Can Businesses Be Anchor Institutions?

(Photo by Mark Lucey)

In the last decade, the social sector has paid increasing attention to the role of “anchor institutions” in building community health and wealth. “Large, usually nonprofit organizations tethered to their communities, like universities or medical centers,” as a recent National Academies report puts it, “their economic, intellectual, and human capital places anchor institutions in a unique position to improve and enrich the surrounding community”:

“While traditional economic development assumes that development will ‘trickle down’ benefits to residents, community wealth building employs and builds on existing assets within the local community to build sustainable ecosystems that promote equity and provide direct benefit to local residents.”

A pioneering voice in conceptualizing and developing anchor institutions and networks, the Democracy Collaborative (DC) has crystallized what it means to be this kind of “existing asset.” Specifically, DC has encouraged anchor institutions to pursue what they call “anchoring strategies,” systemic efforts to leverage the institution’s power to improve local living conditions. Hiring locally, procuring supplies locally, and investing locally are the three most often cited approaches to anchoring.

What about businesses? Could a large business serve the same function? Medical centers and universities are paradigmatically well-suited to play the role, but as it becomes more common to ask businesses to play a more constructive role in their communities, the suggestion that businesses become, or be recognized, as anchor institutions has also become more common.

It's a good question, given the way in which the anchor institution label has catalyzed large “meds and eds” to see themselves as engines of local progress. But universities and medical centers have always been more oriented towards the public good. Does it make sense to include organizations that are explicitly oriented towards profit-making? And can the term “anchor institution” convey something about a business that other labels do not? After all, the business (and academic business) community has already developed a deep library on corporate social responsibility, shared value, impact investing, inclusive growth etc., to say nothing of the more traditional practices of charitable giving.

The argument is that adding the term “anchor institution” to the mix could focus businesses on the potential to generate local (rather than global) benefits, as well as encourage a systemic approach to what are too often scattershot or one-off efforts to do something good. And for exactly this reason, conveners and funders are already applying the concept of anchor institutions to the business sector, presumably to galvanize these kinds of benefits. Robert Wood Johnson Foundation, for example, recently made a series of grants to study the topic of anchor businesses. In response, there’s been a flurry of research activity, including papers titled “Conceptualizing and Defining Anchor Businesses” and “Anchor Businesses in the United States.” These papers are the latest in a line dating back to at least 2008, when the Netter Center for Community Partnerships suggested that large corporations (such as pharmaceutical and technological) could be anchors in urban neighborhoods.

However, discussing businesses as “anchors” requires grappling with nuance. There may not be a simple yes or no answer, or perhaps the answer is both yes and no. In one sense, businesses cannot be anchor institutions in the same way that traditional nonprofit and public institutions can be: unlike the form of “sticky capital” that a university or medical center represents, a business’ long-term presence in a given place is much harder to be assured. But that’s not to say that businesses can’s pursue anchor strategies: intentional efforts to systemically deploy various forms of capital for local benefit.

Businesses Are Not Anchor Institutions…. And That’s OK

The basic characteristics of anchor institutions are that they are large and place-based, which is to say, they are large enough to have a systemic effect on the communities they inhabit. This definition leaves open the possibility that anchor institutions could have either positive or negative impacts on the local community. Although not everyone agrees, the DC has maintained that an organization either is or is not an anchor, but it’s not something an organization aspires to be. In other words, the concept of an anchor institution is not normative. Plenty of anchor institutions exist and do little (or nothing) strategically for their communities.

In health care and higher ed circles, of course, the term has taken on a normative power, even if it wasn’t originally intended to do so. To identify your organization as an anchor institution communicates something about its social consciousness and willingness to undertake internal reforms for the benefit of local communities. One result is that the Healthcare Anchor Network, a national collaboration of leading healthcare systems, is growing in membership, as is the level of ambition around anchoring strategies generally: Whereas the early focus was squarely on hiring, procuring, and investing, anchor institutions have more recently been conceptualized as having additional roles – including growing local affordable housing, generating infrastructure and active collaboration with community. As individual anchor institutions become celebrated, others inevitably strive to emulate their approaches.

Many businesses like to tout that their work is rooted in or serving a local neighborhood, from the for-profit housing developer with construction sites across an entire neighborhood, or city, to the power company with deep investments in enormous infrastructure across an entire region. Or take a local newspaper, like The Boston Globe, whose placed-based nature of their work can appear to signal a certain form of reliability, or expectation that the business will be committed to the local community over the long term. If people in the community are looking to improve air quality, or pre-K readiness, these kinds of businesses may appear ready partners for such long-haul efforts.

However, there is an important difference between a business’ work being rooted in a community and a business being truly rooted in a community. A business may, for example, be Boston-based in the sense that they have employees, storefronts, or even back-office operations, but the organization itself may be based somewhere other than Boston. A real estate developer may own large tracts of land in a city, or a newspaper may report local news, but their headquarters may be located in another state or country, along with their priorities. And even if their headquarters are in Boston now, there’s nothing to say they won’t move in the future, and take the assets of the business with them. Smith and Wesson recently announced it was moving its headquarters out of Massachusetts (as the state pursues a ban on assault weapons), for example, and even business owners with a genuine commitment to their locale can be acquired by other businesses. Athena Health was headquartered in Boston until it was acquired by private equity firms in New York and California in 2019, and they have since been acquired again by other private equity firms.

Business leaders have legal obligations to act in the interest of their organizations, and where applicable, their shareholders. Obligations that can run counter to the non-legal commitments businesses may make to a specific geography. In short, any capital that businesses deploy toward pro-social efforts is always at risk of being redirected towards more traditional organizational uses or even of leaving the community entirely. That risk can be very high for some businesses—like tech startups that are actively seeking to be acquired—while much lower for others, like longstanding family farms, but the risk always remains. By comparison, nonprofits may close their doors, but the risk of them pulling back from pro-social commitments (or leaving a community) is almost nil, on account not only of their mission but their tax status. While businesses can face legal constraints to their local, pro-social commitments, nonprofits can face legal penalties if they deviate from theirs.

