The challenge on our doorstep: A business view of development

The World Business Council for Sustainable Development’s Marcel Engel and Filippo Veglio see a flourishing partnership for economic growth and environmental well-being

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Poverty reduction efforts in developing countries used to be neatly divided into aid that was doled out to governments, and trade and commerce, deployed to boost these economies and create individual prosperity. That world no longer exists. These two sides are now converging, creating a new and ever-changing mosaic.

Photo: Jim Pickerell/World Bank

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Increasingly, reducing poverty and spurring development are creating opportunities – and challenges – for business, too. Business cannot thrive in countries that fail. By better understanding socio-economic and environmental concerns in developing countries, companies can better manage the risks that underpin their license to operate. Further, companies can capitalize on significant market expansion opportunities by developing inclusive business models. These are commercially viable business ventures that enhance access to goods and services for the poor, as well as increase work prospects in low-income communities.

Even though global poverty has fallen by about one fifth since 1990, the task of continuing to whittle down the poverty rate is about to get much harder. That is because our planet’s population is expected to grow by half, topping nine billion by 2050. Every week, about three million people are pouring into the cities of developing countries.

This challenge is already on our doorstep. The United Nations has warned that more people went hungry last year, in absolute terms, than at any point in human history, due in large measure to population growth, a spike in the price of wheat and other staples, and the global economic downturn.

Keeping up with the needs of a growing and ever more urbanized population in the developing countries, and the aspirations of these countries’ middle classes, is increasing global demand for energy and natural resources. This is also putting greater stress and strain on the world’s ecosystems.

Bettering livelihoods, while safeguarding the environment, will necessitate a transformation of our current system, to an economy that is more inclusive, lower in carbon, and more resource efficient. It will require massive investments in new green cities, energy, water, and transportation systems. This is the purview of business. Business is the leader in building efficient infrastructure. Unleashing business investment will be absolutely essential for these mega-building projects, given that business supplies 85% of all global flows of capital.

The companies that are best able to meet the rising demand for food, health care, and shelter, will be the winners of tomorrow. In a recent report by the World Business Council for Sustainable Development (WBCSD), a CEO-led grouping of 200 global companies, the organization makes a strong case for marshalling business action on all these fronts.

The WBCSD points out that by factoring in low-income populations to the supply, production, distribution, and marketing of goods and services, companies will access new markets, while generating new jobs and income, and building up the technical and skills base of the local workforce. What is more, poorer consumers will get affordable products and services attuned to their daily needs.

But we also need to move beyond single company efforts, and find wide-scale, market-based answers. For that, business needs governments at national, regional, and global levels to set the ground rules, so markets can flourish, especially in developing countries.

Notably, regulations must be geared towards upholding the rule of law, boosting entry to the formal economy, and stamping out corruption; providing training and access to capital, especially for small and medium-sized companies; and for making core investments in roads, ports, energy and telecommunications systems – the life support system of daily commerce; and last, they must promote a fair and competitive market.

Governments, civil society, and business must be prepared to join forces in establishing the appropriate framework conditions for development that is rapid, widespread, and sustainable.

Good governance is also fundamental to manage the global environmental and security commons, and to restore worldwide financial stability.

The task of developing sustainably is simply too large and too complicated for business to handle alone.  For that, partnerships must be struck, even with former adversaries.

Indeed, the formerly conflict-ridden relationship between business and non-governmental organizations (NGOs) is evolving into one of constructive dialogue. Partnerships and collaborations, assembling business, government, and civil society around the same table, are needed to find fresh answers to solve difficult problems, such as delivering clean water, sanitation, and other services to the poor in urban slums or remote villages.

To promote greater cooperation among these entities, the WBCSD has forged partnerships with a wide range of stakeholders, from multilateral development banks to environmental NGOs.

NGOs, development agencies, governments, and civil society alike, must change the way they view business. Business must no longer be seen as a purveyor of resources. It must be viewed as an enabler of social and economic progress, and a partner in a common effort to build a more inclusive and sustainable world.

For, the world must not be divided by making a false choice between either economic growth or environmental well-being. Economic growth and environmental well-being are interdependent. We must choose both.

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• Marcel Engel is Managing Director of the WBCSD’s Development Focus Area and Regional Network, and Filippo Veglio is the Deputy Director of the WBCSD’s Development Focus Area.

• WBCSD members are drawn from over 35 countries and 22 major industrial sectors. The WBCSD provides a platform for companies to explore sustainable development, share knowledge, experiences, and best practices, and to advocate business positions on these issues in a variety of forums, working with governments, and non-governmental and intergovernmental organizations.