How Business Can Build an Inclusive Economy

April 8, 2014
  • Jessica Davis Pluess

    Former Manager, BSR

This article is the second in a series on BSR’s new initiative, Business Leadership for an Inclusive Economy. Our first article discussed why the economy isn’t working for everyone. A third article will detail how BSR will work with member companies and other partners for an inclusive economy. 

Late last year, MasterCard CEO Ajay Banga declared that we are on the threshold of a seismic shift. He predicted that commerce would soon be driven by a “more empowered, inclusive planet...where those who aren’t included have an opportunity to join the financial mainstream.” 

For MasterCard, including more people in the economy is a business imperative: 2.5 billion adults do not have a bank account, and 85 percent of all retail transactions are still made in cash and checks. Financial inclusion is also a global development imperative, allowing people to save for their families’ future and invest in their enterprises in safe and affordable ways. In the last few years, MasterCard has combined its technology, expertise, resources, and networks to expand opportunities for underserved groups, including young people and women.

MasterCard is one of the many companies looking at new ways to reach and empower people that have been excluded from the formal economy. Indeed, efforts like these have helped lift more than a half billion people out of poverty in the past 30 years. But despite this progress, questions remain. How do we translate these aspirations into lasting economic opportunity for people and value for the businesses that seek to serve their needs? How can we foster greater—and different—business investments in excluded and underserved populations?

BSR’s new flagship initiative, Business Leadership for an Inclusive Economy, aims to tackle these questions and advance progress on solutions. Our first article explored the trends that point to an economy that is leaving many behind and the subsequent implications for business. This second article outlines what we believe are the key ways companies can help build an inclusive economy that enables and empowers all people to meet their needs, shape their futures, and achieve their potential. We highlight three opportunities for business leadership:  generating decent and empowering jobs, maximizing local benefits and opportunities in communities, and enabling access to essential goods and services.

Our basic starting point for this initiative is the belief that everyone, regardless of predetermined circumstances such as race, gender, sexual orientation, or socioeconomic status, should have the opportunity to improve his or her life. It recognizes that all too often, systemic barriers make it more difficult for grown children of migrant workers to participate fully in the formal economy, for young entrepreneurs without credit history to grow their businesses, for small-scale farmers to weather a typhoon, and for women to advance their careers.

The opportunity for business is also clear. The private sector, on its own and in collaboration with others, is uniquely able to generate inclusive economic progress, and in doing so, innovate in and for new markets, mitigate risks, and build resilient businesses and economies. With this in mind, we have focused our initiative on actions that are at the core of what business does:  the employment it generates both directly and across value chains, the investments it makes in communities in every corner of the world and the products and services it creates. We acknowledge that to achieve our vision of an inclusive economy, companies must embrace both their responsibility to dismantle barriers and their opportunities to drive greater inclusion.

These also reflect areas where BSR can bring unique value: our member network, global and local presence, depth and breadth of knowledge, and experience in building powerful partnerships.

The Three Pillars of Business Leadership

As mentioned above, we will focus our initiative on three interrelated pillars of business leadership to build an inclusive economy: jobs, communities, and access. We recognize the enormity and complexity of the challenges and ambitions set out in these pillars. With this in mind, we plan to design and invest in focused research and projects that will allow us to drive meaningful, measurable change. 

Generating Decent and Empowering Jobs

Jobs are essential to ensuring that people can participate fully in and benefit from the economy. Jobs also allow companies to develop the human capital and supply chain capabilities that form the foundation of any business. However, a job in and of itself does not always offer a route out of poverty or vulnerability.

There remain significant gaps in the availability and quality of jobs in both developing and developed countries. Youth unemployment has reached record levels, and around the world, women are disproportionally engaged in vulnerable employment and earn substantially less than men for comparable work. Additionally, very large numbers of people live just above the poverty line, facing significant challenges in meeting their daily needs and vulnerability to financial and environmental shocks.

Through our work on building sustainable supply chains and healthy workforces, we know some of the levers companies can use to build decent and empowering jobs, which, in turn, help companies tap the best talent, sources of innovation, and production capacity. BSR’s HERproject, a workplace-based health education and financial literacy program, demonstrated early on that jobs that empower workers with knowledge, skills, and access to health services, alongside respect for fundamental labor rights, offer women meaningful economic opportunities, with benefits that extend to households and communities. This pays dividends to business in the form of reduced absenteeism, higher productivity, and better relations between workers and management. 

