By Jane Nelson, Director, Harvard Kennedy School CSR Initiative
Companies have a critical role to play in driving more inclusive and sustainable models of development and, in certain cases, solving specific development challenges. At the same time, there are significant opportunities to discover profitable new business models.
Perhaps one of the most powerful ways in which large companies can have a mutually beneficial impact on improving and scaling development results, is by including and supporting small businesses in their value chains and local communities. The case for action is clear. Helping small businesses to grow is both a development imperative and a corporate imperative.
From a development perspective, small, businesses are crucial to creating jobs, improving living standards, raising productivity, and achieving more inclusive models of economic growth and social cohesion. This is the case in all countries of the world, regardless of levels of income or income distribution. It is especially important in developing countries. As the IFC Jobs Study highlights, “…it is estimated that by 2020, some 600 million jobs need to be created, mainly in Africa and Asia, and largely due to demographic trends. …The private sector, which provides some 90 percent of jobs in developing countries, must be at the core of any response to this challenge.” And most of the new jobs will need to come from small, medium and microenterprises.
From the perspective of large companies, in many industry sectors, small enterprises are often key to building the reach, reliability and resilience of corporate value chains both from the supply-side and in terms of distribution and retailing. Large companies also increasingly recognize the contribution of small, medium and micro-enterprises to creating more prosperous communities and vibrant markets, which are often important enablers of longer-term corporate success. As a result, more large companies are prioritizing opportunities to support small businesses both through their core business operations with the goal of strengthening their value chains and through their community investment activities with the goal of strengthening their local communities and economies. Large companies are ideally placed to do this as they can create demand for the goods and services small enterprises offer and provide information, training, technology, and in some cases financing, to enable these small enterprises to meet market demand.
Despite a shift in emphasis towards more detailed discussions on how to unlock the full potential of business linkages between large companies and small businesses, there remains a significant deficit of in-depth practical examples explaining how companies are leveraging their core capabilities and value chains to achieve greater development impact in this area. We need to build a much stronger understanding of these models to help others to replicate and scale them.
We were, therefore, pleased to have an opportunity, in partnership with Business Fights Poverty, to explore in depth the approach of one company, SABMiller, which is working to support entrepreneurs in its value chain and broader community by strengthening the wider environment or ‘business ecosystems’ in which they are embedded. You can download the report here: snipbfp.org/1eZk5wg.
In the course of supporting several hundred thousand micro, small and medium enterprises within its value chain and communities around the world, SABMiller has learned that in addition to leveraging its core business operations and scale, success also depends on ensuring that small and growing enterprises are embedded in a strong and supportive “business ecosystem” that includes and goes beyond the company itself, to encompass amongst others: public and private sector financial institutions, government agencies, education and training providers, information and communications technology providers, other corporations, and the media. We explored this approach in two of the company’s enterprise development programs; Oportunidades Bavaria in Colombia and Kickstart in South Africa.
I explored these examples and the other key themes of the report at an event last week in London with colleagues from Care International, the UK Department for International Development and SABMiller (you can watch the full video opposite). You can also view a summary of the report in my presentation here.
Over several years, the Harvard Kennedy School Corporate Social Responsibility (CSR) Initiative and Business Fights Poverty have worked together to bridge theory and practice, and to connect people in the field of business and international development. This report is the latest in a series of reports on ways that companies can expand economic opportunity and choice.
We thank SABMiller for its openness to sharing its approach. We hope this report will be a useful source of real-time learning for all those interested in leveraging and scaling the corporate contribution to development.
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