Interview with Markus Dietrich, IBAN IB Policy Lead, on key developments in Inclusive Business in 2017 and ways to strengthen the sector moving forward.
Do you see growing momentum on the theme of inclusive business (IB) globally?
More and more evidence is emerging which shows that IB is delivering financial returns and social impact. Since 2005, IFC has invested over $16bn in over 530 inclusive businesses in more than 90 countries and achieved its financial return expectations. On the impact side, in 2016 its portfolio companies among others supplied 32.7 million people with water or electricity and reached 2.2 million farmers improving their income opportunities.
Please give us as a little bit of insight on recent developments on the work with policy makers. Are they open to spurring IB reforms?
Yes, definitely. There has been significant momentum on the policy side in 2017. Just a few days ago, Mauricio Macri, the President of Argentina, hosted the official launch of the Argentine G20 presidency: the world’s major forum for economic, political, and financial cooperation. He stated that his country will lead the summit “based on the principle of putting people first” and announced that Inclusive Business will be one of its official thematic areas. On 8 November, the ministers of the Asia-Pacific Economic Cooperation (APEC), in a joint-statement encouraged economies to promote IB. Only one week later, the leaders of the Association of Southeast Asian Nations (ASEAN) acknowledged the strong support for IB by its member states and called for greater emphasis on creating an enabling environment for IB in ASEAN, among others through conducive rules and regulations. Earlier this year, the Philippines, ASEAN Chair for 2017, implemented the worldwide first fiscal incentive scheme explicitly for IB in the country. This momentum is significant. It represents concrete follow-up actions to the 2015 G20 Inclusive Business Call to Action and is a clear indicator that policy makers globally aim to carry forward the agreements made on IB in the international arena, so that the lives of people living at the Base of the Pyramid (BoP) will improve.
Why are these changes so crucial?
Let’s look at APEC: Currently the 21 economies comprising APEC represent 46 percent of the global BoP market. Political leaders in these regions are aware that the investment in IB reforms will ultimately spur the inclusive growth agendas of their countries and – in a broader sense – create a pathway to help achieve the United Nations Sustainable Development Goals (SDGs) that are of increasing importance to the international community.
What about companies? Do you see them being more open to inclusive business models as well?
The recent political progress is also becoming visible at the company level. Although progress is still slow, more and more companies are expressing interest in IB models as a recent joint study by the Philippines Board of Investments and the United Nations Development Program’s Istanbul International Center for Private Sector in Development has revealed. The study shows that currently, “social enterprises showed the highest levels of inclusiveness, followed by large national companies; multinational corporations; and micro, small and medium enterprises.”
What bottlenecks remain that need to be addressed better?
First, the specific contribution IB makes to achieving the United Nations Sustainable Development Goals (SDGs) needs to be more clearly defined and subsequently communicated to ensure the IB correct positioning in the continuing policy debate. The World Business Council for Sustainable Development (WBCSD) and the United Nations Development Programme (UNDP), for example, have in 2017 done great work in repositioning IB as THE private sector contribution to the SDGs but more work needs to be done in this regard as the SDGs will become more and more important over the coming years.
Financing IB is often cited by companies as one of the major bottlenecks to scale. In this regard 2017 has shown very positive developments on the regulatory side and the growth of the sector. Impact investment has grown and matured, reaching officially the status of a new asset class and proving in independent studies that it delivers positive financial return. Social impact measurement and management is therefore gaining its rightful place next to financial and environmental reporting, but it still is a way to go until a common standard emerges. OECD’s Policy Framework for Social Impact Investment will become an important stepping-stone in this process once it is launched in the end of 2018. It did however become apparent that the demand and supply of finance to inclusive business needs to be viewed as two sides of the same coin, and the respective policy frameworks need to be coherent and synergistic to avoid confusion.
How is IBAN going to provide this support?
Going forward, IBAN will engage with companies in emerging and developing markets to scale up IB models through capacity building in peer learning formats. While start-up social enterprise communities and multinational companies with IB models seem to have diverse fora to network and find support at their disposal, IBAN found that larger national companies in emerging and developing market are lacking such a network. Therefore, IBAN will aim to close this gap during the next two months. Starting with a regional approach in ASEAN and Africa, IBAN will gather companies with established IB models in its network and enable them through capacity building programs to scale up their IB models and encourage collaborative impact. In parallel, IBAN will continue its regional policy maker engagement in ASEAN and carry the lessons learnt in Asia to Africa to engage both policy makers and established companies in an in-depth dialogue on IB. Also, the team will continue to support the G20 IB initiatives on a global level which ultimately aims for better living conditions for the poor and low income population. Finally, IBAN aims to communicate the impact and contribution of IB in the context of the Sustainable Development Goals to transform the world for the better by 2030 more clearly.
Bringing together IBAN’s policy maker and the company engagement in private public sector policy dialogues will be highlights in 2018. These activities will help to bring IB into the mainstream business discussion which, unlike impact investment on the finance side, IB has still some way to go.
Another important and very exciting development for IBAN is the management of “The Practitioner Hub for Inclusive Business” which it has taken over from Ashley Insight which has done a fantastic job in bringing it to its current level. The Practitioner Hub for Inclusive Business provides access to the knowledge, inspiration and services you need to understand, share, and implement the latest Inclusive Business ideas and practices. It contains a database of 1,600+ publications, including case studies, reports, toolkits, market intelligence and interviews. It also features listings of businesses, intermediary organisations and soon EU donor programs in the inclusive business sector as well as an IB events calendar that lists conferences, workshops and webinars. The Hub’s blog series go out to 5,000+ members worldwide and 60% of the visitors come from the Global South. In 2018, this platform will be redesigned to reach more practitioners and cement its position as the global online hub for IB. It will benefit from IBAN’s engagement with companies and policy makers as a constant source of exciting new content.
This blog post is part of the December 2017 edition of the ‘Monthly Theme’ that reflects recent and future developments in inclusive business.
What progress have we made? Where are the missing links? And what needs to change in 2018 in order to increase momentum on inclusive business? Read the full series to see what thought leaders and practitioners think about these questions.