What is inclusive business – and why should you think about it?

Inclusive business can be defined as the profitable integration of poor people and small & micro enterprises in the core value chain of larger companies. The concept is characterized by a demand driven approach that often requires innovation to extend companies' markets and increase their profitability. People and enterprises at the Base of the Pyramid (BoP) can be involved as suppliers, distributors, retailers, consumers, entrepreneurs & innovators and as additional employees.

Inclusive business markets, however cannot be treated the same like the companies' traditional markets. Inclusive business practices can rather be described as "business unusual". Indeed most of the successful them were connected to new ideas of companies. Products, processes and services thus often need to be specifically designed, or intelligently redesigned to meet the conditions and the needs of the people and enterprises at the BoP.

Inclusive business goes beyond corporate giving. It is regarded as a win-win situations for companies and small and micro enterprises of the low-income segment. The following table summarizes some advantages for business, small and micro enterprises/ poor communities and the governments.

 

Benefits for companies

Benefits for people at the BoP

Benefits for governments

Requirements for companies

Higher profitability

Jobs and income

Increased tax revenues (SMEs)

Changed mindset: Open to collaborate with new markets

Wider market share

Increased market access

Improved social services

High understanding and knowledge of local/informal markets

Lower operating costs

Enhanced human dignity

Increased GDP

Market research, resources/investment

New consumers

Access, innovation and technology

Greater infrastructural support

Innovation and “thinking out of the box”

Better brand of products

Easier access to credit

Improved business climate

Proper calculation on return on investment (ROI)

Ease of doing business due to better relations with government and communities

Better living conditions as a result of the above points

Increased access to (foreign direct) investments

Patience


In many cases the concept is also characterized by longer-term business partnerships with the small and micro enterprises. Therefore companies and third parties support these business partners to become competitive, cost-effective and successful. For example, the support can comprise of training and mentoring, equipment and input, access to finance etc. It also covers continuous communication and the building of mutual trust and understanding.

Companies therefore have to invest first, and increased profits might appear only after an average of five years. Still, inclusive business is regarded as both understandable and motivating. The concept presents a formidable opportunity for a more pragmatic approach to involve companies in social development by aiming at what companies know best: doing business.

The idea of doing business in a more integrative more to achieve sustainable development is not new. According to study by the Monitor Group of 2011, some 430 companies in nine African countries were implementing inclusive business approaches in 2009. Inclusive business meanwhile is implemented in almost every industry sector (examples per country and business sector can be found here: http://www.growinginclusivemarkets.org/).