“Thank you for your courage in attending this session.”
When presenting on the addendum to our Profit & Purpose report, I start by acknowledging the audience. At a time when corporate social responsibility is making headlines for the wrong reasons, people who work at nonprofit organizations are often confused about how to approach local businesses for support. Diving into why it’s so complex is not for the faint of heart.
This is how I found myself in Asheville last week speaking at Philanthropy Institute 2023, an annual conference presented by the Association of Fundraising Professionals chapter in Western NC. It was an uncommon backdrop — corporate social responsibility has typically been thought of as a framework for urban communities with large professional services companies inside skyscraper office buildings. Philanthropy in Western North Carolina has more often been defined by large foundations like the Dogwood Health Trust and leadership gift-making by individual donors.
But something important is changing about how companies based in rural and more sparsely suburban communities interface with social good. And it has the potential to be game-changing for residents who live in disinvested neighborhoods there.
Recently, our company has had a bit of an epiphany: stakeholder capitalism driven by socially responsible investing is driving a new supply chain of social impact. It is a trendline that brings together quite literally everything Next Stage has championed in recent years – the importance of community voice, the power of trust-built sites, collaboration as a critical imperative, the social determinants of everything, and the vital role community health plays as connective tissue.
It made for one heck of a conversation last week in a room full of people who I’m sure are still processing all that was shared. It’s a new way of thinking that I’ll gladly share with you here.
Can we just call them… Social Impact Offsets?
One way to understand how social responsibility is changing for companies with operations in rural areas is to explore global standards for sustainability impacts. A good place to start would be with the Global Reporting Initiative (GRI), which outlines a set of standards for how companies electively report on their impacts on the economy, environment and people. We go in-depth into this process as a part of our recent Profit & Purpose report.
Suffice it to say, companies that desire to benefit from socially responsible investing avail themselves to assessment by third-party groups, like GRI, to aggregate environmental, social and governance metrics for consideration by investors. Ethical investing has become a worldwide trend, representing $1 out of every $5 invested. Companies simply can no longer ignore a trendline representing that much investment.
The key to this rating system is in their balancing framework. No one metric is considered alone, rather a score is determined by looking holistically at a company’s entire ethical footprint. That is important as corporate executives explore their materiality – the company’s unique drivers of societal impact – and design the best way forward.
There are so many unintended downsides in the day-to-day decision-making of companies. A bank rejecting a family for a home loan may be making a good business decision based on a low credit score, but that is also contributing to poor social and economic mobility for people experiencing poverty. It is a minefield for companies that must examine everything they do through a new lens.
This is especially true for companies wrestling with environmental sustainability challenges. Manufacturers with complex supply chains, companies extracting natural resources, agriculture producers optimizing their crops and other private sector businesses that predominantly work in rural and sparsely populated suburban settings can be those most disrupted by poor performance on impact reporting standards.
For the very largest of these companies, secondary markets for carbon offset credits are an essential tool. Some processes people count on every day to feed their families, power their homes and make transportation feasible have negative environmental impacts not easily solved. While R&D departments work on innovative solutions, socially responsible investing is squeezing capital from these companies. And as outlined recently in a Freakonomics podcast, this has the potential to have the exact opposite outcome as initially intended.
But what if there was a secondary market for social impact, allowing a company with complex sustainability efforts a chance to counter-balance with positive social metrics? And what if those companies not only activated this marketplace with investment but also with the entire engine of its business model? Would we call that secondary market ‘social impact offsets?’
There is evidence in the European and Asian markets of this exact way of thinking. While it might take time for the concept of social impact offsets to make its way to the politically charged United States, it is surely coming.
It is a framework that smart companies should be seeking to harness now.
Collaboration in Rural Communities
Heads up – that marketplace of social impact offsets already exists and it’s called the nonprofit sector. Organizations that generate impact through programming and companies with resources to fuel that engine of impact are discovering new forms of mutual benefit.
For companies with complicated sustainability challenges, the lure of social impact offsets may be just the solution they are seeking. That doesn’t mean it will be easily realized.
Creating positive social impact in small towns is incredibly difficult. Beyond limited financial resources, a lack of public transportation, credible service providers and resident trust in systems creates a landscape of challenging factors. And yet, the small size of the community also makes it much easier for a company to demonstrate how its self-interested efforts help move the needle for social and economic mobility.
The emerging concept of demonstrating ‘impact in microcosm’ invites new ways to construct social impact offsets. The targeted work is best pioneered in a rural context, where corporate social responsibility is more often thought of as ‘big city talk.’
Next Stage believes ingredients to make this happen include:
- New Methods of Service Deployment – The lack of health and human service providers in rural communities is a significant barrier to overcome. New models leverage trusted sites, coordinate service delivery institutions, and harness direct service providers to create social impact supply chains to activate nonprofits in urban and suburban areas nearby to bring additional services to underserved communities. This regional hub model is ripe with potential.
- Public-Private Collaboration – Companies pioneering these models will be hard-pressed to deliver them without multi-sector investment. The sustainability of service delivery increases as public sources of funding align with foundations, faith institutions, and private philanthropy. Corporate investment is best used to build capacity and scale interventions – resources that traditional philanthropy and government agencies are typically less nimble to provide.
- Models Built for Measurement – Regional hub service models work best when they are able to generate meaningful impact metrics to demonstrate forward progress. As nonprofits and the companies that invest in them join on the same side of the table, measurable impacts in community become more possible. To us, this sort of progress is what we need to see for a ‘social impact offset marketplace’ to be fully formed.
In theory, theory and practice are the same. In practice, they are different. At Next Stage, we are actively working with employers and nonprofit networks throughout the Southeast to realize new impact models. This construct is something we feel can truly change the world.
If you represent a company, municipality, aligned foundation or regional framework and would like to discuss these concepts in greater detail, contact us today for a free consultation.