Global Compact International Yearbook 2016

innoVAtion
T
his “corporate social innovation”
is the latest advance along the
continuum of corporate social
responsibility, which began in the 1990s,
when many companies began embracing
worthy community causes in areas
where they operated. Programs focused
mainly on the company’s reputation
and license to operate, with little direct
connection to their bottom lines. For
example, Microsoft initiated an annual
Employee Giving Campaign, in which
employees attend fundraising events for
nonprofit organizations.
Good corporate citizenship
This evolution continued in the 2000s,
when companies began integrating good
corporate citizenship into their business
models, often through partnerships with
development finance institutions. For
instance, when the International Youth
Foundation and the Multilateral Investment
Fund (MIF) of the Inter-American
Development Bank Group launched the
New Employment Opportunities Program
(NEO) for youth in 2012, five large
companies pledged resources and joined
the alliance: Arcos Dorados, Caterpillar,
CEMEX, Microsoft, and Walmart. NEO
offers job training and placement services
to improve the employability of
poor youth, and thereby the quality of
the workforce throughout Latin America
and the Caribbean. The member companies
– some of the largest employers in
the region – are contributing money
and helping to shape the training curriculum
and other employment services.
The partnership is paying off; NEO is on
track to reach 1 million youth through
effective job-training programs by 2020.
Shared value
In 2011, professors from Harvard Business
School published an article on
“Creating Shared Value,” and since then,
there has been a growing global movement
to make societal impacts integral
to a company’s strategy. SABMiller, the
world’s second-largest brewer, was an
early adopter. SABMiller and the MIF’s
4e Camino al Progreso Program targets
more than 380,000 small retailers in SAB-
Miller’s biggest Latin American markets:
Colombia, Peru, Ecuador, Panama, Honduras,
and El Salvador. The 4e program,
which began in 2013, aims to improve
small retailers’ business performance
– and therefore quality of life and leadership
abilities – through a combination
of classroom training and in-store
mentoring on business, life skills, and
leadership, and by strengthening the
broader “business ecosystems” in which
the retailers operate, with a special focus
on improving their access to financing
and technology. The hope is that this
effort will strengthen SABMiller’s retail
network and sales.
Corporate social innovation
The latest evolution on this continuum
has been the advent of corporate social
innovation (CSI). The World Economic Forum
launched the Global Agenda Council
on Social Innovation in 2014 – bringing
together an unlikely cross-section
of corporate leaders, impact investors,
and development executives – and offered
a definition for CSI that builds on
shared-value concepts: when companies
proactively design and implement business
models that increase incomes and
better the quality of life of underserved
or vulnerable communities at the bottom
of the market’s pyramid. The mutual
attraction for the unlikely bedfellows is
that CSI initiatives are often fueled by
corporate venture capital – the investment
of cash reserves from a company
to fund new endeavors.
A new alignment is emerging among
corporate venture capitalists and impact
investors. The corporate venture capitalist
is seeking returns for the company and
new capabilities or access to markets that
are aligned with its long-term business
strategy. The impact investor is interested
in placing capital into companies
and generating measurable social and
environmental impacts, together with a
financial return. The impact investor also
wants to expand effective development
solutions and – together with development
finance institutions – is beginning
to understand that working with
large companies may be the best route.
Companies that set up corporate venture
funds also have in-house expertise and
distribution channels that allow them
to scale-up successful projects.
In its study, Investing in Breakthrough:
Corporate Venture Capital, the think tank
and advisory firm Volans identifies six
sectors in which corporate venturing
is active, because these sectors directly
affect businesses, individuals, and the environment:
cleantech, education, health,
urban infrastructure and transportation,
financial inclusion, and agriculture and
food. Not surprisingly, these are also
areas where impact investors place most
of their investments.
Some intriguing CSI examples are emerging.
To name one: Shell Foundation, the
philanthropic arm of the oil giant, formed
a strategic partnership with Husk Power
Systems, a biomass electricity generator.
In five years, Husk has installed 84
minipower plants, providing electricity
to more than 200,000 people in 300
rural villages in India. By electrifying
villages, Husk is promoting economic
development, as businesses are able to
stay open after dark and children can
study at night. Impact investors Acumen
and Oasis Fund have contributed funding
to the venture. Business leaders are at
the forefront of transforming societies’
ability to confront important challenges.
Development finance institutions and
impact investors are along for the ride,
and it is guaranteed to be exciting.
Elizabeth Boggs Davidsen is a principal
specialist at the Multilateral Investment
Fund (MIF) and responsible for its
regional economic development and
value-chains portfolios. She also advises
on new partnership opportunities for the
MIF’s grant and investment activities.
Global Compact International Yearbook 2016 11