Guest Articles

Monday
September 26
2022

Alexandra Nemeth

Social Enterprises Can Grow Their Revenue and Impact by Partnering with Corporations – Here’s How to Support Them

Against the backdrop of cascading global crises, social entrepreneurs are proof that a more just, inclusive and sustainable economy is possible — and other sectors are paying attention. This year, for the first time, social enterprises were included as part of the formal agenda at the World Economic Forum’s annual meeting, governments around the world are doing more to foster social enterprise ecosystems through policy and regulation, and a growing number of corporations are actively looking to social enterprises to help advance their environmental, social and governance (ESG) targets.

As interest in social enterprises continues to increase around the world, Social Enterprise Support Organizations (SESOs) – like impact investors and accelerators – need to take action now to invest in the capacity of these businesses to seize the cross-sector growth opportunities that lie ahead. And due to their size and influence, corporations represent a key area where SESOs can focus these efforts.

 

A Tipping Point for Social Enterprise Inclusion in the Global Economy

Why should SESOs prioritize corporate readiness, and why now? There are five key trends coming together across sectors to create this huge window of opportunity for social enterprises:

Social Procurement

The pandemic pierced the reality of “business as usual” in many ways, including by revealing the fragility and unsustainability of existing supply chains. The need for transparency, resilience and sustainability are driving companies to rethink the ways they procure goods and services up and down the value chain, and they are making spending commitments to procure from social enterprises which already have ESG baked into their core business models – a practice called social procurement. Once considered a niche trend, social procurement has gone mainstream thanks to its adoption by multinational corporations like SAP, Unilever, IKEA, EY and many more. Social procurement is, and will continue to be, a key lever that corporations can use to achieve their ESG goals: A recent report from Yunus Social Business and Boston Consulting Group estimates that it represents a $500 billion market opportunity. This unprecedented alignment has created a meaningful pathway for social enterprises to scale their revenues and impact through sustainable, repeatable, earned revenue streams.

Business Model Futuring

Consumers, investors, governments, employees and communities are demanding that corporations wield their tremendous influence for the benefit of all stakeholders, rather than just shareholders. To position themselves for success in the future, these companies are increasingly working to develop more regenerative, circular business models that embed sustainability into the core of their operations. Social entrepreneurs are the pioneers of these practices, and corporations are increasingly seeking to collaborate with and learn from these leaders on the front lines of social innovation. Take the Mexican construction company CEMEX as an example. CEMEX is investing in and partnering with startups that are shaping the future of construction, both to inform its own strategy and to pilot new initiatives using more sustainable materials that reduce its carbon footprint. One of its recent partnerships is with the social enterprise Arqlite, which has developed proprietary technology capable of upcycling previously unrecyclable plastics into construction inputs. This partnership is enabling CEMEX to turn its own waste into lighter-weight building materials with less carbon output.

Meeting the Evolving Needs of Current and Prospective Employees

The “Great Resignation” and now the “Great Reset” have sent a clear message to employers that it’s time to rethink their approaches to employee engagement and retention. Employees are seeking more than just a paycheck: They want more purpose and personal value at work. Research confirms this: In October of 2021, Gartner surveyed more than 3,500 employees around the world and found that 65% said the pandemic had made them rethink the place that work should have in their life, and 56% percent said it made them want to contribute more to society. Developing pathways for employees to leverage the skills they use at work every day to engage their purpose and values is critical to remaining competitive in the war for talent, and forward-looking companies are making significant investments to do so. Take the IT consulting company Avanade, for example. Through its Citizen Champion program, selected employees are able to receive training, coaching and resources to drive social impact based on the causes that matter most to their communities. Whether that takes the form of pro-bono consulting with a nonprofit or social enterprise, hosting design-thinking workshops, or mentoring future STEM students, employees have the agency and support to do good and give back through the power of Avanade’s workforce and expertise in digital innovation.

Developing the Next Generation of Leaders

The leaders who have brought corporations to where they are today won’t be the same leaders who will take those corporations into the next 10, 20 or 30 years — and this new generation of leaders will need new skills. To that end, human resources and learning and development departments are prioritizing leadership development programs that build the skills emerging leaders will need for the future of work. That includes education about, and exposure to, concepts like sustainable business practices, ESG reporting factors, sustainability and social impact. But leadership development is no longer something that happens solely in a classroom – in fact, experiential learning is proven to be the most effective method of adult learning. To tap into this potential, forward-looking companies like SAP are combining training and real-world experience through initiatives like its Emerging Talent Advisory Board (ETAB) program. ETAB participants are divided into teams, each of which is assigned a senior advisor within SAP to facilitate “reverse mentoring” about the future of the company (in which managers learn from young recruits), and matched with a social enterprise to complete a pro-bono consulting project. The ETAB program gives future leaders the opportunity to both support and learn from social enterprises operating in the industries they themselves work in, which in turn informs the way they operate in their own full-time roles at SAP.

