Contributing to SDGs while maintaining company profitability

This blog was first published in Revista Suiza: Publicación Trimestral de la Cámara de Comercio Colombo Suiza (Swiss Magazine: Quarterly publication of the Colombo Switzerland Chamber of Commerce) in September 2017
By Paula Pelaez, Business Call to Action Programme Manager

Right now, a staggering 2.7 billion people are living on less than $2.50 USD a day – less than the price of a coffee in most Vienna cafes. At just over a third of the global population, it’s a demographic that is both in dire need and impossible to ignore. The Sustainable Development Goals define our universal commitment to address these needs by reducing poverty, improving working opportunities and access to health and education, while pushing for greater equality. For the private sector, this demographic presents a dual opportunity: by engaging them in their value chains, not only can businesses play a role in improving lives, they are also accessing an enormous and underserved market of potential customers, producers, suppliers, employees and more.

Companies that recognize these opportunities – and adjust their business models to serve them – are what we call inclusive businesses.

The core objectives of an inclusive business are the same as any other company: to drive revenue growth, create value and accelerate business expansion. But while doing so, inclusive businesses are also expanding access to goods, services, and livelihood opportunities for low-income communities. Low-income populations could be included anywhere along a company’s value chain, including supply, production, distribution and marketing of goods and services. This generates new jobs, raises incomes, imparts technical skills and strengthens local capacity. Consumers can benefit from products and services that meet their needs in affordable ways.

This integrated paradigm represents a new way of thinking about how private sector can contribute to achieving the SDGs. It represents enormous potential: as inclusive businesses grow, the livelihoods of the individuals in their markets are also improved.

Many multinational companies such as Unilever, Philips and Novartis have adopted this model, growing their bottom lines through innovation and adaptation while at the same time stimulating progress toward the SDGs.
Unilever currently engages approximately 1.5 million smallholder farmers through its suppliers. To ensure the quality of supplied products, Unilever has developed interventions to improve agricultural practices, business capabilities, and life skills for these farmers. This simultaneously improves farmers’ livelihoods. The company also supports agricultural entrepreneurship among young men and women to make rural value chains more attractive for future generations.

In India, Mahindra Rural Finance Ltd uses a microcredit and micro-insurance model to provide home loans to underserved rural and semi-urban consumers. Despite strong demand, a lack of financing typically prevents millions of rural Indians from building or bettering their homes. The company has provided over 250,000 home loans; created more than 3,000 jobs; and remained a profitable and growing business.

In order to ensure commercial viability or to scale up an existing inclusive business model like Unilever or Mahindra, a company must first understand their level of inclusive business maturity – how they are positioned for future success in the context of the SDGs. Our recent report, co-published with Deloitte, Uncharted Waters: Blending Value and Values for Social Impact through the SDGs, outlines a useful diagnostic for companies to assess their maturity and readiness and take tailored steps to incorporating inclusive business into their core strategy. The report provides a transformative suggestion: companies across sectors and geographies, whether or not they already employ inclusive business practices, can benefit from and become true champions of this model.

At BCtA, we have been supporting companies to adopt inclusive business practices, and advocating for greater recognition of the potential of private sector to contribute to SDGs for almost a decade. We currently have almost 200 member companies who are making contributions to the SDGs through their inclusive business commitments. They represent all regions and include multinational and large national companies, as well as small and medium sized companies and social enterprises across a range of sectors including agriculture, infrastructure, healthcare, energy, financial services and mobile technology.

They are working proof that businesses’ growth and socioeconomic development can not only exist, but thrive, together.