Corporate Capital for Social Enterprises

For a social economy to take hold, financial resources are essential. Yet the conversation then turns to whether the funds should come from financial institutions, individual or high new worth investors (HNWIs). Rarely does the corporate sector get a mention.

The world’s largest corporations are awash with cash. Let’s consider Apple Inc., which earlier this year became the world’s top company by market capitalisation. It earned $7.3 billion after tax in the quarter ended 25 June, 2011 and reported cash of over $12 billion, with another $16 billion in marketable short term securities and no debt. While Apple may be unique, it is not alone. Many large companies have been paying down debt, issuing equity and harvesting cash. Whereas governments are struggling, banks are wobbling again and individuals continue to feel the pinch, large corporations all over the world are in rude financial health.

Could they be the answer? Like HNWIs, they are able to contribute expertise and human capital in addition to their financial might. But unlike angel investors they move very slowly before making financial investments. How can this be accelerated?

Corporations have another powerful way of helping the social enterprise (SE) sector: they can engage with SEs in a commercial relationship, providing contracts which generate revenues. Unlike capital investments, social enterprises must provide goods and services in order to fulfil these contracts, but this commerce can be continuous, as opposed to “one-off”. In this way they help SEs professionalize.

But what of the downsides?

• Is securing corporate capital a dangerous step down a slippery slope, imperiling social and ethical missions?
• If social enterprises trade with corporates, should this commerce be on normal terms, or should SEs expect to be favoured? If the latter, does this undermine the goal of making the sector properly sustainable?
• And what about corporate objectives? How much should social enterprises know about their corporate partners? Are some companies simply inappropriate to engage with (e.g. armaments manufacturers)?

Irrespective of the risks, I think this is a source we cannot ignore.