I have spent much of the last decade emphasising how inclusive business is different from corporate social responsibiity. It's precisely because it is core to the business and bottom line that it it has commercial drivers that can take it to scale. So long as the model is 'inclusive', then its social value can multiply without reliance on grants and donations.
When trying to get business leaders to shift their mindset and embrace lateral thinking, or embrace product and supply chain managers, this distinction is really important. So when we define Inclusive Business, we emphasise it. But practical experience in the Business Innovation Facility is illustrating a different side of the coin. The interplay between CSR and inclusive business part of reality, and to support inclusive business we need to recognise it.
A new blog post by an Indian Colleague, Manish Shankar, shares his recommendations to a dairy business in India that they establish a CSR initiative to support their inclusive business model: CSR Done Right.
In Nigeria, our Country Manager Soji Apampa eloquently describes how BIF partners are usually found on a continuum from CSR to inclusive business: We have learnt to trace with them from CSR towards inclusive business to identify where they are on that road and then project with them a vision of possibilities ... This is where the skill is: correctly diagnosing the current situation and working with them to discover and articulate new futures that could be made possible through inclusive business interventions. If they happen to hit their sweet spot in the process, and with your assistance they work out what they need to do in concrete terms to own that future, then you have a potential partner - a driven potentially committed partner (from Do You Know What Your Partner Wants?)
Several inclusive business projects supported by BIF emanate from a CSR stable, including the local sourcing programme of Sun International Hotels in Zambia and GSK, a village level commodity price information initiative, of India's Multi Commodity Exchange, MCX. There is always a risks that they won't clear the hurdle of turning viable. But there are benefits that CSR spend can allow experimentation and innovation before commercial processes kick in.
So going forward, should we continue to define the change in mindset that distinguishes Inclusive Business from CSR, or should be embrace the continuum and develop their synergy?
Great last sentence! I alluded to the distinction in an earlier posting but not as well as you have done. I was thinking of efforts like the shell foundation in mind that, for me, are gestures of philanthropy, resources allocated for which are not in the same bracket as the company's core business and are definitely' "off budget". Thus, not connected to commercial drivers that can take what it does to scale? The Foundation's interventions and results do not appear sufficiently different to those offered and realsied by some mainstream public funded aid. So as you say could be best to develop the synergies of such support. But what and where do such synergies lie, and who finds these out and starts to broker them?
Caroline - you raise an interesting point. For me, the combination of commercial viability and social impact is the key defining characteristic of "inclusive business", and is what sets it apart from previous ideas. The opportunity for scale and sustainability that this presents suggests that we should continue to promote it as a direction of travel - both for businesses and for those wishing to partner with them. However, I think there is a way to rethink CSR in a way that supports this journey. Rather than old-style community-investment CSR, we could think about a strategic deployment of company resources that encourage business model innovations that offer the prospect of social impact. Almost like an internal form of impact investing, and as with impact investing there may be a spectrum in terms of expectations around the level of, and time frame for, any commercial return. So maybe what we need is a new definition of CSR that supports the development of inclusive business.
Great question Caroline! Perhaps the answer lies in both options.
I believe it's important to distinguish inclusive business from CSR, to show that there is a way of contributing to society that is commercially viable and profitable. That's an important point which shouldn't be lost; and in my view it should be the goal. But it needn't be an either/or scenario (either CSR or inclusive business). Instead it can well be a continuum where companies begin with traditional CSR and then, once this has demonstrated results and internal credibility, look at how to innovate further and make it part of their core business.
It makes sense to follow the path of least resistance, starting with the momentum that exists for CSR and make the business case from there for something that's commercially viable.
Very well expressed Caroline, you have captured the issue with great clarity as usual. I think one of the big problems has been the way "CSR" has been used loosely and without clear definition over the past ten years famously prompting Lord Browne when he was CEO at BP to comment "We don't do CSR.." as much as anything because the term was ill-defined.
