Social compact

In a new era of co-operation, companies and NGOs are working together to deliver products and services to developing countries. Examples include Danone's joint venture with Bangladesh's Grameen Bank to sell 'bottom-of-the-pyramid' dairy products and Microsoft's initiative with an NGO called Pratham to deliver PCs to Indian villagers.

by Harvard Business Review
Last Updated: 23 Jul 2013

These alliances are creating new business models that will give social legitimacy to multinationals and help to raise poorer parts of the world out of poverty. In the new partnerships, NGOs bring with them invaluable knowledge of the local markets and cultures, a marketing and delivery infrastructure and plenty of goodwill among the communities that have benefited from their support and assistance over the years. These assets are of great value to multinationals, which would otherwise find it difficult to understand and break into these new markets.

The NGOs, for their part, are able to achieve more within the corporate partnerships and learn about new business models that they can apply to their own missions. Telenor entered into one such partnership with the Grameen Bank and formed a new venture called Grameen Phone, in which it had a 62% equity stake. The Grameen Bank brought to the partnership its unique knowledge of rural micro-credit groups' collection and payment systems.

The new corporate-NGO partnerships bring in their wake three new convergences: standards of practice and regulatory frameworks, such as the Kimberley Process in the diamond trade; brands, marketing and communication, such as cause-related marketing; and professional cadres and career paths in which corporate managers work for NGOs and vice versa.

Some NGOs have become very big players, such as the African Co-operative for Hawkers and Informal Businesses, a lobby group with 120,000 members, which has recently launched a soft drink called Hola, distributed through a not-for-profit entity. A US-based NGO, HealthStore Foundation, developed a business model to provide Africa with safe medicines: its network of 68 'Child & Family Wellness Shops', designed as a franchise system, treated more than 400,000 patients in 2005.

The growth of NGO business sophistication has opened the way for long-term partnerships with corporations based on an integrated business model in which both parties help each other to deliver value. These 'co-creation' models deliver low-priced products to developing economies or niche products to developed markets; create hybrid businesses involving NGOs, corporations and entrepreneurs; and enhance the social legitimacy of the corporation and increase the NGO's impact.

Co-creating business's new social compact
Jeb Brugmann and CK Prahalad
Harvard Business Review, February 2007

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