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12 Nov. 2015 | Comments (0)

Louisville-based beverage alcohol producer and marketer Brown-Forman has a well-established corporate vision: “To enrich the experience of life, in our own way, by responsibly building beverage alcohol brands that thrive and endure for generations.” According to Rob Frederick, Brown-Forman’s vice president and director of corporate responsibility, alcohol addiction completely contradicts that vision.

Frederick says: “The last thing we want is to have someone’s health and well-being ruined by drinking. We’ve focused on helping people with addiction for a long time because it’s very relevant to us as a business.”

Much of Brown-Forman’s work on addiction has been in partnership with The Healing Place, a Louisville-based nonprofit that aims to reach men and women suffering from drug and alcohol addiction, provide the tools for recovery, and restore productive lives. The Healing Place is recognized as one of the country’s most effective long-term social model recovery programs. With 75 percent of its alumni remaining sober after one year, the organization boasts a success rate five times the national average for recovery facilities.

Ripe for a SIB

There is a confluence of factors in Kentucky and Brown-Forman’s approach to addressing addiction that makes a social impact bond (SIB) an appealing option. These factors include:

  • A health crisis Kentucky is in the middle of a heroin crisis and there is much attention on the issue and many approaches surfacing on how to best address it. Nowhere is this manifesting itself more than in the Louisville Department of Corrections, where the jail is increasingly serving as a short-term detox unit. Frederick acknowledges that it has been a challenge for Brown-Forman to get comfortable with heroin and alcohol addiction being lumped together, but at the end of the day, he says, “addiction is addiction, and addicts often use more than one substance.”
  • Cost-effective, measurable solution Addiction is a huge drain on community and government resources, and a cost that far outweighs the cost and benefit of recovery. At a cost of $25 a day and free to clients, The Healing Place’s intervention is cost effective and proven through measurable outcomes. Moreover, the organization deals with constituents who are most in need of assistance—those who are deep into addiction and have had many personal consequences.
  • Government inefficiency The alcohol industry is heavily taxed, which is an ongoing legacy of prohibition that was established to reduce harm. But, according to Frederick, government needs to better address the problem of addiction and the SIB model provides an opportunity to improve the use of limited government resources.
  • Multi-stakeholder response The issues related to addiction and the benefits of recovery affect so many different branches of society that no one party or sector can deal with it alone. Partnerships between the government, private and nonprofit sectors are crucial. Frederick says: “No one actor can or should solve the addiction problem alone, and a SIB is a way to do it in partnership. It’s a really good stakeholder engagement tool.”

Having read about New York City and New York State SIBs, Frederick led Brown-Forman into discussions with local partners, including Louisville Metro Government, the Community Foundation of Louisville and James Graham Brown Foundation, to explore the possibility of developing a project in Kentucky to tackle addiction. The basic premise is to provide treatment to a target population from the local jail that will reduce recidivism and other burdens on local government services. Placing inmates who are ready for treatment will create cost savings, cost avoidance and community benefit. The project reins have been handed over to Louisville Metro to develop the idea further. The explorations have not yet yielded a contract, but they are fairly advanced and have included experts from the Harvard Kennedy School Social Impact Bond Technical Assistance Lab and Third Sector Capital Partners.

Company-led project

To have a company act as convener of a SIB is unique—contracts are typically instigated by government. But having a company at the helm of discussions could become more common, particularly if corporations look at their core social issues and decide that something needs to be done in partnership to achieve a level of impact that they can’t on their own.

Frederick acknowledges that the multi-stakeholder aspect and full system approach of a potential project is part of the appeal, but also adds to the complexity. For instance, one of the challenges that the partners will have to address is that the potential cost-savings of reducing addiction can accrue to many parts of the community and therefore several areas of government. Building a measurement framework and repayment schedule to reflect that is not going to be easy.

Although Brown-Forman has not yet decided whether or not it will invest in any future SIB on addiction in Kentucky, the idea that a SIB could help shift Brown-Forman’s philanthropic mindset from being one of “donation” to “investment” is appealing to Frederick. He says: “You could potentially tap into a much bigger source of funding and significantly scale up our contribution to the issue. It’s a way to have a bigger financial contribution to something that’s accountable and which matters to us.”

This case study is taken from “Making Sense of Social Impact Bonds for Companies,” the latest edition of the Giving Thoughts Series. Download a complimentary copy here. 

  • About the Author:Alex Parkinson

    Alex Parkinson

    Alex Parkinson is Principal of Parky Communications, a communications agency specializing in sustainability and CSR reporting and communications. He serves as the Co-Leader of The Conference Board Cor…

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