Ethical Trade as a Tool for Inclusive Development
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This document discusses the potential for ethical trade and inclusive business models to promote development goals. It notes that consumers are demanding more social responsibility from businesses, while development organizations are looking to partner with the private sector. Ethical and inclusive business approaches that involve poor communities in value chains as producers and consumers can help reduce poverty by increasing access to affordable, quality goods and services. Examples of emerging models discussed include BOP business, social business, and cause-related marketing that benefits small-scale producers. The document argues that combining business efficiency with ethical and development principles in overlapping areas could lead to more inclusive development outcomes.
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Ethical Trade as a Tool for Inclusive Development
- 1. Ethical Trade as a tool for Inclusive Development GDN 14th Annual Global Development Conference 20 June 2013 Asian Development Bank ,Manila SATO Kan Hiroshi Institute of Developing Economies Photo by F.IkegayaPhoto by Sumitomo Chemical Col
- 2. Development and Business 06/20/13 Ⓒsatokan 2013 • ①People wants more efficiency for Development / Aid industry need more Fund for Achieving MDGs • ②Consumer demand more social responsibility for Business Development (Aid) Altruistic Ethical Business (Trade) Egoistic Efficient ①Needs Efficiency ②Needs Social Responsi bility①Needs More Fund 2
- 3. Development sector’s approach to Businiss • UNDP: Business call to action, GSB （ Global Sustainable Business) • UN: Global Compact • IFC: Inclusive Business Leaders Forum • USAID:GDA （ Global Development Alliance ） • DFID: Challenge Fund • JICA :BOP Business support grant 06/20/13 Ⓒsatokan 2013 3
- 4. Why private business should be social/ethical ? • For the sake of avoiding boycott risk • For the sake of profit (BOP Business) • For the sake of sustainable supply chain. • ･･ But, the meanings of ethical varies: environmentally friendly, workplace condition, living wage, no discrimination, philanthropic investment etc. ⓒsatokan 201106/20/13 Ⓒsatokan 2013 4
- 5. Avoiding Risks • Information of discriminated, oppressed, suffered and poor people in a value chain will spread quickly through advanced ITC and NGO networks. • Ethical Consumer “I don’t want to buy Sweat shop products” • High risk of Boycotting 06/20/13 Ⓒsatokan 2013 5
- 6. と Manufacturing 06/20/13 Ⓒsatokan 2013 Production Consu mers Procur ement Distrib ution Developing countries Industrialized countries Value Chain and Risks enviro nment Child labor Global Value Chain safet y price Manufacturing Living wage safety 6
- 7. BOP Business • Business targeting at the lower income strata less than US$3,000 （ PPP ） . • Making goods and services affordable and available for BOP. • BOP are expected to be not only consumers but also producers and distributers (BOP 2.0). • BOP people are now included into Business landscape. =Inclusive Business. 06/20/13 Ⓒsatokan 2013 7
- 8. Ⓒsatokan 2013 Concept of BOP Penalty • BOP are considered as out of the market and distribution network (exclusion) therefore ・・・・・・ • They should buy with few choices • Lower quality (overdue, fake, inferior) goods, in exchange for higher money • Overcoming a lot of difficulties to access • Poor people are obliged to pay higher cost than rich people （ BOP 06/20/13 8
- 9. 06/20/13 Ⓒsatokan 2013 Poverty Reduction through Consumption • If a good become available more easier and cheaper, life will be more stable • If a good become more durable and better quality （ even if the price remain same ） , standard of life will be uplifted. • Private investment for producing better quality goods with cheaper price benefits for economic growth and poverty alleviation. 9
- 10. 06/20/13 Ⓒsatokan 2013 Concept of BOP Business • BOP people are Sleeping consumers • Low benefit but mass amount • Future Volume Zone • Poverty reduction through consumption Base of the Pyramid less than $3000 Poverty Reduction through Consumpti on 10
- 11. 06/20/13 Ⓒsatokan 2013 BOP Business Examples 11 Health :Privent Malaria Electricity: Education and health Transportation: Income Communication: Opportunity Nutrition: Enjoy Eating Communication :Security
- 12. Cause Related Marketing = CRM • Ethical as a tool for marketing • Poverty and development are very good topic for CRM • Fair trade tells consumer that some part of the payment will contribute the betterment of producers life (not only living wage but also education, health and sanitation, infrastructure building and human rights) • Environmental certification are also popular. Ⓒsatokan 201306/20/13 12
