The key to scaling up social enterprises to make an impact

WASHINGTON (Landscape News) — How can we scale-up social enterprises to support sustainable development and generate economic impacts for local communities?

How can social entrepreneurs harness sound business ideas for social gain, and what lessons can accelerate the development of profit-driven yet socially-minded initiatives that target improved natural resource management?

These were some of the questions under discussion at a digital summit during the Global Landscapes Forum Third Investment Case Symposium on Wednesday in Washington. The session, “Scaling-up social enterprises for sustainable landscapes” – reflected the growing role of social enterprises in agriculture, forestry and the environment, and how these socially-minded companies are helping to tackle key challenges such as deforestation, water conservation, and waste management.

Various models over recent decades have shown it is now possible to build a sustainable and economically-viable business around a social cause. However, many enterprises fail to find a sustainable source of funding to support their on-going development, preventing them from achieving their mission and delivering support to the communities that ultimately depend on their success.

RESEARCH AND DEVELOPMENT

Those that grow tend to understand investor interests and needs. “Investors look for a strong team,” said Colm O’Driscoll of ECOSTAR, a research-enterprise hub that provides training and support for young professionals and students to improve entrepreneurship and innovation skills. “Their first question is usually: who are they and what is their background? They want to make sure that your team is solid and has some staying power.”

Capacity strengthening plans could improve team performance: helping social enterprises to understand their strengths and weaknesses, enhance their entrepreneurial skills, and gain new knowledge that allows them to grow and thrive.

Investors also respond well to clearly communicated impacts and effective business plans. Investing in research and development (R&D) is critical – as it helps to identify consumer demands, market opportunities, and viable products. Practical yet cautious strategies were recommended. “Start small,” suggested O’Driscoll. “Test the market first, and then scale-up.”

FLEXIBLE APPROACH

Adopting flexible approaches – knowing when to change or refine existing business plans – can be important. Whole Forest, an agro-forestry social enterprise that works in Ecuador’s fragile Choco rainforest to reduce deforestation and provide alternative livelihood opportunities for local communities, provided technical training, invested in infrastructure, and constructed a factory to produce household products made from locally-sourced sustainable wood.

But, when returns were not as high as expected, the company decided to increase investments in R&D, explained Whole Forest’s Peter Pinchot – thereby gaining additional knowledge on market trends and helping to refine their products and marketing strategies. The result: higher sales, an alternative economy based on sustainable agro-forestry, and a slower rate of deforestation.

THE RIGHT INVESTOR

The success of Whole Forest can also be attributed to a close relationship with a key investor who is closely committed to the company’s mission and conservation goals. According to Pinchot, this shared commitment and close alignment has generated a highly productive relationship that has seen the company benefit from strategic advice, resulting in the adoption of new and innovative ways of working.

How a social enterprise looks for investors and which funding models it prioritizes should also be determined by the institutional context, argued Mariella Belli, a social enterprise consultant. When loans are perceived as being too risky, for instance during the initial stages of a social enterprise’s development, more risk-averse funding models should be pursued instead.