Like any new business development, inclusive business models almost always have an initial negative cash flow or investment phase which, because of the innovative nature of those models, may be extended beyond the time span expected of business-as-usual models. There are a number of ways in which companies may get support (effectively reduced cost of capital) to help cover this front-end exposure. In some cases this will be the CSR budget, as in reputation enhancement or licence to operate spend. But this is not the only form of non-commercial, patient capital available to the business. Host government , bi- and multi- lateral donors or philanthropic funding may all be legitimate sources of initial investment support. The critical test for me is that in due course, often later rather than sooner, the business model becomes wholly commercial i.e. profitable.
The other dimension of CSR support which has been picked up by our colleagues in India and Nigeria, is the journey in thinking and mindset of the executive management of the business. This is where the CSR budget is used to open the eyes of the managers to the possibilities that BoP markets might represent in the future of the business - a sort of test-bed for innovation and new thinking. While this may be a useful avenue to follow, there is a risk that projects in the CSR portfolio get trapped in hands of the Brand and Reputation Management team and fail to get taken seriously by the hard headed business developers who simply overlook the opportunity these innovative models represent in their portfolio.
So I agree with the concept of a progressive journey and any entry point is to be welcomed. But we need to be very clear on the business purpose behind any investment, of the end point being sought (profitability) and most critically, as you have pointed out elsewhere, remember that if it is serious business investment, then we should be sure to measure and performance manage the results in both financial and social terms.
Interesting discussion! I agree that it’s important to continue to distinguish CSR from inclusive business, in the same way that it’s important to distinguish inclusive business from other core business activities that aren’t driven in part by the social or environmental outcomes they achieve. As Daniel points out, too often CSR initiatives within companies are structured in a way that makes them ancillary to core business, to the detriment of both. If the goal is to break down these silos and change the mindsets of those working within each construct, then inclusive business can provide powerful examples of the potential synergies between traditionally distinct business units. Inclusive business is able to build a bridge (or create a continuum?) because it is not defined as one or the other, but as something that contains elements of both.
I think Zahid’s suggestion of CSR being reimagined as a platform for business model R&D is a compelling one, as is Manish’s blog post on CSR being a solution to a business problem. In both cases, the evolution of CSR is being driven by core business needs, which I think is key. So I somewhat disagree with Suzanne that building on the momentum of CSR is the path of least resistance. Having new inclusive business model development be a collaborative effort between CSR and ‘core business’ from Day 1 creates conversations that help break down these silos, and builds the widespread sense of ownership needed to ensure that innovative ideas have the right DNA of both. Though perhaps more challenging and time consuming in the short run, it may increase the chances that new inclusive business models will be successfully implemented and able to be scaled in the long run.
Very interesting discussion! I fully support the embracing the continuum, developing the synergies and as Zahid recommended.... evolving CSR to become a vehicle to help a business become more ‘inclusive’ in their core commercial activities.
Doing so requires a shift in mindset within a company and from what we as society expect from corporates. While working for an accounting/consulting firm in East Africa, I remember being laughed at for suggesting that we evolve our CSR programme from buying and donating used computers to schools to providing accounting and business support/mentoring to SMEs. The donation of computers was my company’s platform on which they engaged with society, touted in brochures and displayed the ‘outcomes’ visually through pictures of children with new computers up around the office.
A number of countries (including India) are beginning to require companies to spend X% (2% proposed in India) of their average net profit on CSR activities. It will be interesting to see how this affects how companies incorporate CSR activities into profitable business activities.
I think CSR as a concept became a box ticking exercise and we have passed that mark when we need to rethink it. CSR got governments off the off and trapped business into providing social services instead of focusing on their core work. It also lets governments off the hook
Inclusive business on the other hand provides direct income to families enabling them to access services. It moves us away from creating dependency and is more sustainable.
