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Business Development Program

SIDO in always has its own concept that The Business, The NGOs and The Development for poverty alleviation is on the top holistic approach by linking between its Social Enterprises and Social Development Programs.

Background Information

According to several meeting of the Group Founders in 2007, it was co-organized a Meeting on Business and SIDO Millennium Development Goals together with its working partners in Cambodia, Australia and the States. The Meetings were an official side event to the Millennium Discussion on the exploration that took place in earlier 2008. These meetings brought together a largely private sector audience with strong representation from the Cambodia, Australia and the States as well as from multinational firms. The Meetings provided opportunities for business to business exchanges of practices and ideas on private sector contributions, social enterprises to development towards the poverty reduction.

Also based on the meetings, a report has been written by all meeting partners, and a series of follow up events are now being planned to mark the report launch and to take forward the discussions.

This is an appropriate time to consider the overlaps in interests between different the private sector, social enterprise, government and civil society. The spread of lethal diseases such as HIV/AIDS, the scourge of terrorism, or environmental damage are challenges that can no longer be ignored by any one segment of society, any one sector, or any one region of the world. Companies and social enterprises cannot escape the impact of core development problems – they too need a safe and stable environment in which to operate. There is growing recognition of these shared problems, prompting innovative approaches to find shared solutions for the poor.
In line with these trends, businesses are increasingly involved in achievement of local development objectives and the Millennium Development Goals (MDGs). The private sector including social enterprise is a crucial source of capital for development. The fact that private financial flows are now substantially larger than official development aid further confirms the need to engage business program more actively in development efforts. There are many examples of great corporate generosity and philanthropy that have vitally important positive development impacts. For example: US firms’ alone donated over $400 million for tsunami relief. Corporate responsibility, however, goes beyond traditional notions of philanthropy. It is a more holistic, sustainable, and economically-driven approach that recognizes that there are also positive drivers for business involvement in development in addition to considerations of risk management, not least due to the creation of new markets. Per capita income is rising in the developing world, opening up vast markets at the “bottom of the pyramid” - for as incomes rise for the four billion people currently living in poverty, market opportunities expand exponentially. The emergence on to the international stage of large firms based in emerging markets, such as India and China, also adds new dimensions to the debate as to whether they take a different approach to relations with civil society and other stakeholders.
Partnerships between companies, NGOs and development institutions have significant potential. While there are a growing number of examples of innovative and exciting new business models and partnerships between companies, NGOs and governments that promote “wins” for all. However, it takes time to change mindsets and adapt to the potential of partnership models. There is therefore a role for academia in analyzing the growing number of examples of successful long term business-NGO partnerships and capturing the lessons learned in terms of what works and what doesn’t. Such cutting-edge research and dissemination of best practices can support a broader change in attitude and create a more conducive environment for effective multi-sectoral partnering.
SIDO, the challenge is to define the incentives for addressing this cross-cutting agenda, foster good will and areas of common ground between the stakeholders, and establish a level of trust that will allow financial and non-financial resources to be mobilized in a truly strategic, collaborative fashion, including through market based mechanisms.

SIDO is in the process in looking ahead the following ideas:

