How Local Policymakers and Practitioners Can Encourage Large Companies to Engage with Lower-Income Communities

By Peter Eberhardt, Senior Research Analyst, Initiative for a Competitive Inner City, and Howard Wial, Senior Vice President and Director of Research, Initiative for a Competitive Inner City, September 2021

You are a mayor, city council member, economic development practitioner, or leader of a community foundation in a small or medium-sized city in which poverty and unemployment are major issues.  You confront the challenges of lower-income communities every day.  Addressing those challenges is one reason—maybe the main reason—why you do the job you do.  But you never have anywhere near enough resources to do even half as much as you’d like to do.  So you look to private organizations with deep pockets and specialized expertise as potential partners.  In the mid- and late 20^th century, those organizations would have been major corporations headquartered in your city.  During the last two decades, when major economic shifts reduced corporate CEOs’ commitment to the cities where their companies operated, they were more likely to have been large nonprofit hospitals or universities.  Now some large for-profit companies are beginning to consider or reconsider their potential to help improve local communities.  You’d like to encourage these companies to do more for and in partnership with lower-income residents but you’re not sure how to do so.

A new ICIC report, made possible by funding from the Robert Wood Johnson Foundation, provides some actionable recommendations that can help you take the first steps. The report, The New Anchors: Corporate Engagement with Lower-Income Communities in Smaller Cities, uses examples from Amarillo, Texas; Fort Wayne, Indiana; Richmond, Virginia; and Syracuse, New York to show how for-profit companies can become anchor institutions for nearby lower-income neighborhoods.  (Anchor institutions are large or otherwise influential organizations that are rooted in their local communities and participate in activities meant to benefit those communities.)

What can you do to encourage for-profit companies in your city or region to become anchors for lower-income communities?  Or, if some of them are already anchors, how can you encourage them to broaden or deepen their commitment to those communities?  The report gives six recommendations about who should identify and work with the companies, what they should do, and how they should do it.

• Citywide and regional nonprofits and governments should take the lead in encouraging for-profit companies to collaborate on lower-income community issues.

Unlike universities and hospitals, which are often concerned with their own immediate neighborhoods, for-profit companies that engage with lower-income communities usually do so at the city or regional level.  For this reason, organizations that work at those broader geographic levels are often better suited than neighborhood-based organizations to encourage for-profit companies to act as anchors in lower-income communities. This is especially important if citywide and regional organizations already have relationships with the companies they hope to encourage to become anchors.

Some small and medium-sized cities, such as Syracuse, have an organization that brings together many other local organizations, for-profit and nonprofit, in support of local and regional initiatives.   If your city or region does not have an active collaboration that includes multiple for-profit companies, citywide and regional organizations can begin by helping corporate leaders understand the needs of nearby lower-income communities and encouraging them to focus their companies’ community engagement strategies on those needs. Building a common language and shared understanding of the community’s needs among corporate leaders could make future collaborations easier. Citywide and regional organizations are also often aware of and best positioned to address their city’s or region’s unique challenges to for-profit anchor collaboration (about which we’ll say more below).

• Start by approaching the kinds of for-profit anchors that are most likely to be interested in engaging with lower-income communities.

In our research, we found that some kinds of companies are more likely than others to be engaged with work that directly benefits lower-income communities. Those companies fall into one or more of the following categories:

• They are privately held.
• They are large.
• They are heavily regulated (e.g., utilities and banks) or otherwise subject to public scrutiny (e.g., supermarkets and other businesses that serve individual consumers).
• They are headquartered in your region.
• The CEO is originally from a lower-income community.

These types of companies may be the ones that are most likely to partner on initiatives that seek to benefit the residents of lower-income communities. If you want to encourage for-profit companies to address the problems of lower-income communities, then start by approaching those types of companies, especially if there are few or no large companies in your city or region that are currently working on those problems.

Although you should start by approaching the types of companies we mentioned, you shouldn’t stop with them.   Engaging all types of for-profit companies to work with lower-income communities is critical for long-term impact. Engaging a broad range of firms increases the diversity of expertise devoted to a lower-income community initiative, potentially leading to more efficient and effective problem solving.

• Appeal to individual for-profit companies differently depending on how the companies think about lower-income community engagement.

