As globalization brings technological advances, new thinking, and greater accessibility to different parts of the world, many large companies are now seeing the value in more inclusive business models which aim to combine commercial success and development impact.
While the concept of inclusive business is not new, interest in it is clearly growing, as evidenced by the increase in companies joining initiatives like The Business Call to Action, which challenges companies to use their core business activities to reach people in poor communities as suppliers, service providers and customers.
New markets offer tremendous opportunities. But how can companies harness these in a way that makes commercial sense? Businesses are continually driven by profit and increasingly opportunities for innovation. If done right, those efforts can also result in economic and social benefits for low-income communities.
Here are seven important principles in having an inclusive business:
Utilize your core business. Much of the discussion about inclusive business models centers on including the poor on the demand side as clients and customers, and on the supply side as employees, producers and business owners. Companies don’t always need to devise all-new product lines or services, instead they need to be creative and adapt their business to meet the range of consumer needs in any new or unchartered market. Consider Santander Brazil, whose one of the missions is to promote banking inclusion. The Spain-based bank has focused on including the un-banked and providing financial guidance for entrepreneurs who lack access to conventional forms of credit. Santander Microcredito, a company that belongs to Santander Brazil, encourages financial literacy and growth in small businesses. Loans are mainly made to informal micro companies that are unable to obtain traditional loans. More than 70 percent of these microloans are targeted at business women who form solidarity groups of five or six members and receive $200-600 loans with no need for additional guarantees.
Be relevant. Design business concepts that are important for a broad consumer base: If you produce pens, make sure people still need pens in the market you are exploring. For example, Royal DSM, a Dutch life sciences, nutrition and materials company, which specializes in developing micronutrients, worked with KeBAL, a social enterprise established by Mercy Corps. Using Royal DSM expertise the social enterprise was able to expand to expand the scale of its business and provide more nutritious and affordable meals to Indonesia’s youngest and often undernourished children. Through this partnership, DSM committed to help KeBAL grow and to transform it into a viable and attractive franchise business which provides nutritious meals.
Learn from pioneers. Companies can learn a lot from the successes of their peers. Small and large companies benefit from best practice discussions, webinars, networking, and industry-specific forums that stimulate substantive discussion around new markets. Many companies from countries like Japan and Sweden in communicating their success have nurtured other companies and inspired them to enter these new markets.
Make the trek. Companies must do the due diligence to find local partners, vendors and distributors that can add value to their business. Many governments offer trade missions to visit certain regions. If this is not an option, decision-makers might instead attend a conference or networking event in a targeted region to understand the local markets. They should work to identify potential local suppliers and retailers, customers, and representatives in the region; and determine how these additional companies and or individual entrepreneurs can add value to the business line. Do they meet a need or offer entry that is otherwise difficult to find? Can they provide distribution for the product or service?
Start small. Many large multinationals have started with pilot programs in new and often undeveloped markets. For example, Japanese retailer MUJI began sourcing wool felt products from small suppliers in Kyrgyzstan and Kenya on a small scale. With a commitment to develop the capacity of local artisans and producers, the company has now expanded its market worldwide including China, Taiwan, Hong Kong, Singapore, the United States, Germany and the UK. They have also worked to expand and build local capacity in other areas, including Cambodia, where they plan to employ and train more than 300 local workers by 2015.
Work with local government actors. Governments can be a great source of information and often have complementary activities that can add value to partnerships and interventions that can support local work. For example, the governments in Kenya and the Philippines have recently initiated activities to encourage a policy dialogue related to building more inclusive markets. The private sector can be a critical driver here.
Re-evaluate your markets. Companies must look at their supply chain and evaluate the market fully. Every project launch or entry into a new market requires a strategic plan and understanding of the current landscape. New markets may require new adaptation or interventions. For example, BCtA member company L’Occitane entered the Burkina Faso market in 2006, finding it to be a rich in its key ingredient shea. In the last few years, the company has expanded its interest in the region and has supported female shea butter pickers and processors. L’Occitane is working to professionalize the traditional shea butter process for women producers, improve the working conditions and conserve their traditional know-how to support their economic and social interests. These efforts have benefited more than 9,700 women through literacy programs, microcredit loans and trainings to support income-generating activities. L’Occitane has built a strong relationship of co-development and fair trade with local communities and works with 5 unions representing more than 15,000 women in 10 provinces.
Worldwide, companies have responded to the Business Call to Action and the notion of embedding more inclusive business practices in their expansion plans. We invite you to learn more at www.businesscalltoaction.org
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