Governments Accelerating Social Enterprise Inclusion Through Public Policy

Governments in increasing numbers are passing legislation to support social enterprises, both in terms of codifying legal structures that weave profit and impact together, as well as through initiatives to help these social businesses grow and thrive. In financial markets, we’ve seen a significant increase in the issuance of green, social and sustainability bonds – according to a 2020 IFC report, “social bond issuances increased eightfold over 2019, sustainability bond issuances increased by a factor of three over 2019, and green bonds broke $1 trillion in cumulative issuances.” Other policies, like the U.K.’s landmark Social Value Act, are exploring how social value considerations can be integrated into the procurement processes of all public sector organizations and their suppliers. And the 38 countries in the Organization for Economic Cooperation and Development are increasingly supporting environmental, human rights, gender equality and other social objectives in their own public procurement. Policy changes like these are breaking down barriers to social enterprise inclusion in the global economy: A recent report from the British Council and Social Enterprise UK, representing the most comprehensive picture of the global state of social enterprise to date, found that over 11 million social enterprises are already operating worldwide, and characterized social enterprise as “one of the largest movements of our time.” 

 

How to Support Social Enterprises in Building Corporate Connections

To position social enterprises to take advantage of this massive opportunity to grow their impact and revenues through partnerships with corporations, SESOs should look to bolster their programming to help these enterprises learn about the opportunity, position their products and services accordingly, find the right sales contacts within corporations, and successfully deliver on larger contracts. Providing the right guidance at the right points along a social enterprise’s growth journey can be catalytic.

In MovingWorlds’ work supporting social enterprises’ efforts to build corporate connections through the TRANSFORM Support Hub, we have found that social enterprises benefit from focused capacity building around the following themes:  

#1: Positioning their products and services for a corporate audience

It takes a different skill set to sell business-to-business than business-to-consumer. Social enterprises need to understand how to map the value chain of potential partners, and develop the value proposition, positioning statement and sales messaging that will resonate with this audience. In this process, social enterprises may also uncover opportunities to change packaging/bundling, pricing and delivery to suit this audience’s needs.

#2: Accessing the right corporate connections

It is often challenging to find the right buyer within a large organization. However, the number of different business units within corporations also represent multiple opportunities for social enterprises to build inroads. Social enterprises need to understand what the different buying units within corporations are responsible for, and the factors they consider in making purchasing decisions. Even within the same corporation, social enterprises need to tailor their pitches to each specific buying unit, as the needs of a procurement team are different from the needs of a corporate social responsibility or sustainability team. SESOs can play a key role in helping social enterprises to build their networks and learn how to identify the key decision makers at their target companies. 

#3: Building the confidence to go through challenging sales processes

When working with large customers like corporations, social enterprises need to understand that they are dealing with a more complicated buying process, as well as a longer sales cycle. Social enterprises need the opportunity to practice and refine multiple aspects of their sales pitch, including outreach emails, first meetings, closing meetings and even legal contracting. Beyond practice, exposure to peers and practitioners who have already successfully navigated the process can help them avoid common pitfalls and move more quickly through these historically long processes. 

#4: Improving operations to successfully deliver on bigger contracts

To scale volume without sacrificing quality, social enterprises need to improve a variety of operations, including customer delivery, accounting, financial planning, logistics and more. Starting with smaller contracts, and building capacity as they go based on what they’re learning from these early customers, will help them focus their limited resources where they are needed most to become more profitable and impactful. By providing guidance on which operations should be built out and when, SESOs can help social enterprises avoid investing too much too early, or postponing critical operations until it’s too late.

#5: Finding and building the right talent and teams

As social enterprises grow and scale, their approach to recruiting, managing and developing their own employees also needs to evolve. Similarly, as these enterprises expand to include teams dedicated to corporate sales and account management, their ability to effectively collaborate within and across teams also becomes more critical. Building human resource operations to support the needs of the enterprise as it grows is challenging to do, but it is critical to both short- and long-term success.

Given the long-term nature of these growth tactics, social enterprises need programming and support that can be accessible not for months but for years, which is typically much longer than the standard time-bound accelerator program. SESOs can add a lot of value to their network of social enterprises by providing ongoing, on-demand capacity-building support related to the themes above, both for current participants and alumni who are ready to diversify into business-to-business sales.

These elements can be developed internally, and some accelerators like Yunus Social Business and the Miller Center for Social Entrepreneurship are doing just that. However, given the diversity and long timeline of the support needed to guide social enterprises through building these corporate connections, a growing number of SESOs are partnering with each other for the benefit of the global social enterprise ecosystem. As one example, the TRANSFORM Support Hub connects social enterprises with corporates, peers, learning content and a global community of pro bono professionals to help build their capacity to sell to and build productive partnerships with corporations. Partners of the TRANSFORM Support Hub, like Mercy Corps Ventures and ChangemakerXchange, can direct their enterprises to the Hub for ongoing support, while also sharing insights, knowledge and new offerings with a global network of social enterprises and other accelerators. We hope these efforts will add to the momentum behind corporate readiness in the social enterprise sector, further boosting these vital businesses’ ability to scale their revenue and impact. 

 

Alexandra Nemeth is the Senior Manager of Content Marketing and Storytelling at MovingWorlds.

 

Photo courtesy of Sora Shimazaki.

 


 

 

Categories
Entrepreneurship, Investing
Tags
accelerators, business development, corporate social responsibility, corporations, ESG investing, global development, impact investing, partnerships, scale, social enterprise