Building Inclusive Business brick by brick

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Dominika Czyz reports from the oikos FutureLab 2011, 14-15 November, St Gallen Switzerland.

Have you ever seen the Great Pyramid of Giza? Impressive, isn’t it? Would you believe it consists of almost 2,5 mln blocks? Striking though the number is, the 2,5 million pales by the comparison with 2,5 billion. And the 2,5 billion build just the bottom of another pyramid: people who live on less than $2.50 per day, the largest group in the world economy that suffers from vicious circle of poverty. Striking, isn’t it? Nevertheless, there is a chance to turn the vicious circle into the virtuous circle. According to Souray Mukherji, speaker at oikos FutureLab, it is Inclusive Business that creates the chance.

First brick to build the fundament is understatement. Inclusive Business is a business that benefits the low-income communities. It contributes to poverty reduction through the inclusion of low income communities into the business process and economic value chain. Inclusive business does not equal social business. Neither is it similar to corporate philanthropy, which has inherent limitations of scope and budget. The basic idea of inclusive business is to use the know-how and capital accumulated at the top of the economic pyramid to develop its base: generate income for the poor on the way to encourage financial independence.

According to Souray Mukherji, India may be a template for planting the idea. Think of SELCO Solar that aims to dispel a myth that the poor cannot afford sustainable technology. The company makes best use of resources targeted at poverty alleviation by maximizing efficiency and innovativeness.  SELCO employs 170 employees. It seems to be a drop in the ocean since in India there are still almost 700 mln citizens that have to survive with only 1,25$ per day. But remember that each wave consists of drops. Creating a wave of change simply requires scaling, replication and recreation.  These are three cornerstones to help Inclusive business idea spread and turn the disparity and great poverty lap into inclusive growth and development.

Firstly, the maximalization principle must be redefined. The company should not maximize profits but social good combined with financial sustainability. The social objective should dominate the commercial objective. Inclusive business should go beyond products and services to generate income. Secondly, the short-term view must be replaced by thinking in the long-run, even though it is difficult to give up immediate earnings only for the promise of a better future. Increasing the income of the poor do increase the earnings of the company – that is a long-term effect of the inclusive business model. Thirdly, innovative methods of financing for inclusive business must be implemented. Mobilizing capital should be combined with building linkages between the investors and the business. What is more, it is government involvement that may help building a proper financial environment for inclusive business. Transferring higher tax revenue obtained from non-inclusive business combined with lower level of taxes in the sector of inclusive business may lead to multiplying the positive effect. Such a tax advantage to social business may channel resources to doing good and catalyze a bigger change, states Souray Mukherji.

Nevertheless, the biggest and most important change is still to come. That is the change of the way of thinking. The next brick to be placed on the fundament is belief. Belief that building inclusive business is possible and doing well while doing good is not an illusion. The example of India shows that business can solve the problem of poverty. If only it is not just business as usual and each single entrepreneur is not just another brick in the wall.

 

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