By Will Nielsen
With editing by Drew Tulchin
There is a recurring label, ‘Inclusive Business’ that is evolving as a coherent philosophy. But what is it and does it help people? Imagine a virtuous cycle offering widespread and steadily improving socioeconomic conditions that works for all people through commercial activity.
Inclusive business is a strategy that has promising economic and social development potential. In its most basic explanation, a for-profit business is designed to incorporate previously excluded groups into the value chain of the business. These excluded groups can become suppliers, distributors, retailers and/or customers. The inclusive aspect is necessarily core to the business model. These are not Corporate social responsibility (CSR) initiatives. There is no philanthropic component. This is money-making business and a core component to daily performance strategy.
History of Inclusive Business
The term ‘Inclusive Business’ was coined by the World Business Council for Sustainable Development in 2005 in reference to business solutions that improve “access to goods, services, and livelihood opportunities for low-income communities in commercially viable ways.” Since then, the term has continued to be used in a similar fashion, often by multilateral organizations, development banks and donor agencies, applied to target investees for their funding initiatives. The theory and practice is that working with low income communities, rather than working for them, will effectively support their ability to improve their well-being, such as through improved access to clean water in slums and access to medicines for rural farmers.
How it works
Poor people tend to pay more for goods and services. Lack of access to basic services and business opportunities restricts individual, group, or community ability to improve their own welfare. By addressing this, businesses can improve access to affordable, quality products and services, but also, through increased market linkages, lead to demand for new skills to be gained, enabling an enhancement in productivity, further improving incomes earned. For the businesses, these efforts lead to new markets, such as a new consumer base in a previously under-served neighborhood or new suppliers who have otherwise been ignored.
Microfinance is perhaps the classic example of an inclusive business, bringing a much needed service to previously under-served, low income communities while also seeking a sustainable business model that is financially profitable. In Latin America, the organization Pro Mujer provides financial services to women in impoverished communities. Since their inception in 1990, they have served over 250,000 women and provided over $2.8 billion in small loans.
There are known examples of household name brands that are finding new solutions. The global consumer goods company, Unilever, added small scale retailers to their distribution networks and provides training services to improve these retailers’ incomes. Unilever now has more than 1 million small scale retailers in their network in India alone.
Unilever extends its market and reach to increase its sales, opening a new channel of operations. This channel benefits low income people by having single unit and affordable products available in remote rural communities, inner city slums, and other hard to reach places. Previously, companies passed over these areas.
Small and medium sized businesses have also identified ways to engage this philosophy for their advantage. Waste Ventures India conducts door to door waste collection. This employs thousands of people and provides a formal system for waste management. Previously, many of these employees operated as independent waste pickers (part of an estimated 1.5 million waste pickers in India), but had no rights, no aggregation of products, and difficulty selling. The goal of this endeavor has tripled their income and cut waste accumulation by up to 80%.
In Costa Rica, Nutrivida provides low cost, high nutrition foods for infants in low income communities which in some municipalities have rates of anemia above 40%. This effort supports full physical, motor, and cognitive development during the critical first 1,000 days, from conception to age 2, of a child’s growth. With this mission, Nutrivida has positioned itself with a large potential consumer base and a model set to scale and benefit people throughout Central America.
Inclusive, not Exploitative
A founding tenet of these efforts is for ‘inclusive’ to avoid ‘exploitation’. Sweat shops do employ thousands of poor people, but the moral obligations of the inclusive business are not fulfilled. The philosophy is predicated on an effort for improved well-being driven by commercial activity, not commercial activity at the cost of well-being. The converging thinking on how this is achieved has helped inclusive business develop as a philosophy distinct from more traditional business. Common features include: Certification and membership to socially responsible entities – be it a local, sector specific entity or a global one such as B Corp; compliance with international fair labor standards; improved access to essential goods and services such as healthy foods, medicine, credit; access to new market opportunities; and fair trade of products, among others.
What this means to you
This business philosophy can reshape economies, improve socioeconomic well-being where it’s needed most, and expand businesses. But what does inclusive business mean to you? Watch for Part II in a few weeks which will provide a deeper look at its application and impact, and in doing so, bring the philosophy home to you.
Looking for More Information?
There is a wealth of information on the Practitioner Hub for Inclusive Business or the Business Call to Action webpage, an alliance among several major donor governments and the UNDP. Recent policy developments and case studies also appear on the G20’s Global Platform on Inclusive Business. In the US, the Social Enterprise Alliance is a network of social enterprises, many of whom follow an inclusive business philosophy, and which publishes a range of relevant resources.
About the author
Will Nielsen first worked as a summer intern for UpSpring in 2013 and has continued to follow and support their work since. Following his internship, Will received his MPA from Cornell University and now works as an independent consultant.
Email Will: Win5@cornell.edu