By Marcos Neto, Director Finance Sector Hub, UNDP
The potential for multinational companies to tackle global issues such as poverty, climate change and gender inequality is immense. With their reach, they have the ability to transform low income markets through innovative business approaches and help lift millions – even billions – out of poverty. Inclusive business is one such model, but numerous internal barriers are preventing multinationals from adopting or scaling this approach.
In the latest Business Call to Action (BCtA) report, launched today at the BCtA 9th Annual Forum, we examine how to overcome these organisational barriers, drawing from examples of successful companies who are already doing this, and offer steps that companies can take to adapt their management practices to become more inclusive business friendly.
Business experts predict that top performing global companies will be those who reach out to new markets while simultaneously addressing some of the world’s biggest social and environmental challenges. Trends such as demographic shifts and automation are already changing the landscape of the global workforce, presenting both new business opportunities and risks. According to McKinsey, by 2025, half of the world’s largest companies will be based in developing countries. Innovative corporates from the Global South will be the ones leading social change, creating jobs and servicing the yet-untapped markets at the base of the economic pyramid (BoP).
However, looking at the market today, replication of inclusive business (IB) is not yet happening widely amongst multinational corporations (MNCs). In addition to market-based challenges, there are often internal constraints that limit the uptake and growth of inclusive businesses.
Our two years of research, conducted in close collaboration with our members, led us to identify cross-cutting IB management practices which allow companies to gain critical insights to improve their models and better communicate impact and business value to investors, stakeholders and customers, thus gaining greater internal support for the sustainability and replication of IB initiatives.
We found a strong correlation between the adoption of specific inclusive business management practices and the continuity and growth of inclusive business initiatives.
Our research shows that successful inclusive businesses apply principles that are quite different from business-as-usual, including in-depth stakeholder engagement, value-based talent management practices that build skilled loyal staff and focus on their wellbeing, coherent performance incentives for management tied to inclusive business success, target-setting consistent with long-term value creation objectives and a sharp understanding of ESG risks and opportunities within the inclusive business. Management practices tailored to address the Base of the Pyramid (BoP) market can constitute a valuable source of competitive advantage, ensure better understanding of and responsiveness to key stakeholders, increase IB impact, both social and environmental, and balance short-term stability with long-term viability and achievement to Sustainable Development Goals (SDGs).
In our report, we introduce a typology of management practices found by large corporations leading IB globally as critical to the growth and success of inclusive business. The typology builds on BCtA’s decade of experience engaging with companies implementing IB across sizes, sectors and regions, BCtA’s State of Inclusive Business Survey and interviews with executives from over 25 MNCs across regions including Essilor, Mastercard, Gap, Sanofi and Ikea.
So, what’s in it for your company?
Adopting inclusive business friendly management practices supports companies to achieve the following results: