Inclusive business: moving beyond philanthropy

In the coming decades, can businesses align profitable ventures with meeting the needs of society? Photograph: Rajesh Kumar Singh/AP

A wealth of opportunities for business to not only grow and prosper, but also develop philanthropic ways of operating and make a profit is opening up with the massive economic and demographic shifts taking place over the coming decades. The World Business Council for Sustainable Development (WBCSD) believes that tomorrow's leading companies will anticipate these trends and align profitable business ventures with the needs of society.

The world is experiencing a shift of power from the traditional industrialised countries to the so-called developing countries, already home to 80% of the world's population and with a combined GDP that surpasses that of the rich countries. By 2050, more than 3 billion additional people will be living in what is now described as the developing world.

While substantial progress has been made in recent decades, poverty and inequity remain critical challenges for sustainable development and global stability. Poverty has many dimensions: about a third of the world's population lives on less than $2 a day and many suffer from malnutrition, lack of access to health services, sanitation, electricity, safe drinking water, shelter or transportation.

If the usual development path is followed, meeting the basic needs of a growing and increasingly urbanised population will exponentially increase the demand for energy and natural resources, thereby further exacerbating the pressure on the world's ecosystems. This means that business as usual is not an option.

Creating shared value for business and society

Successful businesses will be those that recognise the magnitude of the societal and economic changes taking place and harness profit at the same time as supporting the needs of society. As an important part of its efforts to promote business solutions for a sustainable future of developing countries, the WBCSD coined the concept of "inclusive business" solutions.

On the one hand, inclusive business models aim to provide innovative solutions to supply affordable products and services to meet basic needs of the poor for water, food, sanitation, housing and healthcare; on the other, they are also about creating income and employment opportunities for low-income communities – either directly or through companies' value chains as suppliers, distributors, retailers and service providers.

In essence, inclusive business models go beyond philanthropy to find synergies between development goals and a company's core business operations. The profit motivation is fundamental to ensure that business involvement in enabling sustainable livelihoods is both scalable and replicable.

Inclusive business projects can be implemented by companies across all sectors and in all countries. Fast moving consumer goods companies were at the forefront in adapting their products to the pockets of low-income consumers and in engaging independent entrepreneurs to distribute and sell products in remote areas. But many other sectors have followed.

To name just a few examples: life sciences and pulp and paper companies are sourcing raw materials from small farmers, mobile phone companies are facilitating banking services for the poor, cement companies are offering low-income housing solutions, energy engineering companies are enhancing the access to clean and affordable electricity, cooking and heating, banks and insurance companies are providing micro-credits and micro-insurance respectively, mining companies are investing in local enterprise development, and electric engineering companies are enhancing the access to health services to rural populations.

Key success factors for inclusive business

The WBCSD identified three essential factors for companies that wish to implement inclusive business projects.

First, a company should focus on its core competencies and strengths – this is vital to ensuring consistency among a company's portfolio. Second, it should work with government agencies, civil society groups and development organisations with on-the ground expertise. Lastly, it should tap into local networks to gain insights into regional markets of developing nations.

Inclusive business models are just one example of the multiple ways in which the private sector can contribute holistic solutions to support the sustainable development of emerging economies in an increasingly urbanised, energy and resource-constrained world – both to the benefit of these countries and to that of business.