There is growing consensus over the principle by which private sector companies have a responsibility and interest in promoting more sustainable and inclusive economic models. But how is the situation in the field? CAC 40 companies are effectively investing the resources to deliver on their commitments to sustainable development and the fight against poverty and exclusion via social business initiatives.
Going beyond Corporate Social Responsibility
The COP21 “Lima-Paris Action Agenda”, which lists, among other initiatives, the climate projects led by companies, and the importance given to the private sector when the new Sustainable Development Goals (SDGs) were adopted by the UN last September, are both signs that Corporate Social Responsibility (CSR) is now well established. One of the approaches to this responsibility has taken the form of the implementation of social business initiatives, i.e. economic activities whose objective is not to maximize profits, but to provide a response to a societal need. Beyond CSR policies, it involves developing innovative economic models which contribute to changing companies from the inside, their modus operandi, and the very way of doing business.
The survey “CAC 40 Companies and Social Business”, published by Convergences in 2015, focuses on 14 companies which are developing this type of initiative. The results of this first assessment highlight the wide diversity of social business projects led by CAC 40 companies. The study points out the development potential that can be exploited in both the companies which have already taken this path and those which have not yet ventured into the ecosystem of social business.
Two main categories of social business projects
How are social business projects implemented by the CAC 40? The 14 surveyed companies reported that the development of new economic models is central to their approach. There are two main categories of projects: firstly, projects which target the economic inclusion of populations at the Bottom of the Pyramid (BoP), people who live on less than US on less than US$3 a day, and, secondly, the initiatives which support social enterprises.
For the first category, BoP populations can be included through supply and demand. Inclusion by supply takes place by directly involving populations in the production and distribution chain. This is the case with L’Oréal’s Matrix project (2010), which employs women microdistributors for its Matrix products in Rio de Janeiro and São Paulo. Inclusion can also involve demand, by developing products and services that are accessible to these populations. Veolia is a good example of this: through the Grameen Veolia Water joint venture, Veolia sells water barrels to the poorest rural communities in Bangladesh at a price 100 times cheaper than the market price. The Grameen Crédit Agricole Foundation, for its part, meets strong demand for microcredit in order to support projects in the fields of nutrition, health, financial services and agriculture. At 30 November 2014, the Foundation had reached 2.3 million borrowers. Another example is the financing of microfinance institutions (MFIs) by BNP Paribas, one of the bank’s main social business activities with 26 MFIs financed in emerging countries and 4 MFIs in developed countries until 2014.
10 out of the 14 companies surveyed are part of the second category, by promoting the development of social business through the incubation of social enterprises. They include pioneers such as Danone, with the danone.communities fund, which has been incubating local enterprises working to fight poverty and malnutrition since 2007. More recently, since 2011, Orange has been supporting social enterprises in Africa with the Orange African Social Venture Prize. Another example is the ENGIE Rassembleurs d’Energies initiative, which provides technical and financial support to social entrepreneurs, NGOs, foundations and cooperatives in order to promote access to sustainable energy.
Thus, social business initiatives abound and their implementation is real. The development of social business initiatives is less and less relegated to the status of side and secondary activities. On the contrary, it is tending to become an integral part of overall corporate strategies. Companies have moved from an approach that used to be restricted to simply supporting social and environmental projects – in particular through donations and grants – and are now creating new economic and social models. Be it through joint ventures with solidarity-based organizations, new products and services for BoP populations, or more inclusive production and distribution chains, CAC 40 companies are today developing more innovative and inclusive models which are part of their core business.
Impact measurement: the next challenge?
How to measure the actual impact of these projects? How to evaluate whether the objectives set by their responsibility or social mandate have been achieved? While all the companies surveyed consider that it is necessary to evaluate their projects, all do not conduct it as comprehensively, due to its high cost and the difficulty of determining reliable social impact indicators over time. Yet if companies do not find the means to develop impact measurement for these projects, they will not only undermine their credibility in terms of CRS, but also the very sustainability of these initiatives.
Investing in impact measurement is a crucial step in enhancing the effectiveness of these projects and promoting their development. It is for this reason that the next edition of the Convergences survey, published in 2016 in partnership with EY, will aim to shed new light on and provide some responses to this key challenge for the CAC 40 companies: the impact measurement of their social business.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.