Tuesday, December 2, 2008

Should business be involved in poverty alleviation?

In a world of persistent poverty and growing inequality the pressure to respond will continue to increase. This is not only the case for governments, but increasingly one for larger businesses who start realising that it makes little sense to operate in failed societies. 

An article from Sustainability Investment News on the basis of a new WBCSD report, highlights the perceived role of business in poverty alleviation: 

Almost half of the world’s population survives on the equivalent of less than $2 a day. And the gap between rich and poor countries continues to widen; the richest 20% of the world’s population control three-quarters of the world’s wealth, while the poorest 20% control just 2%. 

World Business Council for Sustainable Development (WBCSD), a global association of 200 companies dealing exclusively with business and sustainable development, has produced a report that sees in such dire statistics an opportunity to do business in new ways. The report, developed by the WBCSD Development Focus Area and entitled "Doing Business with the World--The New Role of Corporate Leadership in Global Development", finds that "companies can contribute to global sustainable development through their core businesses in a way that is profitable for the companies and good for development." 

The key to alleviation of poverty is the creation of wealth, the report concludes, and business is a necessary part of the equation. By engaging with low-income segments of developing countries through direct employment and sourcing from low-income suppliers, companies can tap into a market that despite its poverty represents an estimated collective purchasing power of $5 trillion. 

It is a good thing that big business is coming on board in addressing the world's biggest problems.  Social responsibility is not something only for governments, NGOs and philanthropists.

Expect some interesting developments in shaping this suggested partnership between governments, NGOs and business.

Hope that the really poor are not left out in the action.


Tim Brauhn said...

Wonderful post. I speak for my organization, The 1010 Project, when I say that we agree wholeheartedly. We work to eradicate poverty, and we utilize income-generating activities in order to do so.

Partnerships between "big business" and "really tiny business" might just be the dominant paradigm for some time. We work with very small grants - it only takes about $50 to start a business in Kenya - and I can see private sector entrepreneurs liaising with our social sector entrepreneurs to make a huge difference. Thanks for talking about this!

Ron Mader said...

Great ideas! My only request/suggestion is that global initiatives be as transparent as possible. There are many good ideas on paper that are not realized on the ground ... and worse, the failures are not communicated at all, leaving us without any lessons learned from the experience.

Martin de Wit said...

Tim , thanks for sharing The 1010 project with us. I like the approach and flavour of it and have included it on my Links page.

Ron, yes I agree. What I will add to that is that global initiatives are a bit like the development of medicines. Hunderds of experiments start out, only a handful make it through all the rigorous testing. In a way it helps to filter practical implementable ideas from those that sound great, but will never ever make it in the real world. I still think we need all those other ideas that do not make it to to sharpen up this that eventually do make it...

Tim Brauhn said...

Ron and Martin:

Thanks for checking us out. The Executive Director at 1010 was talking just the other day about the ways that even failing in something like this can still work out for the best. Good practices and business techniques, even if they fail, can hopefully "pile up," making future initiatives a bit easier. I agree that we do have to have LOTS of institutional memory.