Business of Impact in Venice was a smash but the feast is not over! We continue to serve you small portions of great wisdom on the topic of corporate social investing.
So, what is corporate social investing and what makes it so special?
Corporate social investing is too valuable an activity to remain a secret to the greater impact ecosystem. This learning bites series will demonstrate the unique opportunities corporate social investors (CSIs) have to offer and highlight where other impact stakeholders can connect and collaborate.
What’s so special about corporate social investors?
Corporate social investors are ideally positioned between business and impact. This allows them to interact with stakeholders from both sides, while bringing unique added value to the table.
CSIs’ function and value differ from other impact stakeholders like private foundations, impact funds, venture capital funds, or similar corporate stakeholders like ESG teams, CSR departments or corporate foundations practicing traditional philanthropy. Let’s have a look at the boxes that CSIs need to tick:
1. Corporate social investors are usually set up as corporate foundations, impact funds, accelerators, social businesses or as a team embedded in a company.
2. They support innovative solutions to pressing social and environmental issues.
3. They do so by providing impact-driven organisations (e.g., NGOs, social enterprises) with capital in the form of grants, debt and/or equity, alongside non-financial support.
4. Corporate social investors are legal or organisational structures related to a company (e.g., by name, funding, structure and/or governance) and have the primary intention of creating social and environmental impact.
While the aforementioned impact and corporate stakeholders can share some of these elements, CSIs tick all those boxes, which makes them stand out.
> Other impact stakeholders may also support innovative solutions, and provide capital and non-financial support, but they are not legal or organisational structures related to a company.
> Similar corporate stakeholders are also legal or organisational structures related to a company, but they do not share the primary intention of creating societal impact.
Even though their approach is distinct, the corporate social investing community is often confused by key stakeholders with traditional corporate philanthropy or sustainability. This confusion is problematic because it can hinder successful collaboration and leads to a lack of understanding of the unique benefits of corporate social investing. Clarifying some key differences can help.
Traditional corporate philanthropy typically allocates smaller grants or donations to a larger number of different (mostly local) initiatives in areas where the company operates. These initiatives are more community-driven, rather than business driven. Traditional philanthropy lacks high engagement with impact enterprises through non-financial support, tailored financial instruments, and impact measurement and management, which are key aspects of corporate social investing.
Sustainability is dominantly driven by business interests. Typically, sustainability is closely tied to the company’s value chain and is expected to have positive impact on the long-term survival of the business (e.g., new market entry, new product innovation, reputation).
While corporate social investing can create similar benefits, it is not the primary intention. Sustainability is also less willing to invest in very disruptive innovations, early-stage impact enterprises that are not yet financially self-sustainable or projects where the business case is not evident. As corporate social investments are long-term, high-engagement capital investments, they are more risk tolerant and aim at having a catalytic impact.
Win-win for impact and business
CSIs’ relationship with a company and their primary intention of creating social impact enables corporate social investors to drive unique value for society and business at the same time:
Impact Benefit
> They have access to corporate resources such as network, expertise and financial resources, and can use them to create a positive impact on society. These resources also include human resources, namely corporate employees who may engage through hands-on and skill-based volunteering opportunities (learning bite on this topic coming soon!).
> Name recognition of their affiliated company gives them credibility and convening power. As a result, they are equipped to mobilise other stakeholders more easily around a social issue.
> They can spark systemic change on an industry level by bringing competitors and/or their CSIs to the same table to address social challenges common within the corporate industry.
Business Relevance
> They can strengthen a company’s brand and license to operate, and attract and retain talent. This is especially true today with the rising expectations from customers and employees towards companies to acknowledge their social responsibilities.
> They can source innovations and gain market knowledge which can feed into the business’ market knowledge of populations currently not within the company’s reach (e.g., disadvantaged communities).
> They can increase the company’s supply chain efficiency by strengthening the communities where the company is operating or by introducing social enterprises as potential suppliers.
