Inclusive business-Does it matter?

Inclusive business is an economically profitable, environmentally and socially

responsible entrepreneurial initiative, which integrates low-income communities in its value

chain for the mutual benefit of both the company and the community (WBCSD and SNV,

2011). Its main aim is to improve the livelihoods of low-income populations while

increasing returns to enterprises.

Inclusive business is hard to categorise. There are examples across the sectors, from

start-ups to multinationals, and from social enterprises to blue chip corporates. Innovation is

no respecter of boundaries, but three broad categories (models) help draw some distinctions:

1. Base of Pyramid (BOP) participation in inclusive value chains

The BOP will be taken to mean: Establishments’ (on the supply side) ‘lying

at the bottom of the Economic Pyramid, i.e., micro enterprises with a turnover of less

than Rs 2 million. They comprise nearly 89% of all establishments in Mauritius

(Census of Economic Activities 2007). Small enterprises (with a turnover of less than

Rs10 million) will also be considered as the next-in-line on the priority list. In total,

the BoP comprises nearly 99% of all establishments in Mauritius.

On the demand side BOP is the proportion of households lying below the

relative poverty line. In Mauritius, according to Statistics Mauritius’ Household

Budget Survey 2012, the relative poverty line, is set at Rs13,330 for a household of

two children aged less than 16 years old, and below Rs3,821 for a one-member

household.

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 Approach: Develop or adapt existing supply and distribution chains in ways that

increase the participation of low-income producers, suppliers, workers, traders,

distributors, or vendors.

Example: In 2010, the Central Electricity Board (CEB), in collaboration with the

Ministry of Energy and Public Utilities, opened up the access to the national

electricity grid through the launching of the Small Scale Distributed Generation

(SSDG) project. Through this initiative, Small Scale Independent Power Producers

(SIPPs) are being given the opportunity to produce their own electricity from

renewable energy sources (photovoltaic, wind turbine, and mini-hydro technologies),

and export any excess to the CEB grid. In so doing the CEB integrated low-income

producers in its value chain and initiated environmental sustainability.

2. Product Innovation for hard-to-reach consumers

Approach: Develop new, or adapt existing products and services to meet the wants

and needs of low-income consumers; enable greater access to these products and

services in underserved markets in urban and rural areas.

Example: The mKRISHI initiative by Tata Consultancy Services Ltd (India) offers

personalized and integrated services in local language to farmers through their mobile

phones. Farmers in remote areas are able to access good quality agricultural inputs

and get information on market prices, weather, and other essentials for improving

yields.

3. Environmental Sustainability

Approach: Create low carbon, climate-resilient businesses that help business and

communities adapt to a changing environment.

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 Example: HiNation’s business venture which, aims to provide rural populations in

Zambia with solar lighting and mobile phone charging by distributing a solar powered

lighting and energy source. Only 20 per cent of Zambia’s population has access to

electricity, so currently mobile phone users have to travel and pay to charge their

phones at kiosks or shops, usually from a car battery or generator.

(Inclusive business hub team, 2015)

Justification for inclusive business to be considered as a major issue

Prahalad (2005) describes our population in the form an economic pyramid in which

the peak of the pyramid represents the smallest group of the population with the largest

purchasing power and the bottom layer represents the largest population group with the least

purchasing power, people living in poverty.

Jenkins et. al. (2011) argue that inclusive business models expand access to goods,

services and livelihood opportunities for those at the base of the pyramid in commercially

viable, scalable ways. Inclusive business models are helping companies turn underserved

populations into dynamic consumer markets and diverse new sources of supply. In the

process, companies are developing product, service and business model innovations with the

potential to tip the scales of competitive advantage in more established markets as well.

However, “the notion of inclusive business calls for additional focus and innovation

in the way companies do business. It involves creating new forms of employment, new

markets, and affordable products and services. This spurs economic growth and encourages

entrepreneurship” (Bonnell and Veglio , 2011).

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 Additionally, Hahn (2012) delved into the concept of dignity and how inclusive

business increases this in poor communities. He stated that unemployment and poverty entail

more than a lack of income, but also a direct impediment to dignity because it prevents

further formation of skills, self-fulfillment, and individual freedom (p. 49). The fact that the

poor often pay substantially higher prices for goods, which has become known as the poverty

premium (or penalty), impedes their rights to provision, self-esteem and maybe even freedom

(of choice) (p. 53). By gaining expanded access to goods and opportunities for increased

income, the poor are then able to live with greater dignity.

Golja and Pozega (2012) noted that existing inclusive organizations businesses cover

various business sectors, of which the most notable is agricultural, followed by the ICT, food

and drinks, artisanal goods, health care, consumer products, energy, bio-fuels, housing and

construction, micro-credit, etc. Various stakeholders included in the business in various

sectors are contributing to the advancement of poor countries and populations, and also the

alleviation of poverty, and ultimately the global collaboration. Business sectors are those

which are essential along with inclusive organizations in promotion and the realization of the

Millennium Development Goals as well as the improvement of the living conditions of

populations around the world.

