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UNCHARTED WATERS BLENDING VALUE AND VALUES FOR SOCIAL IMPACT THROUGH THE SDGS

Empowered lives. Resilient nations.

United Nations Development ProgrammeIstanbul International Center for Private Sector in DevelopmentKey Plaza Abide-i Hürriyet Cad. İstiklal Sok. No: 11, Floor: 5,Şişli 34381 Istanbul, Turkeywww.undp.orgwww.businesscalltoaction.org

Rights and PermissionsCopyright © 2016 United Nations Development Programme.All rights reserved.

September 2016

This document is copyright-protected by UNDP. The reproduction and distribution of this document for information and/or use is permitted with proper citation of the report. The views expressed in this publication are those of the author(s) and do not necessarily represent those of the Business Call to Action partners, including the donor governments, and United Nations, including UNDP or UN Member States.

For further information, contact:Business Call to Action: [email protected]

UNCHARTED WATERS: BLENDING VALUE AND VALUES FOR SOCIAL IMPACT THROUGH THE SDGS 1

Contents

Foreword 2

Acknowledgements 4

Introduction 5

Business and the SDGs: Why It Matters 7

Five ways the SDGs can help Business Generate Value 7 ThreeNotableTrendsEnhancingValueCreation 10 The Role Inclusive Business can play in Driving SDG Alignment 11 Aligning with the SDGs is Good for Business 11

Inclusive Business Outlook: Five Promising Sectors 13

Successful Models in the Five Sectors 13 Financial Returns in the Five Sectors 13 PotentialSDGImpact 13

Are You Ready for Inclusive Business? 25

Understanding your Inclusive Business Maturity 25 The Six Levels of Inclusive Business Maturity: From Bystander to Champion 25 TheInclusiveBusinessMaturityDiagnostic 27

Charting a Course through Inclusive Business 31

The Inclusive Business Process 31 The Inclusive Business Guide 34

Inclusive Business in Practice 49

Novartis 49 JuanValdez 50 TopTenInclusiveBusinessCriticalSuccessFactors 51

Conclusion 53

Appendix 1: The Sustainable Development Goals 54

Appendix2:WorldBank’sGlobalConsumptiondatabase 56

Appendix 3: Inclusive Business Briefs 58

Appendix4:ContributionstotheSDGsbyEngagementType 61

2 UNCHARTED WATERS: BLENDING VALUE AND VALUES FOR SOCIAL IMPACT THROUGH THE SDGS

Foreword

InSeptember2015,theinternationalcommunity achieved consensus on a historic new agenda for change. A range of stakeholders not only collaboratedonthepost-2015agenda,but established a concrete blueprint forglobaldevelopmentto2030–theSustainable Development Goals (SDGs). By recognizing the vital role that the private sector can play in addressing globaldevelopmentchallenges,theSDGagendarepresentsasignificantshiftinstrategyfromtheMillenniumDevelopmentGoals(MDGs).The2030Agenda calls on businesses ranging frommicroenterprisestomultinationalcorporations,“toapplytheircreativityandinnovationtosolvesustainabledevelopment challenges”. One year later,thereisstillanenormousgapinresources needed to achieve the SDGs. Itisclearthatadiversityoffinancing

sourceswillbecriticaltomeettheseambitiousgoals,andthereisagrowingrecognitionthattheSDGsarecreatingrealopportunitiesforthebusinesseswho help to meet them.

Sensingtheseopportunities,companiesare moving beyond the concept of ‘social responsibility’ towards core business models focused on improving people’s lives. These companies are findingwaystoaddresstoday’smostpressing challenges through business ventures that integrate poor and vulnerable people all along their value chains,empoweringthemtoparticipatein–andbenefitfrom–sustainabledevelopment.

AstheUnitedNations’Developmentarm,UNDPhasakeyroletoplayinhelpingcountriestoeradicatepoverty,significantlyreduceinequalitiesandexclusion,andsafeguardtheenvironment. With its Istanbul Global Policy Center and the Business Call toAction,UNDP,inpartnershipwiththe private sector and governments (especiallythroughitsworkontheG20-endorsed Inclusive Business Framework) islayingthefoundationforinclusivebusinessestogrow,thriveandsupportthe achievement of the Global Goals. Thesehistoricgoalsreflectthegrowingacknowledgement that many global issuesaretoocomplexforgovernments,theUnitedNationsortheprivatesectorto tackle alone.

Asthismovementgainsmomentum,consumers and other stakeholders are voicingtheirexpectationsforcompaniesto deliver social as well as economic value. This report demonstrates how the SDGs can help businesses to generatevalueinvariouscontexts,from establishing a market niche in tomorrow’smiddleclasstoattractingtoptalentcommittedtocreatingsocialcapital. But individual businesses cannot do it alone: partnerships are paramount for harnessing the SDGs to drive social and business growth.

Since the majority of private investment remains focused on higher-income consumers–whocompriseasmallfractionofthetotalmarketpotential–therearestillsignificantopportunitiesfor businesses to deliver impact in low-income markets. New technologies such asmobile-moneyplatformsareenablingpoorcommunitiestoaccessproductsand services that greatly improve their lives,andthereisampleevidencethateventhepoorestcommunitieshavesignificantpurchasingpower.Beyondafocusonconsumers,companiescanleverage the SDGs by building inclusive supply chains that make the most of natural and human resources in underserved areas.

Ofcourse,thereareriskstosocialinnovation,andtherewardsmayseemdifficulttoattain.Barrierscanincludehighopportunitycosts,undevelopedpolicyframeworksandcapacitygaps,


nottomentiontheneedtoestablishdemand and trust among the target market.Butissueslikepoverty,hungerandinequalityaretooimportantnottotackle–weallstandtoloseifconcerted,collaborativeeffortsarenotmadetowardssustainableandequitabledevelopment. Using the SDGs as a guide allows businesses to incorporate lessons learnedbytrailblazingcompanies,builduponexistingdatatocreatenovelpathwaysforinnovationandtapintofast-growing markets.

AsajointcollaborationbetweenUNDP,itsIstanbulInternationalCenterforPrivateSectorinDevelopment,theBusinessCalltoActionandDeloitte,this report is intended to aid business leaders in pursuing inclusive business as a key to advancing the SDGs. It explains thebusinessopportunities,offersanassessmentofexistinginclusivebusinessmaturityandprovidesconsiderationsforhowtodesign,measure,communicateand scale impact in line with the SDGs. The report aims to illustrate how the SDGs can be leveraged by private-sector companies to select and develop inclusivebusinessprogrammes,andhowcompaniescanmeasure,evaluateand communicate the impact of inclusive business on the SDGs. It is complemented by the web-based toolkit thatcanbeusedasaself-instructivelearningplatformforcompaniestoassess their models’ maturity level and navigateopportunitiestoleveragetheSDGs for inclusive business.

Development means business: sustainable development must incorporate smart economics. We earnestly hope that this report and accompanying toolkit will support more businesses in aligning their core strategies with the SDGs. In an increasingly complex world challenged bypoliticalinstability,risinginequalityandenvironmentaldegradation,businesses need to ask themselves: it is simplyenoughto‘donoharm’,orisittimetobecomepartofthesolution?

Marcos Neto

Director, Istanbul International Center for Private Sector in Development (IICPSD)Bureau for Policy and Programme Support (BPPS)United Nations Development Programme (UNDP)

Acknowledgements

This report and the accompanying toolkit were prepared by a dedicated team from Deloitte’sSocialImpact*andtheUNDP-hostedBusinessCalltoActionundertheoverall guidance and project manage-mentofSahbaSobhani(UNDP),withinputsandcontributionsfromTatianaBessarabova,TatsianaHulkoandMinjaNieminen(BusinessCalltoAction).WewouldliketoacknowledgeDeloitteConsultingfortheircontributionstothisreport,specificallyW.RobertdeJongh,Alina Capanyola and Abby O’Reilly.

We extend special thanks to UNDP colleagues who lent their expertise essential to the creation of this report:

PedroConceição,DirectorofStrategicPolicy,BureauforPolicyandProgrammeSupport

HansinDogan,PrivateSectorProgrammeManager,UNDPTurkey

MoiraFeil,PolicySpecialist,BureauforPolicy and Programme Support

CarolineLensing-Hebben,ProgrammeSpecialist,BureauforPolicyandProgramme Support

MarcosNeto,Director,IstanbulInternationalCenterforPrivateSectorinDevelopment

NaruePauliloShiki,SeniorAdvisor,StrategyandInnovation,BureauforExternalRelationsandAdvocacy

PaulaPelaez,ProgrammeManager,BusinessCalltoAction

GulcinSalingan,DeputyDirector,IstanbulInternationalCenterforPrivateSector in Development

NikSekhran,DirectorforSustainableDevelopment,BureauforPolicyandProgramme Support

We would also like to thank the fol-lowing experts for their support and insights:

CarolineAshley,DirectorAshelyInsightsandEditor,PractitionerHubforInclusiveBusiness

AnnoGalema,Coordinator,PublicPrivatePartnerships,MinistryofForeignAffairsoftheNetherlands

CeciliaBrady,SeniorPartnershipsAdvisor,CenterforTransformationalPartnerships,USAID

CeciliaBrumer,ProgrammeManager/Specialist,DepartmentforPartnershipsandInnovations,Sida

LilianadeSáKirchknopf,HeadofDivisionPrivateSectorDevelopment,FederalDepartmentofEconomicAffairs,StateSecretariatforEconomicAffairs

LucaEtter,ProgramManager,Swiss Agency for Development and Cooperation

PatrickEgli,DeputyHead,DivisionforGlobalInstitutions,SwissAgencyforDevelopmentandCooperation

ErikoIshikawa,GlobalHead,InclusiveBusiness,IFC

MarkIngram,ChiefExecutiveOfficerofthe Business for Development

ChristianJahn,ManageroftheInclusiveBusiness,GIZ/ExecutiveDirector,IBAN

MelinaHeinrich-Fernandes,SeniorPSDSpecialist,TheDonorCommitteeforEnterprise Development

IanMiller,ProgrammeManager,BusinessEngagementHub,DFID

JohnMennel,ManagingDirector,SocialImpactPractice,Deloitte

KathleenMignano,AssociateOperationsOfficer,IFC

ChristinaTewes-Gradl,FounderandManagingDirector,Endeva

JimTanburn,Coordinator,TheDonorCommitee for Enterprise Development

KurtDassel,Director,SocialImpactStrategy,Deloitte

ChrisJurgens,Director,GlobalPartnerships,USAID

NateWong,Manager,SocialImpactStrategy,Deloitte

MikaVehnämäki,SeniorEconomicAdviser,MinistryforForeignAffairsofFinland

We are thankful to the following BCtA member companies who have provided the rich insights and perspectives that made this report and the accompanying toolkit possible:

AccuHealthaWhere BataCEMEXClickMedix JacarandaNovartisSanergy

Expert reviewers:

MarcosNeto,Director,IstanbulInternationalCenterforPrivateSectorinDevelopment,UnitedNationsDevelopment Programme (UNDP)

NaruePauliloShiki,SeniorAdvisor,StrategyandInnovation,UnitedNationsDevelopment Programme (UNDP)

MarioElíasGonzalezLupercio,SocialInnovationAdvisor,CEMEX

Copy-editing: HopeTraficantiDesign: Laurie Douglas

*As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.


1 TheGuardian,“PaulPolman:ThePowerinthehandsoftheconsumers.”November21,201,http://www.theguardian.com/sustainable-business/unilever-ceo-paul-polman-interview

Introduction

Weliveinaneraofunprecedentedtransformation:fromtheInternetofThingstothesharingeconomy,acceleratingurbanizationtoshiftingconsumerdemand,thissocio-eco-nomictransformationisprofoundlyimpactingthewaywecoexist.Inbusiness,disruptiveinnovationfromthelikesofUber,NetflixandBitcoinhaveupendedmainstreamindus-tries,pushedcompaniesoutsideoftheirtraditionalsilosandacceleratedtheneedforresilienceanddifferentiation.Inthedevelopmentcontext,acombinationoftraditionalaidandmarket-basedsolutions,inmanyinstancesledbytheprivatesector,hascontributedtoanacutereductioninpoverty among the world’s 4.5 billion poor people over the lastdecade.Butdespitetheseimprovements,inequalityre-mainsamajorchallenge,puttingatriskmuchoftheprogressmade to date. The historic response envisioned through the Sustainable Development Goals (SDGs) and the commitments madeasaresultoftheClimateSummitinParisofferaunique,once-in-a-generationopportunitytoseizeontheconvergenceof intent across sectors that can set the world on a path of global sustainability and inclusive growth. What then should betheroleoftheprivatesectorinpursuingsocialimpact? Isittheroleofbusinesstolead?Andifso,how?

Businesses previously relegated the pursuit of social impact todistinctphilanthropicorcorporateresponsibilityefforts.Overthelastfewyearshowever,theprivatesectorhascometorecognizethatcontributingtothepaceandpatternofgrowth,andplayinganactiveroleinsocietyisthesharedresponsibilityofthepublic,privateandsocialsectors.Moreimportantly,theunderstandingthatthiscontributionshouldbe integrated into companies’ core business and should be an inherentpartoftheircreationofvalueishelpingbusinessestosucceedintoday’smarkets.Recognition,ofcourse,ismerelythefirststeponthejourneytowardsocialimpact.

This paper and accompanying toolkit were designed as a practicalreferenceforbusinessestounderstandwhyandhowtheycanembracethisjourneyinthecontextoftheSDGs,andwhyinclusivebusinesses–corebusinessmodelsthatintegrate underserved markets into companies’ value chains

–canacceleratebothbusinessgrowthandsocialimpact.Thisdocument recognizes that business represents just one of themultitudeofimportantstakeholdergroupsintheglobaldevelopment marketplace that must interact with other sectors to achieve and sustain impact at scale. Because this isintendedtobethefirstinaseriesaddressinghowdifferentactorsmighteffectivelyengagewithandsupporttheSDGagenda,thescopeofthispaperisconfinedtofourbusiness-centered themes:

• WhytheSDGsshouldmattertobusiness;

• HowthepursuitoftheSDGsthroughinclusivebusinesscanincreasegrowthandcompetitiveness;

• The degree to which your business might be ready to developintoaninclusivebusiness;and

• Oncethedegreeofreadinesshasbeenestablished,howtostart,develop,refineandoptimizeyourinclusivebusi-ness.

We recognize that inclusive business is not a panacea. The last decade has borne witness to hundreds of inclusive business ventures with varying degrees of success. As many of these exampleshavebeencataloguedandanalyzed,wehavenotedrelevant case studies and discussed examples of successful modelsandexperiences,criticalfactorsforsuccessandpotentialpitfalls.

Ourhopeisthatthisguidewillserveasaconversationstarterfor businesses that seek to align with the SDGs and are keen toinitiate,developorscaletheireffortsthroughinclusivebusiness. In an increasingly complex world challenged by politicalandeconomicinstability,thegrowingneedsofarapidlygrowingmiddleclass,risinginequality,evolvingconsumerpreferences,changinginvestorperspectivesandmostimportantly,aconfluenceofvaluesandvalue,businesses need to ask themselves whether they are ready to seekamoreintentionalpathwaytowardpurpose.AsUnileverCEOPaulPolmansaid,“Wedonothavetowinattheexpenseofotherstobesuccessful.Winningaloneisnotenough,it’sabout winning with purpose.”1


Business and the SDGs: Why It Matters

Inanincreasinglyinterconnected,complexandturbulentworld,businessisnavigatingunchartedwaters.Amidstthisuncertainty,theglobalcommunitycametogetherinaglobalcalltoactiontoguideallstakeholders–includingbusiness–inbuildingamoresustainable,equitableandinclusivesociety. While the SDGs (see Appendix 1) were designed for andapprovedbygovernments,theyalsoconstituteaglobalframeworkformeasuringbusinesscontributionstosociety–how companies can ‘win with purpose’. According to a recent survey,morethantwothirdsofparticipatingcompaniessaidtheywerealreadyplanningtoengagewiththeSDGs,butlessthan half plan to embed them into their business strategy inthenextfiveyears.2AstheUNGlobalCompact2016CEOSurveynotes,only59percentofcompaniesreportthattheircompanyisabletoaccuratelyquantifythebusinessvalueoftheirsustainabilityinitiatives.3 Therefore,thecentralquestionis:ShouldtheSDGsreallymattertobusiness?

Five ways the SDGs can help Business Generate ValueInshort:Yes–theSDGsaremorethanjustanaspirationalframework for governments. They are a roadmap for business opportunity. There are a number of compelling reasons for businesses to pursue social impact and engage with the

SDGs. Beyond the need to heed society’s call for greater transparencyandaccountability,blendingpurposewithprofitcangenerateauniquecompetitiveadvantagewell-suitedtodiscerning consumers and investors. Five distinct drivers of financial value compel companies to make both social impact and SDG alignment part of their core business in order to:

• GENERATE NEW REVENUEbycreatingnewopportunitiesformarketdifferentiationandgrowth;

• RECRUIT AND RETAIN TALENTbyoptimizingyourwork-force;

• INCREASE SUPPLY CHAIN RESILIENCE by enhancing supply chainsustainabilityandoperationalefficiency;

• SPAWN INVESTOR INTERESTbyincreasingattractivenesstoawiderrangeofinvestors;and

• ASSURE LICENSE TO OPERATE by addressing regulatory compliance and managing risks.

Generate New Revenue

In our global economy, the emergence of a new global middle class, dramatic shifts in consumer preferences toward ‘responsible’ products and frugal innovation are creating new markets poised for growth.

What are the Sustainable Development Goals?

InSeptember2015,worldleadersadoptedthe2030AgendaforSustainableDevelopment,whichincludesasetof17SustainableDevelopmentGoals(SDGs)toendpoverty,fightinequalityandinjustice,andtackleclimatechangeby2030.TheSDGsbuildontheMillenniumDevelopmentGoals(MDGs),eightanti-povertytargetsthattheworldcommittedtoachievingby2015.ThenewSDGsgomuchfurtherthantheMDGs,connectingdevelopmental,environmentalandeconomicconcernsunderatransformativeframework.

TolearnmoreabouttheSDGs,seeAppendix 1.

2 MakeityourBusiness:EngagingwiththeSustainableDevelopmentGoals,PWC2015.3 Agenda2016:AWindowofOpportunity,UNGlobalCompact—AccentureStrategyCEOStudy2016.


4 Kharas,Homi.TheEmergingMiddleClassinDevelopingCountries,OECDWorkingPaper285,2010.5 Kharas,Homi.TheEmergingMiddleClassinDevelopingCountries,OECDWorkingPaper285,20106 HittingtheSweetSpot:TheGrowthoftheMiddleClassinEmergingMarkets.ErnstandYoung,2013.7 TheCheckoutResearchStudy,TheGoodScoutGroup,2015.8 2013ConeCommunicationsSocialImpactStudy,ConeCommunicationsandEbiquity,2013.9 Ibid.10 DeloitteUniversityPress(2015).The purpose-driven professional: Harnessing the power of corporate social impact for talent development,

8 September. Availablefromhttp://dupress.com/articles/harnessing-impact-of-corporate-social-responsibility-on-talent/11 Ibid.12 TheCenterforTalentInnovation.HowDiversityDrivesInnovation:ACompendiumofBestPractice,February2014.

• AccordingtotheOrganisationforEconomicCo-operationandDevelopment(OECD),theglobalmiddleclassisexpectedtoexpandby3billionpeopleby2030.Bythen,59percentofmiddle-classspendingwilloccurinAsia;todayAsiaonlyaccountsfor29percent.4 This emerging market middle class will represent 3 billion newconsumersby2030and70percentofglobalconsumption.5

• With unprecedented global demand for goods and services,accessingnewmarketscanbehighlylucrative–includingthosewithagrowingmiddleclassandtraditionallyunderservedmarkets.Accordingtoarecentstudy,thissegmentcurrentlygeneratesoverUS$2.5trillion in annual income and is growing at a rate of over 8percentperyear.Astheirannualincomeincreases,sotoodoestheirdiscretionaryspendingonfoodandotheressentials.6

Beyondthepotentialforgrowthassociatedwitharapidlyemerginganddiverseconsumerbase,consumerpreferenceshavealsobeenshiftingdramatically:

• Onaverage,71percentofglobalconsumerssaythey would be willing to pay more for a socially or environmentally responsible products.7

• Accordingtothe2015ConeCommunications/EbiquityGlobalCSRStudy,91percentofglobalconsumers“unequivocallybelievecompaniesmustoperateresponsiblytoaddresssocialandenvironmentalissues”;90percentwould“liketoseemoreresponsibleproductsandservicesofferedfromcompanies”;and90percentarelikelytoswitchbrandstooneaffiliatedwithagoodcauseifqualityandpricearesimilar.8

• Finally,70percentofmillennialswouldmakepersonalsacrificestomakeanimpactonissuestheycareabout,includingpayingmoreforaproduct,sharingaproductrather than buying it or even taking lower pay to work for a responsible company.9

Recruit and Retain Talent

Beyond the generation of new revenue and growth, diversity and inclusion are increasingly tied to improvements in

company performance and are accelerating competition for talent. Businesses now competes globally for progressively scarcetechnicalandprofessionalskills.Corporatecitizenshipis emerging as an important criterion in the talent market. This has led to more socially conscious companies to gain an edge inattracting,engagingandretainingtopemployees.Thereisgrowingbelief–andevidence–thatbetterandmorediversetalentproducesbetterresults.Forexample:

• Seventy percent of millennials say a company’s commitmenttoitslocalcommunitywouldinfluencetheirdecision to work there.10

• Withincreasingtransparencyincompanyoperations,allgenerationsofworkers–millennials,babyboomers,retireesandgenerationXers–aremakingemploymentdecisions based on the type of impact companies are having on the world.11

• A2012researchreportfromDeloitteAustraliaentitled‘Waiter,isthatinclusioninmysoup?’identifiedan 80percentimprovementinbusinessperformancewhendiversity and inclusion were high. And according to the AmericanSociologicalAssociation,forevery1percentrise in the rate of gender and ethnic diversity in the workforce,thereisbetweena3percentand9percentrise in sales revenue.

