Prioritise impact ahead of growth and get investors involved from day one. Mira Zaghbour shares insights from Oxfam’s work to support impact-driven small and medium-sized enterprises (SMEs) across the globe.
Seven out of ten workers in the Global South work for small and medium-sized enterprises (SMEs), so boosting the environmental and social impact of this sector could have a profound impact on the planet and on people’s lives across the globe.
That’s why, since 2015, Oxfam Novib’s Impact SME development programme has put at its heart supporting “impact-driven” SMEs from Egypt to Nigeria to Vietnam. These are smaller companies that seek to make a positive impact on the world alongside a profit and we have worked with over 400 of them in seven countries.
So what insights can we draw from this work? How can other organisations support social enterprises to both flourish as businesses and have a stronger impact on the lives of workers, communities and on the planet? Here I set out four key insights from an internal evaluation of our programme, along with reflections from Laurens Coeveld, former lead of the Impact SME development programme.
1. Prioritise impact ahead of growth
Impact lies at the heart of successful social entrepreneurship support programmes, even more than growth. Through training and access to finance and influencing, programmes can support impact-driven businesses to think through issues such as gender equality, decent work, circularity and sustainability and incorporate them into their business models.
For example, the programme training inspired Joy Igbodike, founder and CEO of Jaebee Furniture Limited in Nigeria, to turn her business into a fully circular enterprise. She set up a furniture swap scheme that helped low-income people to buy furniture they would not have otherwise been able to afford. Moreover, she partnered up with a fellow social enterprise and started using their fashion waste to create unique furniture pieces. In doing so, she not only boosted the local circular economy, but also opened up a market for affordable furniture among those with low incomes.
A key insight from Joy’s case is that a focus on impact can also be good for business as the furniture swap scheme helped her revenue grow considerably. This shows how focusing on impact can trigger business growth in unexpected ways.
2. Don’t reinvent the wheel: work to build on what’s already there
There are plenty of existing impact-driven entrepreneurs out there trying to grow their businesses and expand their impact. It is crucial to support them in partnership to do what they want, not to micromanage or try to design a business model for them.
According to Laurens Coeveld, former programme lead, “it does not work simply to ‘design a business’, ‘appoint a manager’ and ‘give a lot of startup capital’”: instead, NGOs must work in genuine two-way partnership with existing businesses. That means going out and meeting the entrepreneurs and getting to know their stories, aspirations and struggles. By establishing good listening and communication, programming can be tailored to what businesses really need when it comes to choosing impact themes and supporting founders in key areas such as mobilising investment and networking.
3. Investors need to be involved from the start
Access to finance is essential for impact-driven SMEs to flourish and expand their impact. Our programme supports firms to become ready for investment. However, this is best done by getting the active involvement of investors from the very start. As Laurens says: “Ask [investors] to help in selection of businesses, ask them to support in training the SMEs, to follow up with interesting companies.” He points out that “investment readiness” is a two-way street: yes, businesses must present themselves as credible places to invest but investors should also reach out to the businesses and learn to speak their language to maximise their opportunities for impact investment.
4. Commit to building the evidence base
Planning good data collection and robust evaluation early in the process of supporting a business can save a lot of trouble down the line. This can be done by emphasizing to SMEs the benefits of collecting data from the start to measure their growth and impact.
Indeed, involving businesses in data collection from the outset can help them better understand their own impact, growth and reach over time. it’s important to design tailored and simple impact indicators that track key issues such as usage of renewable energy sources, ethical and sustainable sourcing, and gender-inclusive practices. The goal is to make it as easy as possible for SMEs to monitor their impact. Another option is to have annual business health checks with SMEs, for which they can gather data during the year and then adapt how they do this over time. And, of course, programmes also need good qualitative and quantitative data to show their impact and influence over the wider business ecosystem.
Communication and listening are key
A running theme through all four of these insights is the importance of listening to the innovators themselves: starting from where they are, and avoiding top-down advice and pre-conceived ideas about what works. We hope these insights can help other business support organisations to collaborate better with social entrepreneurs across the world to deliver meaningful, long-lasting impact and to build a fairer, greener and more just human economy.
Find out more about the Impact SME development programme. And read last year’s impact analysis report here. You can also read our previous blog: “Profit and planet can go together – and impact-driven enterprises are showing us how”