Business as usual is not an option in developing countries
Inclusive business models aim to go beyond philanthropy and corporate social responsibility to find synergies between development goals and a company's core business operations.
Leading companies should promote inclusive business solutions as a means of securing a sustainable future for developing countries.
The world is experiencing a historic shift of economic and political power from the traditional industrialised countries to the so-called developing countries, already home to 80% of the world's population and with a combined GDP that surpasses that of the rich countries. By 2050, more than 3 billion additional people will be living in what is now described as the developing world.
While substantial progress has been made in recent decades, poverty and inequity remain critical challenges for sustainable development and global stability. Poverty has many dimensions: about a third of the world's population lives on less than $2 a day and many suffer from malnutrition, have no access to health services, sanitation, electricity, safe drinking water, shelter or transportation.
If the usual development path is followed, meeting the basic needs of a growing and increasingly urbanised population will exponentially increase the demand for energy and natural resources, thereby further exacerbating the pressure on the world's ecosystems. This means that business as usual is not an option.
WBCSD believes that tomorrow's leading companies will be those that anticipate these trends and align profitable business ventures with the needs of society. As an important part of its efforts to promote business solutions for a sustainable future of developing countries, the WBCSD coined the concept of "inclusive business" solutions. It builds on the work of the late CK Prahalad and Stuart Hart on Base of the Pyramid business models, to identify commercially viable business solutions with high socio-economic impact.
On the one side, inclusive business models aim to provide innovative solutions to supply affordable products and services to meet basic needs of the poor for water, food, water, sanitation, housing and health care. On the other side, they are also about creating income and employment opportunities for low-income communities – either directly or through companies' value chains as suppliers, distributors, retailers and service providers.
In essence, inclusive business models aim to go beyond philanthropy and corporate social responsibility to find synergies between development goals and a company's core business operations. The profit motivation is fundamental to ensure that business involvement in enabling sustainable livelihoods is both scalable and replicable.
Inclusive business projects can be implemented by companies across all sectors and in all countries. Fast moving consumer goods companies were at the forefront in adapting their products to the pockets of low-income consumers and in engaging independent entrepreneurs to distribute and sell products in remote areas. But many other sectors have followed.
To name just a few examples: life sciences and pulp and paper companies are sourcing raw materials from small farmers; mobile phone companies are facilitating banking services for the poor; cement companies are offering low-income housing solutions; energy engineering companies are enhancing the access to clean and affordable electricity, cooking and heating; banks and insurance companies are providing micro-credits and micro-insurance respectively; mining companies are investing in local enterprise development; and electric engineering companies are enhancing the access to health services to rural populations.
The WBCSD identified three essential factors for companies that wish to implement inclusive business projects. First, a company should focus on its core competencies and strengths – this is key to ensuring consistency among a company's portfolio. Also, partnering with government agencies, civil society groups and development organisations with on-the ground expertise is vital in addressing a multitude of needs in a holistic approach. Lastly, tapping into local networks is a great resource for gaining insights into regional markets of developing nations.
It should also be noted that the implementation of inclusive business projects is by no means restricted to multinational companies. On the contrary, given the market structure, entrepreneurs in developing countries have always had to adapt their business models to cater for low-income consumers.
In addition, inclusive business solutions are beginning to be applied beyond developing countries. Products that were originally simplified to be affordable for the poor in developing countries are increasingly being upgraded and repackaged as low-cost innovations for consumers in more affluent countries. Examples include portable electrocardiographs, basic mobile phones and laptops.
Inclusive business models are just one example of the multiple ways in which the private sector can contribute holistic solutions to support the sustainable development of emerging economies in an increasingly urbanised, energy and resource-constrained world – both to the benefit of these countries and to that of business.
However, the potential for increasing foreign and local companies' contribution is frequently constrained by the inherent barriers and limitations of doing business in developing countries. Effective public-private partnerships are therefore urgently required to create the appropriate frameworks and incentives to fully leverage businesses contribution. This alliance will help ensure we build what is needed for the future – a sustainable world in which 9 billion people live well and within the limits of one planet.
