Stephanie Schmidt

How are Hybrid Value Chains different from CSR, BoP, Inclusive Business?

Editor’s Note: This is the second of a series of blog posts from Ashoka, (a NextBillion Associate Partner) on the impact of Hybrid Value Chains. The first post by Chloe Feinberg, can be found here.

If you’ve read the latest Harvard Business Review article “A New Alliance for Global Change” co-authored by Ashoka CEO Bill Drayton and Vice-President Valeria Budinich, you may wonder about the actual differences between a Hybrid Value Chain (HVC), Corporate Social Responsibility (CSR), Base of the Pyramid (BoP) and Inclusive Business (IB) .

The field of market-based approaches to address social and environmental issues is still too nascent to start arguing over terms, but it may be worth clarifying some fundamental differences.

Ashoka’s Full Economic Citizenship initiative was born in 2003 to promote Hybrid Value Chains as a new framework that fundamentally transforms how the private sector and citizen sector collaborate to address global issues that neither could address on their own. HVCs harness the skills of the citizen sector and the private sector with the goal of profitability and social impact for corporations, citizen sector organizations (CSOs*) and consumers. I am privileged to be one of the 15+ Ashoka FEC team members, spread over Washington D.C., Mexico, Colombia, Brazil, India and Egypt, leading this effort through relentless engagement of business and social leaders and work on hybrid business models.

Today’s Landscape

Historically, there has been little engagement or dialogue between corporations and CSOs. However, within the last 30 years, CSOs have become more entrepreneurial, competitive, and effective in terms of productivity and scale. This evolution creates new opportunities for CSOs and businesses to jointly engage, by developing new markets that address key social or environmental needs such as the housing deficit, access to health care and productive technologies for small farmers. The current boom in low-income housing for the informal sector in India is a great example of this collaborative entrepreneurship trend. Until recently this USD270 billion market hardly existed because important elements and players were missing.

Now CSOs, real-estate developers and financial institutions are working hand in hand to enable slum dwellers to acquire better homes and build assets for their families. These CSOs range from grassroots organizations that are well-positioned for consumer education in the slums and facilitating credentials required for a mortgage, to actual venture partners that take equity in new social businesses in order to better shape the housing offer to suit community and family needs.

Our Common Goals

HVC, BoP and IB do share the goal of tapping into the potential of businesses to scale up solutions for low-income markets (although HVC is not low-income specific and targets unserved markets in general). The three approaches are aiming for economic profitability as the foundation to ensure sustainability and scale, and seek to leverage the core skills and expertise of companies to ensure effectiveness and impact, as opposed to corporate projects that are remote from the company’s main business. While CSR initiatives typically focus on complying with laws or standards and on managing risks in stakeholder relationships, the above mentioned approaches focus on developing new markets or inclusive supply chains that become key competitive advantages for companies. However, strong and genuine CSR initiatives can be a good background to engage a company in thinking about how its core business could generate societal impact.

Through HVC, Ashoka is advancing Full Economic Citizenship. Social impact is an important dimension from the design stage and needs to be incorporated in business models. Social entrepreneurs and CSOs as partners play a key role to offer system-change innovations and insights to address unserved populations and to fix key issues along the value chains. They also often are the challengers arguing that companies need to think beyond specific products to achieve a real social transformation in communities by including components such as consumer awareness, education or community participation in the core business model. By developing a community of Changemakers, Ashoka’s goal is that within five years, anyone working on corporate strategy anywhere in the world and in every sector, will look for Hybrid Value Chain opportunities that could significantly transform the existing business systems.

* Ashoka and a growing number of sister organizations have banned the “non-” words. Instead of “non governmental organizations” or “non-profits” we use “citizen sector organization.”

Base of the Pyramid, corporate social responsibility