As part of Business Leadership for an Inclusive Economy, we will identify and support practical actions by companies and partners to bring more people into the formal economy and ensure that every job generated by the private sector is decent and empowering. In addition to meeting core labor standards, we believe a good job must ensure wages and benefits that enable an adequate standard of living for employees and their families, provide safe and healthy workplace conditions, and empower people to achieve their potential and build a livelihood. This builds on the work set out in the International Labor Organization’s Decent Work agenda.

Maximizing Local Benefits and Opportunities in Communities

Business activity can have ripple effects that generate local economic development and opportunities for individuals and communities. This is particularly true for companies with a large physical footprint, such as those in the extractives or retail industries, but also for other industries that operate and invest in communities across their value chain.

Aligning investments with the needs of communities, particularly those of marginalized and vulnerable groups, can help communities transcend the significant barriers many face in benefitting from inward investment, resource development, and infrastructure projects. It can also help avoid any negative impacts, such as rapid distortion of the prices of goods and services, environmental and health hazards, and land ownership disputes. This approach is particularly crucial in the many places where governance is weak or disputed and/or where access to local social services and protections is limited. While this plays out differently in urban and rural contexts, there are numerous ways businesses can shape their investments, operations, and engagement strategies to unlock more opportunities for more people.  

We’ve learned through our work in rapidly growing cities in China and Brazil, remote mining villages in Chile and Papua New Guinea, and in the apparel sector in emerging markets like Myanmar how companies can maximize local benefits and opportunities from their investments. For example, companies can enhance local hiring and sourcing strategies; support sustainable resource management; invest in local skills, technology, and infrastructure; and use their influence with government to drive investments in community needs.

We believe that widespread local benefits from investments have a higher likelihood of success when people are able to participate in shaping the future of their communities. We’ve seen this firsthand through our work with Freeport-McMoRan in Chile, which is engaging rural and urban communities near its mining operations to design and implement the company’s social investments, building trust and local capacity.

In taking such steps, companies can create strong community relationships, the conditions for sustained local economic growth, more empowered and loyal consumers, and a healthy and well-skilled employee and supplier base. As part of this initiative, we will work with companies and partners to maximize local benefits and economic opportunities at the community level, for every segment of the population.

Enabling Access to Essential Goods and Services

By 2030, nearly 5 billion people are expected to reach a middle-class standard of living. Despite these projections, essential goods and services such as healthcare, energy, water, food, and housing currently remain beyond the grasp of millions of people, including both the poor and the emerging middle class. For business, this represents a significant opportunity to address unmet needs—and reach large numbers of untapped consumers.

Many companies, often in partnership with other actors, are exploring innovative business models to solve this challenge. Companies are investing in research to help them understand the needs and aspirations of underserved groups, working with innovative impact investors and social entrepreneurs, transforming design processes, redefining distribution networks, and investing in other infrastructure needed to reach populations previously excluded from formal markets. 

Along with many of our peers working on base-of-the-pyramid and inclusive business models, we have documented some of these innovative practices. For example, our work on the Guiding Principles on Access to Healthcare has brought together major healthcare companies to frame the industry’s approach to reducing the global burden of disease, and we have worked with companies like Western Union, where we helped the company explore approaches to support women’s economic empowerment. We are particularly encouraged by efforts that use technology to engage groups with a limited voice and extend the reach of goods and services, such as tailored mobile applications for health and finance.

It is essential that while we expand access, we do so within planetary boundaries. Emerging business models based on the foundations of a collaborative economy are surfacing new opportunities to tackle barriers to access and minimize impacts on natural resources. This represents another design challenge for innovation of products and services to advance sustainability.

We believe that business is one of the many actors that can increase access to goods and services by addressing critical barriers such as availability, awareness, affordability, and quality. Through Business Leadership for an Inclusive Economy, we plan to apply our skills in strategy development and stakeholder engagement to support companies in their pursuit to expand access for underserved populations.

We know that the next half-century is likely to be very different from the last. Galloping innovations, climate change and natural resource constraints, generational shifts in the workforce, rapid urbanization, and hyper-transparency and connectivity are all remaking our economy. The strategies that fueled remarkable human progress over the last century are not the strategies that will accelerate progress in the 21st century. Only by redefining and creating new priorities, actions, and partnerships, will we realize our vision of an inclusive economy.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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