Disruptive Collaboration:  How Companies Can Help Scale Social Impact

Disruptive Collaboration: How Companies Can Help Scale Social Impact

Among the world’s 100 largest economic entities were 69 corporations and only 31 countries in 2017. While this is often interpreted as a negative trend vis-à-vis economic inclusion, we believe thoughtful collaborations leveraging corporate value chains can be propellers of economic inclusion, especially with the support from non-profits, social enterprises, and other enablers.

When Toyota relocated its global headquarters to Plano, Texas, the company brought 4,100 jobs to the region and an estimated economic impact of $7.2 billion to the city. Toyota also delivered hope to the jobless when it provided an impact grant to support a collaborative effort among five nonprofits to improve physical and social mobility in underserved communities. “By engaging multiple local partners on a single issue, we can build on ideas, pool resources, and achieve greater impact in the communities we serve,” said Mike Goss, who at that time served as general manager, Toyota Social Innovation and president of the Toyota USA Foundation.

We met with Goss and his team to learn about the nuances of their approach to social innovation as part of our larger analysis of over 200 efforts from around the world to identify the common patterns among scaled inclusive and climate-smart economic development efforts.

Why Here and Why Now?

As the fourth-largest economy in the nation, Dallas-Fort Worth is home to hundreds of corporate headquarters and US offices of multinational corporations. At the same time, like so many other metropolitan cities around the world, this tremendous economic influence is juxtaposed with poverty, inequality, and rising working poverty. The city also faces significant environmental challenges. Among these are a high degree of air and water pollution, and one of the most rapidly growing urban heat islands in the nation. The environmental and climate risks impact residents at all socioeconomic levels – but especially those with the least means to mitigate these risks. Therefore “inclusive” and “sustainable” or “climate-smart” economic development are closely intertwined. With the combination of pressing problems and a strong private sector, there is a strong ecosystem for fostering inclusive and climate-smart solutions.

Common Ground for a Common Goal

We studied many sustainable inclusive economy cases that successfully scaled social impact, and found they had two things in common. First, they involve the unlikely bedfellows of corporates and social enterprises. Social entrepreneurs pursue innovations with respect to economic inclusion, from innovative affordable products such as solar lanterns to innovative approaches like connecting disadvantaged micro-entrepreneurs to market opportunities. When they partner with corporations, the solution can be disruptive and the impact transformational. But those cases are the exception rather than the rule.

Effective collaboration calls for alignment around a common goal, which necessitates a common framework. The leading framework for inclusive sustainable development is the United Nation’s Sustainable Development Goals (SDGs). Compared to the UN’s 2015 Millennium Development Goals, the SDGs make environmental sustainability, climate change, economic inclusion, and decent work clear priorities in a framework that has been highly actionable in the private sector. For example Schneider Electric, a Fortune Global 500 French multinational with a strong presence in the United States, made a public commitment towards 12 out of the 17 SDGs focusing on universal energy access and women empowerment, in particular, integrating SDGs in their core business model, leveraging market forces to scale impact. As Stephanie Byrd, Schneider Electric’s EcoStruxure Marketing Director pointed out, SDGs are “core to our business and everything we do to the point that it has become central to the company’s identity.”

As practitioners working closely with both corporations and social enterprises, we have had the opportunity to observe the barriers to high impact partnerships even once a common framework is adopted. This is what makes the third stakeholder in what we call “disruptive collaboration”, the enabler, so critical in most partnerships that achieved scaled impact. These often less visible partners foster connections, facilitate, disseminate knowledge, and perform other critical functions such as coordination and facilitate financing, quality control, and research. The “enabler” role we identified is materially different from that of “backbone organizations” or “quarterbacks” because enablers’ primary role is to address the transaction cost and risk that pose barriers to systemic social enterprise – corporate partnerships. We have observed various organizations fulfilling the enabler role effectively; from governmental entities to nonprofit organizations to for-profit entities. The critical factor is for them to speak the language and enjoy the trust of all stakeholders involved, and to be able to help fill any programmatic gaps not addressed by the corporation and the social enterprise.

Leveraging Value Chains for a ‘Higher Equilibrium’

There is a second feature that most successfully scaled inclusive climate-smart economic development efforts that we analyzed share. It is the intentional leveraging of the corporate partner’s value chain for reach and scaling impact. Currently, corporations’ global value chains account for 80% of global trade, and the GDP generated by the 100 largest US companies rose from 33% to 46% between 1994 and 2013. Value chains and the technology that empowers them offer us an infrastructure for access and help to disseminate innovative solutions to low-income populations and to connect often excluded groups such as small businesses, small farmers, women or minority-owned businesses to markets.

Social entrepreneurs often lack scale and the reasons for that are manifold. Corporate value chains can help them achieve scale by providing access to products, services, information, and know-how by leveraging existing corporate infrastructure and expertise. However, to engage a social enterprise in one’s value chain is not a simple undertaking. The enablers, if effective, help address the related transaction cost and risk barriers.

Fostering Disruptive Collaboration for Market Transformation

Inclusive climate-smart economic development is a complex and pressing challenge. Efforts in this area cannot be truly successful unless they are grounded in the private sector and effectively leverage market mechanisms for scale and ultimate market transformation.

Perhaps more so than any other time in history, the private sector has a critical role to play in scaling social and environmental impact in collaboration with other sectors. In the meantime, the evidence is growing that when corporations adopt SDG-related business models, they can reduce risks in their operations, access new markets, and enhance their reputations. The inclusive climate-smart approaches we studied stretch the scope of private-sector solutions well beyond traditional corporate social responsibility (CSR). These solutions demonstrate that inclusive economic approaches can significantly “grow the pie,” especially when they simultaneously address basic needs and create jobs for the vulnerable. In our work, we have found clear evidence that those who take part in disruptive collaboration to foster inclusive climate-smart economic development stand to gain substantial benefits—as does society at large.

For more information about this initiative, visit huntinstitute.smu.edu or http://www.inclusive-economy.org.