Sustainable business with clear benefits for people living in poverty is a cross-cutting theme in private sector collaboration within Sida. The concept of inclusive and sustainable business provides a foundation for cross sector initiatives and sets out what objectives to promote and strive towards. Through partnering with private sector actors, Sida aims to contribute to promoting sustainable and inclusive business practices.
Sustainable business models develop practices that put the needs of future generations at the forefront of business decisions taken today. One common model of describing sustainability takes into account three dimensions: the economy, the environment and society. These are often referred to as the triple bottom line. Each dimension is equally important in order to be truly sustainable.
Sustainable development has been at the core of international discussions since the 1970s. The report Our Common Future (UN 1987) states that sustainable development “meets the needs of the present without compromising the ability of future generations to meet their own needs”. Basically, a sustainable business model is composed of a sound economic business model together with long lasting considerations of the impact it has on the environment and the societies in which it operates.
Sida encourages companies to adhere to globally accepted principles for Corporate Social Responsibility. The United Nation’s initiative Global Compact urges companies to align their operations and strategies with ten principles and “to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption”.
Inclusive business models include people in poverty as clients and customers, and as employees, producers, distributors and business owners at various points in the value chain. Inclusive business engages with those who have no or very low income and who lack basic access to goods and services. Inclusive business models around the world provide clean water, ICT, health care, construction, recycling, education, transport, electrical power and financial services, which in turn provide income-generating opportunities to millions of people all over the world.
According to the World Bank more than 40 per cent, or 2.6 billion people, live on less than US$2 a day. A billion lack access to clean water, 1.6 billion lack electricity (OECD and IAEA), and less than 20 per cent of the world’s population have internet access (ITU). These figures clearly manifest the inequality of today’s world, but they also represent a potential for growth in consumption, production, innovation and entrepreneurial activity.
Inclusive business can create markets or business opportunities where basic goods and services are lacking. Private initiatives that combine the needs of societies with profitable business ventures have a potential market. To be defined as an inclusive business, the initiative should be commercially viable at the same time as it provides access to goods, services and livelihood opportunities for the poor.
Inclusive business models are interesting:
- for companies because they can offer new opportunities for innovation, growth and competitiveness at the same time as bringing about positive social and development impact.
- because of their potential to drive development in self-sustaining and self-multiplying ways that do not require continuous infusions of grant funding
- for people living in poverty because they can bring greater access, choices and opportunities in their lives and futures.
- for Sida and other donors, inclusive business opens up for opportunities to add complementing efforts that reinforce developmental effects of business ventures.