• TheCenterforTalentInnovationinNewYorkfoundthatpublicly traded companies that embraced diversity were 45 percent more likely to have expanded their market shareinthepastyearand70percentmorelikelytohavecaptured a new market.12

Increase Supply Chain Resilience

Optimizing supply chains for resilience can lower transaction costs and increase operational efficiency. Beyond revenue increasesviagrowthandnewmarketopportunities,engagement in social impact can help to manage costs and optimizeefficiency.Forexample,supplychainsustainabilityis increasingly understood to be a core generator of business valuewhileprovidingmeaningfulcontributionstocompanies’reputationandbrand.Inthegrowingretailer-drivensupplychainenvironment,suppliersarelookingforopportunitiestodifferentiatethemselvesbynotonlyreducingcosts,butby


13 DeloitteConsulting.SupplyChainResilience:ARiskIntelligentapproachtomanagingglobalsupplychains,2012.14 TheWorldEconomicForumandAccenture.BuildingResilienceinSupplyChains,January2013.15 Accenture.Don’tPlayitSafeWhenitComestoSupplyChainRiskManagement,2014.16 USSIF.TheImpactofSustainableandResponsibleInvestment,June2016.17 Ibid.18 https://www.jpmorgan.com/cm/BlobServer/giin_2015.pdf?blobkey=id&blobwhere=1320674289058&blobheader=application/

pdf&blobheadername1=Cache-Control&blobheadervalue1=private&blobcol=urldata&blobtable=MungoBlobs19 https://thegiin.org/assets/2016%20GIIN%20Annual%20Impact%20Investor%20Survey_Web.pdf20 USSIF(2014).Report on US Sustainable, Responsible and Impact Investing Trends 2014.Availablefromwww.ussif.org/files/publications/sif_

trends_14.f.es.pdf21 http://www.sseinitiative.org/home-slider/seven-nasdaq-exchanges-join-global-campaign-for-esg-disclosure/22 HarvardBusinessReview(2010).“TheHiddenRisksinEmergingMarkets.”Availablefromhttps://hbr.org/2010/04/the-hidden-risks-in-emerging-

markets23 https://hbr.org/2010/04/the-hidden-risks-in-emerging-markets

integratingsocialandenvironmentalconsiderations.13 Some key trends in this area include the following:

• Eighty percent of companies involved a major survey had atleastoneinstanceofsupplychaindisruptioninthepast12monthsandover30percentreportedthatdisruptionsarecausinglossesinexcessofUS$250,000.14

• Recentstudieshavealsoshownthatsignificantsupplychaindisruptionscancutthesharepriceofcompaniesby7percentandcanhavelastingconsequences,especiallyinindustriessuchasfood,wheretotalprofitswillbeatriskby2030asadirectresultofsupplychaindisruptions.15

Spawn Investor Interest

Socially responsible investing (SRI) has eclipsed US$6 trillion per year – growing more than 76 percent since 2012 and meeting or exceeding market returns.16 The SDGs are coming to be seen as the framework against which many sustainable investments will be assessed for social and environmental impact. Companies pursuing social impact as a part of their core business strategies are seeing increased access to financinginadiversityofforms–fromphilanthropicgrantsandimpactinvestmentstopartialcreditguaranteesandpayforperformance.Thisphenomenonisnotnew,butrecenttrends show that it is becoming more common:

• ThesociallyresponsibleinvestingindustryexceededUS$6trillionintheUnitedStatesalonein2014andstandsatUS$21.4trillionglobally,representing30percentofallprofessionally managed assets in the regions covered by the global survey.17

• Impactinvestorsanddevelopmentfinanceinstitutionshavebeenleadingthewayincreatinganewimpactinvestingassetclassthatisprojectedtogrowfrom US$51billionin2014toUS$400billionin2025.Thisfigureislikelytocontinuetogrowatnearly20percentper year.18Impactinvestment’sshareinglobalfinancialmarketsisestimatedatonly0.2percentofglobalwealth.Ifthissharerisestojust2percent,itcouldmeanoverUS$2trillionhasbeeninvestedinimpact-drivenassets.19

• Inpublicmarkets,majormoneymanagersareexpandingthepracticeofenvironment,socialandcorporategovernance(ESG)integration–thesystematicandexplicitinclusionofESGrisksandopportunitiesintotraditionalfinancialanalysis–towiderportionsoftheirportfolios.20

• Stockmarketsarebeginningtofollowsuit,withsevenNasdaqexchangesjoiningtheglobalcampaignforESGdisclosure–trulyemphasizingtheimportanceofsociallyresponsible business.21

Assure License to Operate

Aligning with the SDGs allows companies more options when managing risks associated with their license to operate. An emphasis on transparency and accountability combined withenvironmentalpressurescontinuestotranslateintoincreasingregulatoryscrutiny.Infact,policyandregulatoryriskhasrisendramaticallyinemergingmarketssincethe1980s.22 Companies that explicitly recognize the dynamism of the environment in which they operate can implement appropriate strategies to address it. Strong community relations,goodwillfromgovernmentsandrespectfromlocalscanmitigatepoliticalandregulatoryrisks.23

Governments are increasingly providing both positive and negative incentives to support domestic production and consumption, which can accelerate inclusive business devel-opment. A growing number of countries around the world aresupportinginclusivebusinessesthroughavarietyofpolicyinstruments.Theseeffortsaredrivenbythegovernments’desire to engage the private sector in order to accelerate the pace of addressing poverty and other social and environmen-tal challenges. Government approaches typically focus on:

• Enabling inclusive businesses to enter and operate in low-incomemarkets(i.e.byremovingobstructivepoliciesormakinginformationonconsumptionpatternsavailable);

• Assistinginclusivebusinessesinintegratingthelow-income market segment into their value chains (by encouraging companies to source from low-income producers);and


24 GSMA(2015).The Mobile Economy.Availablefromhttp://www.gsmamobileeconomy.com/GSMA_Global_Mobile_Economy_Report_2015.pdf25 http://www.hbs.edu/faculty/Pages/item.aspx?num=4110426 Agenda2016:AWindowofOpportunity,UNGlobalCompact—AccentureStrategyCEOStudy2016.27 http://www.wri.org/events/2015/09/call-joint-action-achieve-sdgs-advancing-integrated28 AmountsMobilisedfromthePrivateSectorbyOfficialDevelopmentFinanceInterventions:Guarantees,syndicatedloansandsharesincollective

investmentvehicles.OECDDevelopmentCooperationWorkingPaper,2016.

• Empoweringlow-incomecommunitiestoparticipateininclusive business value chains (by building their capacity andbyprovidingaccesstofinancing).

In2015,theG20InclusiveBusinessFrameworkidentifiedalist of policy instruments available to governments to support inclusive business. These instruments were organized around thecorechallengesfacedbyinclusivebusinesses–rulesandregulations,financing,informationandcapacity.

Thefivedriversoffinancialvalueclearlyoutlinewhybusinesses should integrate social impact into their core businessstrategies.Todaymorethanever,eachofthesedriversisamplifiedbyprominentmarkettrends,fromtransformativetechnologytoresponsiblegovernanceandstronger partnerships.

Three Notable Trends Enhancing Value Creation

Transformative Technology

Technology is enabling companies to reach more consumers atalowercostthaneverbefore–shorteningthedistancetoreachcustomers,transcendinghistoricalconstraintsandenabling new business models. Take mobile technology: the mobileindustrycontributedUS$3trilliontoglobalGDPin2014;today’s3.6billionuniquemobilesubscribersaroundtheworldareexpectedtogrowbyanadditional1billionby202024anddatatrafficisexpectedtoincreasetenfoldinthenextfiveyears.Clearly,thebusinessopportunityissignificant.Moreover,stakeholdersareusingtechnologytobecomesavvierconsumers,employeesandinvestors.Thisproliferationofdataandincreasedaccesstoinformationisfuelingthetrend of conscious capitalism.

Responsible Governance

Companies are responsible to a growing set of stakeholders. AsaglobalCEOstates:“BeingaCEOisnolonger[just]dealingwithyouremployees,yourcustomers,suppliers,yourinvestors.Itisdealingwithgovernments,NGOs,with any interested party who decides to challenge your company.”25Meanwhile,shareholdersthemselvesarehelpingtolowerriskinbusinessactivity,reinterpretinglawsaroundfiduciarydutyandtheextenttowhichtheyrequireasolefocus on maximizing shareholder impact. As the corporate responsibility(CR)reportingchartbelowsuggests,therateofCRreportinghasdramaticallyincreasedoverthelast 30years.

Partnerships

Today’s most intractable challenges are blurring lines across sectors,withagrowingacknowledgement–notonlyingovernment–thatproblemsaretoocomplextotacklealone.In business as well these challenges present threats as well as opportunities,asseenintheintherecentUNGlobalCompactCEO survey that indicates 85 percent of businesses see cross-sectorcoalitionsandpartnershipsasessentialtoacceleratingtransformationtowardstheimplementationoftheSDGs.26 TheSDGsthemselvesunitethesesectors,providingacommonreportingplatformforimpact.27Inadditiontoanecdotalevidenceofanincreaseinpublic-privatepartnerships,thereisagrowingnumberofblendedfinancesources,withUS$36.4billionmobilizedfromtheprivatesectorbetween2012and2014byofficialdevelopmentfinanceinterventionsintheformofguarantees,syndicatedloansandsharesincollectiveinvestmentvehicles(development-relatedinvestment funds).28


29 G20(2015).G20 Inclusive Business Framework.Availablefromhttp://g20.org.tr/wp-content/uploads/2015/11/G20-Inclusive-Business-Framework.pdf

The Role Inclusive Business can play in Driving SDG AlignmentIntheprecedingsections,acasehasbeenmaderegardingwhytheSDGsandtheintentionalpursuitofsocialimpactshouldmattertobusiness.Yet,whilethereisincrementalunderstanding within the private sector that social impact in underservedmarketsrepresentsasignificantopportunityforgrowthandprofitability,mostinvestmentsarestillfocusedontheconsumptionandservicesneedsofmiddle-andhigh-incomeconsumers,whocomposeonlyafractionofthe total market. The remaining 3.7 billion who represent anincreasinglydynamicconsumermarket,diversesuppliernetwork,sourceofuntappedentrepreneurshipandnewchannelsfordistribution,innovationandproductivity,arerelegated to consuming substandard goods and services or aredeniedaccessaltogether.Toalargeextent,theperceptionremainsthatbusinesscannotoperateeffectivelyandefficientlyinlow-incomemarkets–andevenlesssoincommerciallyviable ways. So how can business take advantage of this mass marketopportunity?Beyondthinkingoftheseunderservedmarketssolelyasaconsumerbase,whatareotherwaysinwhichacompanycancreatevalueconsistentwiththeSDGs?Theanswer,inpart,isinclusivebusiness.

Inclusivebusinessisjustlikeanyotherbusiness–itdrivesrevenuegrowth,createsvalue,leveragesinvestment,accelerates expansion and enhances the company’s brand and reputation.Butthereisoneimportantdifference:inclusivebusinessesaredesignedtoprovideaccesstogoods,servicesandemploymentopportunitiestounderservedpopulationsincommerciallyviableways.Thesepopulationsareintegratedwithintheinclusivebusinessvaluechainassuppliers,distributors,retailersorcustomers.29Theycanbelarger,viable businesses seeking to accelerate growth by pursuing customers in new market segments and may be focused on mitigatingsupplychain,labour,competitiveorreputationalrisk by engaging underserved groups. Inclusive business contributestoacompany’sbottomlinebyincreasingprofitsandreducingcostsontheonehand,whileprovidingincomeandemploymentopportunities,andaccesstopreviouslyunavailableorlower-qualitygoodsandservicesontheother.Most inclusive businesses:

• Generatemarketreturnsasstrictlyfor-profitventures;

• Maintain social impact as a core part of their business strategies;

• Includeunderservedpopulationsassuppliers,distributors,consumersand/orsourcesofformalorinformal

• labour,andgeneratemeasurablesocialreturns;and

• Aredesignedwithscaleinmind,optimizingboththeroutetoimpactandcreationofcompanyvalue.

Aligning with the SDGs is Good for BusinessWhiletheSDGshavecreatedanewbusinessimperativeforsocialimpact,overthelastdecadeinclusivebusinesshasspawnedanewgenerationofbusinessmodelsthatcontributetocommercialsuccesses,transformativesocialreturnsandanimportant knowledge base. The convergence of the SDGs with theinclusivebusinessexperienceoffersauniqueopportunitytoleveragewhathasbeenlearned,builduponwhathasbeenprovenandcreatenewpathwaysforinnovation.Withthisinmind,therestofthisreportisfocusedonelaboratingthreeinclusive business insights:

• Fivespecificsectorsofferthegreatestopportunityforinclusive business in the context of the SDGs.

• Inclusive business readiness or maturity can provide clarity as to how a business should move forward given its current state.

• Understandingtheentireinclusivebusinessprocesscanallowforacomprehensiveapproach,avoidpitfalls,miti-gate risks and develop a pathway toward success.

Many companies pursue inclusive business as an economic opportunityoroutofeconomicnecessity.Theyspecificallyidentifyamarketopeninganddevelopabusinessmodelthrough which the unmet needs of poor people can be combined with their willingness and ability to pay. These modelsoftenrelyonfirstunderstandingtherealcostsandtrade-offspoorpeoplefaceinordertoreceivewhatisoftenasubstandardgoodorservice,andthencreatingamorecost-effectivealternative.Beyondseekingoutpoorpeopleasconsumerswithinawide‘wholepyramid’marketingstrategy,supplier-centeredinclusivebusinessmodelsfocusonexpanding a company’s supply chain to keep pace with market demandanddiversifyintonewproductswhentraditionalsupply channels are exhausted.

30 TheBOPisconsideredthelowestoflow-incomesegments,livingonlessthanUS$8.44perdayinpurchasingpowerparity.

Inclusive Business Outlook: Five Promising Sectors

Inlessthanfifteenyears,itislikelythatglobaldemandforfoodwillincreaseby35percent,forwaterby40percentandforenergyby50percent.Thesedramaticshiftsinconsump-tionrepresentaconsiderableopportunityforinvestorsandbusinesses,particularlyinclusivebusinesses,asvisualizedinthechartsbelow.Atthesametime,whileinclusivebusinessopportunitiesexistforabroadrangeofcompaniesinavarietyofindustries,howacompanygoesaboutaccessingthoseopportunitiesoftendiffersbyindustry.Inthissection,wespotlightfivesectorsthatshowsubstantialopportunitygivencurrentconsumptionpatterns,marketneed,socialchallengesandopportunitiesforsocialimpact.Foreachofthesefivesectors,weexploreexamplesofprominentinclusivebusinessmodelsaswellastheSDGstheyimpact.Thefivesectorsarefoodandbeverage,infrastructure,health,educationandfinancialservices.

Financial Returns in the Five SectorsTherearesignificantunmetneedsineachidentifiedsector,offeringbusinessesanopportunitytomeetdemand.Forsimplicity,weemployedaconsumptionviewtodemonstratefinancialreturns;however,itisimportanttorecognizethatfinancialreturnsarealsogeneratedthroughsupplyriskmitigation,effectivedistributionnetworks,strongerrelationshipswithgovernments(e.g.reducingadhocfines)andastrengthenedcorporatereputation.

Intermsofconsumption,consumersinboththegrowingmiddle class in emerging markets and in underserved populationsarecriticaltodevelopment.AnanalysisoftheWorldBank’sGlobalConsumptiondatabaserevealsthatthebase of the pyramid (we found the most common models appear to focus) alone30representsasignificantpercentageofthemarketineachofthesefivesectors.Whileprimarilydrivenbyvolume,notmargins,businessesthatonlyfocus on middle- and high-income consumers miss out on 62percentofthefoodandbeveragemarket;50percentoftheinfrastructure,healthandeducationmarkets;andmorethan20percentofthefinancialservicesmarket.Additionally,fromashareofconsumptionperspective,theBOPisinvesting75percentofitsannualincomeinthesefivesectors.While

themarginsaresmall,themarketsizeforeachsectorislarge(SeeAppendix2fordetailsonthisconsumptiondata).

Successful Models in the Five SectorsSuccessful models (detailed by sector in the tables below) indicate that inclusive business strategies are possible and profitable.Ourbusinessmodelanalysisprimarilydrawsonextensive research by Monitor Inclusive Markets and the BusinessCalltoActionacrosshundredsofmarket-basedsolutions.TheanalysisalsoincorporatesmodelsidentifiedbytheInternationalFinanceCorporation.Businessleadersmay develop inclusive businesses in alignment with one identifiedmodel,incorporateelementsfrommultiplemodelsorcreateentirelynewmodels.Theresearchshowsthatthemostcommonmodelsappeartofocusonadaptingcomponentsforthesakeofaffordability(e.g.payasyougo),mobile technology (e.g. mobile-enabled services) and local distribution(e.g.alocaldedicateddirectsalesforce).

Potential SDG ImpactEach featured sector plays an integral role in the daily lives of people at the BOP in terms of SDG impact. These sectors offersignificantpotentialforjobcreation(SDG8:DecentWorkandEconomicGrowth)aswellasimprovedproductivityandearningpower(SDG10:ReducedInequalities).Inclusivebusinesses in these sectors also contribute to greater wellbeingandempowerBOPhouseholdstoliftthemselvesout of poverty (SDG 1: No Poverty).

Thefollowingpageshighlightbusinessopportunities,viablebusinessmodels,successfulcompanyexamplesandopportunitiesforimpactingtheSDGsineachofthesesectors.Notethattheselectionofthesefivesectorsdoesnotmeanthat successful inclusive businesses cannot be developed inothersectors.Infact,inclusivebusinesseshaveshownsuccessacrossindustries,asdemonstratedinthepagesthatfollow. It is also important to note that country context (e.g. localpartners,governments,locallawsandcountrystability)canmakeanenormousdifferenceinthesuccessofinclusivebusinesses in each of these sectors.


31 GIZ(2012).Growing Business with Smallholders: A Guide to Inclusive Agribusiness,November2012.Availablefromhttp://www.endeva.org/wp-content/uploads/2014/11/Guide-Growing_Business_with_Smallholders_large-2.pdf

32 Ibid.33 http://www.huffingtonpost.com/hugh-locke/smallholder-farmers-are-t_b_7865848.html?ir=India&adsSiteOverride=in34 FAO(2015).The State of Food Security in the World.Availablefromhttp://www.fao.org/3/a4ef2d16-70a7-460a-a9ac-2a65a533269a/i4646e.pdf35 Nielsen(2015).We Are What We Eat: Healthy Eating Trends Around the World,January2015.Availablefromhttp://www.nielsen.com/content/

dam/nielsenglobal/eu/nielseninsights/pdfs/Nielsen%20Global%20Health%20and%20Wellness%20Report%20-%20January%202015.pdf36 MonitorGroup(2011).Promise and Progress: Market-Based Solutions to Poverty in Africa,May2011.Availablefromhttp://web.mit.edu/idi/idi/

Africa-%20PromiseAndProgress-MIM.pdf37 Ibid.38 Ibid.39 Ibid.40 Ibid.

Food and BeverageEngage the BOP as suppliers of agricultural products or as customers for agricultural goods and services

The Opportunity Foodproductionmustincrease50percentby2030tomeet the needs of the world’s growing population.31Dramaticallyacceleratingglobalfoodrequirementsoffercompaniesanopportu-nity to meet this demand.

Increasesinfoodproductionmustcomeprimarilyfromemergingeconomiesgiventhatindus-trialized nations have little ability to dedicate more land to agricultural production, or to furtherimproveagriculturalproductivity.32 Engaging smallholder farmers will enable companies meet growing food demand.

Almost 70 percent of all food consumed worldwide is produced by 2.5 billion smallholder farmersandtheirfamilieson60percentoftheplanet’sarableland.33

Globally,795 million people are undernourished.34Addressingtheneedforincreasedquantityandqualityofaccessiblefoodoffersbusinessesanopportunitytoengagenearly1billionindividuals.

More than one third of global consumers consider sustainably sourced ingredients as very important in their purchasing decisions.35Particularlyindevelopedeconomies,consumersareincreasingly interested in the sustainability of the food they purchase. Making investments in sustainable food and beverage sourcing is a useful way of building a company’s brand.

Primary Business Models Employed

(note that businesses may employ components frommultiplemodelsorentirelydifferentmodels)

Contract production/contract farming: The business directly sources products from large numbersofsmall-scaleproducersorfarmers,providingcriticalinputs,trainingandcredittothesuppliers.Inturn,thesuppliersprovidethebusinesswithassuredquantitiesofaproductataguaranteed fair price.36

Deep procurement: The business bypasses middlemen to directly reach the BOP and purchase productsfromlargenetworksoflow-incomeproducersorfarmers.Thebusinessoftenprovidestrainingtoenhancequality.37

Distribution and sales through informal shops: Thebusinessuses(andupgrades)existinginformaldistributionandsaleschannels,typicallyworkingtoaccesscustomersthroughmultipleshops.38

Mobile-enabled non-financial services: The business leverages the fact that many individuals inthelow-incomesegmentownmobiledevicesinordertoprovideessentialinformationortransactions.39

Smallholder farmer aggregators: The business collects crops from small-scale producers and suppliesthemtolarge,top-of-the-supply-chainbuyers.Manyaggregatorsprovidefarmerswithcredit,storage,transportandcriticalinputs(e.g.suchasseeds)toimproveagriculturalyieldsand to guarantee a more stable supply.40


41 Ibid.42 http://static1.squarespace.com/static/51bef39fe4b010d205f84a92/t/564e05e3e4b05df51b225442/1447953891584/

Small+Holder+Farmers+and+Business_2015_.pdf43 InclusiveBusiness–CreatingValueinLatinAmerica

Food and BeverageEngage the BOP as suppliers of agricultural products or as customers for agricultural goods and services

Company Examples Juan Valdez: SourcescoffeefromBOPColombianfarmers,manyofwhomarealsoshareholders.Thecoffeeissoldinmorethan270coffeeshopsworldwide.

Unilever: Works with suppliers to engage smallholder farmers across the world and help those farmers to grow their businesses.

For more information on each company example, see Appendix 3: Innovative Solutions.

Key Considerations/ Risks

Theprovisionofcreditandstaffontheground,aswellasthedevelopmentoftrustovertime,are important strategic elements for companies engaging with smallholder farmers.41

Agronomictechnicalassistancecanenablesignificantlygreaterproductivity,bringinggreaterincomegainstofarmersthanremovingvaluechaininefficiencies,improvingmarketaccessorcapturing a price premium.42

Aggregatingproductsfrommanysmallholderfarmerscanposechallengesforbusinesses.Potentialsolutionsincludeleveraginglocal‘agriculturalleaders’whoareresponsibleforidentifyingandmanagingsmallholderfarmersandcentralcollectionpoints.43

Potential SDG Alignment


InfrastructureEngagetheBOPascustomersforhousing,energy,communicationtechnologyorwaterservices,consideringthecostsofexternalitiessuchasclimatechange,localpollutionandbiodiversity44

The Opportunity IndividualslivingonbetweenUS$2.97andUS$8.44adayinvest US$710 billion each year in infrastructure, including housing, modern energy services, communications and water.45 The provision of infrastructure products and services to the BOP therefore represents an immense opportunity.

