A2: Main barriers refer to prioritization, practices and scope of business. In agriculture companies could address or reached to a determined number of clients. Infrastructure, distribution, and investments required are a constraint to develop new markets. Developing new segments of business require high initial investments to develop and train subsistence smallholder farmers. International donor funds, could reduce those barriers focusing on developing the correct framework from a policy and advocacy perspective, helping to develop adapted portfolios, training and expanding research capabilities, contributing to create the most successful inclusive business ecosystems, and developing further initiatives to improve rural communities’ income and wellbeing while diversifying risk.
Agreed. And as someone else wrote, de-risking is not only about financial de-risking. Sometimes the political de-risking is far more important.
The ‘risk’ topic is important… this is where international donors like DFID play an important role through derisking and also catalysing projects. At Pearson, we partnered with DFID in South Africa on an employee program… would not have been able to do it without that partnership-- not necessarily just the shared finanical investment but the ‘backing’ of a reputable partner like DFID who brought reputation and expertise on top of financial investment.
I do think that point about the convening power of donors is important. Some of the biggest problems business is trying to tackle in their supply chains require local government involvement, local civil society as well as local business. Donors are often well-networked locally, have some influence with key parts of government, and can help bring people together around solution-finding.
International donors and development agencies can play a critical “brokering” role between local governements and businesses, on key policy issues like import tariffs or tax regimes to which they bring credibility and a sense of public good that the private sector can seldom claim
I agree also for helping to establish the right framework, especially from a policy and governmental interaction.
Government donors can help with improving the regulatory environment, by working with their partner governments. Many low-income countries have policies and regulations in place that favour traditional approaches and hinder inclusive business solutions. For example, inclusive business solutions in the health, energy and education sectors often struggle because government policies favour the public services, even if they are not able to deliver. Large companies do not have the voice to address this, but donor governments do.
In my experience, the challenge for companies looking to scale inclusive business models / responsible business practices is that they don’t operate in isolation, but rather in complex and dynamic systems with several actors, often with competing incentives. When it comes to investing in sustainability programs within a company’s direct operations, companies consider a range of factors when it comes to where to invest and how much to invest (what is the potential for impact / ROI, what is the financial and reputational risk of NOT investing, what are competing needs for these resources). Yet, when it comes to investing in sustainability programs within a company’s indirect operations / extended supply chains, there are a range of other factors to consider. For example, is the policy / regulatory environment conducive to scaling the program? Can we (the company) scale this on our own? If not, who are the other stakeholders that need to be engaged and committed for this scale up to be successful, what are their incentives to support the program, and what resources/skills do those stakeholders have to contribute? It is in this extended supply chain where international donors have a large role to play.
We also need to tackle some anti-trust barriers. Respecting human rights is – and must be – a pre-competitive issue, and progress requires collective action. Yet industry after industry has faced the chilling effect of uncertainty over whether they will be pursued under anti-trust regulations for going after these problems together. This is about more than the standard lawyer’s warning at the start of meetings not to discuss prices etc. It’s about providing positive clarity about how collaboration can and should happen to address the systemic human rights and other challenges that flow from how business gets done. Initiatives such as Action Collaboration Transformation (ACT), which is tackling the lack of living wages in apparel supply chains, constantly have to battle this problem. Government donors can help drive a more joined-up government policy approach that removes this kind of barrier.
Also, coming back to the point on profitability, donors would do well to acknowledge the hybrid nature of some innovations. Therefore, they may require public subsidies over the mid- or long term to be competitive. This is not a flaw. Many of the vital services in rich country contexts are subsidized. Subsidizing output rather than input (e.g. energy sold vis-à-vis an energy project created) would also create a better market for such innovations, with competing providers.
Yes! Donors are well positioned to reduce risk and de-mystify entering new markets through subsidies and challenge grants. We subsidized research for health care responses in a time of crisis, such as the Ebola crisis in 2014 to mitigate the effects of imposed quarantines that restrict movement, preventing people and traders from traveling to local markets.
Hi Caroline - Is there also a role for donors to support the capacity building of local organisations to convene across sectors?
spot on. Often, ‘sustainable initiatives’ are regarded as pilots and while there is often (or always) the rhetoric about ‘scaling’, in reality there are not viable plans (including the financial plan) to actually scale. These initiatives and programs need to be run through the same investment process as rest of business development if they are to have a hope for long term viability in the organization.
One of the major challenges we see is, where businesses are entering or creating a new market, or trying to scale up, how can they meet high quality potential partners from civil society, business and government? Or for business opportunities requiring system shifts (e.g. complete new, or sustainable value chains), how can companies engage with all the right system actors? Donors can support the engagement mechanisms and multi-stakeholder platforms that can convene and support the development of essential multi-sectoral partnerships.
Arguably, the progress and evolution of ESG will be a big impact on bringing down what are still today regarded as barriers to inclusive business models… simply put-- expectations are rapidly shifting and subsequently the rules of the game are being rewritten. Thank you Larry Fink and like minded executives who are driving this change…
There can be, absolutely. And supporting them to take part in the collaborative solution-finding as well. But it’s often not just an issue of capacity but one of influence. Many expert organizations lack that - perhaps because they are NGOs and viewed through political lenses. That said, there are organizations that can bring that convening role, be they civil society or business or hybrid. And it’s right to look at supporting them to do so.
Absolutely. This is particularly important.
I agree, we usually say “we need to embed sustsainability in business” but they are usually set up as initiatives. As long as we do not take a serious inclusive business approach with all its implications many of these activities do not survive in the long run. International Donor Funds, could help to steer inclusive business.
Yes this is true, but often these multi-sectoral partnerships get bogged down in meetings and convenings resulting in little action. I think we have to be careful how many multi-stakeholder platforms are created without building on those that already exist.
THANK GOD Jim Kim was at the World Bank when the ebola crisis broke… world health was totally unprepared and arguably if not for Kim’s global health knowledge and reaization that WHO and others were unprepared and unequipped at the time to responde, therefore pitching for the cach injection with efforts of WB, we would have had far worse outcome.