USAID Promotes Inclusive Business for Development Goals
The Business Call to Action interviews Ricardo Michel, Director, Centre for Transformational Partnerships, US Global Development Lab at USAID
Ricardo Michel is responsible for the overall strategic direction to best use local and global public-private partnerships for accelerated sustainable development. Previously, Michel served as acting director for the Office of Innovation and Development Alliances, where he oversaw the agency’s efforts to find innovative solutions, including mobile technology and public-private partnerships, to address development challenges.
How can the American private sector contribute to inclusive business and development goals?
American businesses are recognising that emerging markets are key to their future success. Today, 11 of the 15 largest importers of American goods and services and 12 of the 15 fastest growing markets for US exports are countries that are former recipients of US foreign assistance.
I started my career as an investment banker before going into international development, so I have seen this change take place first hand. Today, 91% of financial flows from the United States to the developing world are from private sources. To put this in perspective, for every dollar of US government aid in 2010, developing countries received an additional $5 in US private capital flows.
Increasingly, American businesses see that making good on these investments requires that their business models address critical development issues. Whether it’s supporting women and girls’ education, addressing agricultural supply chains, or taking on global health crises, addressing development challenges is good business practice. And as employers, buyers of goods and services, sellers of goods and services and investors, American private sector contributions are critical to advancing local economic development, reducing poverty, and ensuring the provision of basic services to billions around the globe.
What are the exciting changes in USAID’s new model of development (shifting from a donor recipient model to a greater focus on strategic partnerships, results and innovation)?
USAID’s mission is to partner to end extreme poverty and promote resilient, democratic societies. This is an ambitious aim and one that we recognise from the outset can only be achieved if we work alongside a diverse range of stakeholders.
For decades, USAID and its partners have successfully tackled some of the world’s toughest challenges. We have a history of innovation including the Green Revolution, Oral Rehydration Therapy, and other landmark initiatives like Feed the Future and PEPFAR that have impacted hundreds of millions of lives.
What I find most exciting about USAID’s new model of development is its shift to focus even more on results driven by science, technology, innovation and partnership. We are partnering with universities and other US government agencies like the National Science Foundation to tap the ingenuity of young innovators.
We are sourcing ideas from every corner of the globe. Our support of researchers at Duke is putting anti-retroviral drugs in the hands of HIV positive mothers in the form of ketchup-packet like Pratt Pouches. With the Pratt Pouch, if a mother is unable to make the long and hazardous trip to a hospital to deliver, she can still prevent the transmission of HIV to her baby.
USAID’s new model of development is about more than just technology breakthroughs, though. It is about rigorously evaluating everything we do, with a relentless focus on results. And it is about bringing new and existing development allies together around a common goal that, while ambitious, is entirely within our ability to achieve.
How will USAID’s partnerships contribute to development goals?
The potential for development impact is the key criteria for all of USAID’s partnerships. A great example of how USAID’s partnerships contribute to our development goals is our work to support 40,000 coffee farmers in Latin America. USAID recently announced a pre-competitive partnership with Keurig Green Mountain, Inc., Cooperative Coffees, Starbucks, and Root Capital to help coffee farmers combat the devastating coffee rust outbreak. This is an important partnership, because coffee rust has the potential to have hugely detrimental impacts. Both in terms of development gains made in Latin America in recent decades—this outbreak, which has already caused an estimated $1bn in economic damages, if not adequately addressed could lead to 500,000 job losses—and the ability for Americans to get a product so many of us rely on.
What are some of the potential challenges that development institutions like USAID face in promoting more inclusive business activities?
I think there are some very real challenges to those of us trying to reach across sectors and promote inclusive business. There is the challenge of demonstrating the value of what we do—in the case of business, demonstrating that inclusive business models can benefit the bottom line, and for development institutions, demonstrating the measurable difference working with businesses can have in terms of development impact. We all know how important monitoring and evaluating is so that we can better understand what works and what doesn’t work. But I think we’ve yet to hit the nail on the head in terms of how to do this in a way that goes beyond simply highlighting success stories.
