How social enterprises offer big businesses pathways to sustainable innovations

Today, there are many examples of social enterprises, cooperatives and innovative, entrepreneurial non-profits that have long created social and environmental value and provided pioneering examples of purpose-driven ways of organizing economic activity. As such, they are already improving the lives of hundreds of millions of people and changing whole industries.

Partnering with these potent change actors could allow businesses to trial new approaches that help them navigate the challenges of the year(s) ahead while simultaneously achieving business objectives. And as businesses find themselves operating in a challenging economic environment, they should prioritize such engagements with urgency to help build resilience for future market disruptions.

From rising inflation, soaring energy and commodity prices and the increasing severity of climate-related impacts, the pressure on established corporations to innovate and operate in ways that ensure environmental sustainability, respect human rights and improve wider society is mounting. All the while, regulatory requirements for stakeholder metrics are being implemented worldwide that place new demands of compliance on boards and executives.

Momentum for change is building and forward-looking companies have already made the shift to move from traditional corporate social responsibility (CSR) to partner with social enterprises through their core business strategy to advance their non-financial reporting objectives and wider impact goals. Still, they have barely scratched the surface of what can be possible.

A 2021 report by Catalyst 2030 and Resonance outlines various collaboration opportunities between social enterprises and companies. Their spectrum of case studies ranges from strategic sponsorships (direct investments, funding through competitions and funding for ecosystem development) to value chain or social procurement partnerships (social enterprises as suppliers, distributors or service providers).

For example, buying from social enterprises (social procurement) offers both meaningful social impact and benefits for businesses. More and more procurement managers are engaging with stakeholders across their value chain to explore innovative approaches to building resilience. In its Social Procurement Manual, Yunus Social Business has identified a range of meaningful case studies for social procurement, while Acumen and IKEA Social Entrepreneurship have surfaced 100 social entrepreneurs ready to work with companies. And software company SAP has already committed to spending 5% of its addressable procurement volume with social entrepreneurs until 2025.

In addition to procurement, the opportunity for joint product development with social entrepreneurs can allow corporations to tap new customer and market segments. For example, broadening financial services for unbanked communities could raise the functional distribution of social enterprises in the finance space and help seed the development of wider-reaching initiatives.

For example, social enterprise Babban Gona provides microfinance to smallholder farmers and piloted Nigeria's first weather insurance programme with SwissRe to protect their crops. Another great programme comes from global wealth manager UBS, implementing initiatives to foster the impact economy through their philanthropy and social impact investment initiatives.

AB InBev, the world's leading brewer, takes another approach towards combining social impact and business value. In 2018, the company created the 100+ Accelerator programme to partner with startups and social innovators to help develop and scale sustainable technologies that can ultimately help advance the company’s sustainability goals and contribute to the SDGs. The programme offers up to $100,000 in funding to pilot the solution and prove viability.

In 2021, The Coca Cola Company, Colgate-Palmolive and Unilever joined the 100+ programme to bring new challenges and opportunities across the consumer goods sector. Together, the four CPGs have opened their supply chains for sustainable innovation and leveraged their teams to maximize collective impact. So far, 116 startups from 35 countries have already piloted or are piloting their technologies.

One great example is the pilot from Toroto, a startup that implements nature-based solutions with tech-enabled traceability. Through the 100+ Accelerator, Toroto implemented regenerative agricultural practices with barley farmers on 30 hectares in Apan, Mexico which resulted in a 50% reduction in fertilizer usage, a 33% reduction in carbon emissions and a 33% increase in soil organic carbon.

The carbon reductions will be issued as carbon credits to the farmers, further improving their income. As a part of this work, AB InBev has the option to acquire the credits to inset their residual emissions and advance towards their ambition to achieve net zero across its value chain by 2040. The project aims to be scaled to 1,000 hectares in the Apan region.

The Social Progress Credit (SPC) scheme launched by SK - the second-largest corporate conglomerate in South Korea – takes a unique approach to effective partnerships. The initiative has helped empower and grow social entrepreneurs by providing financial incentives tied to their impact. Its success lies in its simplicity.

Social enterprises, working in a range of areas from IT to agriculture to retail, were measured on four key metrics, three of which align with their responsibilities to society: social service, employment, environmental and social ecosystem performance metrics. SPC then provided cash incentives proportional to the value being created, which helped the enterprises grow the breadth and depth of their impact. Their work ranges from creating new types of products, jobs and business models to building a more sustainable value chain.

Over seven years, the expertise accumulated from the social value measurement of SPC enterprises has been incorporated into the social value measurement of SK companies and its affiliates. That reveals that the social value created by the company grew by about 60% from 2020 to 2021.

Partnerships to drive social impact are evolving from a one-dimensional focus on CSR towards a two-way relationship. One that recognizes that social innovation is a significant opportunity for a corporate strategy to help protect and create value – for business, society and the planet. Working alongside social entrepreneurs offers a business case that combines multiple benefits, such as tapping new markets and customer groups, developing impactful products, engaging employees, improving employer branding and increasing resilience and exploring innovative approaches to address sustainability benefits.

To support the development of social entrepreneurship and innovation, many pioneering companies have joined the Global Alliance for Social Entrepreneurship and its 100+ members, hosted by the World Economic Forum and the Schwab Foundation for Social Entrepreneurship. In 2023, the Global Alliance will create further insights and surface case studies for the business case of partnering with social entrepreneurs. And it will offer curated engagements for any company interested in exploring the social entrepreneurship space to create business, societal and environmental value.

Additionally, more data-driven approaches will create further insights and surface case studies for the business case of partnering with social entrepreneurs. In a preliminary analysis, it has leveraged AI-driven data analytics to research which business functions are primarily engaging in social entrepreneurship. A detailed analysis will follow in the coming year.

By acting together, businesses and social entrepreneurs can lead the transition to a purpose-based economy. With greater awareness, compelling business cases and a strong social innovation ecosystem, we can further explore the engagement between corporations and social enterprises to unearth new value. Then perhaps we can collectively multi-solve for economic recovery, equity, climate and nature, and chart a way through the “polycrisis” towards a more prosperous future for all.