Establishing synergies between development goals and companies’ core business operations

The world is experiencing a shift of power from the traditional industrialized 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 US$ 2 a day and many suffer from malnutrition, lack of 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 urbanized 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.

A win-win for business and society

Successful businesses will be those that recognize the magnitude of the societal and economic changes taking place and harness profit at the same time as supporting 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.

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, sanitation, housing and healthcare. 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 go beyond philanthropy 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.

Key success factors for inclusive business

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 vital to ensuring consistency among a company’s portfolio. Second, it should partner with government agencies, civil society groups and development organizations with on-the ground expertise. Lastly, it should tap into local networks to gain 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 urbanized, 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.

To learn more about WBCSD’s work in the area of inclusive business, click through this presentation.