Three questions about corporate responsibility

 

Daniel Nowack

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On September 11 and 12, the EVPA is hosting a ‘European Corporate Philanthropy and Social Investing Summit’ (the ‘C-Summit‘). As the world is in uproar about social inequality, climate change and trade wars, this summit comes at the perfect time. The world still lacks a staggering $2.5 trillion annually to achieve the UN’s Sustainable Development Goals. There is simply no way we can tackle that without the contribution of the corporate sector.

In the past year, we have been researching the work of social intrapreneurs with INSEAD and the Porticus Foundation. These social intrapreneurs are corporate employees that act like entrepreneurs within their company to create new products and business models that solve a social or environmental problem. 

We at Yunus Social Business believe that companies can play a significant role to solve some of humanity’s most pressing issues. And we believe that social intrapreneurs have the power to transform their companies into net positive contributors to people and planet – beyond shareholder value and profits. 

So in the run-up to the conference, there are a few questions that I am bringing with me to Munich. And I am looking forward to lively conversations. Here are my top three:

Should corporate foundations strive for alignment with the strategy of their corporate parent?
Should foundations support initiatives that are aligned with the strategy of their corporate parent?

Eighty per cent of the C Summit’s agenda is dedicated to this question. There are some ethical considerations, of course: Should the work of foundations not be purely philanthropic and selfless instead of creating benefits for their corporate parents? Are we subsidizing corporate profits with the tax-benefits of foundation grants if we are mixing the two worlds?

But we also see the huge benefit of strategic alignment. Our research shows that pure CSR initiatives outperform strategically aligned initiatives in their impact. Most even struggled to survive after leadership changes at the company. As the agenda of their companies changed, they were the first to be deprioritized by new leadership. 

Can we spur social innovation through corporate foundations?
Can we unlock innovation through early-stage grants from corporate foundations to de-risk impactful business models?

As impact investors, we see a huge need for blended finance for innovative social entrepreneurs. Most struggle to obtain capital that allows them to create product-market-impact fit (PMIF) – a positive financial and impact contribution of each unit they are selling. While most impact investors apply venture capital logic from the tech space to this social entrepreneurship space, the timelines towards proof of concept and market-fit are much longer in the social sector. 

With the business mindset of corporate foundations, these entrepreneurs can truly benefit from grant capital that allows them to experiment and strengthen their models. At the same time corporate foundations can create access to global value chains and cusomters to support their grantees for scale.

We also see that engagements in social entrepreneurship create effects on reverse innovation on the corporate parent. Over 34 per cent of the fifty companies we interviewed witnessed this effect. 

Can corporate foundations trigger transformation within their companies?
Can corporate foundations move beyond simply ‘offsetting’ the negative environmental or social impact that their corporate parents create and truly transform how these companies do business?

The journeys of Unilever or Danone tell an inspiring story of change. After creating a joint venture with Grameen in Bangladesh to locally produce fortified yogurt, Danone sparked excitement for doing things differently within the company. It set up a corporate impact fund financed by shareholders and employees. It changed its bonus structures to include impact. And it started the B Corp certification process. While Danone still has lots of challenges to solve, its commitment is truly exceptional for a listed company.

Our research mirrors the effect on culture. Most companies see a significant impact on employee motivation (53 per cent of respondents). One applicant stated that they were struggling to acquire talent in a certain region. But after sharing the story of their inclusive business commitment, ‘applications went through the roof’. 

So I am wondering: Can foundations accelerate the transformation of their corporate parent? Can they combine grant giving with truly meaningful corporate volunteering that reverbs back into the company? Can they even set new standards to include externalities into the product development process – such as CO2 emissions, deforestation or wage inequality? 

The Collaboration Summit
As I mentioned in the beginning, the challenges that we face are plentiful. Above all questions, I am also 100 per cent certain of one fact: That no single initiative, foundation or company can solve these issues alone. We need to work together in truly transparent and meaningful collaboration.

Daniel Nowack is Managing Director at Yunus Social Business


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