How companies can partner with social enterprises in their value chains
(Green Biz) – We have a hard road ahead to achieve the United Nations Sustainable Development Goals (SDGs) by 2030. But we’re seeing strategic global companies step up — setting ambitious targets and mainstreaming sustainability investments within core business strategy. Here, a company’s own value chain is an obvious starting point. How might a product’s journey from design to post-consumption better benefit communities and the environment along the way?
A growing number of leading companies are answering this question, in part, through partnerships with social enterprises. Social enterprises are mission-led organizations — for-profit or nonprofit — that tap market forces to explicitly create social or environmental impact. Catalyst 2030 (a global network of social entrepreneurs) and Resonance (a mission-led global consulting firm) recently completed new research exploring how companies are strategically engaging social enterprises in their value chains and beyond.
What we found is that social enterprises have much to offer: They’re testing and scaling innovative new business models that can help companies solve key sustainability challenges; reach underserved customer populations; and advance more ethical, more resilient supply chains.
When a company engages a social enterprise — as a supplier, a distributor or a B2B service provider — directly within its existing value chain, it takes money it would have spent anyway and directs it toward a partner that will also create social or environmental value.SAP found that by directing just 5% of its addressable procurement spend to social enterprises, it could unlock tens of millions of dollars each year for social impact.
When done right, value chain partnerships between corporations and social enterprises channel substantial resources toward creating impact and meeting corporate sustainability goals. (Indeed, SAP found that by directing just 5 percent of its addressable procurement spend to social enterprises, it could unlock tens of millions of dollars each year for social impact.) Such partnerships can also very effectively serve the broader strategic interests of companies. They can mitigate social and environmental risk, boost brand reputation, build inroads to new markets, unearth novel consumer insights and spark innovation.
3 ways social enterprises can partner within corporate value chains
From huge multinationals such as Johnson & Johnson and Unilever to smaller local firms, corporations around the world have started exploring collaboration with social enterprises. Such partnerships generally follow one of three formats: Social enterprises acting as suppliers; social enterprises acting as last-mile distributors; and social enterprises acting as innovative business-to-business (B2B) service providers.
1. Social enterprises as suppliers
Social enterprises can facilitate responsible sourcing by advancing sustainable production practices and ensuring fair labor. They can do this by acting directly as suppliers. For example: Vega Coffee helps its organic coffee farmers — 95 percent of whom are women — in Colombia and Nicaragua streamline the supply chain and increase their incomes by also processing, roasting and packaging their beans; Javara is working to sustain Indonesia’s food biodiversity heritage by helping local farmers, foragers and food artisans access national and international markets; and Evrnu’s innovative technologies upcycle discarded clothing into high-quality raw materials for the textile industry.
They can also act more indirectly, by advancing sustainability and equity at the first mile. Take GoodWeave, which helps companies ensure and certify that their supply chains are child-labor-free; MyAgro, which has a mobile layaway platform to allow smallholder farmers to purchase seeds, fertilizer and other critical farming inputs in small increments; eKutir, which boosts on-farm productivity and incomes by helping farmers in Asia and Africa access critical information, finance and markets through its Farmex mobile platform; and FairAgora, a Thai social enterprise with practical digital solutions for supply chain compliance, sustainability and fair labor.
Timberland, for example, has partnered with the social enterprise Other Half Processing to build leather supply chains from ranches that use regenerative grazing practices. And IKEA has partnered with social enterprises including Industree, which incubates and accelerates female artisan collectives in India and Africa. Such partnerships have helped IKEA create over 30,000 jobs across six countries while unlocking competitive differentiation with a changing set of unique, handcrafted products.
2. Social enterprises as last-mile distributors
Many global companies struggle with how to best connect with “last-mile” customers in emerging markets. This is a challenge that social enterprises are well-positioned to help solve. Through their deep know-how, innovative new business models and existing local networks, social enterprises can help companies better understand and access hard-to-reach markets.
Such collaboration benefits companies as they hunt for new market opportunity. But it also, more importantly, brings needed products and services to traditionally underserved consumers.There needs to be strong commitment and motivation among leadership and key business units in a company to support the growth of social enterprise partnerships.
Examples of social enterprises that act as distribution partners include Kasha (a mobile e-commerce platform that confidentially sells and delivers women’s health and personal care products in Rwanda), mPharma (which has partnered with major pharmaceutical companies to get medicines more affordably and reliably to African consumers) and Kidame Mart (which empowers rural female entrepreneurs in Ethiopia to provide last-mile distribution of fast-moving consumer goods).
3. Social enterprises as B2B service providers
Social enterprises can help companies advance sustainability and social responsibility initiatives not just at points of supply and distribution, but all along their value chains and operations. These partnerships present a wide range of possibilities.
The social enterprise mPedigree, for instance, provides brands and consumers with a way to protect themselves from counterfeit products; Guild Education partners with major companies to offer higher education and reskilling benefits to corporate employees; and Closing the Loop provides companies a creative waste-compensation solution to facilitate waste-free procurement of electronics.
Although the value chain’s first and last miles generally present the lowest-hanging fruit for partnering with social enterprises, it’s important to keep an open mind to the full range of potential opportunities.
How to prepare for and pursue partnerships
Partnerships between social enterprises and companies can be immensely rewarding — but they don’t happen overnight. It’s important that companies first lay the internal groundwork for successful collaboration.
To start are policies, systems and timelines in place that will allow the flexibility, support and runway that early social enterprise partnerships may require? Social enterprises, after all, may not be accustomed to working at the scale or under the same stringent criteria as multinationals.
Next — and critically — internal buy-in can make or break any partnership. There needs to be strong commitment and motivation among leadership and key business units in a company to support the growth of social enterprise partnerships. Without this support, a company’s partnership champions will be fighting an uphill — and likely unsuccessful — battle.
Here, a good place to start is to understand the key performance indicators (KPIs) of key business units, such as procurement or marketing, and build a case for partnership around these targets. Even better, find ways to align these KPIs with social impact and sustainability objectives — an effort in which executive sponsorship and support will be vital for success.
Even when the necessary support is in place, some companies abandon their partnership efforts because of the difficulty in finding qualified and well-matched social enterprise partners — a search that often must be done country by country, market by market.
Here, trusted intermediaries — such as the Social Enterprise World Forum, Aga Khan Foundation, Acumen or Ashoka — can act as conduits, helping corporates connect with aligned social enterprises. Further, software platforms and databases such as SAP Ariba, Good Market, SupplyChange and Thomasnet can be valuable tools, allowing companies to search for sustainable suppliers and B2B service providers.
Today’s business climate is making it both more necessary and more possible to partner with social enterprises. Integrating such collaboration into corporate value chains, although not always easy, presents an opportunity for big returns — for people, planet and companies.
Some of the above content was excerpted and/or adapted from the recently released report “Catalyzing Collaboration: How & Why Corporates & Social Enterprises Should Partner to Achieve the Sustainable Development Goals.”