Hello Jane, could you introduce yourself and your work?
Hello, everyone. I'm Jane Nelson. I direct the Corporate Responsibility Initiative at Harvard Kennedy School. My work focuses on the role that business can play as a trusted and innovative partner in global development, first by respecting human rights and mitigating risks to people and the planet, and second by harnessing core business models, products, services and technologies to profitably solve social and environmental challenges. We work with various stakeholders in understanding how new models of business, governance and partnerships can help to achieve the Sustainable Development Goals. My particular passion and interest is the role of business in working with others to support more inclusive and resilient economic growth, and to strengthen local institutions and community leaders.
In a recent interview with the IFC you stated that “Capitalism has created incredible wealth, produced goods and services for millions of people around the world, and created jobs, but the pandemic is highlighting and exacerbating key market failures and government gaps.” Could you elaborate on those market failures?
I think the pandemic has highlighted and exacerbated two interrelated market failures and governance gaps. The first has been the high levels of structural inequality and injustice that existed in our societies and economies before the crisis. The pandemic has had a disproportionately negative impact on low-income households; on small and micro-sized enterprises; on workers who are in the informal sector or who work below minimum wage without benefits, such as lack of paid sick leave or health insurance; on communities that are marginalised on the basis of race and ethnicity; and in many cases, on women. Many of the people who have been recognised as essential workers are also among the poorest and most vulnerable. I think there is now much greater public awareness of the long-term and structural nature of these inequalities and injustices. When there is a humanitarian or economic crisis, those people, and the households and communities where they live, are most negatively affected, because we haven't got the systems and public or private services in place to support them.
This links to the second set of market failures and systemic challenges that has been highlighted and exacerbated by the pandemic – the fact that we're not doing a good job at delivering public goods, and affordable, reliable and accessible products and services to people who most need them. Our health systems aren't working for hundreds of millions of people. Our food systems aren't working for the people who are most vulnerable to food insecurity. Our financial inclusion and social support systems aren't working for hundreds of millions of people who have lost their jobs, incomes and livelihoods. And digital technology platforms are not accessible or affordable for hundreds of millions of students, low-income households and small or micro-enterprises
So, I think in both cases, public awareness has been rising in many countries that there are deep-seated structural inequalities and injustices, which markets cannot overcome on their own, and all too often, make worse in the absence of oversight and accountability. We need better governance at all levels – global, national, local and corporate – to address these systemic challenges.
I think both cases have made us realise that while the private sector has a crucially important role to play, good governance in the public sector is absolutely critical. Clearly, inclusive business models have a key role to play as well in helping to overcome structural inequalities, injustices and market failures, but they cannot achieve scale or systemic impact in the absence of supportive public policies, laws, regulations and incentives.
Do you think inclusive businesses have shown to be particularly resilient during the ongoing pandemic? If yes, why do you think they have done so and do you have a concrete example of a company that has shown to be particularly resilient?
I think inclusive business models are proving to be essential, but it's still too early to say how resilient they will be relative to other companies. The situation is dire. Even for someone like myself who's a great optimist, it's hard to overestimate just how difficult the situation is for millions of companies in terms of ensuring their business continuity and financial liquidity. This is true even for large companies, let alone smaller enterprises and inclusive business models.
I think it's worth quoting the interesting research that Business Call to Action has recently done on inclusive businesses. They interviewed 90 survey respondents, mostly from the agriculture and health sectors, which are both crucial sectors in addressing the humanitarian and economic crises we are facing. They found, "By and large, the pandemic has had a substantially negative impact on companies. More than half reported negative or highly negative impact. And only two percent said the crisis has had no impact on them." I think many inclusive businesses are struggling to cope with the pandemic. But, having said that, there are inspiring examples of both larger and smaller companies that are more inclusive in sectors such as food, health, energy, finance and education, that are proving to be both innovative and resilient in the face of the pandemic.
Innovative companies include some of the food and consumer goods companies, such as Olam, ABInbev, Mars, Nestle, Unilever, Cargill and Danone, and some banks, like Standard Chartered, Bank of America, Equity Bank in Kenya, as well as microfinance institutions such as BRAC. Other examples include manufacturing companies that have repurposed or adapted products and services to meet emergency needs. Some mobile phone companies and other digital service providers are working together in Africa and elsewhere to improve digital inclusion. A number of healthcare, consumer goods and e-commerce companies are supporting government efforts to spread health awareness and strengthen local health facilities. I think these types of companies, that are already intentional about engaging with their key stakeholder groups – their employees and workers, their customers and suppliers, their host communities and governments – are generally more adaptive and resilient.
Even in the industries that are most negatively affected, like the hospitality sector, companies that are relationship-focused and inclusive anecdotally seem to be coping better.
You already tackled some lessons learned that you have seen in companies that have proven to be resilient or will survive this crisis well. Are there other lessons learned that you have observed? Other behaviors of companies you have seen that have proven to be positive for those companies, and have shown that they have been resilient?
