The place of enterprise in society is changing. The 21st century is experimenting its own model of responsible economy. The success of ‘mission enterprises’ such as the B Corp confirms the attraction for a new type of corporation responsible for people and the planet.
In this paradigm change where companies are seeking their own pathway to the future, Corporate Social Responsibility (CSR) is becoming a source of competitive advantage.
Leaders among these companies are inventing new models leveraging on social and environmental innovation. Consumer markets are also changing, moved by new expectations and values. Fast moving consumer goods (FMCG) brands are seeking ways to associate with concrete actions supporting causes close to their own values.
In this context, a new form of financial commitment is emerging: micro-levies on the sale of products and services.
The idea behind using micro-levies is to give a fraction of a product’s price to charities, then funds are collected and channelled to projects on the ground. Micro-levies are a great way to turn clients into active supporters of social causes.
This is reflected in the story of One Water, a water brand dedicated to water poverty. Founded in 2005, One Water is a non-profit water brand sold in UK airports for the sole purpose of collecting monies to fund water projects in Africa. Over 15 years to 2020, One Water has given USD 25 million to support 4 million beneficiaries.
Another example is “1% for the Planet”, launched in 2002 by American entrepreneurs Yvon Chouinard, the founder of Patagonia and Craig Mathews, owner of Blue Ribbon Flies. 1% for the Planet gathers enterprises that contribute 1% of their turnover to philanthropy. Whilst not using micro-levies, this form of engagement is based on sales and promoted to clients as a way to actively co-engage with them towards social and/or environmental changes.
To understand how philanthropic donations can help create impact through social ventures, one talks about ‘Blended Finance', a novel form of hybrid finance that blends together philanthropy with private capital seeking financial returns. This alliance of opposites is possible because both sources of funds seek social and or environmental returns.
Mobilised by this common objective, these two types of funds mingle easily and bring mutual advantages to each other. For private investors, philanthropic funds offer a leverage to reduce risks whilst donors seek a role to act as a catalyst and facilitate private investment into impact enterprises, seeking funds to grow and scale their impacts.
Both types of funds look to achieve the same objective: delivering positive impacts on society and the planet.
This new form of hybrid finance, already booming, finds itself helped by the use of micro-levies as a new mode of fundraising. For brand owners, micro-levies are a great way to actively contribute to funding innovative projects and associate with impacts generated by them.
Such projects can be carried out by different forms of organisations including charities, social enterprises, fast-growing impact start-ups or impact investment funds. Substance matters over form.
Micro-levies are a useful way to contribute to concrete actions in support of CSR.
Thanks to micro-levies that use $1 cent per bottle on millions of water bottles sold in supermarkets, The One Foundation and its sister non-profit company Water Unite have launched a new impact fund managed by Wellers Impact, a pioneer in blended finance. Several large retail brands contribute already. In turn, the fund invests in equity and debt into highly innovative ventures that are redefining the business of water distribution, sanitation and circular economy. It targets 1.5 million people impacted with social improvements valued at more than 5 times capital invested.
This pioneering initiative marks the start of a new form of blended finance that involves corporations. This new experiment is bound to enlarge the scope of micro-levies to become a way for corporations to engage in the field and ecosystem of impact investing. Virtually, all types of products and services can become a support for micro-levies.
In the finance sector, funds transfers are rounded down to the lower cent with the consent of clients.
In FMCG, packaging is returned in exchange of redeemable points, a share of which is given to charities or social ventures.
In Software-As-A-Service (SaaS), micro-commissions are collected on the sale of services.
In employee engagement programmes, a micro-share of salaries is collected and match-funded by employers.
In luxury, micro-donations are consented by clients on the purchase of luxury goods.
The Water Unite fund actively collaborates with enterprises to identify and implement new forms of micro-levies. In return, the fund manager shares social and environmental impact metrics collected with donors who incorporate these metrics as part of their Corporate Social Responsibility initiatives. For them, it is a new form of climate and social engagement tangibly measurable in their Triple-Bottom-Line.
Author: Cyrille Antignac
Editor: Charlotte Macdonald
Wellers Impact is a UK-based, FCA-Regulated Impact Investment Manager which works to unlock community-focused impact through SDG-focused impact investing. Through innovative investment models that utilise fair economics, Wellers Impact originates investment opportunities across three core business activities; real estate developments in partnership with local land-owning not-for-profits in East Africa, financial support for agriculture firms and supply chains globally through sustainable development finance and direct investment into private water, sanitation and plastics recycling firms globally. Investment involves risk. Suitable for Sophisticated, Professional and High Net Worth Investors only.