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Inclusive Business: Business for Development (B4D) Pathfinder Project
Working to alleviate poverty by incorporating disadvantaged communities into a company’s value chain, while maintaining profitability, and upholding the principles of corporate social responsibility.
Following the SADC Conference on Poverty and Development (Mauritius, April, 2008) to assess mechanisms to drive change in the social and environmental performance of both domestic and foreign investors, the Southern Africa Trust (the Trust) initiated the Business for Development (B4D) Project. This project offers an innovative approach to Corporate Social Responsibility (CSR) by helping companies go beyond corporate giving, and integrate sustainable development objectives into their core business.
B4D will build on and work with existing CSR benchmarking and reporting schemes to help companies effect improvements and add value to their overall sustainable development effort; but without unduly increasing their reporting burden. Through the Trust, the B4D proposition will be tested, refined and piloted by formal consultation and peer review to produce a management tool that can help companies implement inclusive business which is essentially a management model for the corporate sector. It allows a company to deliver its CSR obligations using its greatest strength and skills – business knowledge and sound commercial relationships.
The concept is relevant to all organisations that have a supply chain and could procure goods and services locally and from low-income communities. It provides a focus for all sectors to share the responsibility for poverty alleviation at a local level, using globally accepted concepts.
The vision is to drive change across SADC by harnessing corporate resources to help alleviate poverty. The ultimate aim is to set-up a regional, self-financing, multi-stakeholder body for the promotion, governance and accreditation of inclusive business to manage the B4D products. The overall outcome for business would be a sector trusted by society that would contribute to sustainable development and add long term value to regional well-being.
CORPORATE SOCIAL RESPONSIBILITY AND INCLUSIVE BUSINESS
Inclusive business is an evolution of Corporate Social Responsibility (CSR). It is emerging globally as a model with the potential to provide ‘win-win’ solutions to the social challenges facing the 21st century.Companies have complex and multi-faceted interactions with their stakeholders, from local communities to regulatory agencies and investors. All businesses – whether Small &Medium-sized Enterprises (SMEs) or MNCs – flourish on a bed-rock of good relationships with those around them. Ultimately, inclusive business is about creating robust commercial relationships.
The B4D products offer a framework for governing these relationships, including with the disadvantaged. By providing a focus for CSR activity, they help companies contribute to the long-term economic health and sustainability of their locality. Traditionally, CSR has been a reactive risk management functio n to protect reputation and brand, and maintain license to operate. Inclusive business changes it to an innovative and pro-active strategic role in search of opportunities to engage with society for mutual benefit.
There is a powerful social and economic case for inclusive business, and an imperative to encourage its adoption. It enables a company to meet the obligations to its shareholders and key stakeholders, as well as helping the disadvantaged.
Companies can build bridges with low income communities, and contribute to poverty alleviation by including them in the value chain. This may be as suppliers and consumers of products and services, as well as potential distributors, retailers, employees (including shareholders, owners and partners in joint ventures) or sources of innovation.
This puts the relationship between company and community on a more equitable and mutually beneficial footing, so that they survive and grow together. It enables the community to participate productively in the local economy, and safeguards human dignity through the principles and practices of CSR.
Inclusive business represents an unrealised potential that offers both a commercial and a social opportunity. Inclusion requires a change of mindset to see the marginalised as economic players. It also enables a company to compete in new markets, and respond to changing ones. The challenge is finding ways to unlock the economic potential of the excluded
The B4D project is an opportunity for business and its stakeholders to manage the risks, share responsibilities and create opportunities together. There are many ways in which different sectors can participate in inclusive business, and there is a sound business case for each sector’s involvement.Inclusive business is enabled by many factors, including macro-economic aspects that define the operating environment, and micro-economic aspects that determine how companies interact with their suppliers, contractors and customers.
Governments have a responsibility to ensure conducive and stable fiscal and regulatory environments, as well as good infrastructure, for business to flourish, which in turn supports inclusive business. Equally, to become good entrepreneurs and informed consumers, the poor need access to skills, finance, legal rights and education.
However, the crux of making inclusive business work is to match potential or existing entrepreneurs to the needs of a host company in a sustainable commercial relationship. To add-value, an intermediary needs to understand the company processes and management systems. The research suggests that the International Communications & Technology (ICT) sector provides some good examples of action by intermediaries.
Ultimately the success of an inclusive business relationship depends on the resilience of the small business. Ideally, the relationship should be symbiotic with the host, but the small business should not be dependent on it for commercial survival and growth.
Good communication between all the practitioners, intermediaries and beneficiaries is critical to the success of inclusive business and B4D. In particular, how disadvantaged communities are informed and empowered about opportunities. For example, SMS is a very powerful communication mechanism. It has great potential for B4D in SADC where there is an exponential growth in mobile phone use, particularly in areas where access to computers and the internet is limited.
One way to enhance knowledge and skills sharing is by creating clusters of practitioners and beneficiaries on a sector and region or country basis. Each cluster will be driven and mentored by companies already practising inclusive business.
B4D offers a significant opportunity and practical focus for business, civil society and governments to collaborate in poverty alleviation at a local level, using universal and globally acceptable concepts. Inclusive business approaches play to the strengths of good business, respond to the uncertain global economic situation, and enable companies to leverage financial value and development gain simultaneously.
However, there are undoubted risks for all involved, both in terms of the speed of take-up of inclusive business itself, and the implementation of these proposals. Inclusive business is unproven in the long-term, at least in terms of publicly recorded profitability for a host company, but it is under-pinned by a sound economic and social case.
For society, inclusive business does more than alleviate poverty through increased employment and access to income. The process:
· bestows dignity and self-worth on individuals and families through sustainable livelihoods, · transforms people from passive subjects to pro-active, economically engaged citizens with expanded social networks and work values, thus increasing institutional capital (governance); and, · enables technology, skills and knowledge to be transferred throughout the system by involving previously poor communities in a value chain.
The potential benefits to SADC governments of embracing inclusive business are high, and may include increased tax revenues and employment, enhanced competitiveness and development, and reduction of the welfare burden. In turn, this enables the state to spend its resources on development and infrastructure projects that might otherwise be shelved as luxuries in the face of wide-spread poverty.
However, in addition to the institutional challenges presented by financial and legislative systems, and uncertain property and land rights, further challenges to promoting inclusive business in SADC are:
· difficulties of in-depth market research in poor communities to identify a profitable niche, · Research and Development (R&D) costs of developing new and appropriate products for the poor, · providing the training and technology required to raise the skills base, · the danger of unrealistic expectations from communities and other role-players, · ensuring high quality, consistent and dependable goods and services from suppliers, and · poor levels of infrastructure for servicing disadvantaged communities.
SADC, as an institution, and its networks, can play a major role in realising the potential of inclusive business by developing an enabling environment. Also, an important way to overcome these challenges is to mobilise current practioners, multi-national market leaders and business organisations as champions of inclusive business and drivers of the B4D project. |