I think there have been four key lessons learned around business resilience. The first is the importance of stakeholder relationships, especially two elements of that. First of all, people really matter. The companies, both large and small, that have genuinely engaged on that basis, focusing on efforts to protect lives and livelihoods, have demonstrated resilience. Linked to that are the companies that have long-standing and trusted relationships with their stakeholders. Companies that have good relationships with their employees and trade unions, for example, have been able to say to them, "Look, we're all in this together. It's a tough time but we’ll cooperate to find ways to get through it.” Companies that have more inclusive supplier and distributor business partnerships have been able to respond more quickly in working together to address challenges such as supply chain resilience and delays. Companies that have good partnerships with non-profit organizations and community organizations have been able to respond effectively at the community level. Those relationships that were already in place have enabled them to respond much more quickly than suddenly trying to build new partnerships in the midst of the pandemic. There have been great examples of new partnerships being built, but I think having trusted, existing relationships and deep respect for people is the first key lesson that has been crucial to underpinning resilience.
The second is diversity. I would point to diversity in a number of areas, such as diverse workforces and diverse supply chain relationships. This can be more costly to develop at the outset but it makes an organization more likely to be resilient both in responding to a crisis, but also in rebounding from a crisis. If you've got a diverse supply chain, for example, and one supplier fails then you've got other options very quickly.
The third point is technology. I think we are seeing that companies that had already started to invest in digital technology have been able to meet specific needs created by the pandemic in a more adaptive and commercially viable manner. Existing digital technology platforms make it easier for employees to work from home, for example. Schools that were already investing in digital technology and children who were already familiar with the Internet were able to adapt quickly. Obviously, that's also the area where we see some of the greatest inequalities, given that a lot of lower-income households and communities haven't been able to rely on access to digital technology. Certainly, the companies that were already investing in digital technology have been able to pivot more quickly. Also, many have been able to deliver key products and services to people more effectively, whether it's digital support to farmers, e-commerce or last-mile health access. The inclusive business models that are built on digital technology platforms have probably been among the most resilient of any business models. They've not only been resilient in terms of business continuity, but they've also been able to continue to provide essential products and services to people who most need them.
And then the fourth area is leadership. If there's ever been a time when we recognise the importance of leaders who can lead with empathy, compassion, engagement, listening, burden sharing, and multitasking, it’s in this time of crisis. We’re also seeing the importance of leaders, both in government and business, who draw on reliable data and respected scientific expertise and use these to make decisions and to share hard truths. We’re realising in this and other crisis situations that you need networked models of leadership. That requires the person or the small group at the top of any hierarchy to be empathetic, to be caring, but also to have built enough trust, respect and capability in the system that employees and other stakeholders are empowered to act on their own. The opposite, the traditional “command and control” model of leadership has been going out of fashion for some time, but it is still reality in a lot of big institutions and countries. I think this pandemic has shown that a more empathetic, engaged, consultative, networked model of leadership is really important.
These to me are some of the key characteristics of companies and countries, as well as communities and cities, that seem to have responded well to the crisis, and that are coming up with more hopeful and inclusive recovery plans.
Is there anything else that you would want to point out when it comes to governments? What could they do during or after this pandemic to help strengthen the private sector, particularly inclusive businesses?
For all of those people, including myself, who have built our careers on the crucial role of the private sector in driving more inclusive and sustainable development, which I continue to believe passionately in, the pandemic has been a sobering reminder of just how important good government and effective, evidence-based public sector leadership is, at the national level, or regional level, or city and local level.
The pandemic has made me realise more than ever that one of the key things companies need to be doing is advocating for effective government, and not trying to get rid of all regulations, avoiding tax payments and minimising the role of government. We need strong, reliable, evidence-based government and public sector leadership. I would make that point as a start. There would be many more companies that would be bankrupt already, and millions more job losses, and hundreds of millions more people who would be falling into or back into poverty if there had not been massive government relief packages in response to the pandemic. Some US$10 to 15 trillion have already been committed around the world in local, national and regional response and recovery packages provided by governments. I think there are going to be interesting opportunities for public and private partnerships going forward, but these big government recovery packages are going to be incredibly important, not just in general recovery, but in efforts to foster other initiatives such as increasing inclusion, strengthening the social contract, and driving “net zero” and other climate objectives as part of the recovery. The EU Green Deal is an example at the regional level.
Linked to that, a number of governments are embedding responsible business requirements for the companies that are benefiting from recovery packages. The French and the Danish governments, among others, are not providing stimulus funding to companies that are based in tax havens. That's just one example. There's a range of requirements that governments are putting in place as part of recovery packages to make these more inclusive and climate friendly. They are saying to companies, "Okay. We're going to help you out, but this is what we expect in return. This isn't just about you going back to being profitable again. It's about being profitable, and more inclusive, and green, and responsible.” Clearly, this is not happening everywhere, but there are hopeful examples of what is possible.
When it comes to public-private partnerships, is there still something you would like to add? You've already tackled the topic a bit, but is there anything you would still want to highlight?