Practical aspect of inclusive business

1. Effects of industrialization and urbanisation

Inclusive business attempts to mitigate the negative effects of industrialization by

proposing business ideas for sustainable development as opposed to classical business models

which focus on development only. The fact of considering only the economic perspectives

has put the future of humanity at stake.

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 Human milieu has suffered a lot since the emergence of industrial society.

Transboundary air pollution, greenhouse gases emission, global warming, climatic disasters,

water shortages, drinking water contamination, freshwater and marine pollution,

deforestation, and other environmental problems are becoming serious threats to the

wellbeing of mankind in this age of industrialization. There are various wide-ranging effects,

as well as serious consequences, of industrial pollution on the ecological balance of the

atmosphere. Global warming is one of the most common and serious consequences of

industrial pollution, causing an increase of the water levels in seas and rivers, thereby

increasing the chances of flood.

With the increase in the number of industries and factories due to the industrial

revolution; air pollution also has increased significantly. The emissions from various

industries contain large amounts of gases, which, when present in elevated levels in the

atmosphere, often result in various environmental and health hazards such as acid rain, and

various skin disorders in individuals. Dumping of various industrial waste products into water

sources, and improper contamination of industrial wastes, often result in polluting the water

disturbing the balance of the ecosystem inside, resulting in the death of various animal and

plant species present in the water. Certain other common effects of industrial pollution

include damaging buildings and structures, increasing the risk of various occupational

hazards such as asbestosis, and pneumoconiosis (Zahedi, Bazmi & Bhutto, n.d).

The Mauritian Context

Industrialization in the local context has made environmental sustainability

(Millennium Development Goals -MDG7) a challenge. The usual downside risks of a more

affluent and developing country are evident. Besides the decline in the proportion of land

area covered by forest from 30.4% in 2002 to 23.9% in 2012, carbon dioxide emissions have

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gone up by 3.8% from 3,543 thousand tonnes in 2013 to 3,676 thousand tonnes in 2014, due

to a rise in emission mainly from the energy industries (electricity production). A large

number of flora and fauna species are threatened with extinction. A total of 89% of the

Mauritian endemic flora is considered threatened. Solid waste landfilled at Mare Chicose

was 6800 tonnes initially and had reached 417,478 tonnes in 2014.

The Mauritian Government’s objective is to transform Mauritius into a forward

looking, economically vibrant and innovative country. Inclusive Business can fittingly spur

innovation and ultimately open up new sources of profitability, while bringing benefits of

economic growth directly to low-income people at the base of the economic pyramid. In the

long run, business cannot succeed in societies that fail and therefore has a vested interest in

stable and prosperous societies. Business as usual is no longer an option – tomorrow’s

leading enterprises will be those that are inclusive and that align profitable business ventures

with the needs of our society.

Micro, small and medium enterprises are strong drivers of Inclusive Business

worldwide but it is also a fact that one of the main challenges for Inclusive Business is to

move from its current position of ‘pilot scheme’ to a real industrial dimension generating

large-scale projects. Sustainable economic growth cannot be achieved without the integration

and participation of the entire population and this is the underlying postulate of Inclusive

Business (Bholah, 2015).

Furthermore inclusive ubsiness can stimulate job creation to alleviate poverty.

Employment is the driver of economic growth and is key to the promotion of human

wellbeing and social inclusion. Taking an employment centred approach, therefore, can

combine poverty alleviation and socio economic development with environmental

sustainability.

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 Unemployment and poverty are the two major challenges that are facing the world

economy at present. Unemployment leads to financial crisis and reduces the overall

purchasing capacity of a nation. This in turn results in poverty. In Mauritius the

unemployment rate in 2014(2nd quarter) was 7.8% (44500 unemployed comprising 19,900

males (45%) and 24,600 females (55%). (Statistics Mauritius, 2014)

The population living in absolute poverty, i.e, on less than USD 2 per day is estimated at

less than 1% in Mauritius. However, a Household Budget Survey of 2012 identifies 299

pockets of persistent poverty across the island and using a relative poverty line classifies

9.4% of the population as relatively poor, up from 7.9% in 2007. The poor are predominantly

found among women where labour force participation rate is low and on Rodrigues Island

where economic livelihoods are largely based on subsistence. An increase in the country’s

Gini coefficient from 0.388 in 2006 to 0.413 in 2012 indicates that growth was less inclusive

during the period. This implies that the gap between rich and poor has increased (Smith,

2008).

The main reasons attributed to the increase in inequality are the shift of the economy

from agriculture and primary production to a more services driven economy, resulting in less

demand for unskilled labour, combined with persistent labour market imperfections making it

more difficult even for skilled persons to enter the labour market (Kalumia and Kannan,

2015).

Inclusive businesses can create employment opportunities for people like the low-

qualified unemployed or the disabled, who are normally excluded from the labour market.

For instance in Mauritius KFC employs disabled people as fast food officers.

