DEDICATED TO MAKING A DIFFERENCE

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INCLUSIVE BUSINESS TOOLS TO CREATE LIVELIHOODS

AND JOBS FOR THE POOR IN THE CONTEXT OF THE
GREEN ECONOMY

by: Caroline Twigg

World Business Council for Sustainable Development
Background Paper for Conference on
"The Environments of the Poor”, 24-26 Nov 2010, New Delhi

Inclusive business: sustainable business solutions that expand access to goods,

services, and livelihood opportunities for low-income communities in
commercially viable ways.

The development imperative

Despite some remarkable progress, ten years after the original adoption of the
Millennium Development Goals (MDGs) at the 2000 Millennium Summit,
shortfalls remain. Shortfalls which have been further aggravated by the recent
economic crisis. As UN Secretary General Ban Ki-Moon stated in September
2010, these shortfalls are "not because the goals are unreachable or because
time is too short, but rather because of unmet commitments, inadequate
resources, lack of focus and accountability … . This has resulted in failure to
deliver on the necessary finance, services, technical support and partnerships."

Business around the world clearly understands that poverty and inequity remain
critical challenges for both sustainable development, and for local and global
stability. Meeting the basic needs of a growing and increasingly urbanized
population in developing countries - as well as the aspirations of their growing
middle classes - will increase the demand for energy and natural resources.

There is no longer a choice between economic growth and the well-being of our
societies and environment: they are interdependent. If we do not make sure we
have both, we risk ending up with neither. Solving the seemingly conflicting
imperatives of improving living standards of the world's population, while
preserving the environment, requires an urgent transition to a more inclusive,
low-carbon and resource efficient economy.

Doing business with the poor

There is increasing recognition by governments, development actors and NGOs,
that broad-based business development is critical to economic advancement and
poverty alleviation. As an engine of growth and development, business brings
investment, jobs, skills, as well as new goods, technologies and innovations
which can improve people's lives.

The World Business Council for Sustainable Development (WBCSD), a CEO-led,

global association of some 200 companies, believes that it is in the enlightened
self-interest of global business to invest in sustainable solutions for development
challenges:

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 WBCSD page 6

• First, business cannot succeed in societies that fail. Stable and prosperous
societies make for better business opportunities.
• Secondly, by proactively addressing socio-economic and environmental
concerns, companies will be able to better manage their risks and thereby
underpin their license to operate, innovate and grow.
• Thirdly, the transition to a more sustainable world represents a significant
business opportunity due to corresponding investments in infrastructure and
technology by both governments and private entities.
• Finally, developing inclusive business models helps companies build
positions in tomorrow's markets.

Inclusive business involves incorporating low-income populations into

companies' value chains, and into the supply, production, distribution and
marketing of goods and services. This generates new jobs and income,
technical skills and local capacity. Likewise, poorer consumers can benefit from
products and services that meet their needs in affordable ways.

Figure 1: Inclusive business maximizes social and economic value

Source: WBCSD

Just as “inclusive business is interesting for companies because it can offer new
opportunities for innovation, growth, and competitiveness at the same time as
positive social and development impact; it is interesting for bilateral and
multilateral donors, foundations, governments, and civil society organizations
because it has the potential to drive development impact in self-sustaining, self-
multiplying ways that do not require continuous infusions of grant funding. And it
is interesting for the poor because it brings greater access, choice, and
opportunity in their lives and futures.”1

1
Jenkins, Beth and Eriko Ishikawa (2010). “Scaling Up Inclusive Business: Advancing the Knowledge and
Action Agenda.” Washington, DC: International Finance Corporation and the CSR Initiative at the Harvard
Kennedy School
 WBCSD page 6

The WBCSD’s online case study library2 contains detailed information on how
some companies are implementing inclusive business ventures, for example:

