Accelerating BoP Development at the Intersection of CSR & Impact Investing
Editor’s note: The following is one of several previews posts leading up to September’s SOCAP 11 Conference in San Francisco.
Innovation in base of the pyramid development flourishes at the intersections.
Through a new collaborative model, the BoP management strategy and innovation firm, I-DEV International, focuses on the intersection of multi-national corporate interests and impact investing to build lasting, profitable, and high-impact SMEs at the base of the pyramid.
Jason Spindler, I-DEV’s managing director and founding partner, took a minute to explain to me a new organizational focus they’ll highlight at the upcoming SOCAP 11 Conference in San Francisco. I-DEV calls it “Collaborative Capitalism”, a partnership model involving a multinational corporation (MNC), an impact investor, smallholder producers, and a BoP strategy organization like I-DEV. By leveraging capital from the impact investor in conjunction with CSR investment from the multinational corporation (MNC), the partnership focuses on building the capacity of the smallholder farmers, fisherman, or artisans and integrating them into the MNC’s supply chain.
For example, through a joint initiative with Opportunity Collaboration and Playa Viva Resort, I-DEV is currently working with Club Med – Ixtapa, a Mexican government financed social venture capital fund, and a local artisanal sea salt cooperative of 150 farmers, to supply the hotel with 100 percent of its kitchen and table salt, and luxury bath salt products for its gift baskets and boutique. The hotel even plans to organize tours for its guests to the salt lagunas, where the co-op harvests natural sea salt with the same organic techniques used by their Aztec ancestors.
Collaborative Capitalism encourages MNCs to engage with BoP businesses as a constructive way to utilize funds from CSR departments directed at producing social good, while also improving efficiency and quality in their supply chains. The link to their core business ensures that the company is funding an initiative with bottom line impact instead of making a peripheral, purely philanthropic investment.
By entering into a partnership with the MNC, the impact investor provides capital to the smallholder farmers for infrastructure upgrades, management and other investments with the assurance that products produced by their investee will in fact reach markets, eliminating much of the top-line sales risk and improving returns.
The small holder producers in the partnership receive professional management training and strategy support from an on-the-ground organization such as I-DEV, while receiving capital investments from two sources (MNCs and impact investors) and a purchaser for their products (the MNC).
I-DEV manages the partnership and provides strategy support to all organizations in the value chain with a special focus on improving the operations of the smallholder producers.
Overall, the investment allows the BoP producers to create higher-quality products, improving the quality and efficiency of the MNC supply chain, while linking CSR investments back to the core business of the MNC, and providing higher rates of return to the impact investor. It’s one of those win-win-win-win situations that we love to hear about.
I-DEV currently partners with a number of impact investing funds to do work on performance improvement with portfolio companies and investment sourcing. As they deepen their engagement at the intersection of MNCs and impact investors through “Collaborative Capitalism” based relationships, they expect the impact from their work to increase exponentially.
To get a deeper perspective on their process and progress to date, join Spindler in San Francisco at SOCAP 11 for a panel titled Financing for Leverage, Scale and Impact, at 4:45pm on Wednesday, Sept. 7 and Patricia Chin-Sweeney, I-DEV’s New York Director, for the Innovations in Conservation Development panel at 1:45pm also on Sept. 7.