‘Inclusive business’ pushed

COMPANIES should practice “inclusive business” to help the Philippine government’s push for inclusive growth, speakers urged in a conference at the Asian Development Bank (ADB) headquarters yesterday.

At the “Philippines Inclusive Business Forum,” Socioeconomic Planning Secretary Arsenio M. Balisacan said in a speech that the government strategy in achieving inclusive economic growth “represents a paradigm shift for reducing poverty,” and to sustain this, the private sector should adopt this same paradigm shift through inclusive business.

The term “inclusive growth” has been generally taken to mean economic growth accompanied by job growth, or growth in which the poor benefit.

Inclusive business, meanwhile, goes beyond microfinance and traditional corporate social responsibility initiatives because it differs “in the scale of impact, financial returns, and investment size,” said Kunio Senga, director-general of ADB’s Southeast Asia Regional Department, in his opening remarks.

The ADB official said “inclusive business should be a core business of the company” and a company that practices it “should address systemic problems of poverty reduction and inclusive growth.”

The ADB characterizes inclusive business as specifically targeting the low-income group and contributing to poverty reduction by making the poor involved in the company’s chain of activities, such as by employing them and by making community suppliers and service providers. Moreover, companies that practice inclusive business provide the low-income market with affordable basic goods and services.

Homegrown fastfood giant Jollibee Corp. and Ayala Corp., the country’s oldest conglomerate, emerged as examples of companies with inclusive business practices.

Historically, Ayala, which is into property development, banking, telecommunications, utilities, electronics, and auto dealerships, has dealt with the premium side of its markets. But in the past decade, Ayala began to “adjust that very dramatically to a whole new different sector,” said Ayala Corp. Chairman and Chief Executive Officer Jaime Augusto Zobel de Ayala.

Unit Manila Water Services, Inc. for instance, provides access to drinking water to low-income communities, while financial-services arm Bank of the Philippine Islands and Globe Telecom have a microfinance initiative. Ayala Land, Inc., traditionally a premium real estate developer, has formed units dedicated to lower-income homebuyers.

Jollibee, meanwhile, taps farmers from the countryside and strives to sell meals at P39 or below $1 each.

“We make money by a meal costing $1. The sales increase is all by volume. Our profit is growing but no price increase… we serve the poor and we make money,” said Ysmael V. Baysa, Jollibee vice-president and chief financial officer.

Mr. Zobel agreed with the need for the private sector to adopt an inclusive mindset, but said the government must put in place the necessary framework for the shift to take place.

“The private sector has to change its paradigm. It has to change its managerial intent, it has to change its way of accessing the customer base, but also it cannot happen without the full engagement of the government in setting the framework for us in order to reach those price points,” he said in a roundtable discussion.

“The paradigm shift needs to come from the private sector… The government needs to be the catalyst,” Mr. Zobel stressed.

Mr. Baysa said incentives are needed, citing for example the need to improve crop insurance services to protect farmers from crop failures.

In the same roundtable discussion, World Bank Senior Financial Sector Specialist Nataliya Mylenko admitted that making inclusive business financially viable is a big hurdle.

“We want development impact, but business has to be financially viable. And if you read a lot of the studies… the so-called business model for inclusive business is still a challenge to make it fully viable commercially,” she said.

“In the end, finding the inclusive business that is a viable business model is up to each business. And a lot of companies say they try and it just depends on having a champion,” she added.

Mr. Balisacan said the government is willing to enable inclusive business practices.

“With a conducive business environment and a more proactive business sector, more and more inclusive business models can be found and adapted, which hopefully will contribute to the attainment of inclusive growth in the country,” Mr. Balisacan said in his speech. — Trishia P. Octaviano, Businessworld