Can business work for poverty reduction?


January 15th, 2015

As someone passionately involved in fair trade for more than two decades I believe business can work for poverty reduction – however we haven’t got it right – yet!

I welcome the renewed debate on business, its impact on poverty and ultimately  how we encourage business to do good. Its great to see DFID – UK Aid taking a lead, even if I personally would want to offer up some challenges!

So I’m going to summarise some of DFIDs  thinking on economic development – their five pillars for action –  and offer up five challenges of my own.

In this presentation from David Kennedy, UK AID (DFID)’s First Director General for Economic Development he sets out ideas how the developing world can be transformed through economic development – if you have 15 minutes its well worth a listen.  To help make this happen, DFID will structure their economic development work around five pillars.

  • The rules of international trade – for example those established through the World Trade Organisation.
  • Supporting the enabling environment – ‘having the things in place that give investors confidence’.
  • Catalytic investment via The World Bank, CDC, etc.
  • Working with the private sector.
  • Marrying up economic development with DFID’s broader themes – girls and women, sustainability, etc.

 

I understand that choices have to be made and priorities set but would still want to offer challenges to DFID and others thinking about how business can work for poverty reduction. Its vital plans address:

  1.  Support for the role of Civil Society and others in holding business and governments to account?
    I’m thinking here of recent examples such as slavery in the Thai prawn industry supplying major UK retailers, or compensation paid by Shell to villagers in Nigeria for the impacts of two massive oil spills – described by the Guardian a ‘David v Goliath battle’. And the BAFTA nominated film Virunga which explores the fight to save Africa’s oldest national park from oil exploration.In each of these cases civil society – local people, NGO’s, the media – has sought to hold business to account and see global agreements – the rules – applied in reality. This isn’t anti-business, its pro-good business.  Talking with many people involved in big business who support fairer trade one of the things they call for is a ‘level playing field’.  book
  2.  Small is often Beautiful?
     It may be that because David Kennedy was talking at scale – addressing more macro level challenges –  that there appeared to be a focus on international and big! Local, small scale business has a huge role to play in poverty reduction. Funding mechanisms that support small scale local business are vital. If he, or anyone else would like to know more about the realities of this work, Practical Action Publishing’s new book ‘The Business of Doing Good’  – insights from one social enterprise’s journey to deliver on good intent, is a great read. The book points to lessons for microfinance and other social purpose organisations using the market place to tackle pressing social challenges.

http://developmentbookshop.com/the-business-of-doing-good

 

  1. The ultimate challenge: our planet is finite, unlimited growth is not possible
    Very soon we have to say enough is enough, we have to tackle inequality, live within our planetary boundaries.  Wellbeing and happiness are not all about money and consumerism we need to find a way to shape business to help drive the transition to truly sustainable development. But we’ve known this for quite a long time.  Fritz Schumacher, Practical Action’s founder, addressed the issue in his seminal work ‘Small is Beautiful’ half a century ago, yet robust action still isn’t happening.  Development financing can be a catalyst for change and the push needs to be towards future proofed businesses – those with lower impact even in the developing world.
  1. We’re not starting from a level playing field
    The rules of trade and the reality of business power are skewed towards developed nations and large scale. This is accepted by all, and why we invest in institutions such as the World Trade Organisation. How do we make sure that in helping business engage in poverty reduction we don’t just increase the divide between the powerful and the disempowered.
  1. Celebrate success and keep pushing fair trade forward
    Shout about the organisations and people doing brilliantly. Push for change fairer trade rules, holding people accountable so they comply and by celebrating real stories of change.  Good news stories are great!

 

Thanks to David for starting this debate. I would encourage everyone who shares Practical Action’s mission – of tackling poverty in the developing world to engage in the discussion – it couldn’t be more important!

5 responses to “Can business work for poverty reduction?”

  1. David McNaught Says:

    Great thoughts Margaret.

    “Can business work for poverty reduction”is an interesting title, as it makes me wonder how it could be possible to see poverty reduction on any scale without improvements in the businesses that employ the world’s poor, whether that means their own subsistence agriculture, small local companies, or massive global employers?

    Making business work for the poor is fundamental to poverty reduction, so I agree that this debate couldn’t be more important.

    For anyone who is interested in this topic, I’d recommend ‘the business solution to poverty’ by Paul Polak & Mal Warwick, which is a very practical book about creating businesses to reduce poverty.

  2. David McNaught Says:

    One question: for people who share Practical action’s mission , how & where can we ‘engage in the discussion’?

  3. davidflint Says:

    The world is finite yet every party presses for growth. Yet “anyone who thinks there can be unlimited growth of anything material on a finite planet is either mad or an economist!”. The political challenge in the UK is to show that we must consume less and that we can live better if we do.

    In the coming general election only one party – the Greens – shows any recognition of this. A vote for the growthist parties is a vote for increased inequality and damage our planet.

  4. Margaret Gardner Says:

    There are lots of opportunities both to get involved in the discussion – through discussion forums on say Linkedin such as Business Fights Poverty which often points the way to other discussions and webinars involving influential people, through debate around our own election choices -as David Flint points out – whatever your political persuasion this should be a key issue, though to our own purchasing – holding the companies we buy from to account. We need to be out there keeping the debate alive.

    Looking more at local to global economic issues I’d also point to our sister organisation New Economics Foundation.

    2015 is an exciting year!

  5. Margaret Gardner Says:

    Todays report from UK Parliamentary spending watchdog to me emphasises both the need for transparency and the need to invest bot only in the private sector but also in strong civil society that can hold governments and the private sector to account

    http://www.theguardian.com/politics/2015/jan/29/hundreds-of-millions-to-foreign-aid-fund-lacked-scrutiny

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