We will be exploring some of these issues in Kampala
I think it would be helpful to first define what we mean by "CSR". The term "corporate social responsibility" is often used interchangeably with corporate responsibility, corporate citizenship, social enterprise, sustainability, sustainable development, triple-bottom line, corporate ethics, and in some cases corporate governance. While these are very different terms, they are often lumped together which muddies the waters for a discussion like this. If we define CSR as, "a corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare." Read more: http://www.investopedia.com/terms/c/corp-social-responsibility.asp#.... Then CSR is not the same as inclusive business but CSR can INCLUDE an inclusive business approach.
I think Jason Saul did a great job of making the case for an inclusive business approach in his book Social Innovation Inc. Yet I also think there is a great advantage to having a CSR program that also invests in risky endeavors that may not have a proven business plan or can help seed fund inclusive business with philanthropic funding. Many companies, especially those expanding in emerging markets, are well served by making philanthropic grants to fund community-based projects in order to garner a license to operate. So while I believe that CSR and inclusive business are not the same thing, leading corporations are investing significantly in both for very different reasons.
Interesting discussion indeed. Very important to clarify such aspects because, as we have seen many times, confusing terminologies end up too frequently jeopardizing progress. Given the undeniable transition from corporate social responsibility to generating corporate social value, changes of mindset are important and thus, distinguishing CSR from IB is not only practical but also strategically very relevant.
If the CSR movement took us away from philanthropic mindsets and moved us from working with directors of corporate foundations to CSR directors, looking at the value chain and its box ticking (thanks Ida) social/environmental perfomance, IB is moving us beyond and sitting us with strategy directors, innovation mangers and “new business departments” looking to change the way they do business at its core.
As most of you have implied, ROI and profitability (from a win-win approach) are a quintessence of inclusive businesses, and upscaling and replication should then be desired goals, so its not so much about reducing as much as possible social and environmental negative externalities, but really about changing the economic ecosystem through more participatory, inclusive and innovative business models with social and economic justice embedded at the bottom line.
Its obvious therefore that CSR and IB are two different battles that should be managed in different fronts, both with very different objectives (and both very needed today for corporations). That does not mean there can’t be synergic relations and given the always scarce availability of funds to move the corporate social agenda forward, such relation is more than welcome.
You have to do both. Because in the real world (i.e beyond the neat, defined, principled world of development practitioners and academics)the continuum is a messy one and a business's scope to move along it depends on where it finds itself, and why. In our experience, a useful start can be made by persuading those responsible to use a portion of delinked CSR spend to overcoming the barriers to inclusive business procurement etc. This allows, through demonstration of the logic and, hopefully, results to change mindsets. The trick is to create Inclusive Business champions out of CSR vested interests. And unless you have senior level champion who can drive a wholesale transformation (1st prize) you need to approach things incrementally. Nice work Caroline.
I tend to agree with Suzanne. Philosophically looking from the outside in I think it is easy to feel cynical about CSR and to advocate a clear distinction. But for companies that already have some kind of CSR activity in place it often feels "safer" to develop and deepen an existing strategy: it's simply easier to sell an apparent extension of present activity rather than a radical revamp of company products or services!
Something that adds to the challenge of the CSR or Inclusive Business debate is also the evolving character of the CSR field. I am particularly fond of Wayne Wisser's depiction of the historical stages of CSR emphases - and his suggestion that progressive firms are adopting a "CSR 2.0" approach which has a lot in common with Porter's vision of shared value and many aspects of inclusive business. A nuanced answer to Caroline's question then, might be that it is important to distinguish inclusive business from "CSR 1.0", but that it may be better to build bridges between inclusive business and CSR 2.0!
Although I want to agree with Suzanne to follow a path of least resistance for a corporation, I believe we need a revolution of sorts to re-shape this discussion. Similar to the CSR 2.0 pivot Duncan mentions, I would imagine that if we continue to believe that the external stakeholder approach which CSR originated from - either as self-regulation or to alleviate (morally) any wrongdoing by the firm - somehow addresses inherent faults in business design, then there will continue to be this long titanic-like shift towards what I would refer to as 'good' business (again requiring further defining). I agree with Ida and don't see her comments as cynical; I see her comments as reality on the ground for most people outside the firm, i.e. stakeholders, community, etc.