I think for those of us who believe in public-private or multi-stakeholder partnerships, the pandemic has demonstrated more than ever just how necessary they are. We’ve talked about stakeholder relationships being important to business resilience. I think public-private partnerships are also crucial to community resilience, national resilience and global resilience. I would highlight four areas where we’re seeing an increased focus on public-private partnerships – both because of the pandemic and because of a growing awareness of racial and other forms of inequality and injustice.
The first has been around the immediate emergency response. There have been a variety of public-private partnerships focused on protecting peoples’ lives, health and safety, maintaining as many jobs and livelihoods as possible, and supporting online learning and education. In short, mitigating some of the terrible social and economic costs of the pandemic. And that's still at an early stage.
Secondly, also still at an early stage, exciting public-private partnerships are emerging around research and development when it comes to developing vaccines, treatments and other innovative solutions to address the public health challenges directly caused by the pandemic as well as strengthening health and food systems more broadly.
A third area of evolving partnerships is around efforts to achieve a more inclusive and sustainable recovery, and to recommit to the Sustainable Development Goals.
Fourth are public-private partnerships around the “future of work” and jobs. Work is going to change for hundreds of millions of people who already have jobs or who had jobs at the outset of the crisis. The pandemic is accelerating digitisation, automation and other disruptive technologies. At the same time, in the face of growing levels of unemployment, hundreds of millions of young people, particularly in Africa, are coming into a workforce without traditional formal sector jobs. We have got to fundamentally rethink not only the future of work but the future of livelihoods and meaningful adulthood and citizenship. Concepts such as universal basic income, valuing unpaid or low paid care work and developing models that combine paid and volunteer or public service work will need to be explored by companies and governments. The answers are going to be different by country and different sectors, but business and government are going to have to work together to shape the future of work , and linked to that, the future of education and learning. For example, what are the high potential inclusive business models that can get learning and education to more people more affordably and reliably on digital platforms?
You already mentioned research. Are there recent knowledge products (i.e. the Covid-19 Response Framework you produced with Business Fights Poverty) you would like to highlight that relate to the topic of business resilience, in particular in the area of inclusive business?
There is a substantial body of evolving academic research and practitioner guidance being produced. In terms of practitioner guidance, in addition to the Business Fights Poverty platform, I would recommend the IFC’s recent study on leveraging inclusive business models to support the Base of the Pyramid during Covid-19. The Aspen Network of Development Entrepreneurs has done useful research and launched a Women's Entrepreneur Fund, and other inclusive business model platforms such as Business Call to Action, the World Business Council for Sustainable Development, Endeva, and the Global Impact Investing Network are doing great work. Also, a number of the consulting firms are doing interesting work, like McKinsey, the Boston Consulting Group, KPMG, Deloitte, EY, PWC, Accenture Development Partnerships, Dalberg, Corporate Citizenship and FSG. There is now a much greater recognition on how important resilience is, because we are going to continue to have systemic shocks, whether they're human-made or natural ones, and other major disruptions due to geopolitics, technological transformation, economic shifts and climate change.
What advice, maybe also personal advice, would you have, if you would speak to an entrepreneur now who is struggling, especially in women-led enterprises? What would you recommend to them for staying resilient apart from all the very insightful information you've already provided?
I'm so inspired and humbled by the entrepreneurs I know, either personally as friends, or the ones I study or just read about. Most of them are dealing with an unimaginably difficult situation. What inspires me most about them is the way they value relationships – with extended family and friends, social networks, as well as business relationships. At a time when there's such intensity of demands, stress and worry, and many tough decisions that have to be made, re-engaging and recommitting to the quality and the meaning of our personal and professional relationships is so very important.
Second, and this is really an extension of that, I would suggest to look at what business associations, business networks, intermediary organizations and business advocacy groups are doing. How can they help entrepreneurs get targeted access to government stimulus packages, donor support, and other types of support? Are there ways entrepreneurs can collaborate with each other to share risks and resources? Or to advocate for specific public policies and market incentives?
Third, is the need to innovate and adapt. It's easy to say, and I know it's very difficult to do, but what's so amazing about many entrepreneurs, particularly entrepreneurs in the inclusive business space and social entrepreneurs, is their ability to pivot and adapt, to see opportunity where others just see problems, to be innovative and creative and to harness the best of technology and people. As research by the IFC, Business Fights Poverty and Endeva has shown, companies with inclusive business models are doing a lot of innovation to adapt their technology platforms, products, services, distribution channels and pricing models to become more resilient and effective at serving vulnerable and low-income people during this crisis.
In closing, I have the deepest respect for two groups right now. First, health workers and other essential workers, who are working tirelessly to keep the rest of us healthy, safe and comfortable, often on low wages with minimal benefits and insufficient personal protections. Second, inclusive businesses, social entrepreneurs and community-based organizations, many of whom are struggling, yet they are still leveraging an inspiring spirit of possibility and entrepreneurship, and looking for solutions not only for their own continuity, but also how they can contribute and make a positive difference during the pandemic. The entrepreneurs who seem to be the most effective and resilient are those with strong stakeholder relationships and support networks, who know how to work with others and build coalitions, and who are most creative and innovative in combining diverse relationships, technologies, sources of financing and business models to keep delivering essential products and services to the people who need them.