Inclusive business is all about reaching people at the ‘base of the pyramid’ (BOP). Surely then it’s the best kind of business for reaching those who bear the brunt of inequality? And for demonstrating leadership to close the gap?
Perhaps. But I have a nagging concern that the inclusive business community is not ambitious enough when it comes to tackling inequality. Pockets of progress do not amount to the urgency, outrage, and pioneering leadership needed to tackle the stain of inequality.
Let me name my starting assumptions:
Firstly, that economic growth can go hand in hand with increased or decreased equality. There is complicated data and debate, but it’s a policy issue, not an inevitability.
Secondly, current levels of inequality, exacerbated by Covid-19, are shocking, and should be shocking us into action. Think how much global progress we have seen since 1980. Yet the UN reports that from 1980 to 2016, the income share of the bottom 50 per cent remained stuck at around nine per cent of global income. In the same period, the share of the top one per cent ranged from 16 per cent to 22 per cent of global income, and they captured over a quarter of the global growth in income.
A host of horrors remain tolerated yet in plain sight: modern slavery still occurs, 689 million people still live in extreme poverty, and for the first time in 20 years that number is on the rise again due to Covid-19. The World Economic Forum depicts this Covid-19 impact depressingly clearly: the rich have shifted to working from home and own assets some of which have boomed, while the poor have lost jobs in sectors that have slumped, work on the front line exposed to Covid-19, and live in countries that cannot afford Covid-19 bail-outs and/or in the informal sector, which is not supported. Racial and gender inequalities, which intersect with these economic inequalities, have been magnified.
Thirdly, I assume that governments have a huge role to play in shaping equality. But business models and business strategies also shape who gains, who doesn’t, and whether inequality widens or narrows among their stakeholders. And within the business community, inclusive businesses should be pioneers.
So why am I worried that IB might be falling short? I have nagging concerns about how we approach ‘inclusion’, asset-ownership, green business, and ambition for disruptive business models.
Just ‘inclusion’ is not enough
The term ‘inclusive business’ itself is a red flag. ‘Including’ people is not enough. In my years at Oxfam we worked to warn businesses against the ‘just add women and stir’ mentality. Simply ensuring some level of participation, by women or other marginalised groups, does not address fundamental barriers or ensure they have the legal rights, skills, and recognition to change the terms on which they engage and flourish.
Some businesses may be labelled ‘inclusive’ simply because they engage with people who live on low incomes. Where they have truly redesigned business models for low income groups to gain access to low cost health care, eyeglasses, education and training, information, or financial services, that is an important contribution to tackle the multiple dimensions of inequality. However, we still need to recognise that most inclusive businesses selling to BOP consumers are more likely to be reaching the poor living on US$3-5 a day, not $1-2 dollar a day.
The ‘inclusive businesses’ most likely to reach the dollar-a-day poor are those working with smallholders, simply because so many farmers are dirt poor. But just buying from poor people is not enough to address inequality or poverty. Improving farmers’ prices received and access to inputs is important, and fairly standard for inclusive business. But a ‘living income’ is still far away, and farmers also need power to negotiate prices, new roles in the value chain, and resilience to climate change. Such long-term perspectives are emerging (for example in the vision of Tony Chocolonely chocolate), but need to become standard.
There are some other great examples of inclusive businesses that design around the needs and priorities of marginalised groups. In this edition, Lonne Poissonnier from Concord illustrates how Indian’s SWaCH works with waste pickers, ELIO Social Laundries in Serbia employs women with disabilities, and Zambian Live Well targets under-served communities. In the last Clued-In edition, we heard how the e-training business Genashtim was designed from the start to provide employment for people with disabilities. In all of these cases, the business does not simply ‘include’ marginalised people but is designed so they can address entrenched barriers. Indeed, recognition of the need to address structural barriers is one of the most positive outcomes of the struggles and progress of Black Lives Matter in 2020.
Ownership affects inequality in wealth
The biggest issue in inequality is in wealth not income. It’s asset ownership, not worker earnings, that fuel the greatest rich/ poor divides. Take the example of India, where inequality has grown faster than in any other country except Russia in the last two decades. The richest one percent of Indians hold more than four times the wealth held by the bottom 70 percent of the country – that is, 953 million people.
We cannot talk about business and equality if we don’t look at who owns the business and who shares in its success. Oxfam’s Future of Business initiative notes that businesses structured as social enterprises do better on gender, race and pay, and it includes a tool to look at who has power and who gets profit. Kate Raworth’s design principles for an economy that lives inside the ‘doughnut’ – meeting basic needs of all and staying within planetary boundaries – includes an explicit focus on governance and ownership.
Within the inclusive business space, there is a welcome and growing raft of innovations in business structures: variations on cooperative structures, worker shares, worker buy-outs and community-owned businesses. Another great example from Concord’s blog is the fair trade fashion producer Manos Del Uruguay, which was set up by women’s producer cooperatives and ensures artisanal women play a role in management. These structures are reaching the mainstream. In the UK, the well-known example is the John Lewis Partnership, while Richer Sounds recently made headlines when founder Julian Richer announced plans to transfer ownership to staff.
Clean and green does not solve inequality
A ‘Race to Zero’ has started – a global campaign for a resilient, zero carbon recovery. I am thrilled that large and small companies are committing themselves to ambitious targets to reduce their carbon footprint. But this flags two issues to me about what we need in the inclusive business space.
Firstly, the race for business that is clean and green accentuates the need for inclusive business models that explicitly address inequality. The Business and Human Rights Resource Centre has flagged worrying problems with human rights performance in the renewable energy sector and action is needed it is to be truly net positive. The same goes for the about-to-boom 'Nature-Based Solutions'. Inclusive businesses models with a strong focus on inequality, and particularly land rights, are urgently needed in these new sectors.
Secondly, in seeking to address inequality, inclusive businesses need to demonstrate the ambition and openness to disruption shown by companies in the ‘Race to Zero.’ Success in net-zero commitments is premised on innovation and yet-to-emerge structural changes to business models, such as earning revenue from leasing products, not selling them. While some of the best pioneers in inclusive business have already turned conventional business models on their head to enable marginalised people to thrive, across the piece, we need to see greater ambition, and willingness to dramatically revise the business model to address inequality.