Related to this challenge of understanding what works, is the challenge of scale and sustainability. One of the purported advantages of inclusive business partnerships is that they offer greater potential for long-term sustainability and greater potential for scale. However, while this is indeed true in some cases, others struggle to scale up beyond a pilot or sustain impact after an initial period of commitment. We need to learn from these experiences so we can integrate the conditions for scale and sustainability into the design of partnerships from the very beginning.
This challenge of scale is one that the US Global Development Lab is eager to take on and we have intentionally designed our work and our structure to identify successful solutions that we can play a turnkey role in bringing to massive scale with our partners.
How will the US Global Development Lab contribute to USAID’s development agenda and potentially encourage a broader set of actors to engage in inclusive business activities?
Last month, the US Global Development Lab hosted its first convening of Cornerstone Partners—a knowledge sharing and thought leadership network of 32 corporations, universities, civil society organisations and bilateral donors—to talk about how we can work together to address some of the world’s most pressing challenges.
I was blown away by the depth of expertise in the room. We had organisations like DuPont, MIT, and the Gates Foundation all talking about food security, clean water, and health. Everyone was putting their best ideas on the table, dissecting them, and coming up with new suggestions—you could tell every person there really cared. Because the issues that are of concern to development practitioners are the same issues impacting businesses—and businesses, in partnership with government and civil society, are uniquely positioned to address these issues through their core operations.
I think our work with our Cornerstone Partners really demonstrates what the Lab and USAID as a whole see as the future of development innovation. We have to engage a broad range of actors to mobilise our collective efforts to address today’s development challenges.
Together with the MasterCard Foundation, The Dow Chemical Company, Atlas Mara, Microsoft, McKinsey & Company, IBM, General Electric, Procter & Gamble, and Intel Corporation, we are helping build the next generation of innovators so that they will in turn take their great ideas and networks to address development challenges in Africa themselves.
What makes the Lab’s approach different from traditional development approaches?
At the Lab, we seek to do development differently, often integrating best practices from the business world. Like corporations, we’ve come to realise how critical innovation is to our success. In 2008, USAID spent roughly $127m on research and development. Today we spend $611m on research, innovation and applied solutions in science and technology.
We also have new ways of working. Instead of selecting in isolation a proposed solution to problems in areas such as water, health, food security and nutrition, energy, education, and climate change, we bring the problem to the table with our partners—be they multinational corporations, NGOs, universities, or locally-based entrepreneurs—and work together to catalyze great ideas and test and scale them.
At the Lab, we take the concept that “good ideas can come from anywhere” very seriously. Some 6,000 organisations have applied to the Lab’s different open-source development programs. Of these, 65% have never worked with USAID before. And 50% of ideas submitted to our Grand Challenges for Development program come from the developing world.
How can platforms like the Business Call to Action work to support the development goals of donor governments?
Multi-stakeholder alliances are critical in bringing governments and companies together to identify and address common challenges. We have found that platforms like these provide a useful rallying point around which a variety of partners can unite and tackle in a coordinated fashion an otherwise elusive goal, each in the ways they are best positioned to address it.
The Business Call to Action has done a particularly good job of expanding the greater development network beyond the usual suspects. This is especially true in emerging market countries. We know that for inclusive business models to scale, they have to be embraced not just in New York, London, and DC, but also in developing countries.
Another example of the power of multi-stakeholder alliances is the New Alliance for Food Security, which brings together African governments, private sector partners, and bilateral donors to end hunger and boost food security. Over 45 multinational and African companies have committed to specific agricultural investments that total more than $3bn and span all areas of the agricultural value chain, including irrigation, crop protection, financing and infrastructure. In 2013, companies reported making $970m worth of investments in African agriculture, part of a comprehensive effort reaching millions of smallholder farmers and creating thousands of jobs.
These kinds of platforms are absolutely critical. But it is important that they are not they only way donor governments are engaging the private sector. As the United Nations looks to define a Post-2015 Development Agenda, it will be important that governments, companies, and other stakeholders continue to find ways to collaborate. In a world where over 1 billion people still live on less than $1.25 a day, we have to continue to push the envelope, finding new ways to collaborate, pursuing audacious goals, and sourcing creative solutions.