Businesses can be inclusive and profitable

Businesses can be inclusive and profitable

Monday, 12 november 2018 | Redacción CEU

Although the terms "integration" and "inclusion" are used interchangeably, they do not share meaning. Their goals may seem similar, but they give name to different models and realities. Inclusion goes a step further in the search for equality: real equity. Inclusion does not seek to give all people exactly the same, but each of them what they need. It does not expect to focus on difficulties or limits, but rather on capabilities. Neither does it deny that there are obstacles, because they are real. On the way to building a more egalitarian, supportive and sustainable society, it is also necessary to count on companies which are ruled by more inclusive principles. However, can companies be profitable at the same time that they contribute to improving the situation of vulnerable populations? What are inclusive businesses?

 

The Business Observatory against Poverty has been one of the last bodies to offer a definition of what inclusive businesses are: <<economic activities that integrate in their business value chain low-income communities, or groups which are exposed to any kind of vulnerability, as their customers, suppliers, distributors or employees, who manage to be profitable and, in turn, generate a social impact that improves the living conditions of the people which is involved>>. The Business Observatory wrote this in its report Inclusive Businesses and Spanish Companies, where it also noted that this type of businesses can be a strategic opportunity for Spanish companies.

According to the World Business Council for Sustainable Development (WBCSD), inclusive businesses are an optimal link between the interests of the private sector and the aspiration to a better world, since they contribute to complying with what were previously the Millennium Development Goals, and now are known as Sustainable Development Goals (SDGs). We have previously addressed the important role that companies have in the future of sustainability and the importance of their involvement in the SDGs. Most of the population, especially people who are part of the younger generations, demands a society aligned with a more inclusive economy. On the other hand, companies will always grow and develop better if the scenario where they are placed has great potential to prosper. If their environment has problems, their survival will be at stake in the long term.

Although many managers doubt that companies are capable of facing social challenges at the same time that they are achieving their own business goals, profitability does not have to be incompatible with inclusion. Indeed, the debate remains open. Nonetheless, there are more and more examples of companies that, concerned about these challenges, get a positive return and a better social acceptance. The aforementioned Business Observatory against Poverty's report points out different studies that confirm the positive synergy between economic profitability and social impact, for example, Total Society Impact by The Boston Consulting Group, The strategic sustainability in the Spanish companies by Deloitte and Profits with purpose by Mc Kinsey.

Before going deep into this approach, it is necessary to specify what we understand by "vulnerable population" in inclusive businesses. This concept is closely linked to the one of the Base of the Pyramid (BOP): the part of the world population that lives with less than $4 per day and that is generally excluded from the economy and traditional business activity. However, this vision does not only have to consider low-income communities, it can also take into account other types of social vulnerability that are not monetary.

According to the eighth annual monitoring report about the AROPE indicator, which is carried out by the European Anti-Poverty Network (EAPN-ES), in 2017, 12,338,187 people were in a situation of poverty and social exclusion in Spain. Companies have great potential to reverse this situation and contribute to improving it from the core of the business activity, in such a way that this approach is not only beneficial for those vulnerable groups, but also for the companies themselves.

 

Businesses can be inclusive and profitable

Why can inclusive models be a strategic opportunity?

The Business Observatory against Poverty identifies nine reasons why companies should integrate inclusive models in their businesses:

  1. Inclusive businesses are a practical opportunity for facing the challenges which are set out by the SDGs.
  2. Market, society and new generations bet on a business activity which is engaged with finding solutions to social challenges.
  3. When companies are concerned about their social impact and seek the common good, they obtain positive results that have an impact on their profitability.
  4. Inclusive businesses can work as complementary actions to public policies that try to solve the challenges of vulnerability in the Spanish society.
  5. Social economy, social entrepreneurship and the generation of the social value of companies are trends that are reinforcing the boost of inclusive businesses.
  6. The growing internationalization of Spanish companies and the promotion of technological innovation are serving as levers to the expansion of inclusive businesses.
  7. Companies that integrate inclusive models in their business value chains achieve a greater social impact on their employees, customers, suppliers or communities. They also improve their businesses thanks to the promotion of transversal and disruptive innovation, the use of technology, the strengthening of the skills of their technicians and professionals and the development of sectoral clustering strategies for the exchange of knowledge and learned lessons.
  8. In order to guarantee the success of inclusive businesses, it is essential to promote the awareness and the change of mentality in the high management of companies. Acting proactively and in line to this is a way to protect the reputation of companies and anticipate and manage the risks which are derived from their social impact, and is also a way to open channels of dialogue and generate a positive reflection.
  9. Although inclusive businesses are a reality in Spain, they need a greater boost and an ecosystem that is more favorable to them. The main areas of intervention are the articulation of a regulatory framework, access to financing, the promotion of capacity development and knowledge management, access to markets and the bet on strategic alliances.

The CEU IAM Business School is the birthplace of managers and professionals who aspire to lead an environment that is constantly changing . Our Global MBA is adapted to the requirements which are demanded by today's companies, always maintaining a strong commitment to ethics.

 

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