Inclusive business – a solution to a problem or dot on the horizon?
Now that development policy is increasingly looking to the private sector for solutions, the question of how to achieve inclusiveness in business development to enhance the food security of smallholder producers and poor consumers is becoming more important. Inclusive business models are presented as a solution, a way in which companies can include societal objectives in their way of working. However, these models have yet to succeed. This was the central dilemma posed in the session on “Inclusive business development for food security”.
A concept note on this theme, developed by researchers from the Global Challenges Programme (GCP) and the Applied Research Fund (ARF) in collaboration with Dutch policy representatives.
Guus van Westen of Utrecht University outlined a key issue in his introduction to the session. As project leader of the GCP project “Follow the Food”, he noted that inclusive business initiatives often stop being inclusive when government support ends. Therefore, he asked: Are businesses to blame for not working through inclusive models? In a competitive market companies often have no choice but to pass pressure on down the value chain, which raises question as to whether or not forcing businesses to operate in an ‘inclusive’ manner produces the best results. Research shows that, in some cases, large-scale plantations can yield better results for (wage) workers than approaches that focus on including a large number of smallholders. Apparently, improving the livelihoods of smallholders requires different approaches than focusing on (inclusive) business development alone.
Various obstacles to inclusiveness were brought forward in discussions on ARF and GCP research projects working on inclusive business development. Kei Otsuki, who is involved in an ARF project in Mozambique, explained that communities faced with the entry of large companies often do not have the means to secure their rights. She found that rights to land access or workers’ rights are often not formalized and the bargaining power of companies outweighs that of communities. Hence, achieving inclusiveness requires more than just interventions that recognize a need for inclusivity. Petronella Chaminuka of the Agricultural Research Council, involved in a GCP project in Ghana and South Africa, explained that smallholders are often stuck at the base of the pyramid because of their limited capital to invest and ability to be competitive within a value chain. They are not capable to fulfil the requirements for entering business models. While Abdulahi Aliyu of Solidaridad West Africa noted in his discussion on the GCP project “Follow the Food”, the private sector focus on promoting one value chain, e.g. cacao, can increase the income of smallholders, but this does not necessarily improve food security for households.
So where does the potential lie and what are the limitations on inclusive business models in sustainably addressing such issues? In his reaction to the presentations, Geert Westenbrink of the Ministry of Agriculture, Nature and Food Quality asserted that we should not limit ourselves by focusing on the concept too much. Look to where there is growth and competitiveness and then see what makes sense. His colleague from the Ministry of Foreign Affairs, Paul van der Logt, added that if such a concept does not do what it should we should not ditch it, but keep learning until we get it right. Building on these comments, some ways forward were provided in the discussions. When talking about whether a focus on small or large-scale farming models is more inclusive, for instance, participants felt that policies should not be constrained by such an artificial distinction. The dynamics and opportunities in a certain context should come first. There was agreement that promoting inclusive business models may be beneficial for the economic development of certain groups, but should not be presented as an approach to poverty alleviation. They may stimulate transformation in the long term, but development cooperation should apply different interventions to achieve its own goals of poverty alleviation and enhancing the food security of poor segments of society.
In general, it was felt that when looking at the context and business case, the way forward becomes clear. However, beyond the context specificity of the business case comes the various ways in which inclusiveness can take form. As one participant aptly put: “Just including people is not necessarily inclusive”. She drew this from experience: in Ethiopia smallholders were integrated into the sesame value chain and, as a result, switched over to a mono-cropping system, which brought with it plant disease. Her take on this was that true inclusiveness brought with it investment in the human and social capital of communities, which was not necessarily improved by stimulating value chain development. In this case, sourcing products from diversified systems could be the more inclusive approach.
Recognizing that people are economic actors, instead of merely ‘poor people’ to be helped, is a crucial element of this view. As one participant put it: “smallholders are investors too and their combined investment is likely greater than that of the private sector”. Instead of creating top-down incentives to work within a certain system, inclusiveness demands starting from the bottom-up. To give a concrete example of how such a middle way could be achieved, Dawit Solomon, Regional Program Leader at CGIAR’s Climate Change, Agriculture and Food Security Program, explained the agricultural cluster approach of the Ethiopian Government, which created hubs where farmers can connect to a value chain, get inputs, and receive training.
In conclusion, some general ways forward in our thinking on inclusive business models were formulated by the group. Differentiating between the actual business (case) that needs to be careful about its externalities and those externalities that should be dealt with by other actors such as the government was suggested as an important way of improving approaches to working with inclusive business models. Working from a (food) systems perspective is one way forward. Everyone felt that continuing to share experiences of what works and does not work is important, as it could clarify ‘inclusive business’ as a concept and help design new types of interventions that recognize its complexity. In terms of the way forward: inclusive business models is a focus of the Food & Business Knowledge Platform and debate will continue there. In addition, the research projects funded within the second GCP call focus on this theme and they will reflect on how to jointly produce an advice.
Watch the interview with Guus van Westen (Video by The Broker)