The second criteria for being an anchor institution, size, functions as a proxy for power in traditional conversations about anchor institutions. But in the business landscape, this requirement fits awkwardly alongside the placed-based criteria: it is often small businesses that are most likely to be longstanding members of a local community. When we asked people around Boston—and particularly people from the marginalized communities that anchors are implicitly meant to serve—to identify what they saw as anchor businesses, the businesses that came first to their minds were small. What distinguished these businesses was a sense that “the neighborhood wouldn’t be the neighborhood without them.” An independent grocery store, locally-owned cafes, and a bookstore were all identified repeatedly. But the more “scale” a business reaches, the less they are likely to remain rooted in place-based improvement efforts. To wit, when we searched the Greater Boston landscape for large businesses as indicated by number of local employees, total revenue, or annual charitable giving, we found ourselves perusing national (and sometimes multinational) corporate websites with little to say about Boston. Some of these organizations had impressive records of pro-social work but rarely were their efforts focused on the local community. This was true even when the business was headquartered in Boston. 

Businesses Can Pursue Anchor Strategies

However, we have been pleasantly surprised by the scope and depth of the commitments some businesses have made to the Boston community. For this reason, we feel comfortable talking about businesses pursuing anchor strategies where their efforts to improve local well-being are systemic. The systemic nature of a business’ approach is what distinguishes the pursuit of an anchor strategy from more scattershot or one-off efforts that can be labeled as CSR, double bottom line, or shared-value-type activity.

What comprises an anchor strategy are coordinated efforts to strategically deploy capital that exists within the business for the benefit of the local community (see below). For example, think of a business that provides down payment assistance (financial capital) to assist employees in purchasing homes locally. Or consider a business that encourages employees to volunteer their time (human capital) with local nonprofit organizations. Of course, the line between what (or who) exists “inside” the business and what (or who) exists “in the local community” can be difficult to draw abstractly. But in practice, we have found the concept useful. Again, any one of these actions in isolation does not an anchor strategy make. Anchor strategies are defined by leadership’s willingness to take a comprehensive look at the kinds of capital their organizations possesses and think creatively about how to put that capital in service of the local community. 

Some examples of how businesses can strategically deploy capital as part of an anchor strategy:

• Human Capital: Hire locally and inclusively; provide additional health benefits (e.g. paid family leave); and provide volunteer time off for employees.
• Financial Capital: Create or donate to funds for community-based organizations, small businesses, students, and/or vulnerable residents to take local action; make long-term place-based investments; purchase locally and/or engage diverse suppliers; and provide employee financial benefits (e.g. down payment assistance).
• Political Capital: Show up to advocate at local town hall, school board, and state house for community interests; submit public comments when policymakers request public input. 
• Physical Capital: Donate or produce supplies to meet priority local needs; donate or subsidize space for needed services.
• Social Capital: Draw on existing individual and organizational relationships to execute strategic initiatives. 

While we remain guarded about heaping undue praise on business, our team has come to recognize that there are roles in community efforts to improve local well-being that businesses can best or only fill. For instance, businesses often have the ability to deploy large amounts of unrestricted money much more quickly than government and even nonprofit philanthropies (a theme we have heard repeatedly in people’s reflections on how the Boston community responded to the COVID-19 crisis). Several people we spoke with pointed to the business community as having played a uniquely effective role in getting financial supports to people closest to the time they most needed them. Businesses also often enjoy status in the community, for better or for worse, which enable them to command attention, mobilize other local businesses, and bestow credibility on initiatives they support. In Boston and elsewhere, the business community’s engagement on environmental sustainability have been game-changing. And in Boston specifically, the business community has latched onto early childhood education as a focal issue, with 70 CEOs and business leaders joining forces to advocate for state and federal policy change as well as elevate best practices for businesses themselves to implement. For their part, small businesses have the unique ability to leverage social capital. Small business owners and their employees are often longstanding members of the communities in which they operate, allowing them to create strong relationships with local customers that can be leveraged to support organizing and mobilization efforts. 

While it may seem like a purely semantic exercise to differentiate anchor institutions from anchor strategies, we find the distinction allows us to avoid unnecessarily diluting the term “anchor institution” while also offering recognition to those businesses that are systemically engaged in the improvement of their local community. And there may be another benefit: kicking the tires on the concept of an anchor institution instilled in our team a healthy skepticism not only about the business sector’s ability to pursue anchoring, but also about assumptions of reliable benevolence on the part of 501c3 (charitable) nonprofit actors. We came to appreciate how rare it is in a modern market economy to have any large organization that is truly place-based: the Mayo Clinic no longer only operates in Rochester, Minnesota, but also Jacksonville, Florida, and Phoenix, Arizona; Trinity Health, which was formed in 2000 as a predominantly Midwest system, now operates 92 hospitals in 22 states. Mega-insurers, as well as mega-providers, that span time zones have become the norm. Should nonprofit hospitals and health systems be assumed to be anchors in light of their increasingly regional and national focus? Businesses may rightly be accused of hoarding resources within their organizations and always being able to walk away from community efforts to improve well-being. But unless we explore the concrete strategies through which an organization anchors itself and systemically builds wealth in its local community, this same skepticism may be warranted on “traditional” anchor institutions as well.

Support for this article was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.

Read more stories by Lauren A. Taylor, Sabrina Werts, Shoba Ramanadhan, Chelsea Heberlein, Sara Singer & Emma-Louise Aveling.