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IIC: A New Catalyst for Social Enterprise (part IV)

October 19, 2010

As promised, the conclusion to this four-part series (1, 2, 3)  inspired by the article “A New Alliance for Global Change,” which appeared in the September issue of The Harvard Business Review.  Hopefully you’ve found the discussion interesting, and if you’re not yet scheming about how to use IIC to introduce HVCs into your firm’s operations, perhaps the following examples will get your wheels spinning.  Below are several examples of how various hypothetical companies in Chicago could leverage IIC dollars to fund innovation through CSO partnerships and the exploration of Hybrid Value Chains.

Banks – The balance sheets of banks across the country are being weighed down by REO properties, and banks face rising delinquency rates and waves of foreclosures in the near future. What if a bank chose to partner with one or several CSOs doing foreclosure mitigation, homeowner counseling, or property acquisition and rehabilitation in one of the bank’s hard-hit markets? The CSOs would help stabilize property values, reduce the instances of future foreclosures, and expedite neighborhood recovery- all of which improve loan performance, reduce REO-related losses, and mitigate the operating risk a bank faces in that region. A bank could make IIC dollars location specific – i.e. all IIC funds generated from the bank’s real estate transactions in a given area support CSOs in that area – or they could aggregate IIC funds generated across a region (or the nation) for targeted distribution. Either way, the bank advances its own economic interest, while supporting neighborhood restoration and stabilization in struggling communities.

Grocery Store Chain – Let’s imagine a local grocery store chain wants to expand into one of Chicago’s many “food deserts” – essentially untapped markets where full-service grocers do not readily exist. The company could use IIC funds generated by its real estate transactions to fund urban agriculture, or health and wellness initiatives, in this target market. A partnership with a local CSO doing urban agriculture could enable the company to secure local produce at a premium and cater to the “buy-local” movement, while supporting economic development and neighborhood revitalization efforts within a new market. This partnership would differentiate the chain from its competitors (a new spin on buying local), potentially decrease inventory costs during summer months (less produce would be sourced nationally or internationally), appeal to growing demand for local produce, build ties between the company and local consumers, and attract positive publicity to the chain- all of which supports real value creation. Likewise, partnering with CSOs to promote health and wellness education in under-served urban communities would help increase consumer demand for fresh produce in this market, while also addressing the obesity and diabetes epidemics that plague these communities .

Wind Power Company – Finally, imagine a large Chicago-based wind turbine manufacturer is looking to expand, but wants to cut component part costs by sourcing locally, rather than relying so heavily on foreign imports. Local suppliers can currently meet some, but not all, of the turbine company’s demands- as they are constrained by lack of a qualified local workforce. Working with an IIC Real Estate Member  to secure new manufacturing and office space, the company could direct all IIC funds from the transaction to a local nonprofit working to transform polytechnic education in a depressed neighborhood and to cultivate a new generation of skilled manufacturing workers. These workers represent a local workforce that is currently lacking, and needed by local component part suppliers to increase production. With those dollars the school could expand its scholarships, its staff, or its admissions. The turbine company could also provide in-kind resources: tailoring a curriculum, offering student internships or career-shadowing opportunities, or even lending staff time to share industry specific-expertise in the classroom.

The partnership between the company and the school will increase the quality of the education and career paths available to students, will motivate them to complete their education successfully, and will provide the company with substantive returns. For example, internships would enable the company to recruit and vet its own future employees with minimal risk. A specially tailored curriculum would ensure a future supply of qualified local workers for local suppliers, leading to increased local production capacity of turbine component parts. Ultimately, these factors will reduce the turbine company’s production costs- all while contributing directly to the economic revitalization of old industrial neighborhoods, and the cultivation of a skilled, middle-class manufacturing workforce.

Conclusion

IIC has arrived at a moment when the civil and private sectors are rushing to enter the new space of social entrepreneurship. In this climate, IIC will become a key player in the sector. It will not only occupy the space as a participant; it will help activate it and organize it. IIC will enable corporations and CSOs to adopt and become a part of a Hybrid Value Chain. It will catalyze innovation by providing a risk-free means for firms to explore collaborative partnerships with CSOs, and the creation of Hybrid Value Chains. IIC harnesses real estate markets to drive philanthropy, but as I’ve hopefully illustrated, the impact of IIC may be much deeper: it may help fundamentally alter the way the private sector approaches philanthropy, assesses value, and addresses society’s most urgent problems.

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