Private sector engagement

Private sector engagement is an umbrella term for the increasingly systematic efforts of development organisations to work with business to achieve development results. For donor agencies, private sector engagement represents a shift away from a focus on bilateral work with developing country governments. It also differs from traditional ways of working with business, in two major ways: It focuses on more equal, longer-term and strategic relationships between development organisations and business; and it uses a wider range and more flexible forms of support.

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    • While ‘partnership’ has often been used as an all-encompassing term for initiatives involving public and private stakeholders, many traditional approaches have been rather transactional and top-down (e.g. calls for business proposals in line with donor priorities, which then lead to short-term projects). Instead, many private sector engagement approaches now seek the active and equal participation of like-minded business in the design and implementation of development solutions that also make business sense. Such ‘real’ partnerships also involve the sharing of resources, risks and responsibilities and deliver mutual benefits. To facilitate such partnership, donors are actively building longer-term relationships with strategically placed companies.
    • Private sector engagement strategies also now consider a broader range of activities and objectives, tailored to different partners and development problems. For example, agencies may offer financial support to leverage, expand, or change the nature of investments; pay for, or provide, technical assistance to facilitate practical research, a new core business product or service or improved working conditions; engage in exchanges of knowledge and networks; and/or work with business through advocacy initiatives or policy dialogue.

The DCED is a key forum and knowledge hub providing practical support to donors in the transition to strategic private sector engagement. This knowledge page lists key resources in four areas: (1) The DCED’s own publications on private sector engagement, based on the extensive experiences of member agencies and other development organisations; (2) Overview documents that map out different trends and engagement practices; (3) information and lessons learnt on four different formats of engagement, including new and traditional approaches; and (4) ‘how-to’ guidance and tools for practitioners.

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All new [aid] investments will explore innovative ways to engage the private sector ‘…’Central to this new way of working is ‘the concept of shared value…: that business can deliver sustainable social impact … while achieving commercial returns.’ Australia DFAT

Find what you need: DCED guidance and knowledge products on private sector engagement

This section provides easy access to the DCED’s key documents on private sector engagement, based on the extensive experiences of DCED member agencies and other development organisations in working with business.

DCED overview documents

DCED research on different formats of engagement

DCED ‘how to’ guidance and resources

Overview documents: engaging the private sector for development

The SDGs confirm that “private business activities, investment and innovation are major drivers of productivity, inclusive economic growth and job creation.” This section links to selected overview documents on how donors and other development organisations engage with business to leverage their contribution towards poverty reduction.

Global reviews and typologies

Agency experiences

Different formats of engagement

Sectoral partnerships

This section lists resources on sector-specific Photo Woman Trimming Fleece 2 2016partnerships, which are typically multi-stakeholder in nature. They feature combined donor and private funding and an agreement of all funding and implementing partners on the sharing of tasks and responsibilities towards a common goal – such as jointly boosting the competitiveness of a particular commodity in a country or regions, or enhancing sustainable production methods in an agricultural sector.

Multi-stakeholder platforms and processes

Multi-stakeholder platforms are a specific sub-form of partnerships, i.e. they involve the active and equal participation of the private sector, are based on a sharing of resources, risks and responsibilities, and deliver mutual benefits. Multi-stakeholder platforms have a knowledge sharing or standard-setting purpose; involve a larger number of organisations; and include multi-stakeholder members, supporters and funders. The direct beneficiaries of platforms are their members. This is different from shared value partnerships, which are organised around the core business model of an individual business, and involve the implementation of activities that directly benefit the poor.

Note that the terms ‘platforms’ and ‘partnerships’ are often used interchangeably in the literature (including some of the publications below). Most of the publications below offer insights into the design and governance multi-stakeholder processes more generally, including platforms.

Impact investment and innovative finance

In addition to grants to share the costs of investments or technical assistance, donors are increasingly interested in other forms of finance to address the diverse needs of businesses. A number of overview documents on concepts, terminologies and current experience can be found below.

Challenge funds and similar cost-sharing facilitiesPhoto Shoemaker

A declining but significant sub-set of ongoing and past private sector engagement work has been implemented through application-based funds and facilities. These central or regional-level mechanisms are primarily geared at businesses from donor countries, and offer cash grants and/or technical assistance to facilitate investments in developing countries. Financial support may either be transferred directly to a business or via an NGO. This section offers a repository of key documents on lessons learnt as well as evaluations of past programmes.

Note that many traditional challenge funds have been designed as donor-led, transactional mechanisms, rather than based on ‘real’ partnership. Some donors have recently changed the design of challenge funds in line with business demand and gaps identified in previous support mechanisms, e.g. by increasingly focusing on highly innovative projects or sharing local knowledge and networks, in addition to financial support. Increasingly though, donor agencies are exploring new approaches that focus on co-developing shared value partnerships jointly with business (see DCED, 2017). This may take several months or even years. Ultimately, they are expected to deliver both commercial and development benefits, by building on a company’s core business to deliver development solutions with a direct impact on the poor.

Research on current practice and lessons learnt in challenge funds

Result reports and evaluations

Practical tools and ‘how to’ resources for engaging businesslab

This section includes documents which provide practical guidance or pointers for how development practitioners can choose partners, design and manage partnerships and collaborations with business, and assess their results.

In January 2017, the Practitioner Hub published a series of blog posts on demystifying the donor-business space, including on how to bridge the cultural gap between business and development organisations, effective approaches to business collaboration beyond traditional frameworks, and lessons on screening partners and designing partnerships from field programmes.

Generic or comprehensive handbooks and guides

Assessing additionality ex-ante

Criteria and processes for choosing partners 

Partnership design

Results measurement

Photo credits

Photo credits in order of appearance: Rob Rickman, Rampant Fiji Ltd/ MDF; Nestlé: Nespresso agro-forestry programme (flickr.com); ALCP Georgia; Urs Flueeller; Nestlé: Youth in Peru (flickr.com)

Photos below: Saira Habib/MDF; Drik/ Katalyst; Tran Viet Duc/Bronwyn Cruden, Global Affairs Canada.