Published 3 January 2024 in Purpose • 13 min read
In a rural Latin American region, demand for local crops had dramatically decreased due to competition from cheap imports, leaving already low-income farmers facing severe unemployment, and putting communities at risk of health complications. When the social innovation unit of a global food company, with a strong track record in the region, found out about the issue, they sought to further develop relations by assisting the farmers and community to find a solution. To help, the company identified a local innovative enterprise and decided to provide initial seed funding and business expertise to develop new crops. Together, the stakeholders identified new agricultural products that would appeal to the community, assisted the farmers in implementing updated growing techniques, and formed a cooperative to provide a market for their produce. The new crops were successful, reinvigorating demand for local produce as well as increasing incomes. However, the venture’s increased farming activity had created an environmental strain on the region. The situation prompted the collaborators – the global company, the local enterprise, the farmers, and cooperative members – alongside the input of an environmental NGO focused on the region, to implement sustainable farming practices.
The result: increased employment opportunities for farmers and better prices through the cooperative, better health for the region thanks to new farming opportunities using environmentally sensitive practices and, simultaneously, more effective and authentic social engagement with the local community for the company. And, for all involved, a renewed sense of hope. This collaborative initiative serves as a notable example of what we call “civic wealth creation”, or CWC.
This concept, detailed in our award-winning research published in Academy of Management Perspectives in 2019, shows the positive benefits and transformative changes that occur when communities, enterprises, and their supporters come together to improve their well-being and vitality through cooperation, kinship, and commerce. For corporations, entrepreneurs, NGOs, philanthropic organizations, local leaders, government agencies, and others, civic wealth creation is the new standard for societal impact.
When diverse stakeholders and regular citizens participate, negotiate, collaborate, and coalesce around positive societal change initiatives, they can develop viable remedies and new approaches to the complex problems that have impeded local economies. By being willing to confront differences and overcome challenges rather than blame intractable problems on market failures or government failures, champions of CWC are bringing together the forces needed to restore and empower local communities.
CWC happens when actors from three major stakeholder categories coalesce: community, enterprise, and regimes of support (See graphic).
The community usually revolves around a locality and refers to an aggregation of individuals within a specific geographical territory who are connected by a shared interest or bond. These places where changes happen can be small in size such as a neighborhood or a village, or larger such as a city. The largest community in which CWC applies is a region.
The enterprise refers to the entrepreneurial energy and the stakeholders and entities that help make the changes financially feasible and lasting. Examples include for-profit entrepreneurial firms, non-profit ventures, community enterprises, and cooperatives.
The regimes of support encompass various types of supporters and networks of supporters. They bring resources, including tangible assets such as money, and intangible benefits such as expertise and guidance to support change initiatives. Depending on the issue or context, they can include corporations, government agencies, philanthropic organizations, impact investing funds, universities, and more.
In situations where civic wealth is being created, representatives of these three stakeholder groups are present and engaged.
By definition, the term “civic wealth” draws attention to a conception of wealth that extends beyond money and material possessions. Civic wealth captures the “intellectual, affective, and material resources, capacities, and capabilities” of a segment of society that are created when representatives of the three stakeholder groups collaborate to strengthen and uplift communities, as the opening example illustrates. Wealth is also created when two of the stakeholder groups interact, producing new benefits for the local community.
We categorize types of wealth as economic, social, and communal. Together, they build civic wealth. The most well-known and widespread type of wealth in the business sphere is economic wealth. It is created when those with an entrepreneurial mindset partner with supporters, who provide advice, experience, and, most likely, funding. Economic wealth takes the form of new sources of livelihoods, greater investments, or enhanced infrastructure in a community, fostering a more robust and sustainable local economy. Lidl, the leading German discount supermarket chain, for example, creates economic value for its stakeholders, including financial investors and family shareholders, customers who benefit from low prices, employees from corporate discounts, and the government from taxes and infrastructure investments. Despite this clear focus on economic wealth creation, the communities where Lidl is present are further enhanced through its support for local causes, community gardens, food banks, and art projects. Taken together, Lidl’s commitment to being “a good neighbor by positively contributing to the communities” improves local economies and reduces environmental footprint.
