A Formula for Lebanon’s Socio-Economic Development: Building the Case for Linking CSR to Social Entrepreneurship

By Gilbert Doumit and Natalia Menhall*, for Responsible Business – Beirut

Lebanon’s predicament needs an out-of-the-box approach to resolve the economic crisis, social injustice and political turmoil. Lebanon’s weak social services and lack of economic opportunities continue to allow political manipulation and clientelism. Private initiatives have always been the cornerstones of the survival of Lebanese citizens in spite of the recurrent crises that the country suffers from. Lebanese do not rely on government services to ensure their basic needs being electricity, water, health or education. Through their entrepreneurial spirit and social solidarity, they succeeded in creating alternative means to overcome livelihood problems and lack of employment opportunities.

Many Lebanese companies are aware of the situation and the different corporate social responsibility programs they adopt contribute to filling gaps of government unresponsiveness. Still, we can argue that CSR is still far from being a strategy that comes out of companies’ conviction to contributing back to society but rather as a marketing exercise. Also, It is still more charity driven rather than “integrating the issues of the workplace, the community and the marketplace into core business strategies.”

Still, in my experience with local and regional companies, I can sense the increase in companies’ awareness of the fact that they cannot grow in an unhealthy society and economy. Many of my clients are becoming more and more involved in civil society and entrepreneurship initiatives and using their CSR programs to support citizens with basic education, healthcare or inclusion. Several initiatives supporting citizens with special needs, women, and youth were sponsored in the past years by commercial companies. It is already an indicator of what our citizens are suffering from. This is not enough though. Companies are invited to rethink their CSR programs to ensure sustainable development and impact, and to expand their opportunities within the marketplace

With a faster pace, social enterprises are proliferating. There are many new entrants to the market working on agro-food, environment issues, education and health that are “generating income by selling a product or service and creating a social, environmental or cultural impact. These organizations are driven by profit and purpose.” Many social entrepreneurs are constantly transforming Lebanon’s challenges into opportunities for development and for engaging citizens at the local level in finding innovative solutions to social and economic problems. 

Especially within the younger generation, social entrepreneurship is gaining momentum, creating job opportunities, solving social problems using innovative means. Social entrepreneurship as a practice is not new to Lebanon and has always existed in our communities, more so in rural areas, where we see citizens coming together to help each other solve local problems through neighborhood initiatives, cooperatives and revolving funds. This new form of entities is still not recognized and regulated by legislation like it is the case in the US that created the low-profit limited liability company (L3C), or the benefit corporation, and the United Kingdom’s community interest company. Social enterprises have still to prove their sustainability and impact in a less than enabling environment.

But the momentum for simultaneous social and economic development of Lebanon has high chances if both, the commercial and social entrepreneurship sectors, realize the social and economic value they can create if they foster their interdependence.

A Synergy for Double-Return

Social and economic conditions affect both, commercial and social entrepreneurship sectors. Both actors within these sectors share a similar social, political and economic environment and improving this environment is to the benefit of both. Within the actual situation, companies and social enterprises share a concern of financial, environmental and social sustainability. An increase in partnerships between both sectors can have double-return: social and economic.

Poverty alleviation and ensuring social justice are important factors of a healthy economy. Building human capacity and creating job opportunities would help Lebanon’s economy to flourish. Ensuring services to fulfill citizens’ basic needs and rights of health, education and livelihoods would reduce community violence, political manipulation and security risks. It can be a means for social cohesion as well as for the economic inclusion of youth and underprivileged.

Economic development and generating wealth require creating job opportunities and increasing the purchasing power of the population that will have a direct return on the financial growth of businesses. Companies realize that their turnovers and profit margins cannot increase within Lebanon’s small economy and low purchasing power of consumers. Relying only on tourism proved to be a high risk strategy with the level of volatility of the political situation. Agriculture, industry and less attractive social sectors such as health and education can become again sources of income as they used to be for Lebanon before the civil war. The social entrepreneurship mindset would enable businesses to spot opportunities in new sectors that were long forgotten. The actual crisis that Lebanon is suffering from with the turmoil of neighboring countries might create new opportunities to innovate in order to survive.

At least so far, there is no hope that government can play a role in the country’s socio-economic development. Commercial companies cannot do it alone, and neither can social enterprises, only partnerships between them can achieve both social and economic outcomes and alleviate their shared burdens.

Areas of Collaboration

This new win-win formula will thrive on the opportunities of collaboration between commercial companies and social enterprises. These are:

Innovation Exchange: innovation could be used for profit making as well as for social impact. This includes technological innovation among other types that would benefit companies and social enterprises alike. For example, while mobile technology for banking services is an innovation for profit purposes, the same innovation is used to reduce farmers’ transportation costs through mobile money transfer.