UN-Habitatestimatesthatmorethan1 billion people lack access to adequate shelter and by 2030,approximately40percentoftheworld’spopulationwillneedproperhousing,accesstobasicinfrastructureandservicessuchaswaterandsanitation.46Offeringhousingandutilitiestothe BOP addresses the unmet needs of billions of individuals.

Thereisavast,unmetneedforaccess to modern energy services,with1.4billionpeoplelacking access to electricity and 3 billion people relying on solid fuels such as biomass and coal to meet basic needs.47CreatingenergysolutionsfortheBOPenablescompaniestomeetthisdemand for modern energy services.



Piggy-backing channels:Thebusinessuses(and/orupgrades)existinginformalsalesanddistributionchannelstoaccessnewcustomers.48

‘Last-mile’ infrastructure: Thebusinessprovidesend-userswithafixedutilityasset,establishingcommunity-level‘last-mile’infrastructure.Forexample,acompanyestablishesawaterkioskinaslumtoprovidecustomerswithwateratalowercostthanalternativessuchassachetsortankersupplies.Customersmaypayperusetodeliveringbettervalueandmatchtheircashflows.49

Pay per use: The business sells a single-use product or a service at lower costs for BOP consumers.50

Off-grid utilities:Thebusinessdevelopssmall-scalepurificationorgenerationsystemstoprovidesafe,affordableutilitiesinplacesitisuneconomicaltoreachthroughthegrid.51

Value-for-money housing: Thebusinessfacilitateshomeownershipbyprovidingaffordablepropertieswithfeaturesthatreducetheongoingcostsofownership.Thebusinessalsoenablesaccesstomortgagefinancing.52

44 WorldBankGroup(2015).Infrastructure Strategy Update FY2012-2015: Transformation Through Infrastructure.Availablefromhttp://siteresources.worldbank.org/INTINFRA/Resources/Transformationthroughinfrastructure.pdf

45 TheWorldBank.GlobalConsumptionDatabase:Whatthedatatellus.Availablefromhttp://datatopics.worldbank.org/consumption/market46 BusinessCalltoAction(2014).Breaking Through: Inclusive Business and the Business Call to Action Today: Mapping Challenges, Progress and

the Way Ahead,September2014.Availablefromhttp://www.businesscalltoaction.org/wp-content/uploads/2014/09/BCtAImpactReport_BreakingThrough.pdf

47 Ibid.48 MonitorGroup(2011).Promise and Progress: Market-Based Solutions to Poverty in Africa,May2011.Availablefromhttp://web.mit.edu/idi/idi/

Africa-%20PromiseAndProgress-MIM.pdf49 Ibid.50 Ibid.51 InternationalFinanceCorporation(2011).Accelerating Inclusive Business Opportunities: Business Models that Make a Difference. Available from

http://www.ifc.org/wps/wcm/connect/12216300487cbe85bbddff51e3a7223f/InclusiveBusinessReport2011.pdf?MOD=AJPERES52 Ibid.


53 BusinessCalltoAction(2014).Breaking Through: Inclusive Business and the Business Call to Action Today: Mapping Challenges, Progress and the Way Ahead,September2014.Availablefromhttp://www.businesscalltoaction.org/wp-content/uploads/2014/09/BCtAImpactReport_BreakingThrough.pdf

InfrastructureEngagetheBOPascustomersforhousing,energy,communicationtechnologyorwaterservices,consideringthecostsofexternalitiessuchasclimatechange,localpollutionandbiodiversity

Company Examples Celtel: DeliversaffordablemobilecommunicationstechnologytoBOPcustomersinsub-SaharanAfrica through local employees.

CEMEX: Offerstraining,fundingandtechnicalassistancetolow-incomecustomerssotheycanconstructtheirownhomesmorequicklyandefficiently.

Manila Water: Providessafe,reliablewaterandwastewaterservicestomorethan6millionpeople in Manila.

Simpa Networks: Providesabasic,portablesolarhomesystemtoBOPcustomersinIndiawhopay based on power usage.



Modelsinthissectormayrequiresignificantup-frontcapitalandrecoveringtheinitialinvestment may take longer given the nature of the market. Leadership support for this investmentiscritical.

Market-entrystrategiesanddistributionmodelsinthissectoroftenrequiretheengagementandparticipationoflocalcommunities;theBOPshouldbeactivelyengagedindevelopingsolutions.

CompaniesengagedininfrastructureinitiativeswiththeBOPhaveemphasizedtheimportanceofalong-termvisionandpatienceingettingthebusinessmodelright.53



54 TheWorldBank.GlobalConsumptionDatabase:Whatthedatatellus.Availablefromhttp://datatopics.worldbank.org/consumption/market55 MonitorGroup(2009). Emerging Markets, Emerging Models: Market-Based solutions to the Challenges of Global Poverty. Available from www.

beyondthepioneer.org/wp-content/uploads/2014/04/emergingmarkets_full.pdf56 WorldHealthOrganization(2015).Tracking Universal Health Coverage: First Global Monitoring Report.Availablefromhttp://apps.who.int/iris/

bitstream/10665/174536/1/9789241564977_eng.pdf57 WorldResourcesInstitute(2007).The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid.Availablefromhttp://www.wri.

org/sites/default/files/pdf/n4b_full_text_lowrez.pdf58 http://www3.weforum.org/docs/WEF_HealthSystem_LeapfroggingEmergingEconomies_ProjectPaper_2014.pdf59 InternationalFinanceCorporation(2015).IFC’sPrioritiesinHealth.Availablefromhttp://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/

IFC_External_Corporate_Site/Health+and+Education/Priorities+Health/60 MonitorGroup(2011).Promise and Progress: Market-Based Solutions to Poverty in Africa,May2011.Availablefromhttp://web.mit.edu/idi/idi/


HealthCareEngagetheBOPascustomersofhealthcareservicesorproductsthroughaffordablepricesandincreaseaccesstohealthcarebyengagingtheBOPindistribution

The Opportunity Inemergingeconomies,individualsmakingbetweenUS$2.97andUS$8.44perdayinvest US$158 billion in healthcare each year.54 The BOP has demonstrated a willingness to pay for healthcare,spendingasurprisinglyhighshareoflimitedincomesonprivatehealthservices.55

Atleast400millionpeoplelackaccesstooneormoreessentialhealthservices,includingprenatalcareandinfantvaccinations.56 Finding medicines and health-related consumer products(e.g.condoms,antimalarialbednets)canbedifficultforBOPconsumers.57MeetingtheunderservedhealthcareneedsofpeopleattheBOPmeansreachingmillionsofpotentialnew customers.

Approximatelyonethirdofallglobalhealthexpendituresby2022willoccurinemergingeconomies.58 Demand for healthcare in developing countries is rapidly increasing as a result ofagrowingmiddleclassandlengthenedlifeexpectancy,presentingasignificantandgrowingbusiness opportunity.59



Distribution through a dedicated direct sales force: The business recruits and trains local agentsasdirectsalesagentstoreachintocommunitiesinordertosellanddistributegoodsorservices.60

Mobile-enabled non-financial services: The business leverages the high rate of ownership of mobiledevicesattheBOPtoprovideessentialinformationorconducttransactions.61

No frills: Thebusinessdeliversasimplifiedserviceorproductataverylowpricetomeettheneedsofpoorcommunitieswhilegeneratingpositivecashflowandprofitforthecompanythrough high volume sales. The business may use ‘paraskilling’ to deliver the service (see below).62

Paraskilling: The business re-engineers complex services and processes into disaggregated simplestandardizedtasksthatcanbecompletedbyworkerswithoutspecializedqualifications.These workers then deliver no-frills service to customers.63

Shared channels: Thebusinessbundlesproductsandservicesthroughexistingcustomersalesanddistributionplatforms.64



HealthCareEngagetheBOPascustomersofhealthcareservicesorproductsthroughaffordablepricesandincreaseaccesstohealthcarebyengagingtheBOPindistribution

Company Examples ClickMedix: Provides mobile-enabled healthcare services to the BOP through trained community-basedhealthworkersandtheClickMedixapplication.

Novartis: OffersaffordablemedicationstotheBOPthroughlocalpharmaceuticalrepresentativesincooperationwithseparatelocalhealtheducators.

Philips: SellsmicronutrientpowdertoBOPcustomersinaffordablesingle-dosepackets(addingthepowdertofoodimproveschildnutrition).



Forhealthcareinparticular,across-subsidizationmodelcanbeeffective,whereaproductissoldtothe‘wholepyramid’andtheprofitsfromwealthierconsumerssubsidizealessexpensiveproduct for the BOP.65

Healthcare’scomplexvaluechainandmultitudeofactorsmayposechallenges.However,companiesmayfindotheractorsintheecosystem(suchasgovernmentsandfoundations)thatare willing to defray part or all of the cost.



EducationEngagetheBOPasbothsuppliersandconsumersofeducationalproductsandservicesforchildren,andtrainingfor adults

The Opportunity The BOP is willing to invest in quality education.66Forexample,inoneofIndia’spooreststates,parentsarewillingtospendmorethan10percentoftheirmonthlyincometosendatleastonechild to private school.67 Serving BOP customers enables businesses to access new consumer segmentsthatareeagertoinvestineducation.

The global market for educational products and services is growing rapidly(bynearly50percentfrom2012to2017),primarilydrivenbyanexpandingmiddleclassinemergingeconomies.68Agrowingglobaleducationmarketindicatesgreateropportunityforbusiness.

‘Impactsourcing’–trainingandemployingindividualsattheBOP–resultsinamore engaged and motivated workforce while increasing global competitiveness and decreasing costs. Thismodelisgrowingat11percentperyearcomparedto9percentfortraditionalsourcing.69 TrainingandemployingindividualsattheBOPoffersaclearvaluepropositionforbusinesses.



Demand-led training: Thebusinessactsasathird-partyvendortoidentify,trainandplaceemployees for job openings.70

Distribution through dedicated direct sales force: The business recruits and trains local agents asadirectsalesforcetoreachintocommunitiestosellanddistributegoodsandservices.71

Impact sourcing: Thebusinessintentionallyconnectslow-incomeindividualstoavailablejobs,providingskillstrainingorengagingathirdparty(demand-ledtraining)toteachfutureemployees.72

Value-for-money degrees:Thebusinessoffersamorefinanciallyaccessibleformofeducation,reducing costs by delivering programming in standardized modules and increasing value by providing course content and career services that are closely tailored to the job market.73

Company Examples Pearson: InvestsinsocialenterprisesincludingSudikshaKnowledgeSolutionsinIndia,whichtrains local women as teachers and empowers them to operate branches of a low-cost preschool network.

Starbucks: Hiresunemployedlow-incomeyouthintheUnitedStatesasapprentices,internsandemployees.


66 MonitorGroup(2009). Emerging Markets, Emerging Models: Market-Based solutions to the Challenges of Global Poverty. Available from www.beyondthepioneer.org/wp-content/uploads/2014/04/emergingmarkets_full.pdf

67 Ibid.68 SharedValueInitiative(2013).The New Role of Business in Global Education: How companies can create shared value by improving education while

driving shareholder returns.Availablefromhttp://sharedvalue.org/sites/default/files/resource-files/FSG-PrintReport-Final.pdf69 RockefellerFoundation(2016).ImpactSourcing:Innovativeemploymentmodelswithpositivebusinessandsocialimpact.Availablefromhttps://

www.rockefellerfoundation.org/our-work/initiatives/impact-sourcing/70 MonitorGroup(2011).Promise and Progress: Market-Based Solutions to Poverty in Africa,May2011.Availablefromhttp://web.mit.edu/idi/idi/

Africa-%20PromiseAndProgress-MIM.pdf71 Ibid.72 RockefellerFoundation(2016).ImpactSourcing:Innovativeemploymentmodelswithpositivebusinessandsocialimpact.Availablefromhttps://

www.rockefellerfoundation.org/our-work/initiatives/impact-sourcing/73 InternationalFinanceCorporation(2011).Accelerating Inclusive Business Opportunities: Business Models that Make a Difference. Available from

http://www.ifc.org/wps/wcm/connect/12216300487cbe85bbddff51e3a7223f/InclusiveBusinessReport2011.pdf?MOD=AJPERES


EducationEngagetheBOPasbothsuppliersandconsumersofeducationalproductsandservicesforchildren,andtrainingfor adults


Forprogrammesfocusedonimprovingeducation,governmentsupport–throughfinancialinvestment,marketdevelopmentandafavorablepolicyframework–canplayamajorroleinsuccess and scalability.

ProgrammesaresuccessfullybundlingeducationwithotherservicessuchasInternetaccessviamobile networks to create more value at a low price point.74




75 ConsultativeGrouptoAssistthePoor(2016).FinancialInclusion.Availablefromhttp://www.cgap.org/topics/financial-inclusion76 Bill&MelindaGatesFoundation(2015).FinancialServicesforthePoor:StrategyOverview.Availablefromhttp://www.gatesfoundation.org/What-

We-Do/Global-Development/Financial-Services-for-the-Poor77 WorldResourcesInstitute(2007).The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid.Availablefromhttp://www.wri.

org/sites/default/files/pdf/n4b_full_text_lowrez.pdf78 Ibid.79 MonitorGroup(2011).Promise and Progress: Market-Based Solutions to Poverty in Africa,May2011.Availablefromhttp://web.mit.edu/idi/idi/


Financial ServicesEngagetheBOPbyofferingfinancialproducts(e.g.credit,insurance)andservices(e.g.banking)insmalldenominationsataffordableprices,andleveragingtheBOPinthedistributionnetwork

The Opportunity ThecurrentUS$70billion microcredit industry provides services to approximately 200 million clients,75Thesheersizeofthisindustryconfirmsthelevelofmarketdemand.

More than 2.5 billion adults still lack access to basic financial services.76 The steady growth ofsavingsaccountsamongtheBOPprovidescompellingevidenceofanappetiteformoreservicesthanmicrocredit:anestimated1billionlow-incomecustomersindevelopingeconomies have savings accounts.77 ProvidingfinancialproductstotheBOPenablesbusinessestoservebillionsofcustomerswithunmetfinancialneeds.

Remittances are approaching an estimated US$350 billion per year and businesses are learninghowtoleveragethesefinancialflows.78 The increasing monetary resources provided by remittancesareexpandingthenumberofpotentialBOPcustomers.



Microcredit: The business provides small amounts of credit to low-income customers unable to accessloansfromformalbanks,oftenviagrouplending.79

Micro-insurance:Thebusinessoffersinsuranceproductsdesignedtomeetthecash-flowneedsof the BOP.80

Micro-savings: The business gives BOP customers the ability to save small amounts of money in adepositaccountwithlowornominimumbalancerequirements,orservicefees.81

Mobile money: The business enables poor people to access and transfer cash via mobile devices oralternativestotraditionalfinancialservicechannels.82

Shared channels: Thebusinessbundlesproductsandservicesthroughexistingcustomersalesanddistributionplatforms.83

Company Examples Citi Mobile Collect: Enables small businesses that are typically unbanked to transfer money via mobile devices.

Mahindra Rural Finance Ltd: Provides home loans to underserved rural and semi-urban consumersinIndia,enablingthemtoaffordhousing.



84 http://www.cgap.org/blog/5-ways-improve-customer-experience-poor

Financial ServicesEngagetheBOPbyofferingfinancialproducts(e.g.credit,insurance)andservices(e.g.banking)insmalldenominationsataffordableprices,andleveragingtheBOPinthedistributionnetwork


ThelackoffinancialliteracyattheBOPcanbeachallengeforcompanies.Initiativeshaveusedanumberofstrategiestoovercomethischallenge,suchasengaginglocalentrepreneurstomarketandselltheirservices,andprovidingtrainingtopotentialcustomers.

Bankemployeesmaylackexperienceservingpoorcustomers.Itiscrucialtorecruitstaffwhoareempatheticandrespectcustomers.84

Mobile-basedsolutionscanfacilitatealow-margin,high-volumebusinessanddramaticallyincrease a company’s reach.

Similartotheinfrastructuresector,financialservicesandfinancialinclusionarekeyenablersforfurther economic growth in the BOP.



Are You Ready for Inclusive Business?

85 InterviewwithAmandaGardiner,2February2016.86 Ibid.

Eachofthefivepromisingsectorsdescribedaboveshowcasemodelsofsuccessfullydeveloped,matureandsustainableinclusive businesses. But for companies not already experiencedininclusivebusiness,thesesuccessesmayappeardifficulttoemulate.Inclusivebusinessmodelstaketimetodevelop. Understanding the maturity of your company’s inclusivebusinessinitiatives(discussedinthissection)iscrucialtodeterminingthenextsteps(discussedinSection4)inordertolaunchorimprovetheinclusivebusiness,andenableitsfinancialsustainability.

Understanding your Inclusive Business MaturityThe concept of inclusive business maturity helps companies tounderstandthestateofexistinginclusivebusinesseffortsin order to recommend the next steps for establishing a commercially viable inclusive business. Inclusive business maturityisindependentofsector,companysizeorevencountryofoperation.Instead,itisstronglyinfluencedbysourceoffinancing,financialexpectations,positioningwithinacompany’sstrategyandpotentialforimpact.

Thankstoenablingtrendssuchastechnologydisruptionandchangesinregulatorycompliance,manycompaniesnowhavea more compelling reason to move from one maturity level toanother.ConsiderPearson,theworld’slargesteducationcompany: Pearson’s Vice President of Sustainability and Social Innovationreceivesfundingtoinvestinbusinessmodelsintheformofacorporatesocialresponsibility(CSR)effort–aphilanthropic approach. 85 The company has explored various approaches to inclusive business and social impact in the past few years and will soon launch an internal incubator to provethelong-termprofitabilityofinvestingintheBOP.TheVice President’s team will source internal ideas aligned with thebusinessunits’strategicplans,testthemandhopefullydeploy new business models for both commercial gain and socialimpact.Pearson’sshiftinstrategy,rootedincommercialsustainability,isindicativeofamoreassertiveapproachtoinclusivebusiness–atacticalnecessityinordertosupport the SDGs.86

The Six Levels of Inclusive Business Maturity: From Bystander to ChampionTable1onthefollowingpagesummarizesthedifferencesandsimilaritiesbetweenmaturitylevels.

‘The Bystander’

The absence of inclusive business: Simplyput,acompanydoesnothaveaninclusive business presence if it does not engage with the BOP in an economically productiveway.Thecompanymaybeoperatingwithastrategicfocusonotherconsumersegments,adifferent

supplierbase,orhaveadistributionmodelthatdoesnotrelyonunderservedpopulations.A‘bystander’doesnotimplyanynegativeintentonbehalfofthecompany,butrather:apredispositiontowarddifferentsegmentsofthemarket;minimal or well-managed supply chain risk that may not requirelocalization;andinsufficientevidencetorationalizeifthe company should pursue a new market opportunity with underservedpopulations.Notwithstandingthispredisposition,abystander’sperspectivecanbealteredifthecompanypossessesabetterunderstandingofinclusivebusinessandthebusiness opportunity it presents.

‘The Accidental Tourist’

Partial or unintentional inclusive business: Some companies engage with theBOPbyvirtueofwheretheyare,buttheyarenotawarethattheiractivitiesconstituteaformofinclusivebusiness.Duetothislackofawareness,thecompanymaymissoutontheadditional

commercialbenefitsofinclusivebusiness(e.g.improvedcompetitiveposition,enhancedcorporatereputationorgovernmentincentives)andadditionalopportunitiesforimpact (e.g. engaging the BOP in another area of the value chain).


Table 1: Inclusive business maturity levels

The BystanderNon-existent

inclusive business

The Accidental

Tourist

inclusive business

The Responsible

Ci�zen Corporate

responsibility with the BOP

The Explorer

Exploratory inclusive business

The Builder

Established inclusive business

The Champion

Inclusive Business

poised for growth

No knowledge or experience working in inclusive business

in inclusive business with-out explicitly recognizing it

or engage the BOP through aCSR ini�a�ve

Inclusive business is immature but

erate revenue

Inclusive busi-ness is part of the company’s core business (or at least of a business unit), and is commer-cially viable

Inclusive busi-ness operates in

or countries, depending on the scale required to reach

BOP’s

to Business

N/A Adjacent or core to the business strategy

Outside of core business strategy

Adjacent to core to the business strategy

Core business strategy

Core business strategy

Internal

Rela�onship

Company Knowledge

and Support

Company not knowledgeable about inclusive business

No leader-ship intent to explore inclu-sive business; company not knowledgeable

No leader-ship intent to explore inclu-sive business

gain; limited company knowledge

Leadership intent to explore the opportunity and invest; company has some familiarity with inclusive business

Leadership

ports inclusive business; com-pany has grow-ing familiarity with inclusive business

Leadership

inclusive business; com-pany has a well-integrated inclusive business model

Principal Funding

Approach

N/A Commercial Philanthropic Commercial Commercial Commercial

Inclusive Business Scale

& Impact

N/A Low to moderate impact

Moderate impact

Low impact Moderate impact

Strong and growing impact

Ac�vely serving Experimen�ng

inten�onal andcra�ed to gen-

profitability

mul�ple regions

Par�al oruninten�onal

for financial

Defini�on

ac�vely supportsac�vely sup-

Table 1: Inclusive business maturity levels


‘The Responsible Citizen’

Corporate responsibility with the BOP: Many companies engage with the BOP either through corporate responsibility effortsorbydependingondevelopmentor government aid. Advantages of the CSR model include valuable social impact,learninghowtooperateinnew

marketsandreputationalbenefits.Themaindisadvantageofoperatingatthislevelofinclusivebusinessmaturityisthelackofcommercialviability,whichisdetrimentaltotheinclusivebusinessmodeloverthelong-term.WithCSR,commercialbenefitsarelimited,theabilitytoreplicateorscalethemodelisminimaland–worstofall–theprogrammemayceasetoexist if CSR or development funds are no longer available.

‘The Explorer’

Exploratory inclusive business: A companypilotingaprogrammewiththeintentionoflong-termcommercialviability is in the ‘exploratory’ phase of inclusive business maturity. While the inclusivebusinessitselfmaybeimmature,the company understands the business

opportunity and the inclusive business model is supported by company leadership.

‘The Builder’

Established inclusive business: A company is considered to have an established inclusive business if its inclusive business modeliscoretothebusiness,sustainable,long-term and generates market returns. At this level of inclusive business maturity: theBOPislikelyengagedinmultipleareas

ofthevaluechain;therisksofdoingbusinessinthemarketarelargelymitigated;andthecompanyhaslikelystartedtomeasuresocialimpact.However,theinclusivebusinesshasnotyetachievedscale,eitherbecausethemodelishighlydependentonregionalattributes(e.g.needsofthelocalpopulation,existinginfrastructure,governmentincentives)orthetimehorizon(e.g.themodelhasnothadtimetobereplicated or piloted elsewhere).