Green jobs can also be created by inclusive businesses. These jobs claim to offer a way out

of the current unsustainable development model of ‘grow first, clean up later’ but instead

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promote strategies to ‘grow clean, create employment and eradicate poverty’. Thus, they

address the double challenge of poverty reduction and increasing resource scarcity linked to

environmental degradation and climate change.

Example: The Bel‐Ombre Foundation for Empowerment Recycling Project (Compagnie

Sucrière de Bel Ombre ltd). The recycling plant in Bel‐Ombre, tackles the region’s

environmental problems and provides employment opportunities for villagers living in

absolute poverty. The recycling of glass, PET bottles, and aluminium cans reduce the

volume of solid waste sent and processed at the landfill dump of Mare Chicose.

Moreover, the recycling plant provides new income and jobs opportunities to the

villagers. The project has created three formal jobs at the recycling plant, four others at

collection points across villages, and an unknown number of informal and indirect jobs in the

collection and selling of solid waste. Besides, the revenues obtained are also used to fund

other social projects benefiting the area (Sultan and Harsdorff, 2014).

Last but not least inclusive Business is being regarded as a key contributor to

Sustainable Development Goals achievement. Kaberuka(2015) argues that the private sector

can play a valuable role in development through the inclusion of disadvantaged women and

men at the “base of the pyramid” via business models that involve poor people as an integral

part of the business proposition consumers and suppliers. However, inclusive business can be

a means of poverty alleviation and is not the means of alleviating poverty.

Neerunjun Hurloll

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References:

Bholah S (2015) National Inclusive Business Award-Welcome to NIBA 2015 Available from
[www] http://niba.enterbusiness.govmu.org/English/Pages/Niba.aspx Accessed on 10/10/15

Bonnell, V. and Veglio, F. (2011), Inclusive business for sustainable livelihoods, Field
Actions Science Report. The journal of field actions, 5, 1–5.

Hahn, R. (2012). Inclusive business, human rights and the dignity of the poor: A glance
beyond economic impacts of adapted business models. Business Ethics: A European Journal,
21(1), 47-63.

Inclusive business hub team, (2015) Spotlight: what is inclusive business Available from
[www] http://www.inclusivebusinesshub.org/page/publications-spotlights Accessed on
10/10/15

Golja, T., & Pozega, S. (2012). Inclusive Business – What Is It All About? Managing
Inclusive Companies. International Review of Management and Marketing, I (2), 22-42.

Jenkins et al. (2011) Accelerating Inclusive Business Opportunities, Business Models that
Make a Difference. Washington, USA: IFC, available on [www]:
http://www.scribd.com/doc/65816678/Accelerating-Inclusive-Business-Opportunities-
Business-Models-that-Make-a-Difference, Accessed on 10/10/2015

Kaberuka D (2015) Inclusive Business regarded a key contributor to SDGs implementation

Available from [www] http://www.afdb.org/en/news-and events/article/inclusive-business-a-
key-contributor-to-sdgs-implementation-14537/ Accessed on10/10/15

Kalumia N and Kannan A (2015) Mauritius-African Economic Outlook Available from

[www]http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/CN_data/CN_Lo
ng_EN/Mauritius_GB_2015.pdf Accessed on 10/10/15

NIBA (2015) Understanding inclusive business Available from [www]

http://niba.enterbusiness.govmu.org/English/understand/Pages/default.aspx Accessed on
10/10/15

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Phiri M and Kannan A,(2014) Mauritius-African Economic Outlook Available from [www]
http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2014/PDF/CN_Long_EN/Ma
urice_EN.pdf Accessed on 10/10/15

Prahalad, C. K. (2005). The fortune at the bottom of the pyramid, eradicating poverty through
profits. Upper Saddle River, NJ: Wharton School Publishing.

Raju, P. K. and Sanker, C. S. (1999). “Teaching Real-World Issues through Case Studies”,
Journal of Engineering Education, Vol.88, No. 4,pp. 501-508.

Smith L (2008) The Gini Index: Measuring Income Distribution Available from: [www]
http://www.investopedia.com/articles/economics/08/gini-index.asp Accessed 10/10/15

Statistics Mauritius (2014) Labour Force, Employment and Unemployment - 2nd Quarter
2014 Available from [www]
http://statsmauritius.govmu.org/English/StatsbySubj/Pages/cmphs-2Qtr14.aspx
Accessed on 10/10/15

Sultan R and Harsdorff M (2014) Green Jobs Assessment Mauritius Available from [www]
http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_317238.pdf
Accessed on 10/10/15

WBCSD and SNV (2011) Inclusive Business: Creating Value in Latin America, World
Business Council for Sustainable Development and SNV Development Organisation

Zahedi G, Bazmi, Bhutto A.W, (n.d) The Environmental Impacts in Industrialization (pp.147-
162) Process Systems Engineering Centre (PROSPECT), Chemical Engineering Department,
Universiti Teknologi Malaysia, Skudai, Johor Bahru (JB), Malaysia, and others)The
Environmental Impacts in Industrialization

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