Corporate social innovation

Companies and non-governmental organisations are forging new types of relationships. Do they really work for the benefit of both?

For a long time, companies and nongovernmental organisations went through a period what influential University of Michigan Professor CK Prahalad, calls “co-existence”. This type of relationship was–and often still is–characterised by relations that were either conflictual, as in campaigns waged by NGOs against certain multinationals, or benevolent, often through philanthropy.

However, companies today are increasingly focused on corporate social and environmental responsibility as they face new constraints in decision-making processes, including the impact of activities on climate and local communities. This, together with unprecedented growth in the number of NGOs worldwide, has led companies and NGOs to forge new types of relationships. Both factors and drivers of social innovation, these types of cooperation– partnerships that transcend coexistence– are best described by the notion of co-creation. What does this term mean?

Co-creation, a concept that Prahalad also used in his work, involves two partners tackling a challenge in an open manner on the basis of mutual co-operation and consultation that extend from the project’s design phase to its implementation and the sharing of its results. For example, over the past few months, Danone, a major foods company, has been harnessing genuine co-creation strategies with certain NGOs and social entrepreneurs throughout the world. Why? And what benefits does a global corporation stand to gain from a close relationship with one or more NGOs?

First of all, it is a way for the company to get a better grasp of its market and future opportunities. Both in France and in developing countries, for example, companies that are used to serving more economically viable segments of the population know very little about lowincome groups, particularly the four billion people who live on less than two dollars a day. By working closely with firms that provide jobs for the hard-core unemployed, for instance, they are able to learn more about these populations and their needs.

Beyond this “marketing” aspect of the analysis, the company also considers the social and environmental value added to be gained through this socially innovative dynamic of including not-for-profit players in its value-creation chain. For example, the FedEx Corporation launched its first hybrid electric truck in 2004 together with the Environmental Defense Fund, an NGO based in Washington DC, and is now the market leader. In the agri-food sector, Danone, in its La Petite Reine project, called on Proxicity, a job-placement firm for people otherwise unable to find work, to make deliveries to some of its retailers in central Paris. The deliveries are made using pedal-powered tricycles, which affect the environment less than trucks do. Delivery times are the same, and the cost structure is adapted through innovative financing arrangements developed by Danone.

Danone has also initiated a co-creation process with SOS Sahel, an NGO, in order to develop and organise acacia gum collection in Chad, Mali and Burkina Faso. Through this initiative, the company is strengthening what it calls its “eco-systems” and thereby the sustainability of its suppliers. At the same time, it enables the NGO to carry out its primary mission, which is to fight poverty by developing income-generating activities.

Pride in ownership, a license to operate, an enhanced image and reputation, improved R&D–these are some of the many benefits of co-creation between NGOs and companies. But if these are to be optimal, each of the players must continually adapt and be open to the other. Not only must the co-creating partners be highly coherent in their expectations and aims, but, if they are to make a social impact, they must provide what the population really wants and follow local public policy guidelines. As Franck Reboud, the CEO of Danone often points out, when Danone becomes involved in this type of co-operation, it is engaging in neither philanthropy nor a subtle form of marketing, but responding to the need for a company in its sector to adapt to market trends, while not neglecting shareholder needs.

The difficulties involved are commensurate with the challenges and should not be underestimated. To work, both partners must agree to any changes in strategy and must be highly motivated, while managers and operational staff must show a high level of commitment. Otherwise, the limitations will show, as the recent ending of a partnership between Friends of the Earth and the French savings bank, Caisse d’Epargne, indicates.

Only time will tell whether co-creation can ultimately succeed in reducing some of the economic, social and environmental inequalities between the so-called developed countries and the rest of the world. In a context of ever greater regulatory constraints on all aspects of social responsibility, these initiatives are opening up a new path for our decision-makers, one that gives social issues a place in the management sciences and enables companies to maximise both profits and social value. For if companies are to be legitimate, competitive and innovative, they will have to open up to the new players, including stakeholders represented by NGOs and social entrepreneurs in order to tackle those social challenges that businesses are inherently ill-equipped to meet.

*Be-linked, Business & Community Intelligence, is a strategy and management consulting firm that is dedicated to NGO/corporate relations. Its mission is to ensure that relations with civil society are included as a key component of corporate strategy. Be-linked publishes Business & Community Brief, a bi-monthly newsletter on NGO/private-sector relationships.


©OECD Observer No 279 May 2010

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