‘The Champion’

Inclusive business poised for growth: Companies with an inclusive business poised for growth are commercially viable and on a clear path to achieving scale.Atthisstage,inclusivebusinessis well-integrated into company culture andisacorepartofthefirm’sstrategyin

one or many lines of business. Companies with this level of inclusivebusinessmaturityareoftenalreadycommunicatingtheirsocialimpactandarelookingtoenhancetheirreportingefforts.Astheycontinuetogrowtheirinclusivebusinesses,thesecompanieswillseektomaximizebothfinancialsuccessand social impact.

The Inclusive Business Maturity DiagnosticThe following inclusive business maturity diagnostic aims to assess the maturity of inclusive businesses. Although a simple diagnostic, it helps companies to understand the state of their existinginclusivebusinesseffortsinordertobetternavigatethe guide that follows in this report. This guide outlines next steps for companies interested in moving from their current stage toward the ‘champion’ stage.

The inclusive business maturity diagnostic is…

• Solely focused on understanding the maturity level of the inclusivebusinesses;and

• Used to inform businesses’ thinking about next steps withtheendgoalofcreatingasustainable,commerciallyviable and scalable inclusive business.

The inclusive business maturity diagnostic is not…

• Dependentonsectororindustry;

• Relatedtothesizeorscaleoftheentirecompany–infact,thesemayhavelittlebearingoninclusivebusinessmaturity;or

• Aspectrumorsequenceofmaturity–companiescanjump from one maturity level to another depending on theirstrategiesandintentions.

To understand the company’s level of inclusive business maturity,itishelpfultoaskthequestionsarticulatedbelowandnotedinthediagnosticassessmentthatfollows.


Figure 1: The Inclusive business maturity diagnostic

The Responsible

Ci�zen Corporate

responsibility with the BOP

The BystanderNon-existent

inclusive business

The Explorer

Exploratory inclusive business

The Builder

Established inclusive business

The Champion

Inclusive Business

poised for growth

The Accidental

Tourist

inclusive business

Par�al oruninten�onal

Does the business

engage with theBOP?

Is the IB commercially viable (e.g.,

does the company get

market returns today?)

Doesfirmleadership intentionallyengage with theBOP?

HastheIBbeen scaled or replicated?

Does the company pursue

a commercial approach

to inclusive business?

NO

YES

YES

YES

YES

YES

NO

NO

NO

NO


• DoesthebusinessengagewiththeBOP?Does the business have any relationship with the BOP, either as recipients of goods or services, suppliers, producers, distributors, employees, consumers or shareholders?

• Doesthefirm’sleadershipintentionallyengagewiththeBOP?Does the business have an explicit strategy around engaging with the BOP? If not, is it engaging as a result of its geographic location, without acknowledging that inclusive business is occurring organically?

• Does the company pursue a commercial approach to inclusivebusiness?Does the principal source of funding come from a commercial business, in the anticipation that the model will operate as a self-sustaining business? The alternative to this tends to be a philanthropic approach, which is pursued by companies through corporate respon-sibility or with support from development agencies.

• Istheinclusivebusinesscommerciallyviable?Is the inclusive business demonstrating the characteristics of a for-profit business venture that has the potential for long-term sustainability?

• Hastheinclusivebusinessbeenscaleduporreplicated?To what extent has the commercially viable inclusive business grown beyond the initial product or service, either to include an adjacent offering, or an offering in a different geography?

Understanding a company’s inclusive business maturity iscriticaltoidentifyingthenextstepstowarddeveloping asuccessfulinclusivebusiness.Thefollowingsectionof the report details the inclusive business process and suggests next steps based on current inclusive business maturity.


The Inclusive Business ProcessThe inclusive business process represents the journey that a company undertakes as it moves from a non-existent programme to a sustainable inclusive business. The overall process is illustrated in Figure 2.

To provide more detail on each step in the inclusive business process,wehavedevelopedaguidetohelpcompaniesmakestrategicinclusivebusinessdecisions,effectivelyexecutethosedecisionsandunderstandtherelationshipbetweentheirdecisions and the SDGs.

Charting a Course through Inclusive Business

Figure 2: Inclusive business process

GrowUnderstand Inclusive Business

Define Business Opportunity

Assess

Plan for SDG impact

Capabili�es

Analyze Environment Test

Measure &Refine

UNDERSTANDthe Opportunity

EVALUATEinternally and externally

ITERATEon the right model

IMPROVEReturns & Impact

• Business model design • Pilot funding • Partnership agreements

• Business case• Leadership buy-in• Funding

• Refined business model • Renewed leadership

buy-in and funding

Indicates milestone or key output

Design

Each step in this process is summarized in Figure 3.

The road to an establishing a sustainable inclusive business is challenging. Once companies understand the business op-portunitybehindinclusivebusiness,theymustbuildinternalcapacity,evaluatetheirexternalenvironment,understandhowtheycancontributetowardtheSDGs,createoradaptproductsorservicesthatmeetlocalneeds,andtesttheseofferings.Thissectionbeginsbydescribingthisjourneythrough what we call the inclusive business process. Later inthissection,theinclusive business guide provides detailed considerationsforeachstepoftheprocess.


Figure 3: Inclusive business process definitions

Notethatcompaniesentertheinclusivebusinessprocessatdifferentstagesbasedontheirmaturitylevels.Table2specifieswhich next steps are appropriate for each inclusive business maturity level.

Appreciate the concept of inclusive business, the opportuni�es that it offers forcompanies, the poor, and society, and how it aligns with the global sustainabledevelopment agenda as ar�culated by the SDGs

Explore how engaging in inclusive business across the company’s value chain can help address exis�ng challenges and offer unique opportuni�es.

Evaluate opportuni�es to engage in inclusive business and assess poten�al marketsincluding the poli�cal and economic context. Develop the program’s business case.

Consider how an inclusive business program would fit with the company’s strategyand evaluate the company’s ability to support the program financially, opera�onally,and culturally. Begin educa�ng senior leadership and aligning internal resources.

Armed with knowledge of both its internal capabili�es and the environment, designan inclusive business program that effec�vely meets the needs of the business aswell as the target popula�on.

Select a representa�ve market to discover how the business model will perform inreal market condi�ons without the risk of a more expansive rollout. Ensure commercial viability through this tes�ng phase.

Develop frameworks to measure financial results and social impact against pre-settargets. Use resul�ng data wisely to refine the business model. Communicate the program’s impact.

Grow the size, scope or scale of the solu�on in a sustainable manner to increasebenefit for both the business and society. Given many ways to grow financially andexpand impact, consider which op�on is best for the inclusive business model in thecontent of the larger company’s priori�es and capabili�es.

UnderstandInclusive Business

Define BusinessOpportunity

Analyze Environment

Assess Capabili�es

Design

Test

Grow

Measure & Refine


Table 2: Next steps based on inclusive business maturity

Passive Approach Active Approach

The Bystander

Non-existent Inclusive Business

The Accidental TouristPartialor

UnintentionalInclusive Business

The Responsible Citizen

Corporate Responsibility with the BOP

The Explorer

Exploratory Inclusive Business

The Builder

Established Inclusive Business

The ChampionInclusive Business

poised for Growth

Understand Inclusive Business

Educate com-pany leaders on inclusive business

Educate company leaders on inclusive business

Educate company leaders on how inclusive business differsfromCSRefforts

N/A: Inclusive business is understood given engagement in inclusive business

Define Business Opportunity

Educate company leaders on the IB opportunity

Educate company leaders on the IB opportunity

Educate company lead-ers on how changes to existingprogramscancreate sustainable and profitableIBmodels

N/A: Business opportunity has likely been defined given engagement in inclusive business – but could be worth revisiting for future justification

Analyze Environment

Consider the market in which an IB model could be feasible

N/A: Likely already operating in emerging market or BOP environment

N/A: Likely already operating in emerging market or BOP environ-ment through CSR

N/A: Business has already complet-ed this step when exploring inclu-sive business

N/A: Business has already complet-ed this step when running and sus-taining inclusive business

Consider new markets or regions for IB expansion

Assess Capabilities

Begin assess-ing internal company capabilities,culture,andpotentialforleadership support

Assess extent to which current activitiesconstituteinclusivebusiness;under stand what’s missing to engage more fully with the BOP

Understand the businessappetitetoengage the BOP in a commercially viable way,andinternalcapabilitiestodoso

N/A: Company has already launched an inclusive business

N/A: While not a top priority for established inclu-sive businesses, it can be a consid-eration for future growth

N/A: While this step is not a top priority for Champions, it can be useful to consider for future growth efforts in core or adjacent inclusive businesses

Plan SDG Impact

Begin under-standing what SDGs should be targeted

Assess whether any SDGs are currently targeted

Determine which SDG(s)is/arecurrentlytargeted

Determine which SDG(s)is/arecur-rently targeted and set goals

Determine which SDG(s)is/arecur-rently targeted and set goals

Determine which SDG(s)is/arecurrently targeted and set goals

Design Begininitialconsiderationsinto how the business could lend itself to inclusive business

Refineexistingmodel and test

Integrate more strongly with the core business by developing a com-mercially viable pro-gram,leveragingexist-ing assets or tweaking existingmodel

N/A: Company has already launched an in-clusive business, but will revisit design consider-ations when test-ing and refining

N/A: Company has already established a successful inclusive business

N/A: Company has already launched an inclusive business

Test N/A: Any inclu-sive business is still far from a testing phase

N/A: Any new or refined inclusive business is still far from testing

Test commercial viability of new model in the market

Test the business model

N/A: Inclusive business is already established

N/A: Inclusive busi-ness is already es-tablished

Measure & Refine

N/A: Any inclu-sive business is still far from requiring measurement

N/A: Efforts are best spent under-standing inclusive business and the opportunity before measuring impact of existing or new practices

N/A: Company likely measures or at least reports on CSR efforts today; rather than focus on measurement, company should aim to understand inclusive business and the op-portunity as a next step

Establish meas-urementpractic-es to understand whatworks/whatdoesn’t,andsubsequentlyrefine

Increase rigor of measurement;enhance report-ing to reap repu-tationalbenefits;refinebusinessmodel based on data

Increase measure-mentpractices,perhaps using SDG indicators to com-municateimpact;refinebusinessmod-eltooptimizeBOPengagement while maximizingprofit

Grow N/A: Any inclu-sive business is far from considering sustainable growth or

N/A: The business should prioritize understanding IB and tweaking existing model before considering

N/A: Any inclusive business is far from considering sustainable growth or scale

N/A: Inclusive businesses should be concerned with testing and refinement, not scale

Grow or scale the inclusive business toultimatelyincrease impact and revenue

Investigatehiddenassets that may enable the launch of another inclusive business


87 UnitedNationsDevelopmentProgramme(2008).Creating Value for All: Strategies for Doing Business with the Poor: Strategies for Doing Business with the Poor.NewYork:UNDP.Availablefromhttp://growinginclusivemarkets.org/wp3/en/wordpress/wp-content/uploads/2010/04/gim-report_executive-summary_English.pdf

88 Ibid.

Figure 4: BOP Involvement in the value chain

Producers and/or Suppliers

Inbound Logis�cs Opera�ons

Outbound Logis�cs

Marke�ng & Sales

A�er-Sales Service

Distributors Customers

Employees Shareholders

economic,socialandenvironmentalconditionsforsustainabledevelopment.

Forbusinessleaders,inclusivebusinessisarareopportunitytocreatevalueforallstakeholders,includingincreasedprofitsforshareholders,improvedlivelihoodsforsuppliers,meaningfulwork for employees and greater wellbeing and economic growthforthecommunitiesinwhichthebusinessoperates.

RESOURCES

Other resources for understanding inclusive business include:

1. Creating Value for All: Strategies for Doing Business with the Poor

2. G20 Inclusive Business Framework

3. The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid

4. When Things Don’t Go to Plan

5. The Practitioner Hub for Inclusive Business

Inclusive business builds bridges between businesses and poor peopleformutualbenefit.87Practicallyspeaking,acompanyengagesininclusivebusinessbyprovidinggoods,servicesorlivelihoods on a commercially viable basis to people living at theBoP,incorporatingtheseindividualsintocompanies´valuechainsassuppliers,distributors,customers,employeesandshareholders (see Figure 4).

As discussed in Section 1,thebenefitsforbusinessgobeyondincreasingprofitmarginsandincludedrivinginnovations,buildingmarkets,strengtheningvaluechainsandenhancinglong-termcompetitiveness.Whencompaniesseeksynergiesbetweendevelopmentgoalsandtheircoreoperations,and deepen investments in low-income or underserved communities,theycreateimmensevalue.

Society–especiallypoorpeople–alsobenefitsfrominclusivebusiness.Benefitsforpoorpeopleincludeaccesstoessentialgoodsandservices,higherproductivity,sustainableearningsand greater empowerment.88Forwidersociety,inclusivebusiness promotes progress toward the SDGs and the

inclusive business processanddetailkeyconsiderationsforcompanies exploring each phase. This guide is most valuable when employed by companies that already have completed the inclusive business maturity diagnostic and are seeking to betterunderstandthenextstepsillustratedinTable2.

UNDERSTAND INCLUSIVE BUSINESS

Appreciate the concept of inclusive business and understand its value – but realize it can be difficult!

The Inclusive Business GuideUsingthisguide,companiescanbegintothinkabouttheiractionplansontheroadtoestablishingasustainableinclusivebusiness.Thefollowingpagesprofileeachstepofthe

http://g20.org.tr/wp-content/uploads/2015/11/G20-Inclusive-Business-Framework.pdf

http://www.wri.org/sites/default/files/pdf/n4b_full_text_lowrez.pdf

http://www.wri.org/sites/default/files/pdf/n4b_full_text_lowrez.pdf

http://api.ning.com/files/wBi6IgNyVl8eDTjj7az71ByINH3GyvSgGYqtpSrVsuToQepCRCIBg9HXciNIqOC6I7BRG7wUwjs8xKV4ujFixHBd*Zuc-45U/IIB_not_to_plan_v10.pdf

http://www.inclusivebusinesshub.org/


89 MonitorInstitute(2014).Growth for Good or Good for Growth?: How Sustainable and Inclusive Activities are Changing Business and Why Companies Aren’t Changing Enough.Availablefromhttp://www.monitorinstitute.com/downloads/what-we-think/growth-for-good/Growth_for_Good_or_Good_for_Growth.pdf

90 Ibid.91 Haub,Carl(2002).“HowManyPeopleHaveEverLivedonEarth?”Availablefromhttp://www.prb.org/Publications/Articles/2002/

HowManyPeopleHaveEverLivedonEarth.aspx

DEFINE BUSINESS OPPORTUNITY Explore how inclusive business can address challenges and benefit the company.

Current challenge questions Inclusive business opportunities

Facing increasing risk of supply chain disruption?

MitigatesupplychainrisksandcapitalizeongrowthopportunitiesbyengagingBOPsuppliers.

Encountering supply challenges, including supply scarcity, inconsistent quality or concerns around future supply sustainability?

Incorporate smallholder farmers or producers into sourcing models and exert greater influenceonsupplyvolumeandqualityinordertoensuresustainableaccesstofuturesupply.Thisisaninnovativewayofdealingwithincreasingdemandforkeycommoditiesastraditionalsourcesofsupplybecomesaturated.89 If there are seasonal disruptions,considerseekingsuppliersinoppositehemispheres.

Insufficient supply yield from existing BOP sources?

Enablesmallholderfarmerstoimproveproductqualityoryieldsbyprovidingthemwithhigher-qualityinputs,innovativetechnology,accesstocreditortraininginmoresustainableandeffectivepractices.

Facing new or increasing competition with the rise of certified products?

WorkwithBOPsuppliersandcertificationorganizationstoadheretohigherstandardsofproducttraceabilityandsustainabilitythroughcertification(e.g.RainforestAlliance,FairTrade),resultinginahigherpricepremiumandappealingtoadifferentcustomersegment.90

Trouble keeping up with shifting consumer preferences toward ‘social good’?

SourcematerialsfromBOPsupplierstocreateentirelynewproductlines,appealingtothe broad base of consumers looking for products that contribute to social good.

Expensive or ineffective distribution network? Innovation required to reach last-mile consumers?

EngagetheBOPasdistributorstoaccesshard-to-reachconsumersforthefirsttime,orexistingconsumersforalowercost.BOPdistributionnetworkscanbebothlower-costandequally(ormore)effective,giventheirgroundinginthelocalcommunityandculture.

Difficulty selling to remote emerging-market customers?

Engage a local distributor or salesperson who knows how to overcome culturally based misunderstandingsabouttheproductswithpotentialconsumers,therebyenablinghigher sales.

Lagging sales in certain distribution networks?

Empowerthedistributorsasmicro-entrepreneurs,aligningtheirincentiveswiththebusinessbyofferingacommission.

Operating in markets where sat-uration or other factors makes it difficult to differentiate? Do new revenue targets require business model innovation or customer base diversification?

Diversify the consumer base through new or adapted products and services by engaging the BOP as customers. Enter new markets and reach into the BOP to gain access to new geographies.91Tobesuccessful,adaptexistingofferingsorcreateinnovativeproductsthatareaffordableandappealingtotheBOP.


Current challenge questions Inclusive business opportunities

Experiencing high operating costs?

InvestigatethecostsavingsofoutsourcingtoBOPserviceprovidersordevelopinganemployeebaseinBOPlabourmarkets.Confineyoursearchtooptionsthatinvolvefairlabourpracticesandweighthecommunityimpactsofamoveonyourcurrentlabourforce(andthepotentialdamagethatlayoffsmightdotoyourbrand)againstpotentialgains.

Suffering unanticipated regulatory challenges?

Improverelationshipswithlocalornationalgovernmentsbyreducingoreliminatinganynegativeimpactsofyouroperationsandrebuildtrustwiththelocalcommunity.Coupledtogether,thesewillultimatelystrengthenyourlicensetooperate.

Seeing social unrest as a result of the company’s local presence? Is the company viewed negatively by the local community?

Findalternativebusinessmodelsthatdirectlycontributetoresidents’economicstandingandreduceoreliminatethenegativeimpactsofyouroperations,ultimatelystrengthening your license to operate.

ANALYZE ENVIRONMENT Identify inclusive business opportunities and analyze the market.

RESOURCES

Key assessment questions Suggested considerations

Who is the target population? How might engaging with the population as suppliers, distributors or customers provide a competitive advantage and make the inclusive business sustainable?

Companiesshouldunderstandtheirtargetpopulationandtheirfitwithinthevaluechain of the product or service. It is important to understand how suppliers and distributorscurrentlymakealivingandhowaspecificinclusivebusinessmodelcouldcompelthemtoparticipate.Forconsumers,considerationsmayincludehouseholdpurchasingpowerandwillingnesstopay,alongwithanyalternativesinthemarket.

What is the target geography? What considerations determine locations of operation?

Thecompanyshouldunderstandtheregion’sexistinginfrastructuresoitcandesignabusinessmodelaccordingly.Forinstance,underservedmarketsareoftenfoundinruralareasgiventhattheyarehardertoreach.Inthiscase,populationdensityisasignificantconsiderationthatcanimpactdistributiontocustomersorcollectionfromsuppliers.

What is the political and economic environment of the target region?

Thecompanyshouldunderstandhowitsoperationswillfitintothelocalpoliticalandeconomiccontext.Theremaybefinancialorregulatoryincentivestoengageininclusivebusinessintheselectedlocation.Alternatively,restrictiveregulationsorpoliticsmayhamperthebusinesscase.Ultimately,ananalysisoftheexternalenvironmentshouldenable the company to select a discount rate appropriate for the perceived level of risk inthechosenregionorcountryinordertodevelopaninitialbusinesscase.

Other resources to consult for defining the business opportunity include:

1. Business Call to Action

2. Growth for Good or Good for Growth?

3. Driving Corporate Growth through Social Impact

4. SDG Compass

http://www.businesscalltoaction.org

http://www.monitorinstitute.com/downloads/what-we-think/growth-for-good/Growth_for_Good_or_Good_for_Growth.pdf

http://www2.deloitte.com/us/en/pages/operations/articles/driving-corporate-growth-through-social-impact.html

http://sdgcompass.org/


RESOURCES

ASSESS CAPABILITIES Evaluate the firm’s competencies, determine its readiness for the challenge and cultivate leadership support.

Key assessment questions Suggested considerations

What existing relationships might the company leverage for market entry?

Thecompanyshouldconsiderhowitsexistingrelationshipsintheselectedenvironment may help market entry. Partners who have experience in the selected area orworkwithBOPconstituentscanbridgegapsinunderstandingandofferinvaluablesupport(formoredetails,seetheDesign step.)

What is the existing competitive landscape in the target area?

Thecompanyshouldcarefullyevaluateanyexistingcompetitors,notonlyintermsoftheircapturedmarketshare,butinordertoborrowfromorimproveuponexistingengagement strategies with suppliers and distributors.

Who are the necessary stakeholders to engage?

ThetargetpopulationandBOPserviceprovidersaretheprimarystakeholders.Butbeyondthem,whoarethekeyactorswhoshapeandsupportthemarket?Whoarethestakeholdersingovernmentandwhataretheirinterests?WhatprominentcompaniesorNGOshavefootprintsinthemarket,andwhatrelationshipshouldthecompanyhavewiththem?Itisimperativetounderstandwhoneedstobeonboardwiththecompany’sinclusivebusiness–the‘minimumviableecosystem’–beforeenteringanewmarket.

Other resources to consult when analyzing the environment include:

1. Accelerating Inclusive Business Opportunities: Business Models that Make a Difference

2. Oxfam Poverty Footprint

3. Breaking Through: Inclusive Business and the Business Call to Action Today

Key readiness questions Suggested considerations

Is inclusive business aligned with the company’s current strategy?

Examinehowaninclusivebusinesswouldfitwiththecompany’scurrentstrategy.It may be helpful to begin by considering how the company lines up against the ‘archetypes’ discussed in Driving Corporate Growth through Social Impact,whichdescribesthefourwaysthatcompaniesarecurrentlyintegratingsocialimpact.Forexample,‘socialinnovators’,companiesthatincludesocialimpactasanintrinsicpartoftheirbusinessstrategies,mayalreadyhaveastrongunderstandingofhowinclusivebusinesswillfitwithinthecompany.Othercompaniesmayfindthatinclusivebusinesssupports their long-term vision by enabling sustainable growth.

Does the company have internal talent capacity?

The company should determine what internal talent it is prepared to dedicate to the inclusive business and whether these individuals have the necessary skills and experience to realize success.

What technical capabilities might the company leverage in an inclusive business?