There is no question in my mind that CSR and Inclusive Business (IB) are distinct activities/ideas, and like Kate suggests we need more conversations around defining these terms; or at least somehow come out with better definitions. The suggestion that these terms allude to a continuum is lost on the human-ness of it all. By taking this view, an iterative view that CSR was the first good the corporation did and then came inclusive business, detracts from the essence and core beliefs inherent in inclusive business. In my view, inclusive business begins with us (people) and tries to shape activity around us that accounts for more than what the financial statements, GAAP, IFRS, etc. define. It's not that IB takes into account these other factors as factors; its that these factors are inherent in the decision making and transacting - they are fundamental to business activity; and we do this because it creates greater value for all stakeholders. When our financial statements begin to include, as part of the bottom line: labor, social capital, civic activity, and giving, among others, as an asset AND environmental damage, corruption, socio-cultural destruction, communities breaking apart, legal costs associated with external but related activity, etc. as a liability,...then, with profitability redefined, we'll be able to better see the difference between CSR and IB.
Thanks everyone for great discussion; this is clearly an topic that will continue in the future.
What I take from the discussion is that 'overlap' is perhaps better than continuum. Inclusive business needs soft finance for initial testing and piloting, as Graham says, and the flexibility of CSR may support this, but so may other sources. The CSR budget - badly defined - may cover all kinds of activities and for rather different purposes to inclusive business. But this may include the more strategic kind of CSR 2.0 that Zahid and Duncan refer to, in which case it has strong overlap with inclusive business.
I certainly don't want to write off the cheque-writing philanthropic kind of CSR. I'm trustee of a deafness research charity that gets support from Crystal Palace Football Club, which is great. My lads' football club gets support from a tile shop for their kit. Great. Both go down well with stakeholders but are not linked to the business. The computers Ellen talks about might or might not have been maintained once donated to the school, so I won't comment, but no doubt many good charities in developing countries make good use of non-strategic CSR funds and society would be worse without them.
But leaving that aside, the strategic type of CSR can definitely provide critical momentum for inclusive business, by providing that testbed, as Kate says. As substantial CSR budgets get legislated, as Ellen says, I expect much more CSR activity will be aligned with the evolution of core business, including piloting of inclusive business models. But Paul puts his finger on the button - can you then move out beyond CSR mindsets and empires? We have one project in the Business Innovation Portfolio that moved from the Innovation Department over to the Commercial Team. There was some bad feeling, But there is now a lot more serious effort. That transition should be welcome. The CSR mindset needs to change. We have others where we are not sure the boundary will be crossed. And we have other very serious and exciting inclusive business ventures that have absolutely nothing to do with CSR, that expand long term competitive advantage, but still do take investment risk and pilots to set up.
So from an inclusive business mindset - back to Graham's point - the issue is perhaps not whether a CSR root is good or not, but what in each case is the best way - from internal or external support - to catalyse the innovation and company structure that will transition into a social commercial business model that really works.
It is interesting that in the discussion around the role of business in society so much time is spent on discussing definitions. This is important, as we need to gain clarity about how to conceptualize this interface in order to invent better business solutions to societal problems.
I'd like to throw another fancy term into the pot: "Inclusive Business Ecosystems." With my colleague Beth Jenkins from Inspiris, I argue in "Tackling Barriers to Scale - From Inclusive Business Models to Inclusive Business Ecosystems" that creating sustainable, profitable business with low-income communities often needs more than an innovative business model - it needs innovation and action on the ecosystem level.
That means that as a company to make my business work, I may have to lobby the government to change the regulatory framework, I may have to enter into coalitions with other companies to establish standards and invest jointly into infrastructure or education, I may have to partner with research institutes to build a basic understanding of the issues I am trying to tackle etc. These are activities that lead to the creation of common goods, something that is not in the DNA of standard business, but is the core business of CSR departments. So it is perhaps not surprising that many inclusive businesses originate in CSR departments. Besides having more freedom to experiment, these departments also have the skill sets required to improve the ecosystem for inclusive business.
