With the recent buzz around sustainability particularly with corporations wanting to become more responsible,businesses around the world are looking at new ways of improving their brand image and increasing employee participation in their organization’s sustainability programs. Going green is the most popular amongst all of them. Critics argue that a lot of this is mere talk and simply a branding strategy but some of it is real substance too. For instance, some companies are improving their energy efficiency and ensuring that their products are more environment- friendly. WalMart says that they want to be supplied 100 percent by renewable energy, create zero waste and see products that sustain people and the environment.

Amidst these corporate programs for social responsibility, what continues to stand out as one of the most successful models of business for developmental impact is an HVC or a Hybrid Value Chain.  An HVC is neither a corporate social responsibility initiative, strengthening low-income communities, through philanthropic partnerships with local CSOs nor an initiative centered exclusively on developing markets for profit motive in which case social transformation is just a side effect. Rather it is a perfect blend of the strengths of the business and the non-profit sector and leverages their core capabilities.

CSOs or citizen sector organizations help a corporation understand the local needs in a community and the business firm is involved in the creation of products or services. CSOs are key market enablers due to their deep understanding of the needs of the local community and their trust-based relationships with these communities. Through a partnership with a business organization, they are not just able to drive and accelerate their agenda of maximizing social impact but often make revenues by taking commissions on sales. For the company, the community represents a significant market opportunity to do product and service innovation, drive sales and create good will.

The most classic example of an HVC is the development of small farmer irrigation market in Mexico through a partnership between Amanco, a leading Latin American water distribution company, RASA, a CSO dedicated to increasing economic power of small farmers in coastal areas and INSO, a CSO dedicated to conservation of water in Oaxaca area. 35 million smallholder farmers live under two dollars a day in Latin America. Irrigation technology could enable them to double or triple their incomes but only about twelve percent of agricultural land is irrigated. This partnership brokered by Ashoka has resulted in the creation of a new market and new delivery channels serving low-income farmers. The role of the CSOs in this case was includes promoting irrigation, mobilizing needed sources of consumer financing and helping farmers link to markets to sell their increased production.

The HVC model goes beyond philanthropy and corporate social responsibility. By leveraging the core assets of CSOs and businesses, HVC partnerships are breaking the inefficient paradigms that separate the two sectors. Another example of an HVC is the micro health insurance service designed by Healing Fields Foundation (HFF), a not-for-profit working in micro health insurance, which has partnered with Ashoka. About three fourths of India’s population, which lives on less than two dollars a day, is extremely vulnerable to both common and critical illnesses and has no access to any form of healthcare financing or risk pooling. There is an urgent need to develop a viable health financing model which can be implemented keeping in mind the specific needs of the underserved clients. One also needs to develop an entire eco-system which makes the access, delivery and management of micro health insurance efficient and commercially sustainable. HFF has designed a customized health insurance policy for its target membership, which it has been implementing for the last 3 years.  The project requires HFF to partner with CSOs for effective implementation and outreach of the product. A significant increase in the size of the network is needed to ensure financial sustainability of the model.  Another critical need is to strengthen upstream linkages with insurance companies. As the size of the CSO network and thereby end clients increases, Ashoka and HFF will jointly approach selected companies to participate in the HVC collaboration.

Businesses involved in HVCs operate very similarly to for-profit social enterprises who often work with low-income communities, use business to solve challenging development issues and define their success based on the double bottom line. Often, these social enterprises also partner with non-profits or CSOs to understand local markets in depth.

There are some very important questions that arise here. For instance, how does one measure the success of a Hybrid Value Chain. Should the metric depend on how much the HVC contributes to improving the lives of low-income populations? Is an HVC supposed to go beyond the mere distribution of products or services to address the community needs through complimentary services (like access to finance) and by scaling social services that CSOs provide? Is an HVC supposed to tangibly improve the livelihoods and well-being of low-income populations? Is the company involved in an HVC supposed to share revenues with the citizen-sector organization? I think that the answer to these questions is that it depends on the case at hand, the community being served, the partners involved and the product and service being provided. The overall success metric should include both qualitative and quantitative metrics which take in account how much the community benefits from the product or service delivered.

Other important questions which could become potential research topics are – Under what conditions is a HVC approach more effective to maximize business results and social impact and in what industries and for what type of products and services? What are the most effective ways of engaging business and social entrepreneurs in the development of joint commercial ventures? If the citizen sector contributes to the creation of new wealth for private investors, how can we then value economically their contributions?

In the last three decades, a large number of citizen sector organizations (CSOs) have emerged to create positive social change. Social entrepreneurs have been at the forefront of developing practical innovations to empower low-income populations as consumers, producers and wealth creators. While the citizen sector is becoming increasingly competitive, pioneering companies have also understood that being socially and environmentally conscious can make business sense. This changing landscape is an opportunity to instill a critical mind-shift within businesses and CSOs to foster business-social convergence and create value for all.

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