Asisnecessarywithanynewmarketentry,thecompanyshouldalsoconsideritsavailabletechnologicalresourcesandcapabilities.Managementneedstounderstandwhatplatformscanbeutilizedforproductsorservices,andevaluateexistingmeasurementcapacities.

http://www.ifc.org/wps/wcm/connect/12216300487cbe85bbddff51e3a7223f/InclusiveBusinessReport2011.pdf?MOD=AJPERES

https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/oxfam-poverty-footprint_3.pdf

http://www.businesscalltoaction.org/wp-content/uploads/2014/09/BCtAImpactReport_BreakingThrough.pdf


Key readiness questions Suggested considerations

What is the company’s track record in developing new offerings or entering new markets?

Thecompanyshouldevaluateits‘adaptiveness’,ortheextenttowhichithasatrackrecordofadaptationandanexistingcapacityforadaptingtochange.Thisincludesafirm’spastexperiencedevelopingnewofferingsorenteringnewmarkets,itsabilitytoadjustproductstosuitnewcustomersandanopennesstochangingexistingprocesses.Ifinternalcapacityisdeemedlow,thecompanyshouldconsiderdifferentmeansofengagingininnovation,suchasinvestinginexternalsolutions,engaginganetwork,acceleratingexternallyorevensandboxingsolutions.92

Is the company ready to make an investment in line with the financial requirements of starting an inclusive business?

Thecompanyshouldbewillingtocommitthenecessarycapitaltofinancethenewprogramme’slaunch.Partnershipsandinnovativesourcesoffundingmayoffersolutionstoreducethefinancialburden.Tounderstanditsfinancialrequirements,acompanycanstartbyassessingaconservativepreliminarybusinesscasefortheinclusivebusiness.Inconversationsaboutfinancialrequirements,itisimportanttounderstandthecompany’sinvestmenthorizonandexpectationsforreturns.

Is the company culture suitable for making inclusive business a priority? How risk tolerant is the company?

‘Culture’referstothesetofcollectivebeliefs,valuesandattitudesofstaffregardingthebusiness’s responsibility to deliver social impact. Recent studies show that employees value a culture that promotes long-term sustainability and experience more job satisfactioniftheybelievetheircompaniessharethatvision.93However,thismaynotbetrueforeverycompany.Additionally,itisimportanttoconsiderwhetherthecultureencouragesriskandinnovation,orsteersawayfromthem.Aninclusivebusinesscanberisky;thus,itisimportanttoeducatestaffabouttherationaleforinclusivebusinessbeforeengaging,especiallyifthefirmisriskaverse.

Is the company’s governance structure conducive to innovation? For the required access to leadership, where should the inclusive business be incubated or monitored?

‘Governance’includestheplacement–bothlaterallyandverticallywithintheorganization’sstructure–ofindividualsexecutingthefirm’ssocialimpactstrategyandsystemofrules,practicesandprocesses.Whiletheprogrammeisnascent,thebusinessmayconsiderhousingitintheinnovationdepartment,oratleastallowingittodevelopwithoutthepressureofshort-termfinancialconstraints.94Inthelongterm,itisimportanttoevaluatewhetherthecompany’sgovernancereflectstheprogramme’sexpectationsforreturnoninvestment.Ifacompanywantsitsinclusivebusinessinitiativetobecommerciallyviableandsustainableinthelongterm,itshouldresidewithinabusinessunitratherthanwithaCSRexecutive.

Does the idea of inclusive business have leadership support?

Onceyouhaveagoodunderstandingofthecompany’scapabilities,ensurethattheprogrammehastheinternalsupportitneedsfromemployees,managementandparticularlyseniorleadership.Gettingdifferentexecutivestochampiontheworkiscriticaltogaininginvestment,ensuringfreedomfromstandardshort-termperformancetargetsandbuildingtheinternalcapacitytomakewide-rangingoperationalchanges.95

What internal gaps in the company should be supplemented by a partnership? What existing relationships does the company have that could turn into valuable partnerships?

Acompanymaywanttoconsidersupplementinganygapsinitsinternalcapabilities(e.g.leadershipsupport,staffexperienceorwillingnesstoinvest)byconsideringdifferentstrategiesforinnovatingordevelopingnewbusinessmodels.Itmaybehelpfulto use the approach provided in License to Innovate: Breakthrough Strategies for Social Impact, which includes abriefassessmenttousewhenfindingthecompany’s‘bestfit’strategyforsocialimpact.Then,considerengaginganexternalpartnertoassistintheinnovationprocess.

92 Deloitte(2016).License to innovate: breakthrough strategies for social impact.Availablefromhttp://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-ops-innovating-for-social-impact-summary.pdf

93 Deloitte(2016).The 2016 Deloitte Millennial Survey.Availablefromhttp://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-millenial-survey-2016-exec-summary.pdf

94 BusinessCalltoAction.“4StepstoStartanInclusiveBusinessEffortfromWithin.”Availablefromhttp://www.theguardian.com/sustainable-business/4-steps-start-inclusive-business-effort-within

95 InterviewwithAmandaGardiner,2February2016.

https://www2.deloitte.com/us/en/pages/operations/articles/five-strategies-for-growth.html

https://www2.deloitte.com/us/en/pages/operations/articles/five-strategies-for-growth.html

http://www.theguardian.com/sustainable-business/4-steps-start-inclusive-business-effort-within

http://www.theguardian.com/sustainable-business/4-steps-start-inclusive-business-effort-within


topursueadditionalopportunitiesincludinginterestedpart-ners,greaterpublicityandavailablegovernmentincentives.

RESOURCES

Other resources to consult in order to assess capabilities include:

1. Growth for Good or Good for Growth?

2. License to Innovate: Breakthrough Strategies for Social Impact

3. “Is your company adequately prepared to develop an inclusive business model that will succeed?”

96 http://sdgcompass.org/97 http://sdgcompass.org/

For ‘The Accidental Tourist’ Only

Evaluate the extent to which current activities constitute inclusive business. Examine the company’s value chain to assess its current level of engagement with the BOP and understandopportunitiestoengagemorefullyininclusivebusiness.Ask:doesthedefinitionofinclusivebusinessdescribed earlier in this report describe the company’s current activities?Ifso,investigatehowthecompanycanmakeinclusivebusinessmoreimpactfultoreapitsbenefits.

Educate senior leadership and management: ensure that company’s leadership understands the concept of inclusive businessanditsconnectiontotheinternationalsustainabledevelopmentagendaarticulatedintheSDGs.Recognizingthecompany’sactivitiesasinclusivebusinessmayhelpleadership

PLAN FOR SDG IMPACT Evaluate the potential for impact across the Sustainable Development Goals.

Whilethefirmcompletesitsexternalandinternalevaluation,it is also important to consider how the company can contributetotherealizationoftheSDGs.TosupportcompaniesinaligningtheirstrategiestotheSDGs,theGlobalReportingInitiative,theUNGlobalCompact,andtheWorldBusiness Council for Sustainable Development developed The SDG Compass. This tool provides a detailed process to assistcompaniesinmaximizingtheircontributiontotheSDGsand is a helpful resource as business leaders plan the SDG impact of the inclusive business.96 While the below content touches on a few external and internal factors to consider whendeterminingpotentialSDGimpact,TheSDGCompassisamoreindepthguidesupportingcompaniesinaligningstrategiestoSDGsandinmeasuringtheirimpact.However,TheSDGCompassisnotspecifictoinclusivebusiness.

Consider external factors when determining potential SDG impact

Recognize how the company’s sector can position it for SDG impact. The comprehensive scope of the SDGs means that companiesoperatingineveryindustryimpactatleastonegoal(eitherpositivelyornegatively).However,thesector(s)in which a company operates may enable it to naturally engagewithparticularSDGs.Thecompanyshouldseektoalign an inclusive business with SDGs that integrate with the company’s vision and core business strategy. Recognizing thatopportunitiesvarybyindustry,seeSection2:PromisingSectorsforexamplesofpotentialSDGalignmentbysector.

Evaluate the company’s value chain to determine opportunities to impact the SDGs. The company should consideritsinteractionswithstakeholdersacrossthevaluechaintoidentifyareaswithahighlikelihoodofeitherpositiveornegativeimpactsonissuesrepresentedwithintheSDGs.97

For example:

A company may engage with BOP suppliers and provide them with training and tools to reduce waterconsumption,effectivelyminimizingitsnegativeimpactonSDG6(Cleanwaterandsanitation).

A company may employ local BOP distributors andpaythemalivingwage,increasingitspositiveimpact on SDG 8 (Decent work and economic growth).

A company may engage with the BOP as customers by supplying healthcare services tounderservedcommunitiesandhelpingendpreventabledeathsandcombatdisease,advancing SDG 3 (Good health and wellbeing).

Asacompanyconsidersengagingininclusivebusiness, theengagementtypeitchooses–suppliers,distributors, orcustomers–willenablethecompanytoimpactdistinct SDGs (See Appendix 4: Contributions to the SDGs by Engagement Type.)

http://www.monitorinstitute.com/downloads/what-we-think/growth-for-good/Growth_for_Good_or_Good_for_Growth.pdf

http://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-ops-innovating-for-social-impact-summary.pdf

http://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-ops-innovating-for-social-impact-summary.pdf

http://api.ning.com/files/C1skQJk80naNEtlAGmMoG2BbeTlVxJ12Ep9UAY*w6XWUkZfhWGkrcgYMbMTZTBTf0ISOiNHj-n0bOoP7-0rijSdhCpjlIaQ4/DevelopingIBChecklist_cobranded_forprint.pdf

http://api.ning.com/files/C1skQJk80naNEtlAGmMoG2BbeTlVxJ12Ep9UAY*w6XWUkZfhWGkrcgYMbMTZTBTf0ISOiNHj-n0bOoP7-0rijSdhCpjlIaQ4/DevelopingIBChecklist_cobranded_forprint.pdf


98 InclusiveBusiness–AcceleratingValueinLatinAmerica

Assess internal possibilities for SDG alignment

Consider ‘hidden assets’. A company may have unused intel-lectual property or insights that can be leveraged to create bothasuccessfulbusinessopportunityandpositiveimpactontheSDGs.Forexample,Promigas,anaturalgasproviderinColombia,realizedthat–throughthecourseofitsnormaloperationstotrackcustomerpaymentsfornaturalgas–ithadaccumulated what amounted to a credit history database. The companyusedthatdatabasetodevelopaconsumerfinancingprogrammeofferingloanstoitsBOPcustomerstohelpthemacquirehouseholdappliancesthatcouldimprovetheirliveli-hoods. The result was both a valuable business venture and positiveimpactonSDG10:Reducedinequalities.98

Align goals with the SDGs. Plan to manage and measure the inclusivebusiness’simpactinrelationtotherealizationoftheSDGs.ConsiderselectingspecificSDGindicatorsfromtheSDGCompassortheBusinessCalltoActiontomeasureandcommunicateimpact.Pleaseseethe‘Measureandrefine’stepforfurtherconsiderationsonassessingimpact.

RESOURCES

Other resources to consult to plan for SDG impact include:

1. The SDG Compass

2. The SDG Industry Matrix

3. Business Call to Action’s Results Reporting Framework

Whetherthefirmisdesigningthebusinessmodelin-house,investinginoneexternallyorengaginginapartnershiptodevelopone,certainbasicconsiderationsshouldremaintopofmind,assummarizedbelowintheInclusive Business Model Analysis Framework.Thisframework,shownin

DESIGN Create the inclusive business in support of the SDGs.

Figure5,allowsacompanytoquicklyconsiderthecoreelements that should be incorporated into an inclusive business,howtheymightworktogethertogeneratevalueforcustomers and companies and how a donor or partner can acceleratevaluecreation.

Figure 5: Inclusive business model analysis framework

Go-To-Market Customer Value

Proposi�on

SDG Impact

Finance Opera�ons

InclusiveBusiness

Model AnalysisFramework

http://www.businesscalltoaction.org/

http://sdgcompass.org/wp-content/uploads/2015/12/019104_SDG_Compass_Guide_2015.pdf

https://www.unglobalcompact.org/library/3111

http://www.businesscalltoaction.org/wp-content/uploads/2010/07/BCtA-Reporting-Results-FINAL.pdf


99 Theprogrammemustbefinanciallysustainableorbetherecipientoffundsthatwouldacceptbelow-marketreturns.However,itisimportantthattheprogramisprofitable.AsOmidyar’sMikeKubzanskynotes,“thegoalisalwaystobeprofitable,notbreakeven,becauseifyou’renotprofitable,youcan’tinvestingrowth.”Oneapproachtofinancialsustainabilityistargetingthe“wholepyramid”insteadofonlytheBOP.Thatis,whenaproductissoldtoallconsumersbutatdifferentpricepoints,theprofitmadefromwealthierconsumerssubsidizesalessexpensiveproductfortheBOP.Thisstrategyenablesthecompanytomaintainfinancialsustainability,whilealsoofferingaproductatapricepointtheBOPcanafford.

100 Fromaninternalperspective,thecompanyshouldaligntheprogrammewiththecompany’soverarchinggoals.AsSeniorAssociateDeanofInternationalBusiness&FinanceatTuftsUniversityinsists,“theprogramme’sbusinesscasehastodovetailintotheoverallstrategyortheportfolioofprojects”Ifthecompanycreatesthisalignmentsuccessfully,thenallofthecompany’sexistingprocessesandsupportstructures,designedtosupportitsoverarchinggoals,willalsosupporttheinclusivebusinessprogramme.

101 Tolowerrisk,companiesshouldanalyzeexisting‘hiddenassets’.Acompanymayhavevaluableintellectualpropertyorinsights,whicharenotcurrentlybeingused,butcouldbeleveragedtocreateasuccessfulbusinessopportunity.Forexample,Promigas,anaturalgasproviderinColombia,realizedthatithadaccumulatedacredithistorydatabasethroughitsnormaloperations–providingBOPcustomerswithnaturalgasandtrackingtheirpayments.Basedonthisknowledge,thecompanydevelopedaconsumerfinanceprogramme,offeringloanstoitsBOPcustomerstohelpthemacquirehouseholdappliancesthatcouldhelpimprovetheirlivelihood.

102 Partnershipsmayplayavaluablerole,andshouldbeconsideredintheprogrammedesign.Partnershipcanbeexaminedthroughthelensoffourkindsofcontributions–Reach,Assets,Reputation,andCapabilities.Reachincludesopeningnewdoorsfortheprogramme,whileAssets meanssharingresourcesincludingintangible,butvaluablebenefitslikecommunityinsight.AcompanymayengageapartnerforitsReputation toaugmenttheprogramme’svisibilityandenhancestakeholderperceptionoritsCapabilities including specialized skills. The business can use the Value Exchange Tooltoconsiderwhatapartnercouldcontributeandifacollaborationmakessense.Itisimportanttonotethatpartnershipsmayincludelargemultinationalcorporations,socialenterprises,foundations,governments,oranyotherentity.Outsideinvestors,whosharesomeofthecostandrisk,maybeanotherpotentialpartner,especiallyasthecompanymovesintotheinitialpilotstage.

103 Asdiscussedinthe‘Understandinclusivebusiness’section,businessesmostoftenengagetheBOPassuppliers,distributors,orcustomers.Eachengagementmodelhasuniqueconsiderationsthatshouldbeincorporatedintothebusinessplan.

Customer value proposition

• Whatisuniqueaboutthisproductorservice?Howdoesthe product or service deliver value for the end consum-er?Whywouldacustomerchoosethisparticularproductorservice?

• Howdoestheproductorservicegeneratecustomerloyal-tyandretention?

• Howmighttheproductorservicebeaffordablypricedforcustomers,butremainfinanciallysustainableforthecompany?99

Finance

• Whatistheprojectedinitialinvestmentrequired?

• Howwilltheinitialinvestmenttodeveloporenhancetheproductorservicebefinanced?Throughcompanyinvest-ments?Externalordevelopmentfunding?Whatrepercus-sionsdoesthishaveontheinclusivebusinessmodel?

• Howalignedisthisproductorservicetothecompany’scorebusinessorexistingstrategy?100

• Whatarethefinancialreturnexpectationsonthisproductorservice?Whatisthetoleranceforrisk?101

• Whatisthebusinesscaseforthisproductorservice?Whatarethefinancialprojections?

Operations

• Howdoesthisbusinessmodelacceleratemodeleffective-nessand/orimpact(i.e.,deliveradditionality)oftradition-alproductsorservices?

• Howmightthisproductorservicereduceriskslikethoseofmarketentry,operationalviability,orbusinessstability?

• Howmightthismodelleverageexternalpartnershipsandactorsforlong-termsuccess?102

• Howdoesthisproductorserviceavoidcreatingsocialorenvironmentalnegativeexternalities?

• HowmighttheinclusivebusinessengagetheBOPassup-pliers or employees in ways that both contribute to the businessmodel’sprofitabilityandachieveahighstandardoffairtreatment?103

• Howmighttechnologybeemployedtoreduceoperationscostsorincreasethemodel’sscalability?

Go to market

• Howwillthecompanymarketthisproductorservice?

• Whatlevelofconsumereducationisrequired?

• HowmighttheinclusivebusinessleveragetheBOPasdis-tributorsandassureaproductisefficientlyandeffectivelydelivered?Howmightdistributorsbeincentivized?

• What channels should be used to provide the product or service?

• Isthereafter-salesservicerequired?Howmightthisbeprovided?

• Howmightthisproductorservicedeliverimprovedbranding?Improvedlicensetooperate?

SDG impact

• Basedonthesector(s)thatthecompanyoperates,whichSDG(s)areanaturalfitfortheexistingbusiness?

• DoesitmakesensetofocusonaspecificSDGtodrivegreateranddeeperimpact?OrshouldthemodelworkmorebroadlytotargetmultipleSDGs?


104 Developacleardefinitionofwhatsuccessmightlooklike,articulateapathofhowsuccessmaybeachieved,andspecifywhatmetricsmustbemeasuredtodeterminewhethergoalshavebeenmet.Goalsshouldbebothfinancial(e.g.whatevidencedowehaveofdemand?Willingnesstopay?Potentialprofitmargins?)andsocial(e.g.aremorechildrenlearningtoread?Hassanitationimproved?).GoalsandsocialimpactindicatorsareasimplewayoftrackingagainsttheSDGs.TheSDGcompassguideprovidessomemoreinformationonhowtoselectindicators.Inyourgoals,striveforsimplicityandclarity.Berealistic.Butmostofall,devotethetime:allorganizations,largeandsmall,shoulddevoteafewhourswiththeirseniormanagementteambrainstormingabouttheinclusivebusiness’sgoalsandactivities.

105 TheSDGscanhelpfacilitatepartnerships.Deloitte’sJohnMennelnotesthattheSDGscanprovidecommonlanguageandcommongoals,includinganalignedtimeline.Bhaskaradds,“Quiteoftenthechallenge[inpartnerships]isthatnooneisquitesurewhoisdoingwhat.TheSDGsprovideayardstickforpartnerships.”

106 TheWorldBank(2015).“StrengtheningtheEcosystemtoMainstreamInclusiveBusiness.”Availablefromhttp://blogs.worldbank.org/endpovertyinsouthasia/strengthening-ecosystem-mainstream-inclusive-businesses

• Howwilltheinclusivebusinessdeliversocialimpact?Which SDGs might the business model most clearly lend itselfto?(SeeAppendix 4: Contributions to the SDGs by Engagement Type for more detail on how the way in which the BOP is engaged can directly contribute toward some SDGs more than others)

• HowwillthebusinesssetgoalsandmeasureimpactagainsttheSDGs?104(SeetheTestandDesignsections.)

• HowmightpursuingoneorseveralSDGsenablepartner-shipstosupplementinternalcapabilities?105

Specific to ‘The bystander’

Start small! Beginwithadesignforasmaller,moremanageable inclusive business. This will allow the programme toeasilyadaptandincorporateinitiallearnings.Thisshouldalso demonstrate the value of inclusive business to company leadershipandinspirefurtherinitiatives.

Specific to ‘The accidental tourist’

Refine existing model. With an enhanced understanding of inclusivebusiness,incorporateinsightstoadaptandimprovetheexistingbusinessmodel.ThismayincludeexploringwaysofcreatinggreaterfinancialreturnandintentionallyincludingtheBOPinadeeperway.Itmayalsoincludeusingexisting

relationshipsandbrandrecognitiontogaingreaterinsightintothetargetBOPpopulations.

Specific to ‘The responsible citizen’

Integrate more strongly with the core business. Develop a commerciallyviableprogramme,leverageexistingassets(e.g.experienceincurrentmarkets),ortweakanexistingmodeltomakeitcommerciallyviableandultimatelyenhanceimpact.Specifically,examine the financial model. Study the pro-gramme’s costs and revenues to diagnose the barriers prevent-ingprofitability.Determineifthesebarrierscanbeovercomebyadjustingthemodelandtherebyenablingitsfinancialsustain-ability.Ifnot,considerusingtheknowledgeandrelationshipsgainedthroughthisinitiativetolaunchanew,commercially-via-blemodelbystartingattheAssessCapabilitiesstage.

RESOURCES

Other resources to consult as part of ‘Design’ include:

1. The wide range of resources on traditional business model design, if that design is being done in-house

2. SDG Compass

3. The Value Exchange Tool to consider what a partner could contribute and if a collaboration makes sense

TEST Pilot the inclusive business for proof of concept

Testinganewbusinessmodeliscomplicated,buttheprinciplesoutlinedbelowcanhelpmakethetestingphaseasindicativeaspossibleofmarketviability.

Understand not only the minimum viable product – but also the minimum viable ecosystem.Increatingtheminimumviableproductorservice,thecompanyshouldselectaprogramme scale large enough for senior leadership to feel comfortablethatthepilotrepresentsabroadermarket,butsmall enough to allow for easy adjustment to the business model.Becauseofinclusivebusiness’suniqueconsiderations,developingaminimumviableproductorservicealsorequirestestingitsminimumviableecosystem.Whatpartnerships

mustbeinplacetotestthemodel?Whatkindoflicensetooperateisnecessarytobeginoperationsinthegivenregionormarket?Launchinganinclusivebusinesswillalwaysrequireovercoming a variety of barriers ranging from an absence of trained human resources to weak supply chains or otherwise underdeveloped support ecosystems.106 It is a crucial piece of the pilot phase to understand where those barriers lie and how to overcome them.

Select an external market. Choose a region or area that willwelcomeaninclusivebusinessinnovation,supporttheprogramme and represent the larger target market.


http://www.monitorinstitute.com/downloads/what-we-think/value-exchange-tool/Value_Exchange_Tool--Monitor_Institute.pdf


107 MonitorGroup(2012).FromBlueprinttoScale:theCaseforPhilanthropyinImpactInvesting.Availablefromhttp://acumen.org/content/uploads/2013/03/From-Blueprint-to-Scale-Case-for-Philanthropy-in-Impact-Investing_Full-report.pdfIbid.

