How to Integrate Social Entrepreneurs within Corporate Value Chains
Increasingly, corporations want to work with social entrepreneurs to secure their supply chain, demonstrate their commitment to inclusive business, and strengthen trust and brand in the communities in which they operate. Social entrepreneurs are seeking to partner with corporations seeing them as first customers paving the path to scale, ever elusive in the world of social impact. So if both sides desire partnership, why are these kinds of engagements the exception rather than the rule?
This question was addressed by the Reaching Out: Integrating Social Entrepreneurs within Corporate Value Chains panel at the inaugural Scaling Corporate Social Enterprise Conference organized by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) in Chile on November 20-21st, which focused on the barriers to scaling corporate social ventures and developing common strategies to overcome them. Both sides of the equation, corporations and social entrepreneurs, were represented on the panel and shared their experiences with trying to reach across the aisle and collaborate.
There were two fundamental elements the panel agreed upon with regard to social entrepreneurs and corporations collaborating: partnering is hard and trust is mandatory. Established corporations and early-stage social enterprises often speak different languages, have incongruent processes, and contend with information asymmetry. Overcoming these challenges takes time, effort, and clear communication. The desire to make the relationship work has to exist for both sides. It many instances, the relationships need both a shared vision and shared values.
Working through these differences can be challenging, but a well-constructed partnership can provide rewards for each party. So what advice can we offer each side?
For social entrepreneurs wanting to integrate into a corporate value chain, we recommend:
1) Focusing on meeting the needs of the corporation, both in terms of the challenges they face as well as integration with their existing systems, and framing these in business terms. The corporation is your customer and they should be treated as such. Interaction between the two parties should occur early in the product development process ensuring that the solution addresses a clear need. An example of a social enterprise that has done this well is ZeroPercent, which connects restaurants with end-of-the-day food waste to food banks whose clients can benefit from access to the goods. From the very beginning, ZeroPercent focused on understanding why restaurants didn’t currently donate to food banks and what incentives would be needed to change their behavior; their business model was designed specifically to meet those needs.
2) Professionalizing your processes and externally facing operations. Corporations are used to dealing with other established corporations and may already be hesitant to interact with a “social-minded” organization. It is important that your communications, customer service, and billing processes are clearly defined and consistent. Piece&Co., a social enterprise that connects large retail brands with local artisans, acts as the professional face of small developing world artisan groups. Large brands want to source fabric and artisan-made goods, but interacting with a group of three artisans is impossible for their procurement system. Piece & Co. acts as the bridge allowing retail brands to continue to use their structured processes to source from small developing world artisans. In some instances, it may be advantageous to interact with an aggregator or intermediary that has the structures and systems in place to serve established corporations.
3) Targeting the right buyer, one whose demand matches what you can supply. As a small social enterprise, it is unrealistic that your first customer will be Walmart. Focusing on supplying to the right scale and type of corporation, will give you and your firm a better chance to succeed by not overpromising and under delivering. As you hone your processes while working with the corporation and better understand your ability to interact with the community to deliver supply, you can begin to build the capacity necessary to scale.
For corporations seeking to integrate social entrepreneurs into their value chain, we recommend:
1) Considering the means and method of engagement. Should social enterprises connect first with the corporation on shared value efforts as part of a wider CSR strategy (rooted in building brand and strengthening trust through local content), with peripheral impact on a company’s core business or should a company engage directly with social enterprises as part of their supply chain and/or distribution models into new customer segments? Understanding how this engagement can occur is critical to managing expectations and building trust. Many corporate engagements with social entrepreneurs may begin as part of CSR and graduate to core business once the model has been proven and is ready for scale.
2) Being selective and assuring social enterprises have the capability to deliver. Unfortunately, these kinds of partnerships are often designed through wishful thinking, rather than defined by business fundamentals and performance management. Integrating social enterprises into a company’s value chain should apply the same rigor as with any other engagement, but at the same time capitalize on the social benefits being created and how these could be maximized as part of the joint venture. Social enterprises generally do not believe they should sacrifice quality or performance to pursue their social missions—quite the contrary, social enterprises can be as or more effective than their competition while pursuing a social mission.
3) Thinking about the social enterprise ecosystem and aggregation opportunities in the value chain. Given that most social enterprises may not have the market maturity and scale to supply the required volumes/services, corporations should use a wide lens and cast a wide net to explore the most viable opportunities for partnership with social enterprises and look for the most promising opportunities for aggregation. This will allow social enterprises to reduce traditional barriers to entry and pool together resources to collectively deliver on value chain demand.
Patience and transparency are important throughout the partnership. Building trust takes time. Both parties, social entrepreneurs and corporations alike, must be willing to openly communicate their needs and what they can and cannot deliver. With patience and time, a rewarding partnership can be developed that meets the needs of the corporation, the social enterprise and the community.
Disclaimer: All thoughts are those of the authors and do not represent the view of their respective organizations.