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The role of inclusive business in poverty alleviation
by Mara Chiorean
02 Sep 2015

Economic growth has produced incredible wealth in cities like Hong Kong and Singapore. Many Asian countries have escaped economic hardship; China for example has grown from a poor to a solid middle income country. According to the Millennium Development Goals Progress Report for Asia-Pacific, the proportion of the region’s population living on less than US$1.25 per day is projected to fall from 53% in 1990 to 12% by the end of the year. But there is still a long way to go. If the poverty line is set at US$2.00 per day, the achievement is less impressive: the number of people living on between US$1.25 to US$2.00 per day has actually increased from 764 million in 1990 to 872 million in 2015. This region remains home to more than 60% of the world’s extreme poor and two-thirds of the world’s hungry.

The private sector has a significant role to play in poverty alleviation by finding solutions to reduce poverty through innovative new business models. Inclusive business is a powerful model that the private sector can use to contribute to development and alleviate poverty, whilst simultaneously creating competitiveness and economic success for business. As businesses create jobs and wealth, inclusive business seeks to include poor communities in value chains in a commercially viable way.  In general, the term ‘Inclusive Business’ refers to companies that go beyond philanthropy and include poor communities in their value chains, from the demand side as clients and customers, and/or from the supply side as employees, suppliers and distributors, while maintaining commercial viability. 

Different engagement approaches for inclusive business
Engagement channel The role of inclusive business
Demand side Product/service Providing essential goods and services for low-income groups, taking their consumption capacity and needs into consideration from the design stage
Supply side Employment Creating jobs with fair wages to generate income for low-income groups, who would otherwise be involved in highly exploitative jobs or jobless
Supply chain Partnering with local or small suppliers, as well as supporting smallholder suppliers to enhance their capacity and the quality of their products
Distribution Integrating poor communities as part of distribution networks

More and more companies are creating inclusive business models that integrate the poor in their value chain in ways which enhance the competitiveness of the business while simultaneously advancing the economic, environmental and social conditions of communities.

Unilever is one company that embraces the inclusive business model using their large scale operations as an opportunity to include millions of people in their value chain: smallholder farmers who may lack access to skills or markets; small-scale retailers who can earn a living by starting or expanding a business selling Unilever products; and young entrepreneurs who may need training. Unilever has mapped where their smallholder farmers are located which has enabled them to understand that they source from five million farmers who, in turn, support communities of over seven million people. It has also helped them identify the needs of these farmers and design appropriate interventions. For example in China, Unilever has worked with over 1,500 smallholder tomato farmers to train them in accordance with its Unilever Sustainable Agriculture Code, which has increased yields by six tonnes per hectare. In India, one of their suppliers, Varun Agro, teaches farmers about intercropping mangoes with tomatoes to increase yields and income for farmers. In Vietnam, Unilever is supporting over 19,000 smallholder tea growers to obtain Rainforest Alliance certification. Women's empowerment is central to the agenda of this project, with many women growers developing the skills to take on leadership roles within the farming community for the first time.

Net-WorksTM is another example of an inclusive business that includes fishing communities in the Philippines in the global carpet supply chain of Interface as a source of recycled nylon. It leverages the business know-how of Interface and the conservation and livelihood expertise of its partner, the Zoological Society of London. Discarded fishing gear — including nets — makes up about 10 percent of marine waste globally. Net-Works empowers some of the most disadvantaged communities in the Philippines to collect discarded fishing nets from the ocean, tackling a growing environmental problem of marine waste, while at the same time providing alternative sources of income for these communities. Collected fishing nets are turned into carpet tiles, supporting Interface’s Mission Zero goal to source 100% recycled material. “Within Interface, sustainability goes beyond reducing the environmental impact of our products,” said Rob Coombs, President of Interface Asia-Pacific, “It is about creating a new way of doing business that is more sensitive, inclusive, and ultimately, more successful.”

In Thailand, Onyx Hospitality Group has been supporting local honey producers through their project Plan BEE by purchasing honey at a fair retail price for use in their restaurants and spas. The group of 10 active beekeeping villagers collectively earned a supplementary income of BHT 219,000 from the sale of honey, a 28% increase in their average annual income. The programme was also designed to help to protect the Asian honeybee (Apis cerena) against the threat of extinction by providing training on bee biology and beekeeping and start-up tools such as bee smokers and hives to participating villagers.

This year at the CSR Asia Summit in Kuala Lumpur on 7-8 October, one of the sessions we will explore the rationale for inclusive business and how a company can use its value chain to create opportunities for poor people and communities. The panellists include Rob Coombs, President of Interface Asia-Pacific and Peter Henley, President of ONYX Hospitality Group. The discussion will cover the sort of inclusive business interventions that are possible along value chains, sharing successes but also barriers to be addressed.

In case you missed them, here are some of CSR Asia’s recent publications on responsible and inclusive business:

Image credit: Unilever

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