108 Ibid.109 Ibid.

MEASURE & REFINE Track results and adjust the business model

Set the company’s financial and impact goals for the pilot. The company should seek to validate both the programme’s commercial viability as well as its scalability. As part of structur-ingthepilot,thecompanyshouldselectfinancialandimpact metrics that will properly assess the pilot’s success and its read-iness to scale to a full programme. While a company will fairly easilyselectrelevantfinancialmetrics,impactindicatorscanbetrickier.Guidanceonselectingimpactindicatorsisavailableinthe SDG Compass.Inthecaseofpartnerships,allstakeholders–includingmanagement,fundersandintermediaries–shouldbewell-alignedonthegoalsandexpectationsofthetestingperiod.

Give the pilot enough time. The company may consider givingtheprogrammean‘incubationperiod’,duringwhichitisexemptfromthestandardpressuresofquarterlyreportingandorganizationalreporting.107Identifywhatmilestonesthepilotwillneedtomeet,duringwhattimeperiod,andwhatdecisioncriteriawillbeusedtochoosewhethertocontinuethe programme.

Run the pilot.Tactically,thecompanyshouldselectateamtosupportthepilotontheground,allowingforrealtimefeed-backandadjustment.Throughoutthisphase,it’simportant

for internal leadership and employees to evaluate the pro-gramme with a mindset of both progression,adisciplinedandhonest assessment of progress toward business model valida-tion,aswellaspersistence,tenacityinrefiningthemodelanddemonstratingviability.108 For more details on measurement andevaluation,seeMeasure&Refinebelow.

Be prepared to engage in an iterative process. Thevalidationprocessisalmostalwaysiterative.Trialsoftenrevealchallengesandweaknessesintheoriginalbusinessmodel,leadingtorefinementsintheproductorservice,technologyandprocesses,followedbyfurthertrials.Thegreaterthedegreeofmodelinnovationinvolved,themoretimeandresources should be invested in this stage.109

RESOURCES

Other resources to consult when testing include:

1. From Blueprint to Scale

2. The 4Ps of inclusive business: How perseverance, partner-ships, pilots and passion can lead to success

‘Measuringimpact’hasbecomeabuzzwordinrecentyears,withtheadventofbothanalyticsandconsumerinterestincreatingsocialchange.Whilemanysocialsectororganizationsandfoundationshaveadoptedvariouswaysofmeasuringimpact,theprivatesector(usedtoitseasily-measuredfinancials)haslaggedbehindinitsoutcomemeasurementpractices.Thisisbecauseimpactmeasurementisnoteasy.Still,itisanecessarycomponentinrefiningthebusinessmodel,increasingrevenueandmaximizingsocialimpact.

Integrate and measure

Select reporting metrics that suit goals. Based on the goals setduringtheDesignandTestphases,identifysocialimpactindicatorsthatarespecificandmeasurable,inadditiontofinancialmetrics.BoththeSDGCompassandthe Business Call to Action initiative propose a set of metrics to best understand how an inclusive business is progressing toward its goals. Includingafewmetricsonsupplier,customer,orbeneficiaryfeedbackisacriticalelementofmonitoring.

Include SDG indicators or other impact metrics in new or existing company dashboards. Company scorecards measure

theexecutionofstrategyagainstmissionandendgoalsovertime.Ideallytheyshouldbedynamic,takenseriouslyandusedfrequentlyasdriversofdecisionmaking.AsstatedbyEndeva’sManagingDirectorChristinaGradl,“CompaniesalreadyuseKPI dashboards or balanced scorecards to determine whether theyareontrackfinancially–trackingsocialandenvironmen-

A Helpful Resource

The SDG Compass Guide discusses a series of important steps for measuring impact. These include understand-ingtheSDGs;definingpriorities(conductedduringtheDesignphase);settinggoals(executedaspartoftheDesignorTestphases);integrating;andreportingandcommunicating.TheSDG Compassalsofocusesondefin-ingimpactaccordingtoamethodcalledthelogicmodel,described in further detail below under Planning and measuring impact through a logic model. It is important tonote,however,thatbusinessesshouldusethislogicmodelasaframeworkbywhichtothinkaboutindicators,notasareplacementfortraditionalscorecards.


http://acumen.org/content/uploads/2013/03/From-Blueprint-to-Scale-Case-for-Philanthropy-in-Impact-Investing_Full-report.pdf

http://www.sankalpforum.com/wp-content/uploads/2014/03/BIF_4Ps_report_final_web.pdf

http://www.sankalpforum.com/wp-content/uploads/2014/03/BIF_4Ps_report_final_web.pdf






110 Saldinger,Adva(2015).“CananewmanagementtoolhelpbusinessesaligntoSDGs?”Availablefromhttps://www.devex.com/news/can-a-new-management-tool-help-businesses-align-to-sdgs-86459

talindicatorsisnotverydifferent.”IntegratingsocialimpactmetricsorSDGindicatorsinacompany’sexistingscorecardcan ensure outputs or outcomes of an inclusive business are measuredandtracked.Reactingtothesocialmetricscanhelpinformbusinessdecisions,justasfinancialoroperationalmet-rics have done for decades.

Novozymes, aglobalbiotechnologycompany,isleadingtheprivatesectorinintegratingtheSDGsinitsmanagementefforts.InJuly2015,astheSDGswerebeingfinalized,thecompanyannounceditsintent to design an assessment and management tool

toevaluatethecompany’sinnovationpipelineduringthe phase where the business case is developed for a particulartechnologyorproduct.110 Novozymes’ head ofsustainabilityClausStigPedersenexplainsthatthetoolwillhelpthecompany“understandandverifycontributionstotheSDGcontextandoptimizeandmaximizecontributionsgoingforward.”111

Ask for help.Today,managerswhowishtomeasurethesocialimpactofinclusivebusinesswithintheirorganizationsarehampered by the limited tools and capacity for measurement. Asaresult,thinkingaboutpartnershipsasawaytofacilitate

The imperative to measure impact

Theprivatesectorhaslaggedbehindthesocialsectorinitsoutcomemeasurementpractices.Thisisbecausethechallengesinmeasuringsocialimpactarenumerous.First,unlikethewidelyacceptedfinancialmetricsthatbusinessesareaccustomedtousing,therearenocredible,widely-acceptedmeasuresforsocialimpact.Thefieldisatanearlierstageofdevelopment,withindicessuchasGIIRSandIRISjustemerging.Second,thetimehorizonrequiredtoseeandmeasuretheimpactofcertaininterventionsorprogrammeswithsocialbenefitcanrequiretenormoreyears.Third,theinfrastructureofthelocaleinwhichacompanyispursuinginclusivebusinessmaybelackingintechnology,humancapital,orotherresources,makingmeasurementmorepracticallychallenging.Andfinally,measurementcanbeexpensive.Whilemanynonprofits,foundationsandevenimpactinvestorslackdedicatedmonitoringandevaluationdepartments,theyareevenrarerintheprivatesector.Asaresult,impactmeasurementcanpresentasteeplearningcurveforexistingstaff,orrequireinvestmentinmeasurementactivitiesthroughathirdparty.Together,thesechallengeshelptoexplainwhycompaniescitedifficultiesinmeasuringimpactasaprincipalreasontheyhavenotparticipatedininclusivebusiness.

Historically,thesechallengeshavebeenunimportantascorporationshavenothadtoworryaboutmeasuringtheirsocialimpact.Veryfew,ifany,companystakeholderswouldevenattempttodistinguishbetweenoutputs,outcomesandimpact,creatingverylittleincentiveforcompaniestopublishanyevaluativeinformation.Instead,theywouldsettleforpublishingadollaramountspentoncorporatesocialresponsibilityeffortsacrossvariouslocations.Andbecausemostexternalstakeholdersdidnotdemandevaluations,managerswerenotincentivizedtomeasureorworktowardssocialimpactgoals,especiallyinlargemultinationalcorporations.Thesefactorscombinetoexplainwhyorganizationshaveoftenfailedtoappropriatelyallocatebudgetstomeasureimpactwell.

Butimpactmeasurementisbecomingincreasinglyimportant.“Thereareincreasingexpectationsofaccurateandreliablereportingaroundtheimpactsofbusiness,”saidKristenSullivan,aPrincipalatDeloitteConsultinginvolvedinreportingefforts.ReportingmechanismsrangefromBCorpcertifications,tosuggestionsgivenbyGIIRSandIRIS,totheguidelinesprovidedbytheSustainabilityAccountingStandardsBoardintheUnitedStates.TheSDGsthemselvesmakereportingaclearexpectation,withSDG12.6callingongovernmentseverywhereto“encouragecompanies,especiallylargeandtrans-nationalcompanies…tointegratesustainabilityinformationintotheirreportingcycle.”TheGlobalReportingInitia-tiveprovidesguidelinesaroundmateriality,context,completenessandinclusiveness,andotherresourcessuchastheSDGCompassprovidesuggestionsforindicatorsusefulformeasuringresults.Still,thelackofsufficientproofpointsinthemar-kethasyettoclearupalingeringskepticisminthemindsofmanybusinessleaders:thatthistypeofreportinghasnovalue.

Itisourperspectivethatitisonlyamatteroftimeuntilamajorityofcorporateactorsstartpubliclydisclosingtheirsocialimpact,perhapsevenusingSDGindicators.WithanincreasingamountofcapitalflowingintoprogrammesengagingtheBOP,investorswillincreasinglydesireto:(i)holdbusinessesaccountable;and(ii)knowthattheirmoneyiscreatingthesocialchangethatwaspromised.Perhapsmostimportantly,fromabusinessperspective,multinationalsareincreasinglyadoptingclearimpactagendas,makingimpactmeasurementandthecommunicationofoutcomesessential.Consumerswanttobeabletoaccessimpactinformationtheycancomparebetweencompanies,whilegovernmentsanddonorswantassurancethattheirmoneyismakingadifference.Already57percentofFortune500companiesreportonsomeformofenvironmen-tal,socialandgovernanceimpacts.Webelievethatfewcompanieswillwanttofallbehindasthebarcontinuestoraise.

http://b-analytics.net/giirs-ratings/

https://iris.thegiin.org


Planning and measuring impact through a logic model

Alogicmodelisacommonformoflinkinginputswithoutcomeswhichoriginatedinthe1960saspartoftheevaluationworkdoneattheUnitedStatesAgencyforInternationalDevelopment(USAID).Itlaysoutthelinkagesaccordingtoinput,activities,output,outcomesandultimatelyimpact.Initssimplestform,alogicmodelhasfivekeycomponents:

Inputs Activities Outputs Outcomes Impact

Definition Resources (capital,human)invested in the activity

Concreteactionsof the investee

Tangible products fromtheactivity

Changes resultingfromtheactivity

Broader change occur-ringincommunitiesorsystemsresultingfromtheactivity

Application or example indicators

$,numberofpeople

Development and implementa-tionofprograms,building new infrastructure,etc.

Measurable actionsorcondi-tionsthatassessprogress against specificopera-tionalactivities,e.g. Number of peoplereached,items sold

Measurable actionsorconditionsthatdemonstrate progress towardsspecificoutcomes,e.g.increased access toeducation

Effectsonbroadertargetpopulation,e.g. sustained drop in poverty,increase in literacy rates

Logicmodelshavemanyusesinthecontextofinclusivebusiness.Theycanfirstandforemosthelporganizationswithgoal-settingbyestablishinglogical,feasibletargetsforoutputsandoutcomes.Byestablishingtargets,thelogicmodelisapowerfulwaytoalignincentivesbetweenpartners,withinanorganization,orforfundersandinvestees.Thelogicmodelcanalsoserveasthebasisfortrackingandmonitoringkeyperformanceindicators(KPIs),asdiscussedinthefollowingsection.Itcanalsobeusedforexternalreportingsinceitisastraightforwardmechanismforillustratingacausalpathfromthebusinessactivitiestoimpact,evenwithaudiencesthatmaynotbewithfamiliarsocialimpactmeasurement.

measurementcanimproveperformance.Whileimperfect,nonprofitsandimpactinvestorshavedevelopedabodyofknowledgeandatrackrecordforinnovatinginmeasurementandevaluationtechniques.LeadersinmeasuringimpactinthesocialsectorincludetheAcumenFund,whichoffersitstoolkiton B Analytics,andBridgesVentures,whichexplainsitsimpactclearlyinanannualreport.Learningfromsuchorganizationsor working with them can improve a company’s ability to cred-ibly assess the impact of their business and integrate into their existingfinancialreporting.112Additionally,companiesshouldtakeadvantageoftheinflowofcapitaltosocialimpactefforts;grants,impactinvestmentsandotherinnovativefinancingmechanismscanbeasourceofadditionalfundstosupportevaluation,whetherinternallyorthroughathirdparty.

Consider investing in evaluation. Measurementandevaluationgenerallyarenotinexpensivepractices–buttherigorwithwhich they are pursued can reduce or raise costs. Start with lowercostoptions(e.g.existingstaffanalysesexistingdata)before pursuing more costly ones (e.g. employing a third party evaluator). Formostcompanies,themorerigorousmethodsof

evaluation,suchasrandomizedcontrolledtrialsthroughthird-partyevaluators,arenotnecessary,particularlyinearlystageswhen the principal purpose is to communicate outputs and outcomes to management and manage against data.

Report and refine

Make better informed decisions and refine the business model.Socialimpactdatacanbeusedinadditiontofinancialdatatodriveinsightsandmakedecisions–especiallyiftrackedovertimeinascorecardordashboard.Datashouldenablethecompanytoeffectivelyadjust,refineandadaptthe business model to maximize both intended social impact andlong-termfinancialsuccess.But,specifically,howmightabusinessthinkaboutusingdatatorefineitsbusinessmodel?One way to do it is to leverage the Inclusive business model analysis frameworkdescribedintheDesignsectionasastartingpoint.Considerthesixcomponentsoftheframeworkand whether the data indicates that any one of those components should be altered. Another framework to guide businessmodelrefinementisthevaluechainitself.Whataretheweakestlinks,assuggestedbythedata?

111 Ibid.

112 MonitorInstitute(2014).Growth for Good or Good for Growth?: How Sustainable and Inclusive Activities are Changing Business and Why Companies Aren’t Changing Enough.Availablefromhttp://www.monitorinstitute.com/downloads/what-we-think/growth-for-good/Growth_for_Good_or_Good_for_Growth.pdf

http://acumen.org/blog/b-analytics-an-effective-tool-for-measuring-impact/

http://www.bridgesventures.com/wp-content/uploads/2014/12/Bridges-Ventures-Impact-Report-2014-spread.pdf


113 AshokaGlobalizer.IncreasingImpactandChangingSystemsbyEngagingMoreandMoreChangemakers.Availablefromhttp://www.ashokaglobalizer.org/files/Ashoka-Globalizer_some%20basics_on%20scaling_social_innovation.pdf

114 StanfordSocialInnovationReview(2014).Impact Investing: On Innovators and Pinballs,3September2014.Availablefromhttp://ssir.org/articles/entry/on_innovators_and_pinballs

115 SchoolforSocialEntrepreneurs(2016).IntroductiontoSocialReplication.Availablefromhttps://www.the-sse.org/resources/scaling/introduction-to-social-replication/

Be transparent.Asdiscussedearlier,akeybenefittoengagingin inclusive business is the way it can enhance corporate reputationandimprovecompetitiveposition.Externalcommunicationisnecessarytoachievethis;thereisnobetterway to communicate than with facts that prove the impact the businessishaving.Developareportingtimelinethatmakessense given internal capacity and stay on track.

Oneearlytrendiscriticaltowatch:someorganizationsaretestingtheabilitytotranslatesocialimpactintofinancialterms,quantifyingratiosliketheeconomicrateofreturnorreturnoninvestment,withtheaimofexpressingimpactinsimilartermstofinancialratioswidelyusedinbusiness.

RESOURCES

Other resources to consult in order to measure and refine include:

1. SDG Compass for business indicators

2. Business Call to Action

3. Formoreinformationonstandardsforreportingandhowtothinkaboutmateriality,consulttheGlobal Reporting Initiative.

GROW Grow revenue and expand the impact of the inclusive business

Influence: Passive impact on external actors(competitors,foundations,government)

Training/Consulting: Knowledge share with external actors

Associations: Agreement with external actors to achieve a common purpose

Strategic Partnerships:Collaborationwith one or more partners who share the risk and reward

Social Franchising:Packaged,provenmodel for franchisees

Independent Growth: Organic expansionbygeography,products,customers,orotherwise

FIN

AN

CIA

L RE

TURN

RISK

Independent Growth

Social Franchising

Strategic Partnerships

Associaons

Training/ Consulng

Influence

Indirect Impact Direct Impact

Approaches for Growth

Determine method for growth. The company can choose the bestoptionforgrowthgivenitsprioritiesandcapabilities.Morespecifically,thecompanymaywishtoevaluateoptionsalongaspectrumofriskandfinancialreturn,asshownbelow.113,114,115

Ontheright-handsideofthespectrum,abusinesscanpursuethegreatestfinancialrewardalongwithacceptingincreasedrisk.Forexample,independentgrowthrequiresgreaterresourceinvestment(talentandmoney)bythecompany;

http://sdgcompass.org/business-indicators/

http://www.businesscalltoaction.org/wp-content/uploads/2010/07/BCtA-Reporting-Results-FINAL.pdf

https://www.globalreporting.org/Pages/default.aspx)ards/Pages/default.aspx

https://www.globalreporting.org/Pages/default.aspx)ards/Pages/default.aspx


116 InterviewwithTonySiesfeld,6January2016.117 InterviewwithKurtDassel,6January2016.118 InterviewwithCharlieHough,9February2016.119 Deloitte(2014).Beyond the Pioneer: Getting Inclusive Industries to Scale.Availablefromhttps://assets.rockefellerfoundation.org/app/

uploads/20140508153451/Beyond-the-Pioneer-Report.pdf

this is riskier because it does not share risk with franchisees or partners.Ontheleft-handsideofthespectrum,thebusinessriskslittlebyinfluencingexternalactors,butthereisnofinancialreturn.

Notethatthedegreeofimpactisnotincludedinthefigureabove.Asathirddimension,impactdoesnothavealinearrelationshipwithriskorfinancialreturn.116Forexample,acompany may contribute tremendous social impact through influence,bymotivatingpolicychangeorcatalyzingthestartof a new industry.

Consider several key internal factors when determining how to grow

Align internal resources. In determining the approach to growth(Figure6),thebusinessshouldconsiderwhichoptionbestalignswithitsexistingcapabilitiesandcapacity.Thebusi-ness should then unite leadership and programme sponsors behindtheselectedgrowthstrategy,whilealigningthecapital,processesandtechnologyneededtogroweffectively.

Leverage technology. Technology can act as an important facilitatorofgrowth,enablingthebusinesstoexpanditsprogrammeatarelativelylowcost.Innovativemobiletechnology that bypasses infrastructure investments can be particularlyeffective.Technologyisoftenthefoundationofbusinessmodelsthatarehighlyscalable,havelowmarginalcost,andarethereforebestpositionedforgrowth.117

Consider the programme’s operations. The business should evaluate the programme to determine which components are replicableandessentialforsuccess,whichcomponentsshouldbe adapted for each new market and which components are unnecessary.Forexample,whenNovartissoughttogrowitsinclusivebusinesshealthprogrammeArogyaParivar,thecompany determined that the programme’s success depended ontheseparaterolesofhealtheducatorsandpharmaceuticalrepresentatives.ThisstructurewasreplicatedacrossitsnewmarketsinKenya,IndonesiaandVietnam.Novartisalsodeterminedthatexternalrelationshipswereneededtoadapttoeachnewmarket.Forexample,thepoliticalstructureinVietnam necessitated closer partnership with the government thanwasrequiredinothermarkets.118

Plan for financial sustainability. The business should complete arigorousfinancialanalysistodeterminehowgrowthwillimpact the programme’s cost structure across the cost ofgoods,distributionandmarketing.Astheprogrammeexpandsthroughincreasedvolumeorexpandedgeographies,

thebusinessshouldadaptitsplantomaintainfinancialsustainability.

Consider several key external factors when determining where to grow

Select expansion markets. If the company decides to grow byexpandingtonewmarkets,itshouldconsidertheexternalenvironmentofanynewgeography,conductingananalysissimilar to what is outlined in the ‘Assess environment’ phase. Understandingthemarket’scustomers,regulatorycontextandanycompetitorswillbeessentialforsuccessfulgrowth.Thecompany may also seek ‘industry facilitators’ (e.g. government orindustryorganizations)toresolvescalingbarriersatthelev-els of both the company and its wider business ecosystem.119 Governmentscanactasindustryfacilitators–especiallyinthecontextoftheSDGs–byprovidingsupportiveregulatoryframeworksandinclusivebusinessincentives.

Consider partnerships.Astheprogrammeexpands,partner-shipsmayofferasolutionforanygapsininternalcapabilities,localunderstanding,orfunding.Partnershipsaremostcriticalforthestrategicpartnershipapproachtoscaling(seeFigure6).Inthisapproach,partnersinvestfinancialresources,politicalandsocialcapitalandtimealongsideoneanother,sharinginthe both the program’s risk and reward. In the case of Novar-tis,toentertheKenyanmarket,thecompanypartneredwithNGOs to address challenges of access to local villages.

Understand and communicate impact. As the programme grows,thecompanyshouldbeawareofbothitsdirectandindirectimpacts,asdescribedinFigure6.Directimpactscanbeevaluatedasdescribedinthe‘Measureandrefine’phase.Thecompanyshouldeffectivelycommunicateitsincreased direct impacts to ensure it fully reaps the business benefitsofgreatersocialimpact(e.g.consumerinterestindevelopingmarkets,talentrecruitmentandtalentretention).Thebusinessshouldalsoconsiderintegratingindirectimpactsinitsannualreportingtocommunicatethegreatersocietalbenefitsgeneratedbythecompany.

RESOURCES

Other resources to consult in order to grow include:

1. From Blueprint to Scale

2. Scaling Up Inclusive Business

3. Breaking Through: Inclusive Business and the Business Call to Action Today

https://www.novartis.com/about-us/corporate-responsibility/access-healthcare/novartis-social-ventures

http://acumen.org/content/uploads/2013/03/From-Blueprint-to-Scale-Case-for-Philanthropy-in-Impact-Investing_Full-report.pdf

http://www.inclusive-business.org/WBCSD_Internal_barriers_and_solutions_to_scaling_up_inclusive_business.pdf




120 InterviewwithCharlieHough,9February2016.121 Novartis(2015).CorporateResponsibilityTargets:ExpandingAccesstoHealthcare.Availablefromhttps://www.novartis.com/sites/www.novartis.

com/files/cr-targets-results-2015.pdf122 InterviewwithCharlieHough,9February2016.123 Ibid.

