Corporate 'Venturing' is Producing Tangible Social Impacts

By Elizabeth Boggs Davidsen

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Elizabeth Boggs Davidsen is acting chief of the Multilateral Investment Fund's Access to Markets and Skills Unit, with expertise in corporate engagement, local development, social innovation, and youth employment. She also advises on partnerships for the Fund's grant and investment activities.

Companies are beginning to understand that they are uniquely positioned to scale up proven solutions to social and environmental problems, and that they have a role in addressing the challenges associated with poverty.

The private sector played a key role in developing the recently launched Sustainable Development Goals (SDGs), and companies are working to align their core business strategies with the global economic development agenda. The reasons are twofold. First, the most advanced companies no longer see corporate social responsibility activities as just a social duty and peripheral to core business. With half of global output, or 40% of market value, originating in emerging markets, companies realize that these markets are essential to the future of businesses that are seeking international opportunities and growth.

Second, development finance institutions and governments recognize that they need to work more strategically with businesses, given shrinking public budgets and the sheer size of global challenges. It's up to the development community and impact investors to learn how to keep pace and accelerate this new trend.

So, a new way of engaging is emerging. Previously the domain of development actors and impact investors, corporate "venturing" now takes many forms and approaches. It's becoming mainstream for many multinational companies to incubate, accelerate, and invest in solutions to pressing social and environmental challenges in order to expand them.

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Three corporations venturing into Latin America

These developments were the backdrop for a provocative panel discussion about "Corporate Venturing and Social Investment," held in Santiago, Chile, on October 28, which the Multilateral Investment Fund organized as part of a larger conference dedicated to financial inclusion. Leading corporate venture capitalists from HP Inc., Telefónica, and Danone, together with an impact investing fund manager, talked about how corporate venturing models offer some of the best hope for the next stage of development in Latin America and the Caribbean.

Paul Ellingstad, director of HP's Human Progress Initiatives, which combines social impact objectives with strategic business goals, shared its experience in social innovation: building and financing eHealth Centers in India--which deliver health-related services and information via telecommunications technologies--and thereby expanding primary health care services to millions. Human Progress Initiatives' next step will be to see if this model could work in Brazil. This initiative was incubated through HP's social innovation program funds. HP--a recent spin-off of the U.S.-based information technology giant Hewlett-Packard Company--has not only significantly increased access to primary healthcare through the venturing program, but has also developed and markets a commercial telehealth service globally.

Telefónica, the Spain-based multinational broadband and telecommunications provider, has a different approach to venturing: seeding start-ups. Entrepreneurs with a business idea that uses technology to solve the problems of the future approach Telefónica's digital start-up accelerator, Wayra, for funding to grow their idea, according to Mariano Amarino, Head of Wayra Latinoamérica. Wayra selects 10 projects in each country where it operates, then provides mentoring and other resources to the projects at one of several newly opened Wayra spaces where entrepreneurs can work. Initially launched in seven Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela), Wayra is now expanding to Europe, starting with an imminent launch in Madrid.

Danone created its Danone Ecosystem Fund in 2009 to strengthen and develop the activities of the partners who make up the worldwide ecosystem for the France-based multinational food-products corporation: farmers, suppliers, and cooperatives; and transport and logistics operators. For example, some projects ensure a steady supply of agricultural raw materials by helping producers form cooperatives. The fund has exceeded its 5-year goals, and Danone is structuring a new ecosystem fund that will be active in Latin America and the Caribbean, offering a range of financial products to its partners there, explained Diego Durazo, who oversees the new fund for the Americas.

Latin America is proving to be fertile ground for corporate social innovation experiments and a range of venturing activities. As new opportunities arise to involve big business in the development agenda, companies are showing that it is possible to generate new, expandable business models that can solve specific social problems.

From the Multilateral Investment Fund Trends blog