Opinion: What corporations can learn from social enterprises

Corporations around the world increasingly advertise their commitment to sustainable development. For some, this is a hollow marketing strategy. Yet even for those who are truly committed to supporting sustainable development around the world, there is no blueprint for how to turn that intent into a reality.

If corporations want to support sustainable development, they need to build more inclusive business models. Doing so is difficult, and scaling even harder. But there are some important lessons corporations can learn from social enterprises, which have pioneered inclusive business models around the world, that can help them contribute more to sustainable development.

While corporations face a different set of challenges to reengineer their businesses, they can look to social enterprises as labs of innovation and seek to adapt their most successful practices, or partner with them to make their business models more inclusive of people who are low-income and marginalized.

An inclusive business goes beyond making products available to low-income consumers, it includes them in its overall strategy and centers them in its business model. When the founders of d.light set out to build an energy company in East Africa, they prioritized developing a PayGo model that would make their off-grid energy solutions affordable to low-income customer households.

As the company built trust with its customers by offering quality services, listening to their needs, and deploying local, community-based salespeople, it learned more about them and developed specific products to meet their needs. Today, d.light has impacted the lives of more than 100 million people across 70 countries, proving this model is not only profitable but scalable.

True inclusivity requires looking beyond a company’s direct workforce and considers its relationship with and impact on its entire supply chain — a lesson major global brands now facing pressure to divest from the Uyghur region in China would do well to heed.

In Colombia, Azahar Coffee’s model started with the base of its supply chain: low-income, smallholder farmers. To make coffee farming more profitable, Azahar established a fixed pricing structure based on a commitment to fair value. By helping farmers ensure a high-quality product and by practicing radical transparency with buyers, Azahar provides more than 3,000 farmers with increased, consistent income as high as 10 times what they previously made.

With an annual revenue of more than $10 million, Azahar has proven the efficacy of this farmer-first model and has offered a new approach to help transform an industry notoriously unprofitable for smallholder farmers.

To be inclusive, businesses must reject the notion that maximizing profit is their sole purpose and equally prioritize benefiting people — especially those who have been left behind — and the planet. Saral Designs, a menstrual hygiene company in India, structured its business model to tackle a collective challenge: period poverty. Saral developed the first semi-automated machine to produce sustainable, low-cost sanitary pads and has created a decentralized structure with a network of more than 40 production facilities and 1,500 “last mile” distributors across India, Bhutan, Rwanda, South Africa, Namibia, and Bangladesh.

Saral’s business-in-a-box model provides entrepreneurial opportunities for people — mostly women — to set up and run local manufacturing units, enabling communitywide economic growth. During the COVID-19 pandemic, this allowed Saral to pivot its operations to rapidly produce and easily distribute another community-need: masks.

For large, multinational corporations, this shift to more inclusive business practices will be particularly complex and require new kinds of investments. The recent inclusive business playbook from Acumen and Ernst & Young Global Limited that recommends large corporations start by reevaluating their “stakeholder stack” and getting board buy-in. Their research shows that inclusivity helps attract and retain talent, stimulate innovation, and even increase profits.

Some major corporations are already making strides. IKEA and SAP have established a commitment to incorporating social enterprises into their supply chains as a means to increase inclusivity. Critically, these actions are accompanied by a shared understanding that, while there may be some short-term financial or reputational rewards, the most substantial benefits will be in the long term.

If corporations truly want to contribute to a more inclusive, sustainable economy around the world, they can learn from the example set by social enterprises that are already doing that. Social enterprises have long demonstrated an ability to use the market to solve problems of economic inclusivity, and it is time for corporations to follow their lead.