Social Entrepreneurship in the Middle East: How Can Medium and Large-Sized Businesses Contribute?

There are a number of ways in which corporations in the Middle East can support and benefit from social entrepreneurship and innovation. The private sector is not only becoming the region’s best bet for future global competitiveness and economic growth, it is also taking a larger stake in social and developmental issues, with the ultimate goal of providing better products and services through inclusive business models that also ensure greater environmental and social accountability. What explains this motivation to engage in social issues? What form does this investment in, or support for, the social sector take in the Middle East? How can these efforts be made more effective?

Why are Corporations Engaging in Social Issues?

Globally, corporate engagement on social issues has included both responding to changing environments, as well as proactively pursuing strategic steps toward maintaining and increasing competitiveness for the company. Companies are often responding to evolving regulations related to social benefit activities and increasing expectations from shareholders and other investors for company practices, products, and services that exhibit greater environmental and social accountability. To ensure that they remain competitive in a global economy, companies are proactively seeking new opportunities to grow revenues and market share by serving untapped markets and building more inclusive business models. Further, they are demonstrating commitment to values and social mission in a number of ways, including developing human capital and attracting and retaining talented employees.

These incentives have led several multi-national corporations (MNCs) to build partnerships with social enterprises. Across the globe, MNCs are realizing the benefits they are able to reap from such partnerships. For example, Grameen Bank and Danone Foods entered into a partnership in 2006 to generate affordable, fortified yogurt for malnourished children in Bangladesh. Grameen Danone Food Ltd, a social business which reinvests its profit into its core social mission, measuring its success by the number of direct and indirect jobs created, improvements made in children’s health, and its environmental impact.[1] In addition, Starbucks has joined forces with Conservation International to establish the company’s Coffee and Farmer Equity (C.A.F.E.) practices to ensure that coffee production and buying practices support income generation for local growers in developing countries and environmental conservation.[2] More recently, they have jointly mobilized $7.5 million over three years to protect forests and surrounding landscapes in coffee-growing regions such as Mexico and Indonesia.[3]

In the Middle East, one of the primary motives for corporate social engagement is the region’s need for a more competitively trained work force. Despite the region’s “youth bulge”, the private sector is limited by the lack of human capital development and highly aware of it. Research shows that more than 25 percent of firms in the region report the lack of skills among workers as a major constraint on business growth, representing a higher rate than in other regions such as Latin America and Africa.[4] Thus, a number of large firms and MNCs operating in the Middle East have focused their community engagement efforts on young people, providing them with specialized skill training for better preparedness for the job market or technical assistance and mentoring to start their own businesses.[5] These investments make sense from both a social and a strategic standpoint for firms operating in the region.

How Are Corporations Engaging with Social Enterprises the Middle East?

There are three ways in which corporations are engaging to improve opportunities for youth and address broader development challenges across the region:

• providing traditional corporate philanthropy;
• engaging in strategic social partnerships; and
• developing commercially viable inclusive business models.

All are important in tackling the wide range of needs and a growing number of companies are relying on all three to consolidate their competiveness and relevance in the global economy.

The Middle East is renowned for high levels of individual and private philanthropy drawing from deep-rooted cultural and religious values of wealth sharing. Thus traditional corporate philanthropy continues to be the most prevalent way for corporations to show their commitment to social and development needs. Some corporations in the region are beginning to use their corporate philanthropy in funding the activities and growth of social enterprises, mostly set-up as non-profits in the region, which in many cases are showing greater innovation and sustainability in tackling social needs.

Beyond philanthropy, strategic social partnerships between corporations and social enterprises are also emerging, particularly in the area of human capital development. By partnering with existing social enterprises, corporations and social enterprises can harness their own core competencies and comparative advantage and co-create social value. In addition to financial resources, companies are leveraging their technologies, market knowledge, management and strategy experience, logistics capabilities, and marketing support in ways that can help social enterprises become more effective and, in some cases, replicate or scale up.

In the region, there are still only a few examples of such strategic partnerships. A particularly successful example is Injaz, a regional social enterprise that brings volunteers from the private sector to public school classrooms where they provide training in business skills and entrepreneurship courses. The Injaz model, which began in Jordan, was embraced by the Jordanian government and has since expanded across the Middle East. In Egypt, corporations such as Mobinil, Procter & Gamble, and British Gas partnered with Nahdet El Mahrousa, a social enterprise incubator, on the Youth Innovators’ Award (YIA) Program, which provides Egyptian youth with opportunities to engage in research and development on science and technology projects.[6]

Finally, a growing number of corporations in the region are developing commercially viable inclusive business models in which low-income producers, employees, or customers are integrated into corporate value chains and to provide goods and services to base-of-the-pyramid (BoP) markets.[7] Such examples in the region have included LYDEC in Morocco, which provides electric, water, and sanitation services to low-income residents of Casablanca, Environmental Quality International which combines sustainable development with eco-tourism in the oasis of Siwa in Egypt, and Orascom which is providing low-cost housing through its Orascom Housing Communities venture also in Egypt. The entry of these businesses into BoP markets has potential rewards both for the businesses and for low-income consumers, producers, and employees.

Although such models are commendable, large corporations in the Middle East could do more to collaborate with existing social entrepreneurs, building on the local knowledge and tested methods of social entrepreneurs, especially in BoP markets, and the market influence and of larger corporations to co-generate economic and social value for a broader population.

How Can These Efforts Be More Effective?

Governments and civil society organizations have an important role to play to encourage such partnerships. In the Middle East, some governments are already actively supporting the intersection of business and development through public-private partnerships as well as through developing incentives to businesses for engagement with social needs. Frameworks of corporate governance, including corporate social responsibility, are beginning to emerge. For example, in Egypt, the United Nations Development Program has recently worked with the Ministry of Investment to launch a national center for corporate social responsibility in 2009, and Egypt has also been a part of the development of the Environment, Social and Governance (ESG) Index to incentivize sustainable business practices.[8]

Policy and legal incentives can also be used to encourage corporate social engagement and more strategic partnerships between corporations and social enterprises. Public procurement policies, for example, can be revised to give some preference for corporations that integrate social enterprises in their value chains or that are generating products and services through strategic social partnerships. Governments can also create tax incentives for corporations’ financial contributions as well as reduced-cost or pro-bono assistance to start-up and scale social enterprises (i.e. legal advising, business plan development, management/financial training, etc.)

Civil society organizations can also play an important role in stimulating demand for such corporate-social enterprise partnerships through creating better awareness among consumers and stakeholders at large. Consumer rights associations, for example, can provide information to consumers who can, in turn, advocate for such partnerships and, more generally, greater environmental and social accountability. In the Middle East, unfortunately, the role of such consumer-oriented organizations remains limited. To increase their visibility, one tangible step could be the introduction of social entrepreneurship labels and identifiers for products to give formal recognition to products and services resulting from social enterprises or corporate-social enterprise partnerships.[9] The media could play a critical role in promoting such an identification or product labeling system, in cooperation with consumer organizations.

In conclusion, current examples around the world and, increasingly, in the region show the potential of corporate-social enterprise partnerships while also revealing the amount of room left for more extensive collaboration toward effective development and growth. Corporate leaders, social entrepreneurs, and policy-makers can each contribute to developing a culture and policy environment where such innovative partnerships are institutionally and systematically encouraged.