Inclusive business for inclusive growth

Source: The Philippine Star


We witnessed in the recent election the many campaign promises of the candidates. One thing common that cuts across their agenda is on how we can really uplift the lives of fellow Filipinos, especially those at the bottom of the pyramid.  Alleviating poverty is the topmost priority of most candidates.  The sustained growth we enjoyed in the current Aquino administration translated to a modest reduction in poverty incidence from 28.6 percent in 2009 to 27.9 in 2012 and 26.3 in 2015.  There is a good momentum and it is important that we sustain this and even accelerate the pace of reduction.  The mass majority, after all, is the bulk of the electorate who select the winning candidates.  Their welfare must be improved.

But no amount of government effort can make everyone succeed in life. Government can set a favorable environment and provided initiatives but each one must resolve to make a change for the better, to take advantage of all programs and opportunities around us and simply work hard. Enabling programs are given by several government and private advocacies.  But one has to make an effort and ride on the wave of economic growth.  Either we get ourselves educated or trained (and a lot of institutions provide these, like TESDA, DOST, DTI, DA, Go Negosyo, Association of Filipino Franchisers, Phil. Franchise Association), so we can get employed, or start a business, or invest in one.  In other words, we have to invest in sharpening our talents and time, work hard, and invest some funds for those who have the means to be able to ride on the growth phenomenon.  We cannot expect the growth benefits to trickle down to all if some really don’t make an effort at all, and simply wait for government dole outs and support.

Many in the business sector, since they are putting a stake in the growing economy, are benefitting on the current upswing in the economy.  The growth fundamentals are there in terms of the benefits from the country’s demographic dividends and growing consumer market with increasing purchasing power from a higher employment rate, increasing OFW remittances, BPO revenues, increasing investments, a stable inflation and interest rate environment, prospects from a more integrated ASEAN economy and many other opportunities.

To be able to facilitate the trickle down effect of the economic gains, we encourage initiatives beyond the norm.  Promoting more inclusive business models can accelerate the growth of smaller economic groups like farmers’ cooperatives, micro producers, social enterprises or small retailers.  There would be more sustained demand for their produce if they are made part of the value chain of bigger businesses.  It will not be dole outs as they have to be competitive in quality and price to retain the supply arrangement.  But this is a more ideal model for inclusive development.

This is different from the traditional corporate social responsibility since this pertains to more philanthropic and charitable activities, that may be time bound and not connected to one’s business model.  Inclusive business models are linked with micro and small enterprises or cooperatives, either as supplier or distributors or consumers who benefit from the efforts of inclusive businesses to lower costs and prices.

In the incoming administration of President-elect Rodrigo Duterte and VP-elect Leni Robredo, both have anchored their programs on how they can uplift the lives of underprivileged Filipinos.

As Go Negosyo promotes entrepreneurship for the past 11 years, we strongly perceive that it will be the solution to poverty. As we say, “Teach a nation how to fish and we will feed a nation for many lifetimes.”

One strategy that will support this mission is the promotion of inclusive business. You may have read this in our column for several times now but let me discuss with you why is this a viable solution to poverty.

Inclusive business is a term coined by the World Business Council for Sustainable Development in 2005. It refers to “sustainable business solutions that expand access to goods and services, and livelihood opportunities for low-income communities.” In simpler term, Inclusive Business refers to private companies who outsource or insource a product or service from or to lowly communities, making them part of the value chain as suppliers, distributors, retailers, or customers.

Small communities or groups are organized to supply products to big companies. One example of inclusive business is the organization of ube farmers in Davao called Purple Passion. It is a small group of ube farmers who now sell their ube jams and ube powders to industrial clients. Our Selecta ice cream joint venture has also developed a group of farmers in Mindanao to support the ube requirements of the production.

Kennemer Foods International Inc. is also a company which promotes inclusive business through sourcing and trading cacao beans sourced from farmers.  Kennemer Foods promotes inclusive growth by (1) promoting market transparency, (2) providing fair value pricing for produce, and (3) implementing sustainable farming practices. It also provides planting materials and inputs, technology and trainings, mentorship and supervision, and access to financing.  Currently, Kennemer Foods has active cacao centers in Mindanao, Visayas, and Palawan.

Mindanao-based company Bali Oil Palm Produce Corp. also taps poor farmers as contract growers of oil palm. In partnership wth Kalilangan Oil Palm Growers Association, Bali Oil operates almost 57,000 hectares of plantation in Misamis Oriental and Bukidnon province. Bali Oil Corp. is one of the companies which adopted the Inclusive Business in Mindanao (IBIM), a partnership between the Philippine Business for Social Progress (PBSP) and the Mindanao Development Authority (MinDA).

As Markus Dietrich and Armin Bauer mentioned in their study entitled Inclusive Business Market in the Philippines (September 2013), “companies adopt inclusive business primarily to create shared value, increase sales, enhance company reputation, and develop the ability to maintain a stable supply of inputs.”

With these efforts to connect the micro and small entrepreneurs to the big entrepreneurs of all industries, it creates a double-edged solution. For small players, it helps them access bigger markets thus making them active members of the value chain. For big players, they now have direct suppliers of quality goods and in return, they help the small players develop and improve. A big brother helping small brother in the business. Synergies of these MSMEs and corporations produce a long-term value-driven partnerships.

If our government will support and promote inclusive businesses, the farmers, fisher folks, and other members of the low-income communities will have a chance to have a better life. And all together, if we cooperate with one another, we can create not only inclusive businesses, but achieve inclusive growth too.

Let us work hand in hand in strengthening the economy!