Corporations are now interested in social sector partnerships for much more strategic reasons than they have been in the past. How can NFP CEOs take advantage of this trend?
For years NFPs have been partnering with corporations, tapping into resources via their philanthropic and social responsibility agendas. However, we are now seeing the emergence of strategic relationships driven by the pressure on companies to find new sources of shareholder value, and this presents game-changing opportunities for NFPs.
The competitive landscape is changing
Businesses are getting more involved in social and environmental problems because they provide productivity and growth opportunities. A survey of global CEOs found that their number one strategic concern is creating inclusive growth, three times more pressing than increasing shareholder value. In other words, they see collaborative, inclusive business models as the foundations they need for driving shareholder returns.
What does it mean?
That all sounds good on paper, but what does it mean in practice? From a company’s perspective, they interface with societal issues in three ways: Firstly, there are those that don’t have any impact on their core business, such as cancer research and banking. A bank may align itself and its staff with a cancer charity because it is ‘a good thing to do’, but it won’t materially improve its financial performance.
Secondly, companies back certain causes for brand and reputation reasons. Kimberly Clark supports the Australian College of Midwives because of the relevance of its nappy and wipes brands to that profession. And on the environmental front, they source 100% of wood fibre from FSC certified sources. Such support and accreditation is valued, however this approach is oriented towards defending value rather than creating value.
The third type of interface is the one that’s about value creation, where there is a revenue creating or cost-saving opportunity. Suncorp partners with Good Shepherd Microfinance to provide affordable insurance products for low income earners, a new growth opportunity for the company that addresses financial inclusion for an under-served demographic. In parts of Western Sydney, real estate agents partner with social services to reduce tenancy evictions that result from adverse life events, such as ill health, job loss or domestic violence. Why? Because it saves real estate agents and landlords money and, at the same time, ensures less people are prone to homelessness.
Creating shared value
Harvard’s Professor Michael Porter and strategic philanthropist Mark Kramer coined the term shared value to describe this third type of interface or strategic approach. It is about creating positive social impact through core and profitable business.
Most large companies are reviewing their social sector partnerships and questioning where the value lies. It represents a risk for NFPs with partnerships that are deemed low value-add. On the flip side, there are fantastic opportunities to co-design and work together. Insurer IAG recently entered into a ten-year partnership with Australian Red Cross with creating shared value as a core aim. The length of the partnership is indicative of the strategic intent.
To play in this exciting new area, companies and NFPs need technical skills for generating innovative ideas, developing them with partners and stakeholders, and forming business cases. More importantly, there’s human and organisational change challenges to deal with, because in cross-sector partnerships the parties have different motives, speak in different ‘languages’ and have their own work cultures. In my work, I’ve found that corporate personnel find it hard to comprehend the complexity of social challenges, and that NFP staff can feel intimidated by forging new types of corporate relationships. It is challenging corporate relationship managers who are used to playing in a philanthropic and CSR program space.
Finding and implementing initiatives built upon shared value principles may provide fee for service opportunities and access to skills, resources and networks at scale that can transform the impact you make.
A framework for developing opportunities
Strategic partnerships are based on the Dr Seuss-like question, “Who wants what we have and who has what we want?” Finding the intersection points between your impact area and corporate agenda is the challenge. As a starting point, consider the following framework:
- The Corporate Agenda – For NFPs, this is the demand-driven approach. Find out where the current pain points are for companies using a strategic and operational lens. For example, if employee absenteeism or productivity problems are hampering a company’s bottom line – and your services help address the contributing factors – then that’s a good basis for an exploratory discussion.
- The Societal Need – You have good working knowledge of your social impact area, so this approach is about clarifying what you are really good at and finding where that asset or skill has commercial value. As an example, financial counselling has many applications, including getting bank customers back on track when experiencing financial hardship, so there is fee-for-service potential.
- Leveraging Under-Utilised Assets – Under-utilised assets can be great sources of inspiration for strategic partnerships. In the Suncorp low income earner insurance example, the model is only feasible because Good Shepherd Microfinance advocates for the customer and distributes the product through its national network. A traditional insurance distribution model would be too expensive.
It’s About Preparation
The reality is that this is a corporate innovation play, where refinements to existing or totally new corporate business models drive the creation of economic and social value. Finding good ideas may be harder than standard partnering approaches, however the rewards are far greater when they do surface.
It’s worthwhile scoping out where your general opportunities lie and equipping your board members with cheat sheet to help them identify the types of companies that you’d like to engage with.
In a world where doing more with less is a priority for all sectors, you can use shared value principles to develop deeper and more strategic partnerships with businesses.