Inclusive Business in Practice

Theprevioussectiondescribedtheroadtosustainableinclu-sivebusiness,startingfromunderstandinginclusivebusinessasaconcept,continuingwitharticulatingthebusinessop-portunityandfinallyaddressingconsiderationsofthedesign,testing,measurement,andscalingofaninclusivebusinessinitiative.Readingabouthowcompanieshavenavigatedasimilar process can ground these ideas in tangible detail. Be-low we share two successful cases of inclusive business in the contextoftheSDGs:Novartis’journeywithArogyaParivarandthemultinationalcoffeebrandJuanValdez.

NovartisWhenNovartisbeganexploringinclusivebusinessin2005,thecompanycouldnothaveanticipatedthesuccessitwouldhavebyopeningitsbusinesstotheBOP.Novartis’leadersatthetimedidhaveaninclinationthattheBOPhadstrongdemand for healthcare services and decided to make this marketapriority.Theresultwasthatinthefiveyears,from2010to2015,Novartis’inclusivebusinesseffortswouldbringhealtheducationtomorethan20millionpeople.120In2015,itmetitsgoalfortheyeartoprovidehealtheducationto12millionpeoplethroughatleast300,000communityeducationmeetingsinruralcommunitiesacrossKenya,India,IndonesiaandVietnamby2016.121 All of this social impact was achieved whilesimultaneouslyreturningaprofittothecompany.

Preparing the organization

AfteravisitfromC.K.Prahalad,Novartisleadershipmadeitsinitialinvestmentinexploringinclusivebusiness.Companyleaders assigned a sponsor to take charge of a core business unit,runwiththeinitiativeandsuccessfullydesignaneffectivebusiness model.

Tothisday,Novartis’inclusivebusinesseffortsresideprimarilywithinthecorebusinessbecause,“that’swheretheexpertiseis,”inthewordsofCharlieHough,VicePresidentandGlobalHeadofStrategyforCorporateResponsibilityatNovartis.Businessunitleadershavefoundthathousingthese

pioneer programmes within the business causes employees tothinkmorecreativelyaboutadaptingsolutionsandgeneratingaprofit.122

Assessing the external environment

Whenconsideringatargetmarketforthelaunchofitsfirstsocialventure,Novartisfocusedonvolume:thecompanywantedtoidentifyatargetpopulationthathadbothampledemand for its healthcare services and reached beyond Novartis’existingfootprint.Ofcourse,substantialdemandnotonlycontributestoagreatervolumeofconsumers,butalsotoalargersocialimpact.NovartisultimatelyselectedIndia,where830millionpeopleliveinruralareasandanestimated65percentofthetotalpopulationlacksaccesstohealthcare.Populationdensityplayedacriticalroletoo:whileruralareaswereviable,Novartishadtoensurethattheprogrammecouldimpactenoughvillages,villagers,doctor’sofficersandpharmaciestomakefinancialsense.

NovartissettledonfocusingitsinitialeffortsintwoIndianstates,withtheultimategoalofexpandingasbroadlyasitcouldafterprovingthatthepilotmodelworked.

Designing a solution

Inordertogroundthenewsolutioninon-the-groundunderstanding,Novartisdeployedateammembertolivein rural India for six months to understand howNovartiscouldexpanditsbusinesstotheBOP.First,Novartistriedtounderstand how it might sell no-frills or generic medicines to theBOPatanaffordableprice.“Whatwefoundoutisthatformostoftheproductswehadavailable–whethertheywereessentialmedicinesornon-essential–therewasareallack of health-seeking behavior from people living in these villages,”recountsHough.“Sotherewasarealneedforhealtheducationandsanitationintheseregions.”123

ThisgaveNovartisitskeyinsight:itneededtotacklewellnessbeforeofferingmedicines.ThatconceptiswhatledittolaunchArogyaParivar–(meaning‘HealthyFamily’)inIndia


124 Novartis(2015).CorporateResponsibilityTargets:ExpandingAccesstoHealthcare.Availablefromhttps://www.novartis.com/sites/www.novartis.com/files/cr-targets-results-2015.pdf

125 ColombianCoffeeGrowersFederation(2014).AboutUs.Availablefromwww.federaciondecafeteros.org/particulares/en/quienes_somos126 GrowingInclusiveMarkets.JuanValdezCoffeeShops:FairTradeasanInclusiveandSustainableBusiness.Availablefromhttp://

growinginclusivemarkets.org/media/cases/Colombia_JValdez_Summary.pdf127 Ibid.

–in2007.ThishealtheducationinitiativetargetsconsumerswhoearnbetweenUS$2andUS$10perday.Itusesapara-skilling business modelbyrecruitingandtraininglocalsinremote villages to become health educators who help inform communitiesabouthealth,diseasepreventionandthebenefitsofseekingtimelytreatment.124 Local teams work with doctorstoorganizehealthcampsinremotevillages–mobileclinicsthatprovideaccesstoscreening,diagnosisandtherapy.Providinghealtheducationcouldbemonetizedoverthelong-term by expanding health seeking behavior and thereby eventually increasing demand for medicines and providing benefitstoNovartisovertime.Inthisway,thecompanyisemploying another prominent inclusive business model: distributionthroughadedicateddirectsalesforce.

ThelastdesignquestionforNovartistoaddresswasaroundgoal-setting.Atthestart,itsettledonthenumberofpeoplewhohavereceivedhealtheducation.Now,theyplantoexpandtheirmeasurementpracticesthroughworkwithBoston University.

Launching Arogya Parivar and realizing benefits

WhiletheinitialgoalwasforArogyaParivartobeprofitpositivewithinthreeyears,ittookonlyslightlyovertwotobeprofitable.DemandforNovartis’healtheducatorswasstrongandtheinitiative’ssuccesswaspositivenotonlyforthecompany’sbottomline,butalsoforitspublicreputation.Asnewsofitsfinancialsustainabilityspread,Novartisdrewinterest from a wide range of academics and business peers.

Scaling and growing

Evenasafinancialsuccess,ArogyaParivarcouldneverbeprofitableasNovartis’othercorebusinesses.Asaresult,whilethe programme was widely viewed as a success within the company,Houghfoundthat,“Whennewleaderswouldcomeintothefirm,therewasalwaysthatquestion.Soweretellthestory,re-makethecase,ofhownotonlyareweexpandingourbusinessinaprofitablewaythroughArogyaParivar,butweexpandpatientreach.”

NovartishassincegrowntheArogyaParivarmodel.Usingasimilarprocesstoitsinitialexternalassessment,thecompanyhasnowreplicatedtheprogrammeinKenya,Vietnamandmostrecently,Indonesia.Ineachcase,theprogrammetookitsreplicableelements–thepairingofahealtheducatorwithatraditionalsalesperson–andadaptedtheresttolocalmarketconditionsanddiseaseprevalenceineachcountry.Forexam-

ple,inVietnam,Novartisengagesinaprivate-publicpartner-shipwiththeHealthServices,whereasinKenya,thecompanyworkswithlocals,NGOsandoutreachworkerstoaddresschallenges of access and availability of medicines and doctors.

Looking beyond…

ThesuccessofArogyaParivarinfourdifferentmarketsgaveNovartisleadershiptheconfidencetolaunchintoanotherendeavorin2015.Giventhecompany’sexpertiseinnon-com-municablediseases(NCDs)andthenewSDGs’recognitionofNCDsasamajordevelopmentchallenge,Novartis’CEOaskedthe company’s Access to Medicine Team to design a new inclu-sivebusinessinitiative.Theteamcamebackwithaproposaltoinclude15medicinesinalow-pricedportfoliotobeofferedtogovernmentsanddevelopmentinstitutions.Thecompanylaunchedtheprogramme–NovartisAccess–inconjunctionwiththeSDGsinearlyfall2015inKenya,EthiopiaandVietnam.

Based on desk research and an interview with Charlie Hough, Novartis VP & Global Head of Strategy for Corporate Responsibility.

Juan ValdezJuanValdezisaninternationalcoffeehousechainthathasgrown into one of the best examples of inclusive business. The company engages all segments of the income pyramid in its home country of Colombia and increasingly in its operationsabroad.

Designing the inclusive business

ThestoryofJuanValdezbeginswiththeNationalFederationofCoffeeGrowersofColombia,anNGOfoundedin1927thatrepresentsmorethan500,000Colombiancoffee-growingfamilies.125TheFederationismadeupalmostentirelyofsmall-scalecoffeegrowerswhooperatecoffeeplantationsoflessthanfivehectares.126 Its members are about a quarteroftheestimatedtwomillioninhabitantsincoffee-growingregionsofColombiawhodirectlydependoncoffeeproductionfortheirlivelihoods.

WhiletheFederationwassuccessfulinorganizingandprovidingincometotheseBOPcoffeesuppliersfordecades,intheearly2000stheorganizationdevelopedtheideaofcreatingadirectsaleschannelasameansofincreasingthegrowers’profits.Todothis,in2002itcreatedaparentcompanycalledColombianCoffeePromotion(Procafecol)andthe Juan Valdez brand.127


128 http://www.federaciondecafeteros.org/particulares/en/sala_de_prensa/detalle/steady_growth_in_procafecol_s.as_financial_indicators_during_the_first_quar/

129 https://www.federaciondecafeteros.org/algrano-fnc-es/index.php/comments/juan_valdez_supero_100_tiendas_en_el_exterior/130 GrowingInclusiveMarkets.JuanValdezCoffeeShops:FairTradeasanInclusiveandSustainableBusiness.Availablefromhttp://

growinginclusivemarkets.org/media/cases/Colombia_JValdez_Summary.pdf131 ConsultativeGrouptoAssistthePoor(2010).Andhra Pradesh 2010: Global Implications of the Crisis in Indian Microfinance,November2010.

Availablefromhttps://www.cgap.org/sites/default/files/CGAP-Focus-Note-Andhra-Pradesh-2010-Global-Implications-of-the-Crisis-in-Indian-Microfinance-Nov-2010.pdf

WhatmakestheJuanValdezinterestingasanexampleof inclusive business are two key elements of its business model.First,itusesadeep procurement model to source thecoffeebeans:TheFederation’sfarmersprovidethecoffeeandtheFederationhandledthedistributiontoJuanValdez.Second,JuanValdeznotonlypays the Federation a premiumonthecoffeeitselfbutalsopays royalties based onitssales.Asaresult,thecoffeegrower-ownedFederationreapsbenefitsdirectlyproportionaltoJuanValdez’ssuccess.“Asourcompanygrowsandasourprofitsgrow,wehavearound18,500coffeegrowerswhoareindirectlyshareholdersfor the company. Their shares have appreciated in value tremendouslyandweareproudofthis,”explainedDr.HernánMéndez,PresidentofJuanValdez.

Structuringthecompanysuchthatthecoffeegrowersthemselves are shareholders means that the company never needstotradeoffprofitforimpact,becausetheprofitsdirectlybenefitmembersoftheBOP.Asaresult,JuanValdezhasbuiltanearlyunassailablelevelofbrandloyalty,sinceitsColombiancustomersappreciatethattheprofitsgodirectlyto the farmers. While Starbucks entered Colombia a year and ahalfagoandnowoperatestenstoresinthecountry,JuanValdez has seen no impact on its sales.

Growing the brand and scaling

Afterestablishingafootholdinitshomemarket,JuanValdezlaunched in Chile and Ecuador through private partners using a franchising model. Countries in close proximity to Colombia weretheinitialgeographicfocusbecauseof:(i)thestrongculturalvalueofqualitycoffee;and(ii)theeaseofdoingbusiness in Spanish-language countries. As Juan Valdez has expanded globally over the last several years to non-Spanish-speakingcountries,theparentcompanycontinuestofocuson understanding the culture of each country and the role of coffeeinthatsociety.

Recognizing its success

Asof2014,slightlyoveradecadeafterlaunchingJuanValdez,thecompanygeneratedmorethanUS$20.3millionfortheFederationinbrandroyaltiesandpaidUS$2.5millioninpremiumstoColombiancoffeegrowers.128In2015,JuanValdezhadmorethan320storesworldwide,incountriesincluding the United States and Spain.129 Its success made it

possible to pay growers 25 percent more than the standard Colombianmarketprice,contributingsignificantlytothegrowers’ incomes.130

Lastyear,JuanValdezengagedinconversationsaboutgoingpublic–ariskypropositionforinclusivebusinesses(considerforexample,theoutcomeoftheAndhraPradeshmicrofinancecrisis).131Conceptually,theFederationwillremainthemainshareholderandholdanIPOinordertofinancemorerapidexpansion than it could support on its own. Méndez hopes that Colombians will buy shares in the company because of itssocialandeconomiccontributionstothecountry,andanticipatestheJuanValdezmaybereadytotakethisnextstepin2018.

Advice for companies

JuanValdezadvertisesitsproductsas“100percentColombiancoffee,”emphasizingtheproduct’squalityandtastewithoutpromotingthesocialbenefitofitsownershipstructure. Méndez sees this as a shortcoming in the current marketandnotesthatashiftisunderwayaspartofthecompany’s2020strategy.Hisadvicetoothers:dothesameintoday’sworld,wherecreatingsocialvalueisincreasinglyvaluable to driving sales.

Based on desk research and an interview with Dr. Hernán Méndez, President of Juan Valdez.

Top Ten Inclusive Business Critical Success FactorsWhile this Guide advocates for inclusive business as a strategic pathwaytoaddresstheSDGs,itdoesnotsuggestthatthismodelaloneisapanacea.Likeanybusiness,inclusivebusinessiscontextdependent,requiresnavigatingthroughanumberofstrategicandoperationalblindspots,andultimatelydeliversvaluetoitstargetcustomerefficientlyandeffectively.Thefollowingcriticalsuccessfactorssummarizesome the important elements to consider when designing and implementinganinclusivebusiness:

1. Understand the business model and business model maturity: The degree to which an inclusive business will be successful depends heavily on their degree of readiness/maturityandthedefinitionofthebusiness


modelitself.Modeldesignanddiagnosticsareoftenrequiredtoassurethebusinessisreadytoexecuteandattainsuccess.

2. Assure a minimum viable ecosystem: Given the usual marketfailuresintheinclusivebusinessecosystem,itisnot unusual for these business models to face a number ofdependencies,interdependenciesandblindspots.Understandingwhothecriticalstakeholdersareandhowtheyshouldbeengagedisanessentialpreconditionforinclusive business success.

3. Access the right types of finance: Given the risks normally associated with inclusive business design and implementation,traditionalfinancingstreamsmaynotbeavailableatdifferentstagesintheinclusivebusinesslifecycle.Ratherthan“force”thewrongtypeofcapitalattheincorrectdevelopmentstage,inclusivebusinessesshould be savvy as to how to explore and exploit blended financeopportunities.

4. Identify, leverage and monetize ‘hidden assets’: While inclusivebusinessispredicatedonthenotionthatitshouldbeacorebusiness,therearenumerousexamplesof companies developing an adjacent business that leveragestheirhiddenassets(forexample,leveragingaccesstoconsumerdatatolaunchadifferentproductorservice,orleveragingadistributionnetworktoadvanceanewproduct).Hiddenassetsareoftenuncoveredaspartofasocialinnovationprocessacompanymayelecttoundertake.

5. Assure appropriate customization and segmentation: Understanding the localized needs of the BOP consumer segment allows for the development of sales,distributionandproduct-developmentstrategiesuniquetothismass-marketopportunity.Thisrequirescontemplationonnotonlycriticalelementslikequalityandaffordability,butalsohowpurchasingdecisionsaremadeandbywhom,aswellashowthemodelsdeveloped can be replicated.

6. Mitigate logistics and infrastructure gaps: In many underservedenvironments,logisticsandinfrastructuremaybepoor,ifavailableatall.Inclusivebusinessesmayrequirestrategiclogisticspartnerships,‘cooperative’models,ordistributioninnovationinordertoeffectivelyandefficientlysourceordistributetheproductorservicefromthissegment.Whileachallenge,manyinclusivebusinessesareabletofindalternativesthatarenotcostprohibitiveandstillallowtheproductorservicetoremaincompetitiveinthemarket.

7. Collective access and individual ownership:Forexample,poorpeoplespendUS$37billiononpoorqualityenergysolutionstomeettheirlightingandcookingneeds.Community-owned‘mini-utilities’canofferenergysolutionsforbothhouseholdandproductiveuseatalowercost(through‘radicalaffordability’).

8. Frugal innovation: Relatedtoethnographicresearch,inclusivebusinessoftenrequiresthedevelopmentof‘nofrillsgoodsandserviceswithuniquepricingstructuresand models to realize success.

9. Begin with the end consumers: Underserved populationsinteractwithgoodsandservicesdifferently,demonstratinguniqueconsumerbehaviorthatdoesnotfitintotraditionallyunderstoodconsumerpreferences.Assuch,usingethnographicresearchallowscompaniesto observe the end-consumer in context and make determinationsabouthowaproductorserviceshouldbedesigned,howtheendconsumerwillinteractwithitandwhatcriticalsuccessfactorsaretoensureviabilityandsustainability.

10. Design for scale: Given both the internal business pressuretodemonstratefinancialreturnswiththisconsumersegmentandtheimportanceofsocialimpact,the business model and strategy should be designed with scaleinmindfromtheoutset.Howwillthemodelgrow?Howwillitbereplicated?Whatmightbethebarrierstoscaleandhowshouldthesebeovercome?Answeringtheseimportantquestionswillbecriticaltoensuringthelong-term success of the inclusive business.


132 PewResearch(2015)“MillennialssurpassGenXersasthelargestgenerationintheU.S.laborforce.”Availablefromhttp://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest-generation-in-u-s-labor-force/

133 Deloitte(2016).The 2016 Deloitte Millennial Survey: Winning over the next generation of leaders.Availablefromhttp://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html

134 PaulPolman,CEOUnilver

Conclusion

ThisreportwasdesignedasapracticalreferenceforbusinessleadersastheyseektobestpositiontheircompaniesforfuturesuccessinthecontextoftheSDGs.Withconsiderationstailored to each company’s level of experience with inclusive business,thecontentisbroadlyapplicableacrosstheprivatesector.Italsooffersimplicationsforactorsseekingtodesigna more inclusive global ecosystem. Governments and social sectororganizationscanusethiscontenttosupportbusinessleaders in developing inclusive businesses.

Asaneweraofpurposefulbusinessdawns,thestrategiesdiscussed here are not solely intended to foster inclusive businessforadvancingtheSDGs,buttoadvisecompaniesonapathforwardthatissociallyandenvironmentallysustainable,andprofitable.Findingthesetwopathsisincreasinglyimportantforcompaniesintoday’srapidly-changingworld,wherethevalueofbusinessisbeingactivelyredefined.“Wethepeoples”–thecelebratedopeningwordsoftheUNcharter–aredemandinggreaterrespectforhumanqualityof life through their purchasing and employment decisions. Millennialsarenowthelargestgenerationintheworkforceandmorethan90percentofthembelievethatthesuccessofa business should be measured in terms of more than just its financialperformance.132,133

Many business leaders have already recognized and acted on thistransformativeredefinitionofvalue:thisreportfeaturesmany companies who are tackling the world’s greatest challengesinawaythatalsomakesfinancialsense.Commercewas originally founded on the principle of providing a product orservicethatmeetsasocietalneed–todaythoseneedsarebeingdefinedintermsofinclusiveandsustainabledevelopment.134Manybusinesseswillneedtoredefinethevalue they provide or risk irrelevance.

We hope for a future in which the inclusive business maturity modelbecomesobsolete.Inthatworld,allcompanieswillbecome ‘Champions’ that do not designate parts of their operationsas‘inclusivebusiness’,butratherintegrateitintotheiridentitiesandcorestrategies.

IntheSDGs,the193UNMemberStates–governmentsrepresentingmorethan6billionpeople–havearticulatedtheworld’sprioritiesinaccordancewithmillionsofadditionalvoices from the private sector and civil society. As is stated in theSDGs,“Thefutureofhumanityandofourplanetliesinourhands…Wehavemappedtheroad.”Thequestionis: Canbusinessleaderslearnhowtodrive?


Thisappendixprovidesadditionalinformationonthe2030Sustainable Development Agenda and the 17 SDGs that it encompasses.

AttheUnitedNationsSustainableDevelopmentSummiton25September2015,worldleadersadoptedthe2030AgendaforSustainableDevelopment,whichincludesasetof17SDGstoendpoverty,fightinequalityandinjustice,andtackleclimatechangeby2030.

What are the Sustainable Development Goals (SDGs) and how are they different from MDGs?TheSDGs,alsoknownastheGlobalGoals,buildontheMillenniumDevelopmentGoals(MDGs)–eightanti-povertytargetsthattheworldcommittedtoachievingby2015.TheMDGs aimed at an array of issues that included slashing poverty,hunger,disease,genderinequalityandaccessto

Appendix 1: The Sustainable Development Goals

waterandsanitation.EnormousprogresshasbeenmadeontheMDGs,showingthevalueofaunifyingagendaguidingglobalandnationaldevelopmentpriorities.Despitetheaggregatedsuccess,progresswithinandacrosscountrieshasbeen uneven.

ThenewSDGsgomuchfurtherthantheMDGs,connectingdevelopmental,environmentalandeconomicconcernsunderatransformativeframework.Thenewdevelopmentagendawasbuiltinconsultationwiththeprivatesectorand,therefore,envisionsamuchbroaderengagementofbusiness,alongsidegovernmentsandotherstakeholders,inachievingtheSDGs.Finally,theSDGsareuniversal,encompassingboththe developed and developing world. This brings the set of goals home to every global company that strives to maintain competitiveadvantageinaworldofenvironmentalchallenges,newconsumertrendsandmarketvolatilities.

http://www.undp.org/content/undp/en/home/presscenter/pressreleases/2015/09/24/undp-welcomes-adoption-of-sustainable-development-goals-by-world-leaders.html

http://www.undp.org/content/undp/en/home/presscenter/pressreleases/2015/09/24/undp-welcomes-adoption-of-sustainable-development-goals-by-world-leaders.html

http://www.undp.org/content/undp/en/home/presscenter/pressreleases/2015/09/03/global-goals-campaign-2015.html

http://www.undp.org/content/undp/en/home/sdgoverview/mdg_goals.html


Measuring Progress towards the SDGsMeasurementandreportingisapivotalaspectofthe2030Development Agenda. Monitoring the development goals atnationalandgloballevels,measuringprogress,informingpolicy and ensuring accountability of all stakeholders contributingtotheSDGsrequiresarobustframeworkofindicatorsandstatisticaldata.

