By Sahba Sobhani, director, Istanbul International Centre for Private Sector Development; Luciana Aguiar, head of Business Call to Action; Dr Christian Jahn, executive director, Inclusive Business Action Network; and Susann Tischendorf, director at Inclusive Business Action Network
The ongoing pandemic shows the complexity of human needs and how quickly they can evolve. Companies need to be able to serve those needs efficiently. With unique business models at their core, inclusive businesses have demonstrated that they are well-equipped to do so, ultimately contributing to the creation of more resilient societies. Inclusive businesses represent an important private sector contribution towards the needed paradigm shift in how to do business in the post-Covid-19 world.
“Capitalism has created incredible wealth, produced goods and services for millions of people around the world, and created jobs, but the pandemic is highlighting and exacerbating key market failures and government gaps,” says Jane Nelson, founding director of the Corporate Responsibility Initiative at the Kennedy School of Government at Harvard University.
As such, inclusive businesses are a key mechanism for better livelihoods in places that traditional businesses and government programmes fail to reach, by engaging with low-income communities as employees, suppliers, retailers, distributors or customers.
“The sheer scale and global impact of the covid crisis could be the tipping point in moving responsible and inclusive business practices fully into the mainstream,” echoes Laura Kelly, director of shaping sustainable markets at the International Institute for Environment and Development.
There are several aspects that make inclusive business a key solution to creating the future “new normal”. Inclusive businesses are mission-driven and stay true to “the why”, such as the commitment seen by Spanish company Supracafe to its inclusive business initiative in Colombia, which directly sources coffee beans from female farmers. The company expressed that “despite business being deeply affected by the pandemic we will continue to support our work in Colombia.”
Innovative fundingAt the same time, inclusive businesses are aligned to Environment, Social and Governance (ESG) standards and thus are often outperforming companies without such standards. This in turn enables inclusive businesses to attract innovative performance-based funding opportunities. Inclusive businesses are also used to collaborating and entering partnerships, especially with governments, to maximise impact.
The pandemic highlights how important the joint efforts of the private sector and government are to reach communities quickly, as the example of the French multinational Essilor shows. The company has a widespread rural network of vision care providers. It currently uses this network to support governments, especially at the local level, to raise awareness among communities about social distancing, handwashing and keeping safe.
Meanwhile, inclusive businesses are characterised by resilient business practices. For example, many inclusive business models have strong digital elements to overcome challenges in last-mile distribution and around information issues. Such as the AI-based triage, point-of-care screening and mobile clinics supported by company Sevamob’s customisable telemedicine platform that can be used in a hybrid model to easily reach underserved and rural communities.
Empowering the poorResilient business practices also help provide structured responses to economic shocks, as demonstrated by L’Occitane’s inclusive business initiative in Burkina Faso. The company buys hundreds of tons of organic Fairtrade certified shea butter directly from a community of 10,000 women, and it was important for the company to create sustainable communities. The company’s Resist Programme over the last two years has built women’s resilience against economic and climate challenges, increasing their autonomy while reducing their dependency on L’Occitane. When the pandemic hit, the company felt its full force due to the closure of their retail networks. Yet, many women they partner with were protected, thanks to having pluriannual contracts with minimum volumes and because they had developed other sources of income.
But how can inclusive business models be identified effectively by governments, investors, and companies? Over the past months, the Istanbul International Centre for Private Sector Development, Business Call to Action (BCtA) and the Inclusive Business Action Network (iBAN) have taken the initiative to address this issue. Building on the 2015 G20 Inclusive Business Framework and its definition of inclusive business, the organisations collaborated to develop the Inclusive Business Operating Guidelines that aim to establish a commonly agreed understanding of inclusive business.
This is crucial to identify and replicate successful approaches more easily as well as opening up funding opportunities for companies. The document that will be launched later this month will help policymakers support companies that align with the post Covid-19 agenda of inclusive growth and provide guidance for companies towards re-modelling their businesses.
More humane and inclusiveWithout diminishing its devastating impact, if the Covid-19 crisis has a silver lining, it is the opportunity it provides to create the enabling environment for inclusive businesses to thrive contributing to more equitable societies and reducing poverty.
Companies themselves are confirming this. In a recent study by BCtA on the impact of Covid-19, the majority of the companies that responded reported a negative impact of the pandemic on their business. Yet, they made a strong call for inclusive business models as an effective response to the crisis, among others because it made clear that Covid-19 affects the weak the hardest. Nathalie Aldana, of Nathalie’s Direct Trade, said: “The time is now for a larger collective awareness for other ways of doing things, we hope the next normal after Covid-19 will be a more humane, inclusive system, based on a more genuine form of solidarity and empathy where real value is created for everyone along value chains in the world.”
Inclusive businesses create triple wins: businesses are economically profitable and stable; low-income communities have better access to services, products and increase their income; and governments have less social expenditures.
Including the 4.23 billion people at the base of the economic pyramid in the economic trajectory will contribute to building back better resilient communities and help achieve the Sustainable Development Goals.