By building on traditional knowledge, Beyond Good not only created a sustainable and ethical chocolate business but is also helping to preserve and amplify the cultural heritage and diversity of the communities it works with
Social wealth is created when regimes of support directly assist and collaborate with a local community. They can provide business experience (corporations), administrative support (non-profits), funding and advice (philanthropic organizations), knowledge (universities), and more. Social wealth reflects the benefits accruing to the well-being of a community that embraces the contributions of its supporters, such as improved access to healthcare, education, and justice, among others. For example, Bush Brothers & Co, the leading provider of baked beans in the US, led the effort to convert an old school building into a primary healthcare clinic serving the rural community of eastern Tennessee where most of its employees live. The company wanted to provide better access to healthcare for its employees and their families as well as for the residents of the surrounding area, who had to travel long distances to see a doctor or a dentist. The company also wanted to preserve a local historic building, which was built in 1925 and had been vacant for years. The company, with strong connections to the school as many of its employees and their relatives had attended it, wanted to honor its legacy as a center of education and community for generations. Finally, as any sound business caring about its viability would do, Bush Brothers also wanted to reduce its healthcare costs, which were rising due to the lack of preventive care and chronic conditions among its workforce.
Communal wealth is created out of a community’s own entrepreneurial efforts to enhance its lot with limited influence from the regimes of support. It manifests as capacity building, enriched culture, and enhanced self-sufficiency. Consider the Brixton Pound, a local currency launched in 2009 by activists who wanted to support the local economy in the London borough of Brixton and promote social justice. The Brixton Pound can only be spent at participating local businesses, which encourages people to shop locally and keep money within the community. It’s an example of how communities use creative problem-solving – in this case, a unique local money system – to highlight their values and boost their communal prosperity.
It is important to note that the model presented in the graphic is dynamic: civic wealth can also be created in moderate forms when one stakeholder group is less engaged than the other two. For instance, a non-profit that combines community leadership with corporate donations and volunteers to build local infrastructure and enhance local well-being generates both communal and social wealth. The community developing an entrepreneurial spirit and a sense of responsibility contributes to the creation of communal wealth. The community also benefits from the creation of social wealth through enhanced facilities, leading to various advantages such as a healthier and more active population. However, such an initiative does little to create economic self-sufficiency and thus would have a limited impact on economic wealth, resulting in a moderate level of civic wealth creation.
Five clear principles indicate that CWC is strengthening communities through commerce and collaboration. Taken together these principles are what distinguishes CWC from other forms of social helping such as philanthropy, corporate social responsibility (CSR), and social work.
Stakeholders are engaged in community life, have a sense of responsibility for others, and contribute in ways that bring about positive change. This principle more than any other explains why we use the term “civic” to characterize the phenomenon: it emphasizes the importance of involving local people, and of caring for others beyond just economic matters.
Example: There are few better examples of this than Mondragon, a federation of worker cooperatives that began in Spain’s Basque region in the wake of two wars. It was a desperate time for workers and their families, but through thoughtful collaboration and the determination to focus on both fairness and practicality, they were able to develop very forward-thinking practices. Today, cooperative members, who ascribe to four core principles – cooperation, participation, social responsibility, and innovation – work directly alongside each other to develop and support the civic wealth of the region. Their purpose stems from mutual involvement in both work and community life, which helps build a sense of solidarity and collegiality.
Many of the problems that communities face cannot be solved with simple fixes or one-dimensional solutions. For systemic change to take place, a wide array of resources – including physical, cultural, intellectual, political, financial, and natural resources – needs to be mobilized and organized.
Example: Fogo Island is a small island off the coast of Newfoundland and Labrador, Canada, that has faced many challenges, such as the decline of the fishing industry, the out-migration of youth, and the loss of cultural identity. However, the community has mobilized a broad array of assets and partners to support its change efforts and revitalize its economy. In particular, a native who became a Silicon Valley executive helped position Fogo Island as a tourist destination. These efforts not only brought residents back but also boosted economic prosperity and strengthened community resilience in the face of future shocks.
Business activity and entrepreneurship are employed to build solutions that are economically viable and sustainable, and that foster independence. One of the key distinguishing features of CWC stems from the role of entrepreneurial venturing and commerce. Compared to some community development efforts that strengthen economies by relying on grants and donations, CWC promotes self-sufficiency through lasting co-created solutions.
Example: Take Beyond Good, a chocolate company that empowers farmers and strengthens the local economy by making its end products – “heirloom” natural chocolate bars – in Madagascar next to where the cocoa is grown. Through its entrepreneurial and innovative approach, Beyond Good has created work opportunities for community members rather than shipping cocoa beans overseas and improved education and skills training for employees. It also promotes sustainable farming practices and the environmental protection of fragile cocoa trees.
Stakeholders with a wide variety of capabilities, motives, and aspirations combine their talents and work together to make things happen. Civic wealth is created when diverse sets of people and organizational actors form coalitions with a common purpose: to solve problems and improve living conditions.
