Perspectives on Impact: A Discussion at SOCAP

December 19, 2019

The annual SOCAP Conference is the place where impact investors come together to share, learn, and interact. As part of the Fund’s continuing effort to understand, shape, and share how impact emerges from our work, Working Capital Investment Fund hosted an invite-only breakfast for some of our key stakeholders and industry friends.

One of the key topics of conversation was the varying types and timing of capital needed to address and improve labor rights in global supply chains. Sandy Tesch-Wilkins, who oversees the philanthropic Sidecar Innovation Fund for Working Capital, reflected on the critical support that Technical Assistance grants played in the success of Sundar (now a Working Capital portfolio company) and Simulanis. Through the use of grant capital, both have gotten early exposure and traction in the labor rights space and have been able to strengthen products into the market which positions them to improve working conditions.

Dan Viederman, Managing Director of Working Capital, spoke about Humanity United’s multi-pronged approach to systems-level social change, which incorporates a policy team that advocates for enforcement of the bans on child- and forced-labor made goods through the Tariff Act; communications efforts to strengthen message awareness; support for investigative journalism, including the Guardian and Transparentem, to drive corporate behavior change; and of course grant capital to provide institutional support to changemakers. Having multiple types of capital – including grants and equity – has given Working Capital a multi-faceted tool box to tackle the issues of labor conditions in supply chains.

A conversation developed around the tradeoffs that may come along with blending impact and investing. and positioning of different funds and actors on concessionary vs. market rate returns and whether there is some tradeoff with impact. We had a few different fund voices in the room and got a breadth of answers on the subject. Working Capital’s current fund is a PRI-only equity fund, so we make impact-first investment decisions. Financial returns to Working Capital investors will help prove that our impact thesis is correct – corporations need more and better tools to tackle labor issues in their supply chains –  and will lead to sustained impact for workers. A more mainstream fund manager who attended said that while the returns they offer are not concessionary, they of course still lose money on many portfolio companies. He reiterated that impact investors need to define a clear pain point and go deep on it to find a viable market that can support a portfolio of solutions before market-rate returns can be achieved.

Of course impact can’t emerge unless brands and buyers use tools and services that strengthen worker voice, facilitate transparency and identify risks. Good + Well’s Alexandra Baillie led a discussion on the challenges, needs, and drivers of corporate decision-making. Their portfolio companies, as well as those of Working Capital, have experienced the value of talking to the corporate social responsibility (CSR) departments of multinational corporations as a good starting point, but recognize that the CSR team is unlikely to have the budget to move beyond a pilot stage; getting into the operational center of a business is critical to scaling with large customers.

Harrison Dillon, co-founder and chairman of Phylagen, spoke about the ways in which Phylagen has seen its findings be used by multiple stakeholders within companies, including anti-counterfeiting, responsible sourcing, and quality control. Tying the results of Phylagen’s microbiome DNA traceability solution to the core operations of companies has created a better understanding of the challenges associated with securing responsibly-produced products and addressing risks in supply chains.

We engaged in dialogue around our “Developmental Evaluation” approach.  Lee Alexander Risby of C&A Foundation, which conceptualized and financially supported the work, and Karim Harji of Evalysis, who is one of the lead implementers of it, spoke to how our Developmental Evaluation embraces the dynamism and complexity of how change happens in this space, and uses a range of tools and metrics to learn from impacts among different groups of stakeholders – from the investment team, to workers, to corporations.

There is much that needs to happen in order for workers to experience meaningful change in global supply chains. The companies supported by Working Capital will have impact in varied ways. We remain committed to sharing what we learn and helping active multinationals understand their own impact.