NGOs: From Grantees to Shared Value Partners

Among all the inquiries we’ve received about Creating Shared Value  during the last 6 months, the most curious have been from non-governmental organizations (NGOs). They wonder what CSV will mean to their fund-raising. There’s little risk that the $4 billion in corporate philanthropy, much of it directed to NGOs, will go away in the next few years. More important are the implications of Shared Value for NGOs’ programs. Increasingly, we’re seeing businesses reach out to NGOs as partners to enter a new market or reduce costs in their value chain. NGOs would be wise to seize this trend and change the way they look at business – less as generic donors and more as highly specific partners to scale their social impact ambitions.

From Grantee to Strategic Partner
We’re witnessing a profound shift in the relationship between NGO and business where mutual needs are being served in the spirit of Shared Value. This new relationship will not replace the role NGOs have played with companies for decades – as recipients of matching grant funds, service providers for disaster relief, and implementers of projects that benefit communities where employees live. Yet, as businesses see their touch points with society less out of obligation and more about competitive advantage, NGOs will serve a new purpose and new partnership criteria will appear. For the most part, this will expand, rather than reduce the pie of resources available for NGOs from corporations.

As companies consider Shared Value initiatives, they will need partners to help reconceive products and markets, build clusters to fill holes in their external business context, and reduce costs in their value chain. There are plenty of capable for-profit companies that can help companies on the Shared Value journey but it’s remarkable how many NGOs are ahead of the private sector. Take TechnoServe, mentioned in our 2011 Harvard Business Review article, that improves the pre-competitive business conditions in developing countries for companies such as PEETs coffee and Coca Cola. This is just one example among a growing list of strategic partnerships between business and NGOs.

Strategic Partner Examples

  • Redefining productivity in the value chain: NGOs have been working with the private sector in a partner or “supplier” mode for years. It’s in the value chain where businesses have been most apt to partner with NGOs, particularly around issues of compliance. We’re now seeing new nonprofits move beyond compliance to improve efficiencies in the value chain that have huge social and environmental benefits. Nonprofit FishWise partners with seafood retailers, producers, and distributors to find more sustainable sources of dwindling ocean fish. The World Wildlife Fund (WWF) acts on an even larger global scale, partnering with Walmart on similar sustainable seafood issues and Coca Cola to help the company improve its use of water.
  • Enabling local cluster development: TechnoServe is a longtime partner to business. What’s noteworthy is the cast of new NGOs entering into partnerships. CARE has dozens of corporate sponsors and among these are a few that are examples of Shared Value. For example, CARE helps to train farmers in Ghana to improve their cocoa yields on behalf of Kraft. Nonprofits also enhance the communities where products are sourced on behalf of companies. Save the Children is partnering with Starbucks to provide education and health services in its coffee-growing areas.
  • Reconceiving products and markets: Seattle-based PATH is a highly-regarded nonprofit that frequently partners with the private sector to develop health technologies for patients in developing countries. For example, the NGO dramatically expanded the use of a vaccine for Japanese encephalitis, a disease that affects the rural poor, by helping with tricky regulatory hurdles and negotiating a public sector price so that the Chinese commercial partner made a financial return. PATH worked in a similar way with US-based Temptime Corporation to develop a vaccine vial monitor to reduce vaccine spoilage.

Social and Environmental Impact
Business benefits throughout all these NGO partnership examples. Perhaps most exciting for us is the social side of the Shared Value equation. Throughout the examples above, corporations are facilitating or amplifying the social impact missions of the nonprofits. PATH cannot develop new vaccines or medicines on its own. Once perceived as a poverty aid organization, CARE now publicly recognizes the value of business to increase the incomes and well-being of the poor. When CARE and Plan International partner with Barclays bank, they can better deliver financial services to the poor. Likewise, WWF recognizes that there’s no way to reduce high demand and poor governance of fisheries without a market-based solution.

Unique Offerings
Business partnerships are not always the answer for NGOs as there might not be obvious overlaps. But when the rationale exists, it’s clear that each actor has unique offerings. For example, PATH comes to business with a bundle of incentives, relationships and tools that fill gaps and make it more economically viable to develop a health technology. Each side is looking for particular, non-existent relationships, knowledge, and resources:

NGOs Should Seize the Initiative
Rather than wait for business to knock on their doors, NGOs should pursue these assets and skills to scale, sustain and accelerate their missions. Where to look?

On behalf of the beneficiaries and at-risk environments in which they serve, nonprofits can create more social impact by leveraging the private sector’s need for the following:

  • Continuous supply of high-quality inputs and talent
  • Reduced costs in the value chain
  • Continued vitality in communities where workers live
  • New markets and customers

Starting with the NGO’s targeted beneficiaries and locations, NGOs can look for leverage in places where there is an existing geographic or product overlap or where companies will need to de-risk their value chain, introduce new products, and address deficiencies in their competitive context.

Today, many nonprofits tend to view companies as funders. There’s nothing wrong with this philosophy and much good comes from traditional company-NGO relationships. But if nonprofits want their programs to move from pilot to solution more quickly and in a sustainable manner, they would be wise to reconsider business as Shared Value partners.

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