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6.2 Propositions for engaging the international business community: Enterprise solutions to poverty

Guest post by: Shell Foundation

Article Overview: Our second set of propositions relates to the role of large businesses, especially multinational corporations, in tackling poverty. Our core position is that through harnessing its value-creating assets, big business is especially well-equipped to add enormous value to pro-poor enterprise initiatives – and elsewhere in the war against poverty.

6.2 Propositions for engaging the international business community: Enterprise solutions to poverty

Our second set of propositions relates to the role of
large businesses, especially multinational corporations,
in tackling poverty. Our core position is that
through harnessing its value-creating assets, big
business is especially well-equipped to add
enormous value to pro-poor enterprise initiatives –
and elsewhere in the war against poverty.

As noted above, some of this is happening but not
enough and our propositions below focus on how
to make more of it happen.

1. A case of mutual myopia: the
wrong ‘ask’ and the wrong ‘offer’
An important and very simple reason why not
enough of the ‘right’ type of business engagement
with poverty takes place is that civil society is
usually primarily interested in the financial contribution
business can make – and business is used to
and perfectly happy with doing just that.65 The
issue of seeking or offering access to a company’s
value-creating assets as the key contribution to
tackling a poverty issue via a public-private
partnership (PPP) simply doesn’t arise.

No doubt this situation could be improved
through education and exhortation directed at
both sides. But we think something more
fundamental has to occur in order to break
through the self-reinforcing, mutual myopia that
leads to the suboptimal involvement of business in
the fight against poverty.

2. Making poverty partnerships more
like business partnerships

And this ‘something’ is to do with recasting the ‘riskreturn
profile’ of the poverty projects and publicprivate
partnerships that business is asked to join.

Let us explain. Businesses participate in commercial
partnerships with each other because they offer
each partner specific value they cannot secure by
acting alone. Both sides bring to the table an
exclusive set of assets essential to accomplishing the
task at hand. And both sides have a strong vested
interest in a successful outcome.

The contrast with the typical poverty project or
PPP in which business is asked to participate is
illuminating. First business is often not consulted
in their design and as we’ve noted money is usually
the main input asked of business. PPP objectives,
though worthy, are frequently so generally specified
that the outcomes, even if achieved, will have little
real social or business relevance.

Moreover, the lead civil society partners are not
really ‘at risk’ in any meaningful sense as they rely
on aid or public money to fund their
involvement. Most importantly, while
knowledgeable, articulate and full of ideas, these
partners usually don’t have influence or are not
empowered to deliver change where it’s needed in
order to help achieve the PPP’s objectives.

This is not a criticism of the competence or
commitment of civil society partners or of their
right to play a role or of the value of their
contribution to PPPs. It’s simply acknowledging
that on their own, non-empowered civil society
partners can’t bring enough of value to the table to
catalyse a high value-added response from business.

So not surprisingly, big business turns down most
invitations to join PPPs because they have the
wrong sort of risk–return profile. And when
business does join up, the inputs that are sincerely
offered, while appropriate to the circumstances are
rarely the core value-creating assets where we
believe real social value-added lies.

Clearly there are some very successful PPPs out there
where the business partners are delivering real social
value via deploying their core competencies. And
there is already a sizeable ‘literature’ full of useful
recommendations about the principles of effective
public-private partnership. But we want to draw
attention to two fundamental weaknesses that undermine
the ability of many pro-poor public-private
partnerships to contribute to their full potential.

a. Ensure the right parties are at the PPP table or
don’t bother issuing the invitations

Big business is often appropriately criticised for not
involving key stakeholders in discussions about
actions by the business that directly affect them.
But very often, the civil society members of a PPP
do not have the power or influence to effect the
changes necessary to solve the problem the PPP
was set up to tackle. Our proposition is that only
parties who add real value and are empowered and
able to deliver change where it is needed should sit
at the public-private partnership table.

b. Set goals that make a difference to
poor people but ensure that the partners
also secure ‘returns’ they value

Any pro-poor project or PPP of value must have
achievable goals that deliver measurable (and
wanted) benefits to poor people. But our main
point here is not about the poverty outcomes of
PPPs but about the benefits that devolve to the
partners as a result of participating in the initiative.

It seems to us that to get big business to invest
value-creating assets in PPPs, these need to generate
‘returns’ to all partners in ‘currencies’ they value and
at a scale commensurate to the risk they are taking.

This is precisely the logic deployed in the design
of our SME funds in South Africa and Uganda.
The local banks felt that the SMEs helped initially
would eventually become customers for larger
commercial loans – while Shell Foundation got
involved to demonstrate to other banks that
investing in SMEs was good business.

The process at work in this example is linear and
in the banks’ case clearly linked to future profits.
Other risk-return relationships are possible. For
example, big businesses operating in the same
country could pool their input needs and thus
create a market for local SMEs in return for
government efforts to introduce ‘level playing field’
policies with regard to adherence to standards or
the removal of differential pricing structures.

The challenge is in crafting a PPP that will deliver
to each of the partners a set of returns of sufficient
value that it makes it worthwhile for them to
exclusively commit whatever is necessary on their
part to achieve the overarching social outcomes of
the partnership.

3. It’s all about getting the risk and return
balance right

There are many other dimensions that could be
explored arising from the proposition that PPPs
should be structured like business partnerships.
But they are all essentially thrown up by the fact
that the parties involved would have to deal with
the implications of a very new set of risk-return
relationships. Again the challenges in doing this are significant but we think the potential benefits are
of such scale that this topic too is worthy of more
extensive debate.

Related Articles
  6.0 Propositions and conclusion: Enterprise solutions to poverty
  6.3 Come Together: Enterprise solutions to poverty
  2.0 Introduction: Enterprise solutions to poverty
  1.15 Building an employment agenda: Working Out of Poverty
  1.0 Executive Summary: Enterprise solutions to poverty

Article Tags: business engagement, business partnerships, civil society, civil society, poverty issue, poverty project, PPP, public private partnership



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