Corporate Social Investing: Our Reflections From Implementing A CSI Initiative

June 23, 2020

We noted with appreciation the article in the Stanford Social Innovation Review on The Rise of the Corporate Social Investor by Karoline Heitmann and others.  The piece discusses how business and corporate foundations, impact investors and accelerators can collaborate to achieve social impact, much as happens within Working Capital Fund. 

Many corporations commit to large and long-term social and sustainability goals, say the authors, but generally do not change their core business practices in such a way as to enable those goals to be met. Of the hundreds of businesses that make commitments to the UN Sustainable Development Goals (SDGs), for example, fewer than half measure their impact against the SDGs. On their own companies will only undertake “incremental initiatives that are close to their own value chain” rather than those which would enable a broader transformation. Business needs a “catalyst” in order to “pursue loftier ambitions,” a type of collaboration which the authors term the Corporate Social Investor (CSI). 

From our perspective at the Working Capital Fund these new CSI approaches offer the potential to reimagine relationships between corporations and change agents and in the process do away with broken, old, and limited thinking about the necessity for adversarial relationships between the corporate and social sectors.  Yet clearly there are inherent tensions with the model and CSIs carry with them the imperative to deftly balance the value of corporations – which have unique expertise and are a necessary avenue to scaled change – with a recognition of the power imbalances that often underpin social injustice and inequality. 

We have seen this first-hand at the Fund.  Initially incubated within Humanity United – the human rights-focused foundation of eBay founder Pierre Omidyar and his wife Pam – Working Capital as an early-stage venture capital fund seeks to identify new and innovative solutions to the persistent and systemic problems of labor exploitation in supply chains. The Fund counts upon the participation of corporates and corporate foundations including Walmart Foundation, Apple, Disney, C&A Foundation (now Laudes Foundation), and Zalando as Limited Partners.  As a thematic CSI targeting forced labor and labor exploitation in the supply chains of multinational companies across very different industries, the Fund focuses on investing in solutions that provide business and workers with better visibility into labor conditions within their extended supply chains.  

In designing the Fund we realized that truly to drive change at scale and transform corporate practice we needed business around the table.  Through our previous decade-plus of work in the space we recognized that severe labor exploitation in extended supply chains is a pervasive and increasingly well-documented risk to companies and that the current tools available to corporations (social audits, voluntary codes of conduct, and even most industry collaborations)  are limited and ineffective, or at any rate too slow. 

Including corporate representation in the design of the Fund allows for a win-win.  Corporations provide feedback for portfolio companies on product-market fit and the ability of tools to address pain points. They are also in a position to help early-stage innovators scale as they begin to show traction.  In exchange corporations get exposure to innovation and new ways to embrace transformative solutions for vulnerable workers with potential business relevance. 

As noted by the authors, this is an emerging field and remains fraught with challenges.  Laws restricting corporate foundations from business alignment due to self-dealing risks are vague, and often tricky to navigate. Further, scrutiny and cynicism over CSI legitimacy is real and there is constant pressure to demonstrate that your work isn’t simply “impact washing” for uncommitted corporates.  At our Fund, we have taken deliberate steps to balance business interests with worker rights by allowing companies to participate in governance but not to make direct investment decisions, by ensuring we invest in tools that are used by workers directly, by integrating rigorous third-party impact assessment to ensure integrity to our mission, and by sharing learning about how the innovations we support lead to change–or don’t.

Under the right circumstances this model allows for deeper and more scalable impact as investors, advocates, and CSI’s complement each other’s expertise and experience and use collective insights to address issues more deeply and effectively.  When we started Working Capital four years ago there were very few CSI initiatives.  Many corporations were unfamiliar with these approaches and few were able or willing to transcend traditional grantmaking and philanthropic approaches.  We very much hope that these models will receive more attention and more investment – and that the community which embraces them will commit to best practice impact management and measurement for accountability and learning.