Inspired by best practice within the private sector, a new report titled ‘A meeting of mindsets’ highlights how social enterprises and sustainable investors can work together to develop market-based solutions to tackle one of the world’s biggest challenges.
Increasing number of mainstream investors are prioritising sustainability initiatives – a welcome addition to the SDG funding landscape where official development assistance as well as philanthropic investments are being stretched to the limit.
However, many social enterprises, particularly in the WASH sector and those targeting the bottom of the pyramid, are failing to attract these types of investment.
This is mainly because finance sources, including impact investment, is only made available to those businesses that can prove they know how to use it.
“Meeting the global market need for water requires the characteristics of the business sector, such as scale, speed in decision making, communication and marketing, innovation, and large workforces.”
However, being able to qualify for investment whilst demonstrating how it will be used, is often not enough. To win over investors, enterprises must also prove market viability – does it solve a problem or fill a need or is some way be embraced by the market?
On the other hand, financers interested in impact investment, should reflect on the extent to which their expectations have been shaped by traditional, commercial investment and private sector norms.
“While most investors are accustomed to two-dimensional risk and return assessment when considering investments, there needs to be a transition to a three-dimensional approach that evaluates risk, return and impact.”
WSUP’s driving vision is to create a world in which all urban residents including the poorest have access to clean water and safe sanitation. Part of this vision involves connecting different actors who can create change in the WASH sector, offering space for collaborative working and drawing on the strengths of development and commercial approaches to both public sector and market-based solutions.
“What WSUP’s work has in common with these inventors, and entrepreneurs, is the desire to change people’s behaviour and in doing so, prove demand and create a self-sustaining market.”
Based on our experience, this new report by WSUP’s Innovation & Consumer Needs Team (ICoN) explores how fundamental practices such as managing growth finance and creating and sustaining consumer demand adopted by successful private sector enterprises can be replicated by development actors pursuing market-based solutions; and the role investors can play in shaping the future of social enterprise.