable development.” It recognizes the unique contribution of social and solidarity economies toward sustainable development, focusing on social inclusion, environmental sustainability and economic growth. The resolution signals an increasing awareness of the need for a more equitable economic system.

Recognizing the need for sustainable development is one part; delivering on it requires collective action. While the resolution sets out recommendations to support the development of social and solidarity economies, it is our joint responsibility to turn these into real-world impact. Collaboration across sectors will be the key to unlocking the social economy’s potential.

In the spirit of collaboration, the Forum’s Sustainable Development Impact Meetings 2023 convened a group of social economy representatives – both public and private sector leadership – to discuss the implementation of the resolution on the social economy. It unearthed examples that already show how collaboration between the public and private sectors supports the development of the social economy.

At the meeting, Alexandra van der Ploeg and Jean-Philippe Courtois presented an open letter to the chair of the UN Taskforce on the Social and Solidarity Economy, offering the support of the private sector in the implementation of the resolution. It represents more than 30 private sector members at the Global Alliance for Social Entrepreneurship, who are not just eager to continue their partnerships with social innovators around the world but also to explore the growing opportunities to integrate principles of the social economy into the way they work.

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How collaboration unpacks potential

Social procurement

Social procurement is at the intersection of business efficiency and social and environmental responsibility. It’s an approach where companies integrate social entrepreneurs into their supply chains.

Social entrepreneurs find business opportunities that contribute positively to the greater good, making social and environmental impact. This direct integration serves dual purposes: it offers financial support and opportunities for scale to social enterprises. It also allows businesses to align their operations with social and environmental responsibility goals.

Leaders such as SAP, IKEA, Unilever and eBay have pioneered this domain. For instance, these corporations create a win-win situation by setting up procurement partnerships with local artisans or sustainable suppliers.

Their businesses benefit from unique, ethically sourced products and local entrepreneurs receive a reliable revenue stream. To support the ecosystem, SAP has partnered with the Social Enterprise World Forum (SEWF) to introduce scale verification systems, allowing companies to identify and partner with social innovators more rapidly.

The European Commission, through its Social Economy Action Plan, has spotlighted the need for public social procurement. This plan created a consortium with key players like Buy Social, Euclid Network or Yunus Social Business. Their combined aim is to fortify the European ecosystem for social procurement.

Borge Brende, President of the World Economic Forum, emphasizes the importance of collaboration between the public and private sectors in promoting social procurement. Historically, the Forum's First Movers Coalition has demonstrated that such cooperative efforts can significantly boost demand for sustainable technologies. A similar initiative centered on social impact, specifically social procurement, would be timely and send a positive message to the broader ecosystem.

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What is the Global Alliance for Social Entrepreneurship?

Outcome-based funding

Outcome-based funding combines financial returns with measurable social or environmental impact. It ensures funding for a good cause and tangible, positive results.

Social impact bonds are the most commonly known example of this idea. Funders interested in a social outcome (outcome payers) set specific social goals and the bonds’ returns are based on achieving these goals.

Variants of these principles have emerged around the world. The SK Group, for instance, introduced Social Progress Credits, which provide social innovators with an added revenue channel. African restaurant chain Nando’s has created a social impact bond for malaria in Mozambique. With partners like Coca-Cola, this bond underscores the potential of collaborative efforts to address global challenges.

Scaling outcome-based funding often encounters hurdles such as complex legal structures or the cost of third-party impact verification. Many suggest that the solution lies in robust public sector engagement. When public institutions endorse and support these models, it boosts their credibility and appeal to private investors.

Collaboration between public and private sector actors has significant potential in mobilizing critical resources supporting the social economy with private sector support commitments. The Global Alliance invites companies to join its members in creating societal impact and driving value for business through social innovation. With the help of outcome-based funding, public sector actors can ensure that these resources are used most efficiently to generate social outcomes.

Employee ownership

Employee ownership is rooted deeply in the principles of the social economy and emphasizes the equal distribution of value among those who create it. Whether through cooperatives or employee stock ownership plans, the idea is to give workers a stake in the businesses they contribute to.

As ownership transitions become a reality for many family-owned businesses, several consider employee ownership structures. This growing trend has also motivated large private equity firms like KKR and TPG to engage in the Ownership Works initiative – a pledge to give employees ownership in their portfolio firms. And so KKR’s latest acquisition of the publisher Simon & Schuster was largely based on developing a broad-based equity ownership programme for its 1,600 employees.

In the United States, this trend received legislative support with the Employee Equity Investment Act (EEIA). This act aims to match private sector funding for ownership transitions, promoting broader employee ownership.

In many ways, the social economy inspires inclusive and fair pathways towards a more sustainable economy. Employee ownership, a cornerstone principle of the social and solidarity economy, is just one example of adopting social economy aspects into mainstream business. Collaboration between public and private sector actors ensures that these principles transition into the mainstream economy and thus scale beyond the active organizations in the social economy.

An interactive ecosystem map highlighting partnership pathways between companies  and organizations supporting social entrepreneurs.
An interactive ecosystem map highlighting partnership pathways between companies and organizations supporting social entrepreneurs. Image: World Economic Forum

Towards a collaborative future

These examples showcase that cross-sector collaboration can significantly advance the social economy and create pathways for businesses to genuinely integrate social innovation principles in their operations, thus transforming the economy at its core.

Looking ahead, implementing the UN Resolution will require industry leaders and the public and private sectors to collaborate and translate the commitments into actionable strategies. The Schwab Foundation and the Global Alliance for Social Entrepreneurship act as bridges between policy intentions, proven social innovations and on-the-ground realities. They will work with the UN inter-agency Task Force on the Social and Solidarity Economy to enable continuous, productive engagement and, where relevant, complement public sector efforts supporting the social economy with private sector support commitments.

The UN’s resolution has laid the important groundwork and created global recognition for the social economy. It is the beginning of a journey towards a truly inclusive and sustainable economy that can yield positive outcomes for society, planet and business.

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Related topics:
Davos AgendaSocial InnovationEconomic Progress
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