Thesetof230globalindicatorsformeasuringthe169targetsproposed by the Inter-Agency and Expert Group on SDG indicators (IAEG-SDGs) is a framework intended for follow-up and review of progress at the global level towards achieving the17SDGs.InMarch2016,theframeworkwasendorsedbythe47thSessionoftheUnitedNationsStatisticalCommission.SinceJuly,theUNHigh-LevelPoliticalForumonSustainableDevelopmenthasbeenoverseeingnationalandthematicreviewsoftheimplementationofthe2030Agenda.TheForum’smandateistoprovidepoliticalleadership,guidance,andrecommendationsontheAgenda’simplementationandfollow-up,withtasksincludingreviewingoftheSDGimplementationonthenationallevel;keepingtrackofprogress;spurringcoherentpoliciesinformedbyevidence,science,andcountryexperiences;andaddressingnewandemerging issues.

Fortheprivatesector,thispresentsaformidableopportunitytoaligncorporatereportingwiththeemergentUNSDGindicatorframework.Thetimingisopportuneasallstakeholders,includingnationalgovernments,striveforagreateralignmentandharmonizationofmeasurementandreportingsystemswiththeSDGtargets.

UNDP Support to implementation of the 2030 Agenda for Sustainable DevelopmentHavingalargecountrynetworkinmorethan170countriesandterritories;aprincipalcoordinationrolewithintheUNDevelopmentSystem;theprovenabilityinsupportingeffortstoreducepoverty,inequality,andexclusion;andanintegratedapproachtosupportingprogressacrossthemultiplegoals,theUnitedNationsDevelopmentProgramme(UNDP)isuniquelyplacedtosupportcountriesinrealizing2030DevelopmentAgenda.

UNDPsupportscountriesinthreedifferentways,throughtheMAPSapproach:mainstreaming,acceleration,andpolicysupport.

• Providingsupporttogovernmentstoreflectthenewglob-alagendainnationaldevelopmentplansandpolicies.Thisworkisalreadyunderwayinmanycountriesatnationalrequest;

• SupportingcountriestoaccelerateprogressonSDGtargets.Inthis,wewillmakeuseofourextensiveexperi-enceoverthepastfiveyearswiththeMDGAccelerationFramework;and

• MakingtheUN’spolicyexpertiseonsustainabledevel-opment and governance available to governments at all stagesofimplementation.

UNDP is deeply involved in all processes around the SDG roll out.ThroughourRapidIntegratedAssessment,weassistcountries in mapping of SDGs goals and targets against nationalpriorities,aligningnationalmonitoringframeworkswiththeSDGs,andstrengtheningtheuseofdataforanalysisandimplementation.


135 TheWorldBank.GlobalConsumptionDatabase:Whatthedatatellus.Availablefromhttp://datatopics.worldbank.org/consumption/market

AnalysisbasedontheWorkBank’sGlobalConsumptionDatabase,whichaggregatesconsumerspendingin92countries across four income segments: lowest income (below US$2.97percapitaperday);lowincome(US$2.97–US$8.44);middleincome(US$8.44–US$23.03);andhigherincome

(aboveUS$23.03).135Notably,consumerswholiveonlessthanUS$8.44percapitaperday(lowestandlowsegments)contributeasignificantportionofthespendingineachofthese sectors.

Appendix 2: World Bank’s Global Consumption database

Figure A: Household Spending by Sector and Income Segment in Developing Countries

$85 B $158 B

$175 B

$80 B

$1,041 B

$353 B

$1,305 B

$710 B

$1,103 B

$734 B

$318 B

$336 B

$0 T

$1 T

$2 T

$3 T

$4 T

Food and Beverage

Infrastructure Health Educa�on Financial Services

Lowest Income Low Income Middle Income Higher Income

$55 B $4 B $138 B $16 B $147 B $32 B $58 B $42 B

Health Educa�on Financial Services


Figure B: Share of consumption by sector for low income segment in developing countries

Infrastructure$710 B

Clothing and Footwear$214 B

Health158 BEduca�on

$138 B

Personal Care$44 B

Financial Services$16 B

Food and Beverage$1,305 B

Transport$215 B

Others$308 B

Foodandbeverage,infrastructure,health,education,andfinancialservicesrepresent75percentofconsumptionforthelowincomesegment–thetargetformanyinclusivebusinesses.

AnalysisbasedontheWorkBank’sGlobalConsumptionDatabase,withafocusonlow-incomeconsumers(US$2.97–US$8.44percapitaperday).Theseindividualsarewillingtopay for products and services in these sectors. Infrastructure includeshousing(US$351billion),energy(US$184billion),ICT(US$152billion)andwater(US$23billion).


136 https://www.unilever.com/sustainable-living/the-sustainable-living-plan/enhancing-livelihoods/inclusive-business/137 BusinessCalltoAction.CaseStudy–CEMEXPatrimonioHoy:Providingintegralhousingsolutionsforlow-incomefamilies.Availablefromhttp://

www.businesscalltoaction.org/wp-content/files_mf/bcta_casestudies_cemex_ph_final.pdf138 HarvardBusinessReview(2012).Celtel’s Founder on Building a Business on the World’s Poorest Continent,October2012.Availablefromhttps://

hbr.org/2012/10/celtels-founder-on-building-a-business-on-the-worlds-poorest-continent139 WorldResourcesInstitute(2007).The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid.Availablefromhttp://www.wri.

org/sites/default/files/pdf/n4b_full_text_lowrez.pdf140 HarvardBusinessReview(2012).Celtel’s Founder on Building a Business on the World’s Poorest Continent,October2012.Availablefromhttps://

hbr.org/2012/10/celtels-founder-on-building-a-business-on-the-worlds-poorest-continent141 ManilaWater(2016).ManilaWater:CareinEveryDrop.Availablefromhttp://www.manilawater.com/Pages/Home.aspx142 InternationalFinanceCorporation(2012).ManilaWaterCompany:ManilaWater’sInclusiveBusinessModel,August2012.Availablefromhttp://

www.ifc.org/wps/wcm/connect/160ac4804d332fd589accdf81ee631cc/Manila+Water.pdf?MOD=AJPERES

Appendix 3: Inclusive Business Briefs

This appendix elaborates on the examples profiled in Section 2: Opportunity Sectors.

Food and BeverageUnilever: Unilever engages approximately 1.5 million smallholder farmers through its suppliers that act as smallholder farmer aggregators. Through its Enhancing Lives strategy,Unileverhelpsdevelopinterventionsforsmallholderfarmerstoimproveagriculturalpractices,businesscapabilities,andlifeskills.Unileveralsopromotesyoungagricultural entrepreneurs to make rural value chains more attractiveforfuturegenerations.Thecompanyaims tocontinueexpandingopportunitiesforsmall-scaleretailersandyoungentrepreneursinthedistributionandretailingofits brands.136

InfrastructureCEMEX: CEMEXofferstraining,funding,andtechnicalassistancetolow-incomefamilies,enhancingtheirself-buildingcapacitiesneededtoconstructtheirownhomes.Partof this programme uses a microcredit model to enable the poor,whoaretypicallyunabletoreceiveloansfromformalbanks,toaccesstosmallamountsofcredit.Whileitnormallytakesfamiliesupto15yearstobuildahome,thisprogramhelpsitsbeneficiariesreducethistimetobetweenthreeandsixmonths,andsavesthemuptoUS$460–anamountthatwouldtakeoneyearfortheaveragebeneficiarytosave.TheprogrammealsoexpandsCEMEX’scustomerbase;by2016theyexpecttoreach120,000newcustomers,generatinganadditionalUS$7millioninrevenue.137

Celtel: Celtel was founded in 1998 to bring mobile communicationstechnologytosub-SaharanAfrica.Celteldeveloped a pay-per-use model so BOP customers could purchase prepaid cards (or scratch cards) for just a few dollars’ worth of the local currency to use cellular service138 Celtelengagedlocalemployees,withAfricansmakingupabout98percentofthecompany’sstaff,manyofwhomown stock.139AftergrowingtooperateinthirteenAfricancountries with licenses that covered more than a third of the continent’spopulation,CeltelwasacquiredforUS$3.4billion.ThecompanynowoperatesasAirtelandstillhelpsimprovequalityoflifeformillionsofpeople.140

Manila Water: Manila Water developed a pay-per-use model todeliverwaterandwastewaterservicestomorethan6million people in Manila.141 Low-income households are willing topayforsafe,reliablewater.Connectingthesehouseholdtothe water system enables access to new markets while also reducingcostsfrominefficienciesandillegalconnections.142 Through partnership with local governments and community-basedorganizations,thecommunitiesareincludedinthedesignandimplementationofthewatersupplysystems.ManilaWaterisaprofitable,publiccompany,benefittingmillions of families.

Simpa Networks: Simpa Networks providesabasic,portablesolar home system in an off-grid utilities model to BOP customers in India. The system includes a low-cost meter connectedtoacloudbasedsoftwarethatenablesSimpatotrack customer usage. Customers purchase the system with an initialdownpaymentandthenselecthowmuchenergycredittopurchase.Aportionofthispaymentcoverstherepayment


143 http://www.adb.org/sites/default/files/publication/30383/affordable-solar-power-india-energy-poor-homes.pdf144 BusinessCalltoAction.CaseStudy–PhilipsHealthcareServices:ProvidingmicronutrientstochildreninKenya.Availablefromhttp://www.

businesscalltoaction.org/wp-content/files_mf/bctacasestudyphslweb.pdf145 Sudiksha.Sudiksha:WhoWeAre.Availablefromhttp://www.sudiksha.in/Home.aspx146 Pearson(2015).SustainableDevelopmentGoals&theWorld’sLargestLesson,2September2015.Availablefromhttp://blog.pearson.com/

sustainable-development-goals-the-worlds-largest-lesson/147 Sudiksha.Sudiksha:WhoWeAre.Availablefromhttp://www.sudiksha.in/Home.aspx148 PearsonAffordableLearningFund(2016).Sudiksha.Availablefromhttps://www.affordable-learning.com/portfolio/sudiksha.html149 Pearson(2014).Low-costpre-schoolchaintapsintowomenentrepreneurstoprovidequalityeducationtounderprivilegedinIndia,26June2014.

Availablefromhttps://www.pearson.com/news/announcements/2014/june/low-cost-pre-schoolchaintapsintowomenentrepreneurstoprovid-equali.html

150 https://news.starbucks.com/news/top-us-based-companies-launch-100k-opportunities-initiative151 CitiGroup(2016).“CitiMobileCollect”RecognizedasBestMobileMoneyDeploymentintheAmericasinTheMobileMoneyGlobal&Digital

PaymentsSummit2013.Availablefromhttp://www.citigroup.com/citi/news/2013/131119a.htm

costofthesystem,whiletherestgoestoSimpaasprofitandtocoveroperationalcosts.Oncefullypaid(typicallywithintwotothreeyears),thesystemunlockspermanentlyandcontinuestoproduceelectricityforthecustomerforfree.Simpahasinstalledover15,000solarhomesystemsinIndiaand is rapidly growing.143

HealthcarePhilips Healthcare: Philips developed a micronutrient powder(MNP)forchildrenaged6to59monthsthatcanbesprinkled onto any semi-solid food. Philips uses distribution through dedicated direct sales force,sellingMNPthrougha trained sales force with the product packaged in single-dosepacketsatalowercosttoensureaffordabilityfortheBOP.Highdistributionvolumeensureseconomicviability.Sofartheinitiativehasreachedapproximately22,550childrenthroughthesaleofnearly40millionMNPpackets,generatingUS$323,645inrevenueforthecompany.144

ClickMedix: ClicMedix developed a mobile-enabled non-financial servicesmodeltoeffectivelyprovidehealthcareservices to the BOP. Community-based health workers are trainedandequippedwiththeClickMedixapplication.Theyactasthehandsandeyesofremotedoctors,transmittingdescriptionsofsymptoms,diagnosticsdevices,images,andvideorecordingsofthepatientthroughtheClickMedixplatform.ClickMedixhasexponentialrevenuegrowthandhasreachedover700,000underservedpatientsatthebottomofthe economic pyramid.

EducationPearson: PearsonisenablinginnovationsolutionsineducationthroughasignificantinvestmentinSudikshaKnowledgeSolutions,basedinHyderabad,India.Sudikshaisanexampleof modified para-skilling,wherepara-skillingistheideaof modularizing complex tasks into simple jobs to create employmentopportunities,increaseproductivity,andkeepcosts to serve low. Sudiksha trains and educates local women

asteachers,providingapackageoftimetables,guidancenotes,studymaterial,andexpertsupporttosimplifytheteaching process.145 These local women are then empowered to open and run neighborhood branches of a low-cost preschoolnetwork.Ultimately,thewomensharetheprofitsof these ventures.146Thepreschoolsaresimple,withminimalresourcestohelpreducethecostofprovidingeducation.Withover500millionchildreninIndiabelowthepovertyline,theirstudentsareprimarilyurban,poorchildrenagedtwotosix years.147Unabletoaffordtraditionalpreschooleducation,thesechildrenwouldnotbeabletoattendschoolifnotforSudiksha.148 Sudikshareportsanimpactofapproximately800low-income families as a result of their preschool network.149

Starbucks:Starbucksisleadingthe‘100,000Opportunities’campaign with more than a dozen US-based companies to hire morelow-incomeemployeesasapprentices,interns,andpart-andfull-timeemployees.Thisimpact sourcing model aims to engageatleast100,00016to24yearoldsacrossthecoalitionofbusinessesby2018.The100,000Opportunitiescampaigntargetsthe5.6millionyouthwhoareoutofschoolandnotworkingtofillthe3.5millionunfilledjobsintheUnitedStatesthatdonotrequireafour-yeardegree.Thisprogrammecreatesmutualbenefitforyouthswhofacesystemicbarrierstojobsandeducation,aswellascompaniesthatneedanddependonmotivatedworkers.150

FinanceCiti Mobile Collect: Citiusesamobile money solution,enabling small businesses to transfer money via mobile devices. This service enables typically unbanked small grocery stores and other businesses to replace cash payments to their providerswithmobiletransactions.Thepaymentsolutionwasintroduced in the Dominican Republic and is also available inIndia,China,andSouthKorea.CitiMobileCollectwasrecognized as the Best Mobile Money Deployment in the AmericasinTheMobileMoneyGlobal&DigitalPaymentsSummit2013.151


152 BusinessCalltoAction.CaseStudy–MahindraRuralHousingFinanceLtd:MakingHomeLoansAvailabletoPoorPeople.Availablefromhttp://www.businesscalltoaction.org/wp-content/files_mf/bcta_casestudy_mahindra_web.pdf

Mahindra Rural Finance Ltd: Mahindra uses a microcredit and micro-insurance model to provide home loans to under-served rural and semi-urban consumers in India. Despitestrongdemand,alackoffinancingtypicallypreventsmillionsofruralIndiansfrombuildingorbetteringtheirhomes.Mahindradesignedahomeloanproduct,coupled

withlifeandpropertyinsurance.ThecompanyoffersfixedinterestratesandmanyrepaymentscheduleoptionssoBOPcustomerscantailorthescheduletotheircashflows.Mahindrahasprovidedover250,000homeloans;createdmorethan3,000jobs;andremainedaprofitableand growing business.152


In inclusive business, a company may choose to engage the BOP at different points across its value chain, depending on where it makes the most sense given the external environment and internal capabilities. This appendix describes which SDGs are most likely influenced by type of engagement with the BOP (most commonly as producers or suppliers, distributors, or customers).

Appendix 4: Contributions to the SDGs by Engagement Type

Producers and/or Suppliers

• Empowerindividualstoliftthemselvesoutofpovertybyengagingthemassuppliers,providinganincreasedormorestable(e.g.,promised)sourceofincome

• Increaseagriculturalproductivityofsmall-scalefoodproducersbyprovidingaccesstoresourcesandtraining

• Instructsupplierstoproducegoodsmoreeffectivelyand/orpreservegoodslonger

• Ensuresuppliershavethetechnicalandvocationalskillsnecessary

• Instructsuppliersonsustainableproductionpractices,providingtheknowledgeandskillsneededtopromotesustainable development

• Reducetimeandeffortrequiredtoproducegoods,freeinguptimeforchildrentolearn

• Engagewomen(e.g.,artisans)assuppliers,enablingthemtosupportthemselvesandbecomefinanciallyindependent

• Teachproducerssustainablepracticestominimizethereleaseofhazardouschemicalsintothewatersupplyandincreasewater-useefficiency

• Stimulatepercapitaeconomicgrowthintheregion(s)bystimulatingfullandproductiveworkforthelocal,engaged suppliers

• Promotesafeandsecureworkingenvironmentforsuppliers,giveninternationalspotlightonfairworkingconditionsparticularlyforlargecompanies

• Provideaccesstofinancialservices(e.g.,credit),enablingsupplierstogrowtheirbusinesses

• Promoteinclusiveandsustainableindustrializationbyengagingsuppliersinthevaluechainandpartneringwithgovernmentstobuildrequiredinfrastructure

• Enablesupplierstoincreasetheirincomes,contributingtoincomegrowthinbottom40%ofthepopulationataratehigherthannationalaverage

• Supportthe“economicinclusionofall”byengagingBOPsuppliersinthevaluechainthatmightnotother-wise be engaged in the formal economic sector


Distributors

• Empowerindividualstoliftthemselvesoutofpovertybyengagingdistributorsasemployeesorthirdpartyvendors,providingthemwithanincreasedormorestablesourceofincome

• Traindistributorsonhealthcareandnutrition,improvingtheirownwell-beingandalsoenablingthemtobetterprovidetheproductorservice;fast-movingconsumergoodssuchassanitationproductsaresimpletodistributeandrequiresomefrequency

• Instructdistributors,providingthemthetechnicalandvocationalskillsforemployment,decentjobsandthepossibility for entrepreneurship

• TrainBOPaseducatorsthroughparaskilling,enablingthemtoincreasequalityeducationopportunitiesavail-ablefortheircommunities

• Contributetofamilies’increasedincome,betterenablingthemtosendtheirchildrentoschool

• Engagewomenasdistributorsofgoods(e.g.,sanitationproducts)orservices(e.g.,education)enablingthemtosupportthemselvesandbecomefinanciallyindependent

• Stimulatepercapitaeconomicgrowthintheregion(s)byengaginglocaldistributors

• Supporthigherlevelsofeconomicproductivityaswellasfullproductiveworkfortheengageddistributors

• Promoteinclusiveandsustainableindustrializationbyengagingdistributorsinthevaluechainandpartneringwithgovernmentstobuildtherequiredinfrastructure

• Designinnovativedistributionmethodsgivenchallengesassociatedparticularlywithruraldistribution

• Enabledistributorstoincreasetheirincomes,contributingtoincomegrowthinthebottom40%ofthepopu-lationataratehigherthanthenationalaverage

• Supportthe“economicinclusionofall”byengagingBOPdistributorsinthevaluechain

• Moresustainablyandefficientlydistributeproducts,preservingnaturalresources

• Reducespoilagealongthesupplychainbyemployinglocaldistributorswhocanbettermanagesupply

• Helpdistributorsplanforclimate-relatedhazardsandnaturaldisasters

• Reducetheclimatechangeimpactofdistributorsbykeepingthedistributionnetworkslocal

• Trainproducersinthesustainableandefficientuseofnaturalresources,enablingbusinessestocertifyprod-ucts and command a higher price

• Facilitatereducedfoodlossesalongproductionandsupplychains

• Helpsuppliersplanforclimate-relatedhazardsandnaturaldisasters

• Reducetheclimatechangeimpactofsuppliersbytrainingtheminsustainableproductionpractices

• Contribute to the sustainable use of terrestrial ecosystems by training suppliers to sustainably use their land


CustomersNote:Acompany’sspecificcontributionmayvarydependingonwhatproductorservicethecompanyoffers.Thelistbelowisasampleofpossiblecontributions.

• Providecustomerswithaccesstobasicgoodsandservices,appropriatetechnologyorfinancialservices

• Offerfoodornutritionalsupplements,promotingaccesstosafe,nutritiousandsufficientfoodallyearroundandcontributingtotheendofmalnutrition

• Supplyhealthcareproductsorservices–fromvaccinestobasicsanitationproducts—thatreduceglobalmaternalmortality,endpreventabledeaths,andcombatdisease

• Improvequalityoflifethroughaccesstoservices(e.g.,healthcareprofessionals)andgoods(e.g.,sanitationproducts)

• Provideeducationalmaterialsorplatformsforchildrenoradults,particularlythroughmodularizedlearningprograms and services

• Engagewomenascustomers,offeringproductsorservicesthatimprovetheirwellbeingorqualityoflife

• Empowerwomenthroughmicrofinance

• Facilitateadequateandequitablesanitationandhygieneforallthroughaproductorserviceoffering

• Expandaffordable,reliableandmodernenergyservices(e.g.,electricgrid)toreachBOPcustomers

• Provideinnovativeproducts(e.g.,cleancookstoves)forBOPcustomersthatenablethemtoaccessaffordableand clean energy

• Provide products or services that increase the share of renewable energy in the global energy mix

• Promoteproductiveactivities,jobcreation,andentrepreneurshipbyofferingproductsandservicestoBOPcustomers,includingaccesstofinancialservices

• Provideproducts(e.g.,solarlamp)andservices(e.g.,telecom)thatcontributetoincomegrowthofthebot-tom40percentofthepopulation

• Supportthe“economicinclusionofall”byengagingBOPcustomersinthevaluechain

• EnableBOPcustomerstoaccessadequate,safeandaffordablehousingandbasicservices

Empowered lives. Resilient nations.

United Nations Development Programme (UNDP) works in more than 170 countries and territories, helping to achieve the eradication of poverty, and the reduction of inequalities and exclusion. UNDP helps countries to develop policies, leadership skills, partnering abilities, institutional capabilities and build resilience in order to sustain development results. For more information: www.undp.org

Istanbul International Center for Private Sector in Development (IICPSD) is one of six UNDP global policy centers with a special mandate to focus on the role of the private sector in development. The mission of the Center is to conduct research, carry out advocacy and contribute to public-private dialogue to develop market solutions to poverty reduction and human development. For more information: www.iicpsd.org

Business Call to Action (BCtA) challenges companies to advance core business activities that are inclusive of poor populations and contribute to achieving the Sustainable Development Goals (SDGs). BCtA is supported by the Dutch Ministry of Foreign Affairs, the Swedish International Development Cooperation Agency, the United Kingdom Department for International Development, the United States Agency for International Development, the Ministry of Foreign Affairs of the Government of Finland and the United Nations Development Programme (UNDP) — which hosts the secretariat. For more information: www.businesscalltoaction.org

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