French blue chips converge on social business

By Bill Hinchberger 01 July 2015

French flag flies atop the Paris Bourse, now known as Euronext Paris. Despite generating small profits, social business initiatives are taking root at France's publicly traded companies. Photo by: Novopress.info / CC BY-NC-ND

The CAC-40 index is the French equivalent of the Dow Jones Industrial Average in the United States: the top publicly traded companies listed on Euronext Paris, the Parisian stock exchange. These include many household names, including electric utility company EDF, cosmetics giant L’Oréal, motor manufacturer Renault, and energy producer and provider Total.

More than one-third of CAC-40 firms boast “social business” initiatives, according to a survey by the Paris-based anti-poverty think tank Convergences.

The classic definition of “social business” comes from Muhammad Yunus, founder of the Grameen Bank, the seminal microfinance and community development organization based in Bangladesh: Business people can recover investments but “cannot take any dividend beyond that point.”

Three CAC-40 respondents — Crédit Agricole, Danone and Veolia — have joint ventures with the Grameen Bank.

Beholden to demanding shareholders, many CAC-40 firms prefer something championed by the Organization for Economic Cooperation and Development that allows reasonable profit-taking, noted Nathalie Touzé, Convergences’ executive director.

However defined, CAC-40 social business initiatives pull down few profits. And that seems OK.

“If I am at economic break-even, that’s enough,” said Joël Lelostec, business development director at Schneider Electric. “There is not a lot of pressure to be highly profitable.”

The Convergences report included a set of recommendations for firms and nonprofit partners that might want to venture into social business. Here are some of the highlights:

1. Capitalize on experience and pool resources.

Forge the right partnerships and harness everyone’s strengths, be they multilateral banks, nonprofits, local entrepreneurs and others that are increasingly taking the field.

“Hybrid models are a trend,” Touzé said. “You have to have a mix of tools to achieve profitability — especially if you want to adapt to the needs of poor people in the developing world.”

Under the banner of “BipBop” — Business Innovation and People at the Base of the Pyramid — stands a partnership that unites Schneider Electric and the Paris-based Participatory Microfinance Group for Africa, or PAMIGA. BipBop provides solar-powered electricity kits to all comers in rural Africa — from single homes to small businesses and entire villages, starting in Cameroon, Ethiopia, Tanzania, Senegal and Burkina Faso.

Schneider Electric’s core business is not to reach the people at the BoP, said Renee Chao-Beroff, PAMIGA’s general manager. “They have the technical skills but no idea how to reach the population — especially off-grid. So they partnered with us.” PAMIGA identifies clients and offers loans.

Following a two-year pilot program, BipBop gathered over 100 stakeholders in Addis Ababa, Ethiopia, to share lessons learned and develop tool kits.

As a corollary, Chao-Beroff warns that nongovernmental organizations should do their own due diligence before inking deals with companies, no matter how well-endowed.

“NGOs should always refuse to be subcontractors,” Chao-Beroff said. “Some NGOs wanted Schneider Electric as a donor, but it is not a donor — nor are other large firms. They should have their own business models, otherwise it is just a [company] logo on some kits.”

The bottom line for NGOs, Chao-Beroff said, is for them to understand that due diligence is for both sides.

“NGOs should never think that they are just being evaluated,” she said.

2. Involve all stakeholders in the ecosystem.

When Schneider Electric launched its rural electricity drive, the firm sought out its established distributors and installers.

“That was the easiest way to go but not the best,” Lelostec said. “It already existed, so it was easy. But it was not the best because they were located in the cities.”

Eventually, Schneider Electric and PAMIGA hit on the idea of recruiting local entrepreneurs to act as sales-installation-maintenance representatives.

“That was the missing link,” Chao-Beroff noted. “These distributors are capitalists. They are close to the village and if you introduce solar to a village, people are afraid that the system might break down. They need a local who can do maintenance.”

Over 100 such entrepreneurs have been trained and are on the job.

“It is a clear business model,” Chao-Beroff said. “It is not subsidized.”

PAMIGA meanwhile has begun to raise money with investors ranging from the European Investment Bank to Calvert, a U.S. private investment firm, to create a fund to provide bigger loans, into the thousands of dollars, for small companies and villages.

“They are considered too risky,” she said. “The banks have no clue, and won’t give them loans.”

3. Invest in measuring impact.

“If you look at companies that work with the BoP, few spend the time and resources needed to measure impact,” Lelostec said. “If you don’t measure, how can you adjust or know when you have reached your goal?”

The Schneider Electric team includes an individual assigned to measure economic and social indicators, which include the effects of household electricity on women who are relieved of the burden of scavenging for firewood.

Chao-Beroff stressed the need to set a baseline from the outset.

4. Educate the stakeholders.

Everyone recognizes that local entrepreneurs needed training. But internal education is where companies often reap their greatest benefits. For example, many corporate employees want meaning in their work lives and social business can offer an opportunity, said Jeanne Boillet, an associate of the global consulting firm EY.

“Social business is a powerful tool for mobilizing internally,” Touzé added.

And there’s more. When companies look at the BoP, they often discover new ideas. Call it “reverse innovation,” said Bénédicte Faivre-Tavignot, chair of the program on social business, enterprises and poverty at business school HEC Paris.

It’s an example of “disruptive innovation,” Touzé said. “When companies build a line of products for poor people at affordable prices with good quality, they can develop products that can be sold in the developed world.”

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About the author

Bill hinchberger
Bill Hinchberger@hinchberger

Bill Hinchberger is Devex's Paris correspondent. In his spare time, he's a freelance writer, communications consultant and educator. A native of California, he lived in Latin America for over two decades, reporting for media such as The Financial Times and Business Week. He also served as president of the São Paulo Foreign Press Club and founded the online travel guide BrazilMax.com. Assignments have taken him to over 30 countries, from Cuba to Egypt, India, Kenya, Turkey, and beyond.


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