While corporate philanthropy and development aid will be necessary for the short to medium term, the economic recovery agenda demands collective and coherent action from businesses, including corporations and small and medium-sized enterprises (SMEs). If ever evidence was needed that inclusive business should be higher up the agenda, this is it.
Inclusive business and COVID-19
The economic effects of the COVID-19 pandemic are likely to hurt the poorest most, as they are forced to sacrifice their future wellbeing in the interest of satisfying immediate needs, becoming trapped in their present developmental state following a reduction in self-investment and a lack of social opportunity.
Unlike corporate philanthropy and corporate social responsibility, inclusive business transforms core business activities; supply chains, distribution chains, workforce operations to include those who live on less than 8 US dollars a day. Adopting an inclusive approach to doing business is a promising strategy to tackle the poverty challenges posed by coronavirus for two reasons. First, it enables economic growth, private sector development and poverty alleviation in a resource-neutral or positive way. And second, it allows stretched public funds to be strengthened with private-sector capital looking to blend profit with purpose.
Finding ways to tackle health deficiencies in poor labour forces, or developing products that raise the wellbeing of the poor will result in increased market efficiencies, and translate into cost savings, revenue growth and improved profitability. This will help build sustainable ecosystems to create robust and stable markets.
It will take commitment and innovation on the part of entrepreneurs and business leaders, as the solutions are not expected to be easily found; but in engaging with the BoP, economic and social returns could be simultaneously optimised.
Some think that companies must have large reserves of cash to be able to experiment with inclusive business model innovation within their companies. But many SMEs have created business models that intentionally and explicitly include the poor; from Artisan Apparel in Uganda to Higher Grounds Coffee in the United States, to The Retrade Project in South Africa.
As Mike Debelak from Inclusive Business Sweden said in an interview with Impacto International “It is a commercially viable model that benefits low-income communities by including them in a business’ value chain on the demand side as clients and consumers, and/or on the supply side as producers, entrepreneurs or employees.”
How inclusive businesses can foster the recovery process
- Via Intrapreneurship; the type of entrepreneurship required in inclusive business involves companies modifying their existing operations and processes with transformative inclusive practices.
- Through cross-sector collaboration; this crisis is also an opportunity for the public and private sectors to work together in developing more resilient and inclusive economies. Governments could promote partnerships for innovative solutions to the challenges posed by this and future pandemics in low-income contexts, including mobile information services, access to medicines via micro-distribution models and developing e-solutions for remote employment.
- By measuring its impacts; the goal of measurement is not to maximise the amount of data collected, but to get the right data and institute the right processes that will use that data internally to refine the business model for the better. At Impacto International, we advocate businesses to operate under impact models that are relevant to the social or environmental challenges they intend to tackle; measurable by design and scalable, because true impact creation is underpinned by models striving to move the needle on an issue.
A call to business action
The socioeconomic fallout from the global pandemic could increase global poverty by as much as half a billion people. Income losses in these countries are forecast to exceed $220bn. Systemic social consequences are yet to unfold i.e.: nearly half of all jobs in Africa could be lost. In Latin America, 1 every 2 workers is informal. For many of them, the lockdown measures mean no income, no sick leaves, and no unemployment insurance. As Asian countries face a potential second wave of coronavirus, the dangers of COVID-19 not being timely contained coupled with long-term distancing measures means points to the sheer scale of the potential poverty tsunami that could follow COVID-19.
This is a call to action for businesses of all sizes and, and across all sectors, to plan for and implement inclusive business models. Businesses must become part of the post Coronavirus response in low-income settings. Poverty reduction, now exacerbated by a global health crisis, will not be achieved without the intervention of businesses as drivers of economic recovery and inclusive social development.
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Grace Avila Casanova
Business Sustainability Specialist and Co-founder of Impacto International
