By Marcos Neto
Multinational companies have immense power to tackle global challenges such as poverty, climate change, and gender inequality. They have the ability to transform low-income markets and help lift millions—even billions—out of poverty. Inclusive business, which is designed to benefit low-income communities is one such model, but numerous internal barriers are preventing multinationals from adopting it.
In the latest Business Call to Action (BCtA) report, launched at the BCtA 9th Annual Forum, we examine how to overcome these organizational barriers, drawing from examples of successful companies who are already working inclusively, and offer steps that companies can take to adapt their management practices.
Business experts predict that top performing global companies will be those that reach out to new markets while simultaneously addressing some of the world’s biggest social and environmental challenges. Demographic shifts and automation are already changing the global workforce, presenting both new opportunities and risks. According to the McKinsey Global Institute, by 2025 half of the world’s largest companies will be based in developing countries. Innovative corporations from the global south will be the ones leading social change, creating jobs and servicing the yet-untapped markets at the base of the economic pyramid.
However inclusive business is not yet happening widely in multinational corporations. In addition to market challenges, there are often internal constraints that limit its uptake and growth.
Our two years of research, conducted in close collaboration with our members, identified management practices that allow companies to gain critical insights to improve their models and better communicate impact and value to investors and customers.
We found a strong correlation between specific inclusive business management practices and their continuity and growth.
Our research shows that successful inclusive businesses apply principles that are quite different from business-as-usual, including in-depth stakeholder engagement, talent management that builds skilled loyal staff, with a focus on their wellbeing, coherent performance incentives for management tied to inclusive business success, target setting consistent with long-term value, and a deep understanding of environmental, social and governance risks and opportunities. Management practices tailored to the bottom of the wealth pyramid market can constitute valuable competitive advantage, ensure better understanding of, and responsiveness to, key stakeholders, increase social and environmental impact, balance short-term stability with long-term viability, and help achieve the Sustainable Development Goals (SDGs).
In our report we introduce a typology of management practices of large inclusive business corporations. It builds on BCtA’s decade of experience, BCtA’s State of Inclusive Business Survey and interviews executives from more than 25 multinationals including Essilor, Mastercard, Gap, Sanofi, and IKEA.
So what’s in it for your company?
Inclusive management can achieve the following:
- Overcome organizational barriers: Initiatives are better integrated into overall business plans, and supported by the whole organization, from senior management to operational teams. Removing organizational barriers means inclusivity has a greater chance of succeeding.
- Increase impact: Tailoring management practices to address the specificities of base of pyramid markets ensures a better understanding of, and responsiveness to, stakeholders. It also helps balance short-term stability with long-term viability.
- Competitive advantage: This approach can help a company establish competitive advantage, as companies can better recognize and communicate the impact and value of their businesses, particularly in relation to their social good, which they can articulate through their contribution to the SDGs.
- Maximize business value creation: Companies that are implementing inclusivity well apply principles that differ from business-as-usual, including in-depth stakeholder engagement and value-based talent management that builds skilled loyal staff and focuses on their wellbeing. It can also include coherent performance incentives for management tied to inclusive success, target-setting consistent with long-term value, and a comprehensive understanding of economic, social and governance risks and opportunities.
We have also launched an online tool that can be used by companies to better understand how they can improve their own management, compare themselves to peers, and develop a practical plan to improve areas of weakness.
We hope that this publication and tool will have an impact on companies that consider tapping into the exciting business opportunities that exist both at the base of the economic pyramid, and as well as addressing social and economic challenges that can help to meet the SDGs.