Marcel Engel is managing director for the Development Focus Area at the World Business Council for Sustainable Development (WBCSD)
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While substantial progress has been made in recent decades, poverty and inequity remain critical challenges for sustainable development and global stability. Poverty has many dimensions: about a third of the world's population lives on less than $2 a day and many suffer from malnutrition, have no access to health services, sanitation, electricity, safe drinking water, shelter or transportation.
If the usual development path is followed, meeting the basic needs of a growing and increasingly urbanised population will exponentially increase the demand for energy and natural resources, thereby further exacerbating the pressure on the world's ecosystems. This means that business as usual is not an option.
WBCSD believes that tomorrow's leading companies will be those that anticipate these trends and align profitable business ventures with the needs of society. As an important part of its efforts to promote business solutions for a sustainable future of developing countries, the WBCSD coined the concept of "inclusive business" solutions. It builds on the work of the late CK Prahalad and Stuart Hart on Base of the Pyramid business models, to identify commercially viable business solutions with high socio-economic impact.
On the one side, inclusive business models aim to provide innovative solutions to supply affordable products and services to meet basic needs of the poor for water, food, water, sanitation, housing and health care. On the other side, they are also about creating income and employment opportunities for low-income communities – either directly or through companies' value chains as suppliers, distributors, retailers and service providers.
In essence, inclusive business models aim to go beyond philanthropy and corporate social responsibility to find synergies between development goals and a company's core business operations. The profit motivation is fundamental to ensure that business involvement in enabling sustainable livelihoods is both scalable and replicable.
Inclusive business projects can be implemented by companies across all sectors and in all countries. Fast moving consumer goods companies were at the forefront in adapting their products to the pockets of low-income consumers and in engaging independent entrepreneurs to distribute and sell products in remote areas. But many other sectors have followed.
To name just a few examples: life sciences and pulp and paper companies are sourcing raw materials from small farmers; mobile phone companies are facilitating banking services for the poor; cement companies are offering low-income housing solutions; energy engineering companies are enhancing the access to clean and affordable electricity, cooking and heating; banks and insurance companies are providing micro-credits and micro-insurance respectively; mining companies are investing in local enterprise development; and electric engineering companies are enhancing the access to health services to rural populations.
The WBCSD identified three essential factors for companies that wish to implement inclusive business projects. First, a company should focus on its core competencies and strengths – this is key to ensuring consistency among a company's portfolio. Also, partnering with government agencies, civil society groups and development organisations with on-the ground expertise is vital in addressing a multitude of needs in a holistic approach. Lastly, tapping into local networks is a great resource for gaining insights into regional markets of developing nations.
It should also be noted that the implementation of inclusive business projects is by no means restricted to multinational companies. On the contrary, given the market structure, entrepreneurs in developing countries have always had to adapt their business models to cater for low-income consumers.
In addition, inclusive business solutions are beginning to be applied beyond developing countries. Products that were originally simplified to be affordable for the poor in developing countries are increasingly being upgraded and repackaged as low-cost innovations for consumers in more affluent countries. Examples include portable electrocardiographs, basic mobile phones and laptops.
Inclusive business models are just one example of the multiple ways in which the private sector can contribute holistic solutions to support the sustainable development of emerging economies in an increasingly urbanised, energy and resource-constrained world – both to the benefit of these countries and to that of business.
However, the potential for increasing foreign and local companies' contribution is frequently constrained by the inherent barriers and limitations of doing business in developing countries. Effective public-private partnerships are therefore urgently required to create the appropriate frameworks and incentives to fully leverage businesses contribution. This alliance will help ensure we build what is needed for the future – a sustainable world in which 9 billion people live well and within the limits of one planet.
Marcel Engel is managing director for the Development Focus Area at the World Business Council for Sustainable Development (WBCSD)
This content is brought to you by Guardian Professional. Become a GSB member to get more stories like this direct to your inbox
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