Strategic alignment can be risky – but 'impact integrity' is possible
The strategic alignment between a corporate foundation, impact fund or accelerator and its related company can help both parties achieve social impact in many ways. But this close relationship can also jeopardise the ‘impact integrity’ of these corporate social investors, unless they develop clear strategies to mitigate this risk. EVPA's Nicolas Malmendier introduces new research.
To align or not to align, that is the question that shapes how corporate social investors – such as corporate foundations, impact funds and social businesses – create positive impact on society.
In 2019, EVPA published research on Social Impact through Strategic Alignment. This shed light on the different ways in which corporate social investors can increase their social impact by aligning their mission with, for example, the geography, industry or business strategy of their related company.
Our latest research, which will also be one of the main topics of our C Summit in November, will explore how they preserve their impact integrity despite their challenging position as an impact-driven organisation linked to a company.
Social enterprises, NGOs and other social purpose organisations can directly benefit from the strategic alignment chosen by a corporate social investor and their related company. For example, Hear the World Foundation, founded by the hearing aid manufacturer Sonova, supports projects to improve the lives of children with hearing loss in low- and middle-income countries. Its mission is aligned with the industry in which its related company operates. Thanks to this alignment, the foundation’s grantees can increase their impact as they receive access to the company’s expertise and technology around audiological care through the foundation.
Non-profit Écoute-moi! helps children in Chad with hearing loss, who otherwise would not have access to audiological care. It is funded by the Hear the World Foundation, which draws on the resources of hearing aid manufacturer Sonova (credit: Écoute-moi!)
Read more about Hear the World Foundation and Sonova: Listen to me: pioneering hearing care in Chad
Philips Foundation, founded by the Dutch health technology company Philips, provides access to quality healthcare for underserved communities, in line with the company’s inclusive business strategy of expanding access to care. By seeking business alignment, the foundation can leverage the company’s expertise on access to care as well as any additional corporate resources that help the investees grow and scale their impact (the full story of this win-win relationship will be published soon on Pioneers Post).
As such success stories make a good case for a close relationship with the related company, it is not surprising that corporate social investors increasingly consider alignment an effective strategy to unlock corporate resources and expertise. Recent data shows that over 50% of European corporate social investors would in future like to align their mission with social issues related to the corporate industry or even with the company’s long-term (inclusive) business strategy, compared to 28% currently doing so in 2021.
- Read our special digital magazine, A new dawn for corporate impact? exploring the cutting edge of corporate philanthropy and corporate social investment
Many practitioners see this as a positive trend. But strategic alignment can risk jeopardising the impact integrity of corporate social investors.
By definition, corporate social investors are linked to a corporation while pursuing a social mission to achieve positive impact on society. Even though this relationship gives them unique opportunities, such as access to corporate employees, expertise and assets, it also causes certain tensions that need to be balanced carefully. Close alignment with the related company might make it more challenging for a corporate social investor to preserve its impact integrity. New research by EVPA – to be launched on 15 November – aims to highlight how corporate social investors deal with these social-business tensions and challenges.
Tensions – and how to mitigate them
"Even though this relationship gives them unique opportunities, such as access to corporate employees, expertise and assets, it also causes tensions"
Initial findings show that corporate social investors face numerous challenges due to their inherent relationship to a company. For example, if a company struggles with a negative public perception, this might limit its related corporate social investor’s ability to effectively collaborate within the social sector as potential partners are reluctant to engage with them. These partners could question its credibility and fear reputational damage by being associated with its name.
- Read: ‘It's really difficult to fight against perceptions’ - Valérie Faillat, Sanofi Espoir Foundation
Moreover, corporate social investors are frequently misconceived within the related company as a vehicle that should create business benefits alongside their impact-driven activities. As a result, some feel the pressure to make a business case to justify their existence. Pressure can also come from external stakeholders, such as customers of the related company who perceive the corporate social investor as a vehicle that should primarily serve their interests. As a result, outsiders expect certain social activities to receive support, but these can exceed the corporate social investor’s mission scope. Overall, corporate social investors find it challenging to position themselves clearly between their related company and civil society as well as to communicate this to all relevant stakeholders.
Some experience these challenges very strongly, while others only do so to some degree. The level depends on a number of contextual factors such as the corporate social investor’s legal structure, the regulatory environment and cultural constraints. However, whatever the context, corporate social investors can put in place measures and strategies to address and mitigate these challenges.
- They can involve independent experts in the selection process of investees, eg in the form of an intermediary committee, to ensure that impact considerations are prioritised and do not come at the cost of business imperatives.
- Clear and consistent internal and external communication can clarify the role of the corporate social investor as an impact-driven organisation with considerable independence from the related company.
- Corporate social investors can decide to partially or even completely staff their team with people from the social sector instead of recruiting corporate employees. This approach can also apply to the board composition and helps avoid any potential bias towards the company.
As strategic alignment can amplify the above-mentioned challenges, such measures can help corporate social investors ensure impact integrity and avoid their social mission being altered by the connection with their related company.
These are just some of the findings of EVPA’s research, which will provide a comprehensive mapping of the unique challenges that corporate social investors face as well as the strategies they adopt to preserve impact integrity. Watch out for the launch of this research at EVPA’s C Summit on 15 November.
Article originally published by Pioneers Post here