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Corporate donations shouldn’t be Band-Aids. Big bets on social enterprises will make more change

Companies should think beyond charities when making their donations.

Corporate donations shouldn’t be Band-Aids. Big bets on social enterprises will make more change
[Photo: MichaelJay/iStock, xamtiw/iStock]
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When the COVID-19 pandemic first hit, many business leaders started rethinking how their companies could serve the needs of society as a whole. And for many, that meant donating to relief organizations and charities: Seven in 10 U.S. corporate funders increased their charitable contributions in response to the pandemic.

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Corporate charitable donations were critical in order to absorb the immediate shock and disruption of the pandemic. But for business leaders willing to consider a far-sighted approach, there is another, higher-risk strategy with potential for longer-term change: betting on social enterprises. Social enterprises—essentially, startups and businesses that serve a social purpose in addition to a financial one—will be key to the world’s recovery as we build back a stronger, more resilient economy through innovation and inclusion of low-income populations that have thus far been excluded or exploited.

On the ground, this looks like a plastic waste collection and processing company in Ghana called Coliba preserving jobs for 210 women living at the bottom of the economic pyramid; or in Peru, 150 smallholder farmers earning income despite supply chain disruptions because Wasi Organics, a local snack food business, is putting their needs ahead of short-term cash flow.

Whether preserving jobs or pivoting to provide masks, safe drinking water, and food, fledgling enterprises are meeting vulnerable communities’ most urgent needs while simultaneously building long-term support systems in the process. But these early-stage businesses can’t do this work alone. In fact, facing limited cash reserves, falling revenues, and dwindling options for funding, as many as 42% of these enterprises are at risk of shutting their doors—and rolling back decades of progress fighting poverty. And that’s where large corporations have an opportunity to step in.

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Corporations can help sustain and expand social enterprises in three key ways:

Direct a portion of their philanthropic funds to social enterprises

Large corporations with corporate social responsibility (CSR) funds, corporate foundation arms, and other available philanthropic funds have the resources to transform low-income communities in crisis with long-lasting effects.

Outside of their current networks, corporations can work with intermediaries to identify social enterprises that are now especially vulnerable. These enterprises will help maintain community resilience for a quicker and more equitable recovery, and could become future suppliers or retailers.

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Barclays, for example, is supporting my organization Acumen’s America Emergency Fund, which is providing relief to vulnerable communities through social enterprises like Bitwise, ConsejoSano, and Everytable. These social enterprises are already having a transformative impact in their communities.

Bitwise, which runs a diverse and inclusive coding academy in Fresno, California, launched a platform this year to connect displaced workers to training opportunities in six states. ConsejoSano, another California company, helps healthcare providers serve multicultural patients; it partnered with community health centers this year to raise awareness of new care options like telemedicine and drive-through testing. And Everytable, which operates affordable, grab-and-go restaurants in Los Angeles communities that are food deserts, was able to provide healthy meals to foster youth facing emergency food insecurity this year.

Support social enterprises in their value chains

Beyond philanthropic funding, corporations bring unique value to social enterprises by incorporating health and nutrition products into their sales channels or linking enterprises to new markets. Corporations can support the small businesses and social enterprises already in their value chains by maintaining business relationships, extending credit, and seeking out new opportunities for collaboration that may have been created by the crisis.

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As soon as the crisis hit, Ikea Social Entrepreneurship began working with social enterprises in its network and in parent company Inter Ikea group’s supply chain to help them survive. Despite facing an impact on sales itself, the company recognized that for social enterprises with smaller margins, decreased sales could force them to shut down. So along with providing emergency relief through Ikea Social Entrepreneurship, Ikea also committed to maintaining its purchases from the social enterprises in its supply chain throughout the crisis.

Supporting social enterprises can prove mutually beneficial. By helping to keep social businesses afloat, corporations are also maintaining a more stable and diversified value chain.

Lend their business acumen and expertise

As businesses themselves, multinational corporations have a wealth of knowledge to offer and can find ways to share this expertise with social enterprises in their networks. This type of accompaniment—particularly scenario planning, cash flow management, and digital business models—is invaluable to social enterprises facing unprecedented challenges and uncertain markets.

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Unilever, for example, supports social enterprises through its Transform network, a partnership with Ernst & Young; the U.K.’s Foreign, Commonwealth, and Development Office; and corporate partners such as MasterCard. Transform provides expertise on business resilience using its “Survive and Thrive” digital collaboration platform to help social enterprises not only withstand the COVID-19 crisis through business continuity support, but also prepare for the future with stronger business models. Long term, Unilever is building a more diverse and resilient value chain with lasting local benefits.

Supporting small, high-potential social enterprises is not without its risks. It takes courage to bet on unproven business models to serve difficult-to-reach customers in new or unstable markets. Donating to a short-term relief effort is certainly more straightforward and can yield more predictable results. However, social enterprise isn’t about short-term fixes; it’s about investing for the long haul to build more resilient systems.

Social enterprises innovating to solve our greatest challenges are a vital part of how we respond to crisis and how we recover. For corporations that recognize that the potential to build back better—and toward a more resilient and inclusive society—outweighs the risks outlined above, social enterprises represent ideal partners and an allies in any COVID-19 response.

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Yasmina Zaidman is the chief partnerships officer at Acumen.