Simply ensuring some level of participation by marginalised groups may be insufficient to tackle economic inequality, as Caroline Ashley argues in her editorial, but inclusive business models can be highly innovative and structure their businesses to allow underrepresented groups to thrive.
Inclusive businesses can help address economic equality when they feature targeted processes or policies that level the playing field. They can address an imbalance of power by providing more equal representation for all stakeholders, for instance by including workers in participatory governance structures.
IBs can also address inequality by providing opportunities for decent work and women’s economic empowerment.
Inclusive business entrepreneurs highlight the importance of educating the consumer and cultivating long-term empathy rather than short-term sympathy for greater impact.
In order to address inequality, equitable partnerships allow innovative IBs to partner with larger partners to scale up and expand their reach.
Economic inequality is a chasm that is not easy to overcome, but conventional businesses can learn from innovative IB models how an intentionally diverse, people-centred approach can put equity at the heart of company policy.
Economic inequality is a chasm that inclusive business can help overcome.
Inequality was already on the rise globally even before the Covid-19 pandemic caused widespread economic shocks. The UN World Social Report 2020, released in January, showed that the richest one percent increased their share of income between 1990 and 2015 while the bottom 40 per cent earned less than a quarter of income in all countries surveyed.
The coronavirus pandemic has only exacerbated the gap between the haves and the have-nots. Between April and June 2020, in the U.S. alone the fortunes of the top five billionaires rose by $102 billion, increasing their wealth by 26 per cent. The combined wealth of US billionaires increased by over $637 billion to a total of $3.6 trillion, more than the entire wealth of all 54 countries in Africa. At the same time, the World Bank estimated that the pandemic would push an additional 88 to 115 million people into extreme poverty this year.
To address the challenges of economic inequality, are there insights about equity and inclusion that conventional businesses can glean from inclusive businesses (IBs)? IBs are inclusive because they include those living at the base of the economic pyramid in their business model. However, Caroline Ashley makes the argument in her editorial that simply ensuring some level of participation by marginalised groups is not enough. “Some of the best pioneers in inclusive business have already turned conventional business models on their head to enable marginalised people to thrive, but across the piece, we need to see greater ambition, and willingness to dramatically revise the business model to address inequality,” she writes.
"We need to see greater ambition", writes Caroline Ashley.
Inclusive businesses can help address economic equality when they feature targeted processes or policies that level the playing field. They can tackle an imbalance of power by providing more equal representation for all stakeholders. “Inclusive businesses are directed by participatory decision-making and inclusive governance, shifting power to people who are often left out of business decisions affecting them,” says Lonne Poissonnier, Policy Officer for CONCORD Europe, a coalition of European NGOs, who highlights the transformative nature of inclusive business models in her blog. For example, Manos Del Uruguay, a fair trade fashion producer, provides a management role for artisanal women.
Other ways in which inclusive businesses can promote equality are by facilitating access to finance and helping suppliers at the base of the pyramid to negotiate fair prices. IBs, unlike conventional businesses, are often mission or values-driven and people-centred. “By putting values at the centre of their business model, they help people and communities increase their resilience,” argues Ms. Poissonnier.
Inclusive business provides opportunities for those at the base of the pyramid.
IBs can also address inequality by providing opportunities for decent work and women’s economic empowerment. For example, Black Mamba has a policy of pro-actively employing women, who have a lower status than men in Eswatini, while also providing education about women’s rights.
“By focusing purposely on hiring women and working with women in our value chain (80% of our employees are women and 70% of the smallholders we work with are women) we strive for gender equality and to improve their status in a strongly patriarchal society,” says Ms. Castellanos. She highlights her company’s partnership with local NGO Guba as vital to reaching her company’s goals.
Inclusive business can open doors – not only for women.
However, inclusive businesses are not always able to empower communities at scale without access to a large, loyal consumer base. Phoebe Swinn Yap and David Chen of Golden Sunland, a Singapore-based inclusive agribusiness, argue that empathy, not charity, is key. They believe that inclusive businesses can expand their impact by focusing on knowledge equity and the other side of the supply chain: consumers. “We need to move toward a newer narrative where we help consumers understand they are part of the problem, and thus are integral within the decision making process.” They also argue that inclusive businesses have an important role to play in educating consumers: “Inclusive businesses have roles and we would even venture to say responsibilities to tell stories in a manner that cultivates long-term empathy instead of short-term sympathy.”
Claudia Castellanos, co-founder of Black Mamba Foods, based in Eswatini, agrees that “consumers nowadays are demanding equality, as they are demanding fairness and good business practices.” Nicolas Simiyu, founder of FarmGRO Africa, also believes that clients are willing to pay more for good practices and traceability of supply chains. “These loyal clients can then be cultivated to solve the challenges mentioned.”
Inclusive businesses need a loyal consumer base.
Equal partnerships are important to support inclusive businesses to scale in an equitable way. However, this does not always occur naturally due to power imbalances, and often inclusive business entrepreneurs feel that they are at a disadvantage. MIT D-Lab’s 2019 cohort of Scale-Ups entrepreneurs, six entrepreneurs building inclusive businesses in East Africa, identified establishing equitable value chain partnerships with larger organizations as a top priority and challenge.
“To effectively and sustainably solve the world’s inequalities, it takes partnerships that can leverage the innovation and agility of social enterprises together with the reach and resources of large organizations,” writes MIT D-Lab Program Director Saida Benhayoune. MIT D-Lab used key lessons learned from a year-long joint learning lab in collaboration with SEED to design an innovative toolkit to help all stakeholders diagnose their specific gaps and map out an equitable partnership model.
Inclusive businesses can provide more equitable economic opportunities when they are supported by partners and stakeholders who provide an opportunity to scale up their impact and by loyal consumers who share their values. The most influential inclusive businesses are those that design around the needs of underrepresented groups and demonstrate innovation, ambition and the flexibility to restructure their business models. Policymakers and governments can further support businesses that are inclusive through regulation and legislation. Economic inequality is a chasm that is not easy to overcome, but conventional businesses can learn from innovative IB models how an intentionally diverse, people-centred approach can put equity at the heart of company policy.
Inclusive businesses and large companies can support each other if their partnership is equitable.
Additional research on economic inequality that could be relevant for inclusive business entrepreneurs is listed below:
- UN World Social Report 2020: The World Social Report 2020, published by the UN Department of Economic and Social Affairs (DESA), shows that income inequality has increased in most developed countries, and some middle-income countries.
- World Inequality Database: The World Inequality Database includes an interactive world map and country data.
- Our World in Data Global Economic Inequality Data: This site includes a number of graphs showing income inequality over centuries as well as inequality between countries.
- World Economic Forum article on inequality: This article highlights multiple forms of inequality and the effect of Covid-19 on them.
- Poverty and Shared Prosperity 2020: This World Bank report predicts that economies with lower levels of initial income inequality will observe a higher (absolute) growth elasticity of poverty reduction.
- OECD Employment Outlook 2020: This report shows that the Covid-19 pandemic affects vulnerable workers most.
- Oxfam and Development Finance International, Commitment to Reducing Inequality Index: This site provides a global ranking of government policies on reducing inequality with a focus on Covid-19 preparedness and response.
- The Elephant Curve of Global Inequality and Growth: The curve of cumulated growth from 1980 to 2016 by percentile of the global distribution of income per adult has an elephant shape. This is due to high growth rates at the median (fast growth in China and India), modest growth rates above the median, and explosive growth rates at the top.