- 13. 06/20/13 Ⓒsatokan 2013 13
- 14. Goodwill competition? 06/20/13 Ⓒsatokan 2013 14 Cadbury declared all Dairy milk will be 100% Fair Trade cacao. Nestle followed to make 100% Fair Trade KitKat
- 15. Social Business • Variety of social business models are innovated • Fee for Service/Cross Subsidy Pricing • Social marketing • Development oriented Social enterprise ・ Grameen model of Social Business = no dividend for shareholder 06/20/13 Ⓒsatokan 2013 15
- 16. Marriage of Development and Business • Business with Ethic and Development with Efficiency will Overlap • Widening overlapping area may lead to more inclusive development Ⓒsatokan 2013 Efficient Development Ethical Business Social Business Social Entrepreneur Private companies BOP Business 06/20/13 16
Editor's Notes
- “ Inclusive Business” is fast becoming prominent especially among multilateral agencies. For example UNDP published a book entitled ”Creating Value for All” while IFC has organized the “Inclusive Business Leaders Forum”. This has further been consolidated by UN’s “Global Compact” agreement and UNDP’s “Business call to Action” initiative which are addressed primarily to private firms. There are many varieties of Inclusive Business models such as Cause Related Marketing including Fair Trade, Base of the Pyramid or BOP business, and so-called “Social Business”. Inclusive business is expected to contribute to inclusive growth, but the balance between business and development is delicate. This paper presents the case for “Ethical Trade as a tool for Inclusive Development”. The closer relationship between business, development and inclusive growth is important for several reasons. Development agencies have less resources and they need to rely on the private sector for dealing with development projects more efficiently. On the other hand business is required to be ethical and is obliged to solve social problems; otherwise it cannot sustain its long and complicated value chain. One of the key concepts for Business and Development combination is “Ethical”. Since global value chains become more and more interrelated, and the consumers in developed countries have more information about the living condition of producers of the goods they consume, a single “un-ethical” event on a value chain may damage the brand image of a global company. If being ethical pays off in the long run, each actor will have an incentive to be more ethical. That is the way business activities contribute to inclusive growth Now, the PowerPoint file I send you is not on CSR. This is about Inclusive business models such as BOP business, Cause Related Marketing including Fair Trade, and Social Business. The point I want to argue is how Inclusive growth can be realized in conjunction of Business and Development. If I will tailor this presentation in line with this year's GDN topic "Inequality, Social Protection and Inclusive Growth", tittle would be "Ethical Trade as a tool for Inclusive Development". I will argue that Business and Development are now approaching each other. The reason Development approaches to Business is lack of development fund and need for efficient management skill of projects. On the other hand, Business has also reason for approaching Development (or Ethical activities for solving social problems in the developing countries). Typical combination of Development and Business is Fair Trade that is directly interacting with marginalized producer in the developing countries with business approach. Base of the Pyramid business is another experiment of Business cum Development approach. There are several examples in Africa and South Asia of Social Business which is targeting to solve social problem through business activities. Dr.Yunus of Grameen is one of the opinion leaders for Social Business.Overall, key concept for Business-Development combination is "Ethical". Ethical Trade seems to be too naive and idealistic, but global value chains become more and more interrelated, each actor is requested to be Ethical because the consumers in developed countries have more information of their counterpart in developing countries. That is the way Inclusive development prevails in low income countries. 2013/6/20 satolan 2013 IDE-Jetro
- BOP Business Lecture 2013/6/20 satolan 2013 IDE-Jetro
- 時事トップセミナー 佐藤寛 2013/6/20 satolan 2013 IDE-Jetro
- BOP Business Lecture 2013/6/20 satolan 2013 IDE-Jetro 経済産業省／ジェトロ BOP ビジネスセミナー Ⓒ JETRO-PPP 2010ⓒJetro-PPP 2009