ƒ S.C. Johnson, DuPont: raw material sourcing from small-scale producers

ƒ Vodafone, ANZ: financial transactions via mobile phone platforms
ƒ Coca-Cola, Unilever: innovative distribution models
ƒ Anglo American, BHP Billiton: investment in enterprise dev.
ƒ Holcim, CEMEX: affordable housing
ƒ Deutsche Bank, Allianz: microcredits and microinsurance
ƒ Unilever, P&G, Akzo Nobel: food fortification
ƒ Schneider Electric, GDF SUEZ, Philips, Shell: affordable access to
energy, cooking stoves, and lighting systems

In essence, inclusive business models search for synergies between

development goals and company’s core business operations. Therefore sound
inclusive models can deliver higher socio-economic value for communities while
opening new avenues of growth for the company. The notion of inclusive
business calls for additional focus and innovation in the way companies do
business. It involves creating new forms of employment, new markets, and
affordable products and services. This spurs economic growth and encourages
entrepreneurship.

Foundations for success …

It is vital to ensure that companies’ products are appropriate for low-income
communities, and that local suppliers’ products and services are adequate for the
operation of the company. Developing appropriate products, and sustainably
integrating low-income suppliers into a value chain are delicate balancing acts.

The WBCSD identified three factors which help build successful inclusive
business models: focus, partner, and localize.3 In essence, companies need to:

• Focus on core competencies: companies that understand and focus on their

key strengths can more easily innovate around these. This helps guarantee
consistency between the company’s portfolio of activities and its inclusive
business model, and makes it easier to take successful pro-poor business
into the mainstream.

• Partner across sectors: governments and NGOs are increasingly interested in

working with business. By involving development organizations and local
groups which share complementary goals, essential links can be made with
communities within which business operates. In turn, companies benefit from
on-the-ground expertise and additional resources, and essential trust is built
with communities. Thinking across sectors can also lead to innovative
partnerships and new ways of engaging different industries to address a
bundle of needs holistically.4
2
See case study gallery at www.wbcsd.org/web/dev/cases.htm
3
See WBCSD’s report “Doing Business with the Poor - a Field Guide”, at
http://www.wbcsd.org/web/publications/sl-field-guide-reprint.pdf
4
On the topic of partnerships, see also the WBCSD / IBLF A Business Guide to Development Actors at
www.wbcsd.org/web/devguide.htm
 WBCSD page 6

• Localize the value creation: companies operating in developing countries

often lack sufficient infrastructure and support systems, eg market
intelligence, manufacturing capabilities or distribution channels. They have
much to gain from engaging with local networks and local knowledge.

Figure 2: The building blocks of successful inclusive business ventures

Source: WBCSD

… within a framework for success

For market-based inclusive business solutions to be scaled up successfully, the
appropriate legal, institutional and financial framework conditions need to be in
place. Recognizing this, many governments are improving the environments in
which business operates. The World Bank’s 2010 Doing Business report notes
that, despite the economic recession in 2008/09, “more governments
implemented regulatory reforms aimed at making it easier to do business than in
any year since 2004, when Doing Business started to track reforms5.” Low-
income and lower-middle-income economies accounted for two-thirds of reforms
recorded. Thus, money is flowing and on balance, country risks are falling.

Governments’ actions include:

• Promoting a fair and competitive global market
• Establishing regulatory frameworks that uphold property rights, accelerate
entry to the formal economy and eliminate corruption
• Building capacity and educating
• Facilitating access to finance and investment risk mitigation instruments,
in particular for small and medium enterprises (SMEs)
• Securing the necessary investments into core infrastructure, such as
roads, energy systems, telecommunications and ports.