Example: In Central America, Water for People supports impoverished villagers in developing their own sustainable water and sanitation systems. The effort involves drawing together village elders and community leaders, teachers and parent associations, local entrepreneurs and local government, specialized engineers, and international aid organizations. In other words, the whole community, with the help of outside support, is engaged in improving its well-being and takes ownership of the solution to ensure that it thrives in the long run.
Another idea that is fundamental to CWC is engaged participation by all those affected. Among the many stakeholders who are involved in CWC initiatives, the people who are being helped or benefit from the positive change are an essential part of the conversation and are closely involved with designing and implementing the solution.
Example: Housing Works operates a bookstore café in New York City that generates income by helping the homeless and those who are living with HIV/AIDS. The homeless and low-income citizens are trained to work in the café which has become a gathering place for the arts community and others struck especially hard by HIV/AIDS. Housing Works also engages the community in providing services including legal help, job training, and primary care.
As these five principles indicate, CWC is a promising new way to bring about societal change. It reflects the sense of caring and responsibility that people feel for those they share a bond with, either because they are neighbors living near each other or because they share things in common, like common interests or common experiences.
Lidl’s commitment to being ‘a good neighbor by positively contributing to the communities’ improves local economies and reduces environmental footprint
To secure a more sustainable and inclusive future, we need creative ideas and partnerships that reimagine the global economy. In Issue XII of I by IMD, we explore how the fast-emerging “impact economy” is changing the way we do business – and the world.
Whatever your role, experience, or aspiration in the impact economy and sustainability space, here are key steps to consider when applying the CWC framework:
1. Draw a map of all current and potential stakeholders involved in the initiative and identify to which of the three stakeholder groups they belong. Is there any person or group who has been left out? In the case of Housing Works, initiators of the project first had to map out the different stakeholders: the main beneficiaries – the community of homeless and low-income people living with or at risk of HIV/AIDS – but also the community of New Yorkers who would come to the café as patrons and other supporters of the bookstore. Once identified, it was then critical to balance the needs and preferences of low-income households with the requirements and standards of the relevant government agencies and construction companies. Housing Works also engaged with the media to gauge public opinion and gain trust and support for the initiative.
2. Identify and formulate a shared purpose that will determine the intentionality common to all actors involved. Is everybody on the same page? In the case of the Brixton Pound, the shared purpose that led to the creation of the currency was to support the local community and economy in that area of south London, in response to the financial crisis. Stakeholders had united behind the idea that the currency would encourage local trade, support independent businesses, and build a human-scale circular economy. The currency further contributed to creating a sense of community and pride among local residents.
3. Take stock of the available resources and assets present in the community as well as those available from, or made available by, the enterprise and regimes of support. What else is needed to pursue the initiative? In the case of Beyond Good, the natural resources (cocoa beans) were being taken away from the community as soon as they were harvested; the processing of the raw material – value-creating activities – was happening far from Madagascar, in Europe and North America. Beyond Good redirected the supply chain in favor of leveraging local resources. It learns from the local knowledge of the farmers about the best varieties, planting methods, harvesting techniques, and post-harvest processing of cocoa beans; it protects biodiversity and uses endemic trees in its pest management; it acknowledges and rewards the contributions of the communities to its innovations and products by sharing the benefits equitably and transparently. By building on traditional knowledge, Beyond Good not only created a sustainable and ethical chocolate business but is also helping to preserve and amplify the cultural heritage and diversity of the communities it works with.
4. Identify opportunities for commerce and trade that could generate revenue. How might a viable business model be developed? Most notable in the case of Fogo Island is the building of the Fogo Island Inn, a luxury hotel opened in 2013 that offers stunning views, local cuisine, and contemporary design. All profits from the inn are reinvested in the island and an artist residency program. As a result, the number of visitors interested in the island’s natural beauty, cultural heritage, and artistic innovation has increased significantly. The rise of sustainable tourism on the island was responsible for the creation of more than 100 jobs.
5. Convene relevant stakeholders from each group identified in the first step; make sure to include community members most affected by the design of the CWC solution. Are everybody’s interests accounted for? In the case of water and sanitation issues, the issue is not so much the provision of wells and latrines as it is ensuring that the community preserves them for use in the long run. Water For People did exactly that: it directly engaged with the beneficiaries and realized that the biggest need lay in the maintenance of the water supply. As a result, it implemented a plumber training program that not only created jobs but also ensured the community was equipped with water supplies over the long run.
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