Innovating for equity is a win-win for companies and communities

In the US alone, it is estimated that the widening racial wealth gap will cost the country up to $1.5 trillion in economic growth by 2028. This will constrain GDP growth by 6%. A record number of commitments were made in 2020 to combat systemic racism. Despite incremental progress, diversity and inclusion initiatives are suffering from increasing backlash and regression. And yet, social innovators are driving new ways of connecting increased racial and ethnic equity with the growth of collective economic value.

At the same time, consumers and employees expect companies to make a difference on issues like equity and inclusion — 85% of Americans say global and national brands should play a role in solving global problems. Research from agencies such as Edelman, Ipsos and Nielsen consistently demonstrates that consumers in regions like Europe, Asia, Africa and Latin America also prioritize purchasing from socially responsible companies.

One of the best ways to contribute to making a positive change and make the most of this opportunity is by partnering with promising social innovators. Social innovators are proximate leaders who are connected to currently excluded communities and implementing novel solutions to meet those communities’ needs.

The newly released report by the Schwab Foundation’s Global Alliance for Social Entrepreneurship, Innovating for Equity: Unlocking Value for Businesses and Communities, outlines clear, actionable steps for working with social innovators who are advancing racial and ethnic equity. Published in partnership with Echoing Green, the GHR Foundation and Dalberg, the report explores three pathways to execute this critical work.

There is a tremendous opportunity for organizations to diversify and enrich their connections with marginalized communities. By solving problems with ingenuity, social innovators are key to unlocking economic value in global markets that address the needs of these communities and the business opportunities that exist within them. Proximate social innovators offer unique insight on unmet business opportunities often invisible to larger companies.

With this insight, community engagement becomes intersectional. Seeing customers as they are — multi-faceted human beings — creates asset-based approaches that encompass various elements of identity. Proximate social innovators are valuable connection points between existing companies and communities because they know and have direct experience with the problems they seek to solve.

The following case studies, drawn from the report, show how investing in social innovators can be a win-win; The innovators receive much-needed capital to make a difference in their communities, while global companies gain access to investment opportunities through a scalable model that works across geographies. These innovators are focusing corporate attention on areas valued by the communities themselves, strengthening business operations and growing community wealth.

Sub-Saharan African smallholder farmers typically rent out tractors through fractured, informal equipment networks that lack tracking, management software, affordable rental fees and effective control of fleets. Echoing Green Fellow Jehiel Oliver noticed that agricultural equipment multinationals did not understand this local context. With insight from farmers in Nigeria and Kenya, Oliver developed an Internet of Things-enabled tractor sharing app and fleet management service — Hello Tractor — that helps farmers own, manage, hire out and track equipment. Hello Tractor gives smallholder farmers access to local community members hired as employees to provide technical support and local market insight, and finance booking agents to become business operators who buy their own tractors to rent out.

This shift expanded the markets and services that corporate entities provide to meet the needs of marginalized racial and ethnic groups, improving inclusion and generating both local and corporate economic growth.

Hello Tractor participated in an agricultural equipment manufacturer’s Startup Collaborator programme. That company then invested in the organization, with the gobal to “increase connectivity, connect with customers and solve problems” across African and South Asian markets. The new business model has been so successful that Olivier is now adapting Hello Tractor for expansion into other similarly situated economic markets in Africa, Pakistan and Bangladesh.

In the US, residential buildings in neglected urban neighbourhoods are the second highest polluters. Low-income Black and Latinx residents and owners who would benefit from green retrofitting of buildings are often deemed ineligible. These requisite financial products are tailored to address energy efficiency and amenity upgrades for real estate in affluent neighbourhoods. BlocPower, led by Echoing Green Fellow Donnel Baird, uses proprietary software and data modeling to analyze the electrification potential for buildings nationwide, providing relevant solutions to excluded asset owners. This solution is even more powerful given the projected market volume for climate adaptation may reach $2 trillion annually by 2030.

Microsoft, McKinsey & Company and Goldman Sachs have each supported BlocPower through mentoring and catalytic funding. The New York City Mayor’s Office has also supported Baird’s work, showing how government policies can help drive market growth through investment and incentives for cross-sector partnerships.

Companies and governments have an unparalleled opportunity to support social innovation at all stages of development: seeding, refining, scaling and mainstreaming the innovative approaches brought by proximate leaders. Doing so will advance collective economic growth in ways that truly incorporate excluded communities. That is the smarter business choice for long-term sustainability and prosperity.