How public and private leaders can build a social economy by working with impactful businesses

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Daniel Schmid, Chief sustainability officer, SAP SE, François Bonnici, Director, Schwab Foundation for Social Entrepreneurship; Head, Social Innovation, World Economic Forum, Marcos Neto, Director Sustainable Finance Hub, UNDP & Cheryl L. Dorsey, President, Echoing Green

• Social innovators have a vital role to play in our economies of the future, filling the gaps in formal systems.
• Unprecedented demands are being placed on social enterprises, but despite the pressures, they continue to be resilient.
• Strengthening corporate and public sector engagement in the social enterprise ecosystem can reshape global progress towards the UN’s SDGs.

A lot can happen in two years – especially when our future is at stake. While the COVID-19 pandemic has inflicted massive economic and social damage on the world, it has also prompted an unprecedented flowering of innovative responses and a new spirit of collaboration and unusual alliances that bring hope. The World Economic Forum’s Global Alliance for Social Entrepreneurship (formerly the COVID Response Alliance) is one such initiative.

What began as a collective response to support social entrepreneurs working on the frontlines of the crisis to protect the world’s most vulnerable [people, communities, and ecosystems], has evolved into a powerful public-private partnership of more than 100 leaders from government, business, philanthropy and academia with the potential to drive transformation at the speed and scale needed to rebuild and ‘re-steer’ towards a more just and sustainable world.

A vital, but overlooked, force for transformation

Social entrepreneurs have long played a vital role in driving transformation. We look to them for innovative business models and ways of operating that point towards a more sustainable and equitable world. Social enterprises can be relatively small and are sometimes overlooked as a force for change, but their role has become harder to ignore over the past two years. They have demonstrated their ability to move fast and facilitate collaboration, stepping up as first responders to fill critical gaps left by overwhelmed formal services.

In 2020, when the global health crisis was at its worst, and whole economies were locked down, a record number of 12 000 social enterprises were established in the UK alone. Of these, 47% were led by women, 31% had directors from Black, Asian, and Minority Ethnic backgrounds, and 22% operated in the most deprived parts of the country. Beyond their powerful social justice embodiment, they proved financially resilient too – 44% reported increased revenue flows, compared to just 18% of commercially-minded businesses over the same time period.

What is the Global Alliance for Social Entrepreneurship?

The Global Alliance for Social Entrepreneurship is one of the largest multi-stakeholder collaborations in the social innovation sector.

The Alliance has 100 members – corporations, investors, philanthropists, governments, researchers, media, and industry actors – who work together to build an engaged ecosystem of key public and private sector leaders in support of a social innovation movement that transforms society to be more just, sustainable and equitable.

Launched in response to the COVID-19 crisis by the Schwab Foundation together with Ashoka, Catalyst2030, Echoing Green, GHR Foundation, Skoll Foundation, and Yunus Social Business in April 2020.

In that pursuit, the Global Alliance will continue to mobilise a trusted community of leaders together with core partners – SAP, Bayer Foundation, Motsepe Foundation, GHR Foundation, Porticus, Deloitte, Microsoft and Catalyst 2030, that acts and learns together so that social entrepreneurs can flourish.

Contact us to get involved.

Removing the obstacles in the path of social entrepreneurs

We’ve seen during COVID-19 how social entrepreneurs punch above their weight and can make attractive partners for both governments and profit-driven businesses that may lack capacity or the innovative capabilities to reach the last mile and disrupt the status quo – and yet the obstacles in their path remain considerable.

For instance, while there is significant evidence that corporations can increase their inclusion and sustainability impact when they use their spending on procurement to purchase goods or services from social enterprises. However, around 77% of social enterprises report difficulties in their engagement with corporations, especially when it comes to integral business functions, such as agreements on pricing and payment and delivery terms. Other barriers limiting their growth include a lack of visibility; absent supportive legal and regulatory frameworks; minimal verification measures and standards; and a limited supply of financial resources, with restricted access to markets.

It is vital that we start to dismantle these barriers and tap into the power of social entrepreneurs as the challenges we face are only growing. Oxfam recently pointed out that cuts in social services like healthcare, education and social programmes have increased the number of people living in extreme poverty to 860 million people this year. At the same time, Russia’s war in Ukraine is driving rising prices of food and energy, and many countries are exhausting their finances, with debt defaults looming large. In this time of volatility and uncertainty, the social enterprise ecosystem has a lot to offer by restoring and building trust in societies, creating opportunities for inclusive jobs, and advancing inclusive health and racial equity.

Priorities for a more supported ecosystem

There are three trends that we believe need to be developed to enable a more supported social enterprise ecosystem: strengthening corporate engagement, building collective actions and networks, and developing stronger social policies.

Strengthening corporate engagement starts with the transformation of value systems by making procurement responsible so that buying from social entrepreneurs becomes the norm, rather than the exception. This would require expanding and streamlining access to quality non-financial support for purpose-driven enterprises to enable social entrepreneurs to become ‘corporate-ready’.

The new TRANSFORM Support Hub, powered MovingWorlds, SAP, TRANSFORM and Unilever, is one such initiative that aims to strengthen engagement and deepen impact between sectors. The platform offers social enterprises opportunities to build their capacity to solve strategic business challenges and integrate themselves into corporate supply chains. For example, Drinkwell, a social enterprise partner to both utilities and to corporations like Unilever through its Pureit brand, receives influential pro bono consulting support from SAP on the TRANSFORM Support Hub. Expert volunteers lean on their strategic business acumen to help leaders at Drinkwell operate more effectively as a team, which in turn, accelerates the organization’s mission to reach 100 million individuals who live beyond the networked water system. When corporate employees engage through the Hub, they are immersed in an unparalleled experiential leadership program and become better corporate leaders, which promotes a more just, sustainable, and equitable economy.

Collective actions and networks can be reinforced to boost the participation of social business in other sectors too. The UNDP’s Business Call to Action (BCtA) and Endeva report “Two Hands to Heal” demonstrates how building a consortium with another partner can help an inclusive business to meet the often onerous tender requirements commonly issued by governments and increase its chances of selection during the public procurement process.

Partnerships such as these can be powerful in advancing a range of pressing social agendas. For example, within the Global Alliance for Social Entrepreneurship, its members are using their collective influence to advance the racial and social justice agenda – an initiative being led by Echoing Green, the GHR Foundation, and the Centre for the New Economy and Society. Together, these partners are bringing together globally-minded leaders from diverse geographies across the social innovation ecosystem to dismantle barriers and support innovators addressing racial inequities.

Last but not least, there is a need to accelerate the establishment of inclusive and impact-driven economies and societies through policy changes and public sector action. Governments can unlock the social economy through creating incentives for funding and investment, expanding education and research, as well as collecting and making visible social impact data to avoid impact washing, and enhancing the integrity, accountability, and transparency with respect to the environmental and social footprints of enterprises.

Laying the foundations for a flourishing social economy

Approximately 75% of social enterprises link impact metrics to the United Nations SDGs with poverty, gender equity and decent work as major areas of focus. Social entrepreneurs balance resilient business practices within a context of social justice. In contrast, only 38% of mainstream companies align their impact with the SDGs. International organisations like UNDP are also working on bringing together key actors through the Sustainable Finance Hub to enable governments, the private sector and international financial institutions to accelerate financing and measure impact towards achieving the sustainable development goals (SDGs).

If we want to recover from the current crises, rebuild more quickly, and lay the foundations for greater resilience in the longer term, we need to work together to deliberately and determinedly strengthen the social innovation ecosystem. Anything less will amount to selling our future short.