I agree with most of the posts in this string but reply in particular to this comment because I believe that there is still a space for CP or corporate philanthropy that does not so much "let government off the hook" but recognizes that often large companies and MNCs have more capital at their disposal than governments and are also often in a position to take a more business like approach than government departments to it's expenditure on public capital infrastructure projects - think of the the great social infrastructure projects in the 19th centure in UK - like sewerage systems etc that were funded by philanthropic companies with no real return or impact on their core business other than a more healthy workforce - that could have been described as CSR - and think how much funding gets wasted on such projects when undertaken by governments, subcontracting to "connected" companies etc.
Yes Caroline is right in highlighting the continuum of basic CSR to Inclusive Business and I like the way that some of the more basic initiatives can be designed to eventually contribute towards more inclusive business models but Kate, below, is also right that it is not necessarily a straight line nor a single line with one endpoint so yes IB models are one element of corporates doing their core business in a socially responsible way, as much as there are other models within CSR.
This is a great discussion. Thanks!!! I believe that there is a potential and clarifying link between CSR and inclusive business and support more the idea of IB as a continuum of CSR strategies and programmes. In a sense, the concept of CSR (and now more clearly, shared value), proposes a framework in which a company can assess and rethink the social value (as well as other values, of course) generated through company´s business activities and value generated to its different stakeholders. Low income markets or BoP markets, are one of the stakeholders in any company operating in a developing country (therefore they can be included as potential stakeholders in the area of CSR +community).
The key question is how we (those that support CSR both by creating debate and knowledge as well as taking it into practice) put more explicitly into the center of the debate of CSR or shared value, that companies should put the core of their resources and capacities into creating social value (business models, know how, qualified human resources) and also into the center of social investment. We should be seeking a sort of "core business centered CSR", in which CSR resources and inputs are no longer different ones but the most relevant a company may have. In this way CSR activities devoted to "community support and engagement" (sometimes in the pocket of "social or philantropic activities") will tend to use those same core resources and the link with inclusive business will come closer.
But there is a key issue for this to happen and that is to have greater bridges between the needs, demands and capacities within people at the BoP and business. There is a great knowledge and awareness gap that should be solved. NGO have a key role in this sense due to their closeness to low income populations and have the opportinuty to take the lead in the provision of key information and knowledge. Now we need also, as it was mentioned before, investment resources so that companys and NGO can work together in the start up of this inclusive business ventures.
And these skills in working in partnership to find and develop that best way for the particular business and social context are rare indeed. This is an area we need to develop and share more widely but can really only come with experience such as yours Caroline!
Caroline, in my point of view, CSR and Inclusive Business are different in many ways, but, I´m not saying they don´t need to cooperate.
One of the biggest problem starting a Inclusive Business is the difficult regarding low income costumers, product quality, and self sustainability in the first years. At this point we can have an approach similar from Manish Shankar case, where they used CRS to contribute/help Inclusive Business Iniciative, using CSR to support the Inclusive Business iniciatives, from start.
I´m proposing a Inclusive Business StartUp Promotion/support using CSR money. After a while, we have a Inclusive Business running by it self and generating more money, reinvesting on it´s own business or even in a new CSR Startup iniciatives.
Having said that, I think both iniciatives can run alone, each one with own strategies, market and stakeholders. Inclusive Business are suppose to make profit, to mantain and reinvest in the business, CSR don´t.
Best of all, both working togheter to make a better social impact,
I like you idea about inclusive businesses beginning with people.
Recently I've pondered what decisions would look like if the purpose of a corporation as a legal entity was tied to its mission statement rather than to maximize shareholder value. With this model, the board of directors might be responsible to the company's mission rather than company profits. Would this alleviate some of the pressure on decision makers to avoid inclusive business models that might be riskier than the momentum of the status quo?