Value Chain Development: gaps in the value chain, quality of supply or distribution, have sometimes high quality and financial costs on business. Investing in social enterprises, working in communities, might reduce a cost, enhance quality and create job opportunities for a social sector or a rural community and diversify sources of supplies. For example, rural women production of agro-food items can contribute to enhancing a restaurant’s menu.

Client-base Expansion: especially when brands of both a commercial and a social enterprise have high good will in the marketplace, joint marketing and advertising strategies and activities can mix client bases and reach out to new clients. For example: we are seeing more and more commercial companies and social enterprises co-branding themselves, both to improve their brands value, one by reflecting its social responsibility while the other to brand itself with a higher value brand.

The above areas are very relevant to Lebanon case, and I have examples for each, you can reach out to me to tell me more about other successful or failed collaboration opportunities that you have experienced for better collective learning.

What’s in It for Commercial Companies

In addition to the long term economic returns that companies can cultivate by supporting social entrepreneurship, I observed several of my clients benefitting from direct and immediate results such as: attracting talented and entrepreneurial human resources from within the social sector, retaining the ‘millennials” employees who are driven by impact and not only by salary, and integrating innovation within their policies, systems and services.

On the other side, entrepreneurs, CEOs and senior managers are required to be aware of social entrepreneurship as a concept and a practice. Also, companies need to be ready to take a longer term risk supporting social enterprises rather than the immediate “feeling good” that charity work triggers. Finally, businesses need to have already adopted CSR as a strategy that is driven by the conviction of the role of business in social development.

What’s in It for Social Enterprises

Most social enterprises I worked with are aware of the challenges regarding their financial sustainability and their business model scalability. Their key strength relies on their flexibility nurtured by their passion for the cause they are working for, and the flexible structures they create. But they need new sources of local income and support. Few social enterprises have benefited from their partnership with the private sector in different ways: the business knowledge of companies can be very helpful for social entrepreneurs, sometimes coming from non-business backgrounds, through mentorship and coaching services, access to start-up funding through social investments from within CSR programs, and in some rare cases, incubation period to help use the companies’ premises, resources and good will for expansion.

To succeed their partnership with private sector companies, social entrepreneurs need to equip themselves with business knowledge and skills. They need to create convincing business models that can prove their financial return in addition to their social one. Finally, social enterprises might need to be perseverant and patient before they achieve success.  

Forms of Relationships

More forums and platforms are needed to foster the interaction between both sectors. The Society of Social Entrepreneurship is one of these platforms that bring together all stakeholders to have meaningful conversations for collaboration and creation of opportunities. There are multiple forms of relationships that we see created in the marketplace between commercial businesses and social enterprises:

Impact Investment: many companies today are using their CSR funds to invest in social enterprises start-up, growth or expansion. It is a long term strategy for sustainable impact that companies choose and that later can contribute not only socially but into a higher return on their brand value.

Joint Initiatives: several large companies have allied themselves with non-governmental organizations and worked for a common project that solves a social problem. We have seen as well financial investments in social innovation and the output was used for both commercial and social purposes.

Business Partnerships: the ultimate while the highest risk form of relationship is the partnerships when we see financial, organizational and legal ties between commercial companies and social enterprises. We see it more recurrent between small and medium enterprises with sometimes same (social) entrepreneur being behind both businesses.

The new formula for Lebanon social and economic development is already in the marketplace, but it needs momentum driven by private initiatives. Lebanon has gone through multiple crises and survived them all. Our businesses and communities are at risk again with fewer opportunities in the region because of the geopolitical dimension of the problems. But, with commercial companies’ social responsibility and Lebanon young social entrepreneurs, we can be again a model for cohesion, innovation and sustainability. Social and economic problems are only opportunities for innovation and creativity. Starting a nation-wide conversation on linking CSR and social entrepreneurship, and forging new partnerships for double-return that generate social and economic value might be imperative within amidst a high risk environment.

Gilbert Doumitis the Managing Partner of Beyond Reform and Development (www.beyondrd.com), a social business and a consulting firm. He is a social entrepreneur, a 2008 Yale World Fellow and a lecturer at Saint Joseph University.

Natalia Menhall is a Founding Partner of Beyond Reform & Development (www.beyondrd.com), a social business and a consulting firm. Her experience combines social entrepreneurship with environment policy. She works with social enterprises in the MENA region with a special focus on training and development.

 

SourceResponsible Business Magazine

 

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All, 2013

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