The private sector has a critical role to play in engendering sustainable economic development. Business investments can stimulate job creation, promote entrepreneurship, and improve living conditions for those living in poverty. At the same time, there is growing recognition among private sector companies of the untapped market potential among the several billion people living on less than four dollars a day – a population segment frequently referred to as the base of the economic pyramid. Today many companies are going beyond traditional models of philanthropy and CSR to create inclusive business models that engage low-income people as consumers, producers, suppliers, and distributors of goods and services, and which have the potential to deliver both commercial and social returns.
Two of the trends which have shown staying power in the inclusive business field are the development of inclusive supply chains and the introduction of innovative products and services designed and priced to meet the specific needs of people living at the base of the pyramid (BoP).
Inclusive supply chains
Multinational corporations seek to improve competitiveness and to reach new markets. In the agricultural sector, companies are restructuring supply chains to incorporate smallholder farmers and other local entrepreneurs. By leveraging local agricultural capacity, large companies are able to overcome challenges such as high shipping and logistics costs, thereby becoming more efficient. Supply chains in close proximity to production facilities enable companies to better manage quality control and mitigate supply risks.
Further strengthening the business case for integrating local producers into the supply chain is the shifting regulatory environment in which governments increasingly require foreign-owned companies to invest in and produce social returns for the communities in which they operate. Inclusive supply chains can have a powerful impact on poverty reduction. Smallholder farmers, most of whom typically survive on less than two dollars a day, are given access to start-up capital, markets, and technical training all of which improve their competitiveness while providing secure livelihoods and opportunities for income generation.
Innovative products and services
Companies under pressure to grow revenues are motivated to develop new products and services to reach previously untapped markets in emerging economies. New offerings tailored to the specific needs of low-income people abound. Investment in R&D by both large firms and social enterprises has led to cutting edge products and services which produce commercial and social returns. Providing households with affordable renewable energy sources, meeting basic needs such as access to clean water, and leveraging mobile technology for the provision of financial services are just some of the areas in which businesses are combining technological and business innovation in order to capture new customers.
Inclusive business at Rio+20
Despite the growing momentum around inclusive business initiatives, companies nonetheless face challenges that prevent such efforts from succeeding and reaching scale. In seeking to facilitate a discussion on how to support private sector companies engaged in advancing development goals through business, and ahead of the UN Conference on Sustainable Development – known as Rio+20 – the Business Call to Action, World Business Council for Sustainable Development, Business Action for Africa, International Business Leaders Forum, International Chamber of Commerce, UN Development Programme, and UN Global Compact will host a half-day workshop entitled “Profits and Opportunities at the Base of the Pyramid (BoP): Sustainable Development through Inclusive Business”. The event, which will take place as part of the Corporate Sustainability Forum, will feature innovative market leaders who are driving inclusive business initiatives and investment strategies within their companies to promote long term growth.
Representatives from companies including PepsiCo, Vestergaard Frandsen, Econet Mobile, SABMiller and IKEA will discuss their experiences in implementing inclusive business models and provide an overview of the challenges they face as well as effective solutions for overcoming barriers to commercial success. Key themes will include:
- How have firms overcome key challenges such as access to distribution channels to reach scale at the BoP, product affordability, and access to finance?
- What types of multi-stakeholder partnerships must firms build to facilitate inclusive business models, and how can other actors contribute to these alliances?
- What are the key drivers for inclusive business within companies? Does support for inclusive business have to be driven from the executive suite or can it be driven from the ground up? How can companies build a culture that facilitates inclusive business?
- What conditions are necessary to foster an enabling environment for inclusive businesses?
After the event, we will share our views on cutting edge inclusive business initiatives presented at the event, while also capturing recommendations for how stakeholders engaged in the inclusive business movement can have further impact.