What Happens When Large Companies Join Forces with Innovative Social Enterprises [Webinar Recap]

Over a relatively short period, sustainability has become central to the corporate world. In 2011, 20% of S&P 500 companies published sustainability reports. By 2019, 90% did. And this shift is global: A 2020 survey of 5,200 companies across 52 countries found that 80% now report on sustainability, with a significant majority linking their business activities to the UN Sustainable Development Goals (SDGs).

The question is: what next? How should companies turn pledges and promises and reports into lasting and effective action?

The short answer is that collaboration is key—and leading companies know that they need to bring new partners to the table. Catalyst 2030 and Resonance just released new research on how large corporates are teaming up with innovative social enterprises in creative and powerful ways to advance social and environmental impact. To build on this work, Resonance’s Steve Schmida spoke with three cross-sector leaders who are pioneering corporate-social enterprise partnerships:

• Alexandra van der Ploeg, Head of Corporate Social Responsibility at the global technology company SAP, where she is responsible for setting the global direction of CSR through strategic partnerships and programs.
• Naa Akwetey, Senior Vice President, Strategy and Business Development, at mPharma, an award-winning healthcare social enterprise headquartered in Ghana and operational in Nigeria, Kenya, Zambia, Rwanda, and Malawi. mPharma partners across pharmaceutical supply chains to expand access to affordable healthcare in Africa.
• Vikas Bali, CEO of the global impact advisory Intellecap, which works to build enabling ecosystems and channel capital to create a more sustainable and equitable society. At Intellecap, Bali is focused on developing innovative business models for emerging markets across Asia and Africa.

Below are three key takeaways on how companies and social enterprises can work together to solve pressing challenges and advance corporate sustainability.

3 Takeaways on How Companies and Social Enterprises Can Work Together

1. Huge value can be unlocked by making social enterprise partnerships “core business”—but there are challenges to scale.

For more than a decade, SAP has been engaging with and supporting social enterprises. But a few years ago, “We became aware of this completely new opportunity to partner with social enterprises that we’d not had on our radar yet—and that’s social procurement,” SAP’s Alexandra van der Ploeg said. Social procurement allows companies to engage social enterprises—as suppliers and service providers—directly within their existing value chains. “We were quickly convinced about the business case for social procurement, and we realized that we had an opportunity to unlock significantly higher investments for social impact than what any corporate philanthropic vehicles could do.”

The World Bank estimates that 2019 global procurement spend was at least $14 trillion. As van der Ploeg noted, directing only a small fraction of this money—which gets spent regardless—toward social enterprises and diverse suppliers would accelerate impact in ways unimaginable through traditional CSR. SAP alone has determined that, through procurement, it could channel $60 million per year to social enterprises and diverse suppliers by 2025. Across Fortune 500 companies, this number is around $25 billion.

“This is not about being philanthropic,” added van der Ploeg. “It really engages the whole of SAP’s business—including procurement, sales, product development, and CSR. It’s about doing more with the money that we are spending anyway through procurement—and making that money go further by delivering social impact as well.”

The potential is big; yet there are challenges for scale. Much needs to be done to help social enterprises build their capacity to be “corporate ready”—and for corporates to adapt systems, procurement policies, and internal incentives to better integrate social enterprises. Another challenge for companies? How to identify, verify, and connect with viable social enterprise partners. SAP is using existing tools to help create solutions: For example, the SAP Ariba Network is the largest B2B marketplace in the world, supporting nearly $3.5 trillion in transactions each year. In partnership with leading social enterprise organizations, SAP is working to use Ariba to connect corporate-ready social enterprises to other companies eager to engage in social procurement.

2. When done right, partnering with social enterprises offers corporations tremendous strategic value.

The value that corporations offer to social enterprises may be obvious: Access to capital, markets, consumers, research, infrastructure, and so on. “There are millions of reasons for them to partner,” said Intellecap CEO Vikas Bali. But he also offered three key reasons why corporations should invest in partnerships with social enterprises.

First, social enterprises often bring intimate, boots-on-the-ground access to the first and last mile—to the billions of people who will increasingly act as producers and consumers across global value chains.  Second, social enterprises provide a pathway to innovation and invention that large, bureaucratized companies struggle to replicate. Social enterprises can pivot their models quickly; they can experiment; and this gives corporates a low-cost method to understand and solve for new consumers and markets.

“Third, and this is a little controversial, instead of access to stock market value, companies are understanding that they need access to societal value creation,” Bali said. Companies are recognizing that the market value of their business must now be measured in parallel with how valuable it is to society. “I do clearly see a trend where large corporates are saying we need to do the right thing, we need to be seen to be doing the right thing. This is not just giving away small amounts of money through CSR, it’s about being a responsible, sustainable, resource-efficient business ourselves, and thereby there is this need to partner with social or impact enterprises.”

mPharma's Naa Akwetey added that social enterprises, which are embedded in local communities, can provide corporates with essential “perspective,” on-the-ground understanding, and market data that otherwise get buried in global value chains. mPharma, for instance, can give feedback to multinational pharmaceutical companies about patient behavior, preferences, and buying choices in specific markets and across countries. All of these insights are of particular importance given that the markets where corporations tend to have limited optics and sparse data—those in emerging economies—are often the markets where the most growth is expected in coming decades.

3. Partnerships between corporations and social enterprises don’t exist in a vacuum. True success often calls for an ecosystem approach.

A great idea is not enough. To grow, an enterprise needs access to capital, to talent, to markets, and to legal and technical assistance. “All of these things have to be kept in mind as large corporates start dealing with impact enterprises,” says Bali. “It’s not just buying into a great idea; it’s buying into an idea and saying we will develop the ecosystem for this idea to sustain, to flourish, to become scalable.”

Van der Ploeg noted that SAP’s social procurement programs are, at the moment, focused more on investment in capacity building than social procurement proper. SAP is taking the time to build the foundation that will make social procurement viable—for SAP, for social enterprises, for other companies, and for the ecosystem at large. Two examples of ecosystem building efforts currently underway are SAP and MovingWorld’s S-GRID Accelerator and the work of the COVID Response Alliance for Social Entrepreneurs.

“This work is trying to address problems that society has not been able to solve for thousands of years, so there are no quick fixes, there are no easy solutions, and these solutions are not one-dimensional. It will require an ecosystem approach,” Bali said. “Ecosystem-building is a fine art, and lots of stakeholders need to come together to take the journey forward.”

Catalyzing Collaboration Between Companies and Social Enterprises

Achieving the SDGs by 2030 is a goal beyond the reach of any one actor or any one sector. Strategic collaboration between corporations and social enterprises has potential to propel impact and advance the SDGs—while offering powerful benefits to all partners along the way.