Once you’ve identified the companies that seem likely to be interested in acting as anchors, you should appeal to each company in a way that reflects the company’s own view of lower-income community engagement. Some companies see engagement as “shared value”—something that will be both profitable for the company and good for the community. Others view it as charitable giving or corporate social responsibility. Still others consider it to be an expression of their corporate identity. Some companies have already acted as anchors and may be open to broadening or deepening their work in lower-income neighborhoods. Others may be reluctant to discuss poverty and its causes but may be persuaded through an indirect approach. For example, one nonprofit leader we interviewed for the report was able to persuade a company to develop an anonymous online platform for employees to request support by showing a company leader that some of the company’s employees already benefited from the nonprofit’s program. Our interviewee reported that the company has since seen a decrease in employee turnover and is re-evaluating its wage structure to better align its lowest wages with living wages. If you want to encourage for-profit companies to act as anchors in lower-income neighborhoods, begin by having preliminary discussions with company leaders to understand how they think about lower-income community engagement. Appeal to them in ways that resonate with their thinking.

• It is often helpful to start by encouraging for-profit companies to engage with workforce development in lower-income communities. 

Workforce development, including recruitment and training, is a common business need of for-profit companies seeking to hire people without bachelor’s degrees. It is the most common area of engagement we found among the companies we studied. Even if companies have no previous experience with formal workforce development programs, they can partner with existing workforce development organizations, including community colleges, community-based organizations, and the public workforce system. Moreover, the business voice is often missing from workforce development programs, so for-profit companies can help improve those programs while benefiting lower-income communities and meeting their own workforce needs. Some cities (such as New York) and states (such as Pennsylvania and Ohio) recognize the importance of business to workforce development efforts by funding industry workforce partnerships—groups of companies in the same industry or cluster that work together to identify and meet their common workforce needs. Participating in such partnerships can be a way for for-profit companies that haven’t previously acted as anchors to begin to do so.

• Local governments, foundations, and other influential organizations should help incentivize and support collaboration among for-profits.

The companies we interviewed for our report told us that increased collaboration between for-profit companies on lower-income community issues would benefit the city and/or region. But they cited various obstacles to collaboration, including not having a convener, not having the resources (mainly time) to collaborate, and not having a culture of collaboration among for-profit companies on community engagement initiatives. Foundations of all sizes and geographic scopes can provide additional resources and encourage the development of a culture of collaboration by providing grants specifically for collaborative projects that include multiple for-profit anchors as key partners.

The individual(s) or organization(s) that can best convene for-profit companies to collaborate will vary greatly from city to city. In general, this role requires broad influence across sectors and sufficient resources to play a major role in any collaboration. In some places, a mayor or other government leader, the leader of a local nonprofit anchor, the leader of a local foundation, or the leader of a for-profit company may be best suited to bring other companies together to help them collaborate on lower-income community issues. In others, existing business organizations may be the best conveners. Business organizations may be well positioned to encourage this type of collaboration. These types of organizations already bring for-profit companies together to support their collective needs. In some cases, they have already initiated collaborative lower-income community engagement efforts involving companies.

• Government, philanthropic, and nonprofit organizations that fund collaborative community engagement initiatives in which for-profit companies participate should require independent evaluations of the outcomes and impacts of those initiatives.

The companies we studied often measure the outputs of their community engagement programs, such as the number of people the programs serve.  But none measure the programs’ impacts.  This isn’t surprising, since companies rarely have the ability or incentive to measure the impacts of their own programs.  Even if they did, the general public wouldn’t find the results credible.

Yet credible independent evaluations of companies’ community engagement programs could be extremely valuable. They could help companies understand whether their community engagement strategies are having their intended impacts and, if they are, which components of those strategies are most effective. This knowledge could enable companies to improve the effectiveness and impact of their strategies. Current and potential community engagement partners that work with companies on community engagement initiatives would also benefit from knowing whether those initiatives are effective. Foundations and nonprofit organizations interested in encouraging for-profit companies to act as anchors in lower-income communities would be able to understand which initiatives were worth encouraging. Those organizations would be able to share that knowledge widely with stakeholders from different regions and industries.

Government, philanthropic, and nonprofit organizations can give companies an incentive to participate in independent evaluations of their community engagement programs.  They can do so by funding community engagement activities in which for-profit companies participate (especially initiatives that involve multiple companies and nonprofit organizations as well) and requiring independent evaluations as a condition of providing funding.  They have the financial resources needed to fund evaluations and give for-profit companies an incentive to cooperate with evaluators, the knowledge needed to choose competent evaluators, and the independence needed to sponsor credible evaluations.

National foundations may be able to play an especially valuable role in supporting evaluations of community engagement initiatives in which for-profit companies participate. They have more financial resources and more expertise in evaluation than do most local foundations and most organizations that are interested in community engagement. They have the ability to convene many other community engagement stakeholders and to use their convening and communication power to spread best practices across the nation.

Read the full report: The New Anchors: Corporate Engagement with Lower-Income Communities in Smaller Cities

Support for ICIC’s research was provided by a grant from the Robert Wood Johnson Foundation; however, the views expressed in the report do not necessarily reflect the views of the Foundation.