Delhi Sustainable Development Summit 2002
DSDS 2002: Plenary session 5, 10 February 2002
Defining the stakes, engaging the stakeholders
Sustainable livelihoods: the business connection
A growing number of companies are realizing that there are good business reasons, as well as good moral and philanthropic reasons, to promote sustainable livelihoods for the poor.
Business has long been a provider of tools out of poverty. However, now companies are taking a harder look at how they individually and markets in general can do more to help the poor toward sustainable livelihoods. Part of the motivation is enlightened self-interest: the realization that it is impossible to do business in a failing society.
But, companies are also starting to argue that meeting the unmet needs of the worlds poor can represent new business opportunities.
Developing economy markets tend to be chaotic and lacking in structure; also, the transaction costs of reaching low-income consumers often appear prohibitively high. One of the chief barriers to private sector activity in such countries is that they tend to lack the institutions, human capital, policies and infrastructure to capitalize on the trade and investment opportunities globalization represents.
However, there are good business reasons for exploring these markets.
In recent years, the limitations of both welfare and international aid in helping the poor improve their lives have become increasingly apparent. Meanwhile, the market is emerging as a powerful means whereby societies can realize development objectives. This presents a powerful opportunity for smart companies to gain first-mover advantages by cultivating new markets in emerging economies. Opportunities include meeting basic needs such as clean water, health care, sanitation, food, shelter and new energy sources. With many markets in the industrialized North nearing saturation, companies are therefore turning to the South as a promising untapped source of new customers.
In the WBCSDs earlier work on Sustainability through the Market, one key question was to see how, beyond achieving sustainable markets, one could extend those markets to serve the needs of the poor people of the world. "Making markets work for all" indeed appears like a sine qua non condition to ensuring a sustainable development in the developing world. It involves two basic measures: enabling access to effective markets and spreading consumer purchasing power.
The last 15 years have marked a period of unprecedented growth in the world economy. Progress has also been made in reducing poverty. According to UN figures, this decade has seen a modest decline in the absolute number of people trapped in deep poverty (living on less than a US dollar a day) from 1.3 billion in 1990 to 1.2 billion in 1998.
Yet, the benefits of economic growth have not been distributed evenly across and within countries. This has led to a distrust of globalization among certain groups against international organizations such as the WTO, the World Bank, the IMF, the World Economic Forum, and the G-8. For many, the large multinational companies also form part of this "establishment of the affluent".
Finding new ways to bridge the gap between the haves and the have-nots, through the provision of income-generating activities for the poor and affordable products that meet their needs, may actually be the best political argument for the expansion of trade and greater market liberalization.
New business models
Promoting sustainable livelihoods for the poor is indeed a powerful way to counteract dissatisfaction with, and demonstrate the benefits of free trade and open markets. Where businesses operate responsibly and sustainably, the very business of doing business creates employment, generates new wealth, raises skill levels and strengthens local economies.
Yet, to succeed in such markets requires entirely new business models that tackle the structural problems of reaching consumers at the bottom of the economic pyramid.
Also the products offered by companies in these markets should not only satisfy basic fundamental needs such as water, nutrition, shelter, etc. but also provide innovative and high-tech services and products.
So, being profitable in such markets means thinking differently, producing differently, and learning to bridge the affordability gap by adapting from a situation where a few units are sold at a high price to one where many are sold at low cost.
Other challenges that companies must overcome, to reach out to these markets, include providing easy access to credit and capital; introducing new technologies with advanced environmental performance; stimulating local employment; and forging public-private partnerships to ensure market success for sustainability.
Why should business be involved?
There are several reasons for business to be concerned with helping to create sustainable livelihoods for the poor. As long as there are billions of people who are economically powerless, genuine global sustainability will elude us. But beyond ethical and environmental considerations, creating ever more opportunities for poor people to construct sustainable livelihoods for themselves is very much in business self-interest.
Against this background, the WBCSD is undertaking a new initiative, Sustainable Livelihoods: the business connection. This project builds on previous work done by the council on corporate social responsibility and sustainability through the market.
The project examines the relationship between business and poverty, and looks into the role of business in extending the benefits of sustainable economic development to a wider cross-section of the poor. Ultimately, the initiative will strive to develop a strong business case for poverty alleviation.
A key component of the project will be to collect the information, through case studies, on what business is already doing to help the poor create sustainable livelihoods in different sectors and countries.
But business cant do it alone. Improving the living conditions of the poor people of the world requires working with other stakeholders to change the governance frameworks of developing countries.