An inclusive value chain

Inclusive business can have a particularly significant impact in the development
of SMEs. Local entrepreneurs and SMEs form the backbone of global economic
activity: in developing countries, over 90% of firms outside the agricultural sector
are SME and micro-enterprises. These SMEs are the driving force behind
innovation, production and employment. They understand the communities within
which they operate and from which they draw their workforce. They can provide

5
World Bank “Doing Business” database, at www.doingbusiness.org
 WBCSD page 6

goods and services tailored to local needs and at locally affordable prices.
However, developing country SMEs are often unable to fulfill their potential
because of inadequate skills and capabilities; poor or obsolete infrastructure and
technology; unfavorable regulatory frameworks, and difficulties accessing
finance.

In this context, it is possible for large corporations to use inclusive business

approaches to significantly improve the situation for SMEs. Building relationships
to source local supplies, or contracting local SMEs to sell and distribute company
products strengthens their capacity and creates local livelihoods. Companies can
also help build long-term capacity by providing training in basic skills, technology
transfers, by investing in infrastructure, and by sharing and imparting knowledge.

Tools for action

WBSCD and its member companies have developed various tools to support any
company wishing to do business in a more inclusive way. They include:

Inclusive Business Challenge6

This simulation tool helps companies and stakeholders identify and implement
inclusive business models. It helps companies raise awareness of business’ role
in development, and introduces the challenges, drivers and principles of inclusive
business. It presents good practice examples and integrates inclusive business
into company strategy. A key feature is the interactive workshop to identify risks
and opportunities in building inclusive business.

Measuring Impact Framework7

This framework helps companies assess their contribution to economic and
broader development goals in the societies in which they operate. It aims to
underpin a company’s license to operate, improve stakeholder engagement
processes, help a company manage its risks, and to enhance its contribution to
society. It was developed by over 20 WBCSD member companies, reviewed by
15 external experts and co-launched with the International Finance Corporation
(IFC). It outlines the business case for companies to measure their impact, and
provides a framework methodology, and user guide.

Inclusive Business blog8

This is an informal blog created and administered by Alliance for Inclusive
Business between the WBCSD and SNV Netherlands Development
Organization. Its aim is to highlight the Alliance’s activities, most notably the
ongoing business-brokering activities in nine Latin American countries. It serves
as a platform for communicating about companies’ experiences in designing and
implementing inclusive business ventures, and shares tools related to this. The
site also provides links to external resources, cases and tools, with the aim of
enabling as much “learning by sharing” as possible.

6
See www.wbcsd.org/web/ibchallenge.htm
7
See www.wbcsd.org/web/measuringimpact.htm
8
See www.inclusivebusiness.org
 WBCSD page 6

A more inclusive future

The WBCSD believes that the leading companies of the future will be those that
align profitable business ventures with the needs of society. Business should not
be viewed solely as a provider of resources, but as an enabler of social and
economic progress and as a key partner in a common effort to achieve inclusive
and sustainable development.

Through their operations worldwide, WBCSD members have seen how

enhancing energy and resource efficiency, and finding new ways to meet rising
demands for food, healthcare, shelter, energy, mobility, water, and sanitation are
defining challenges. Yet these can come hand-in-hand with successful business
activities. The companies which can take advantage of those opportunities are
the ones that anticipate trends and respond with smart solutions. They are also
the ones whose leaders not only lead their companies, but also help guide
society toward major investments in sustainability.

LITERATURE
A Business Guide to Development Actors: Introducing company managers to the
development community World Business Council for Sustainable Development /
International Business Leaders Forum (2004) Geneva, Switzerland

Business and Development: Challenges and Opportunities in a Rapidly Changing

World, World Business Council for Sustainable Development (July 2010)
Geneva, Switzerland

Inclusive Business - profitable business for successful development World

Business Council for Sustainable Development / SNV Netherlands Development
Organization (2006) Geneva, Switzerland

Scaling Up Inclusive Business: Advancing the Knowledge and Action Agenda

Jenkins and Ishikawa (2010). Washington, DC: International Finance Corporation
and the CSR Initiative at the Harvard Kennedy School.

World Business Council for Sustainable Development online case study gallery:
www.wbcsd.org/web/dev/cases.htm