The Successful NGOs - Business Partnerships

  • Business Alliance for Food Fortification (BAFF) – Health
    The Business Alliance for Food Fortification (BAFF) is a strategic partnership network to strengthen private sector initiatives in food fortification for the poor in developing countries. The BAFF, will be jointly funded by various resources, is chaired by SIDO Group Founders. The goal of the BAFF is to ensure a long-term, market-viable supply of fortified foods for the people living with vitamin and mineral deficiencies. These deficiencies cause untold human suffering and millions of dollars in productivity losses and curative healthcare costs. The BAFF’s purpose is to identify new financial mechanisms and new business models, expand scientific knowledge and expertise in fortification, and catalyze joint action between companies, development partners and government.
  • Partnership between “I.T. Employment for People with Disabilities and corporations
eBay Group, a corporate foundation established by an internet auction power house, eBay made a cash donation to the project called “I.T. Employment for People with Disabilities.” SIDO will initiate the project and it will aim to improve job prospects for disabled people by providing computer training and enhancing online networks to connect them globally and locally. The program was designed in Central of Phnom Penh through SIDO 140 partners including local NGOs and CBOs, Government, Private sector, Media sector and INGOs witin 24 towns and provinces in Cambodia and will be spreading out to Lao PDR and Vietnam by receiving instruction in how to train people with disabilities for employment.
The company, Premier Programming needs to contribute an in-kind donation to “I.T. Employment for People with Disabilities.” Their contribution is closely related to their business; i.e, they specialize in products and technologies for people with disabilities. This contribution is a true “win-win” situation: Premier Programming gained connections, reputation and potential for its future business by offering an in-kind contribution, and the project gained valuable technical support.
  • Partnership between Road and Bridge companies
    SIDO will partner with road and bridge-building company to build both city and rural road. When the company faced strong opposition from the communities whom affected by lack of new roads, SIDO will form a variety of grassroots organization to convince its partners in building more rural remote roads. The partnership went through three stages. In the initial stage when SIDO contact the company, community service was formally a part of the company mission, but the company was not deeply committed to community engagement.
But soon the company will begin to build confidence itself to be a valid counterpart in negotiation with the communities. Once the relationship proved to be beneficial for both parties, it moved to a higher level of the partnership. The company will play role an external company consultant on social issues, acting as a liaison between SIDO and other communities. Finally, SIDO and the company substantially increased its commitment to their communities and his work by providing extensive both funding in the creation of CBOs (Sustainability, Education and Solidarity).
Business and Poverty: Opening markets to the poor
In recent years, SIDO assumed that the business has played a significant role in alleviating poverty, especially in sectors such as construction, restaurants, telecommunications, information technology, and microfinance. Certain initiatives in these sectors, such as microfinance in Cambodia and wireless telecommunication in Asia, have yielded impressive results, creating unrealistic benchmarks against which other corporate programs are being judged. Although businesses have made significant contributions in some sectors, in many others they have been unable to “move the needle” on poverty.
It can be argued that the private sector may have contributed to broadening the gap between the rich and the poor and to environmental degradation, but business has also helped improve the quality of life in many low-income areas. There have been quiet but strong links among economic growth, innovation, and development. This article is not intended to defend once again the fundamental economic rationale for capitalism and its potential role in alleviating poverty. Rather it is meant to bolster that premise with current examples and practices and to urge businesses to adopt a more proactive role in the development of markets that benefit the poor. Our SIDO perspective is that its
responsibility is not only to increase its investors’ wealth, but also to help create wealth for the people whom we work with in each country people at the Base-of-the-Pyramid (BoP) who make do with incomes of less than $1 per day, as characterized in the under the poverty line.
Poverty is an economic, social, cultural, political, and moral phenomenon and SIDO believes it is necessary to address these dimensions in an integrated fashion—one that contributes to sustainable global development. Also through SIDO Social Enterprise Model illustrates this approach of being self-reliance financial supports. By providing opportunities for training, education, job opportunities and a steady income to poor rural farmers and workers in exchange for a consistent experienced supply, SIDO Business development program effectively linked with the Social Enterprise and it integrated poverty alleviation into a business model that was mutually beneficial method. It has been able to increase its supply of a variety of its products and poor communities have benefited from job security, improved nutrition, and a better standard of living.
There are many ways in which business that SIDO is doing and with a believe that it can help in opening markets to the poor, ranging from Agri-business, industrial business, multinational corporations (MNCs) and local small and medium enterprises (SMEs) to corporate foundations, business alliances, and small entrepreneurs from both developed and emerging economies as SIDO Social Enterprise with its links.

Business models that engage the poor
New business models have focused mainly on cost structure, innovative distribution methods, and logistics, and have ignored the need to develop
market institutions. Productive corporate engagement at the BoP will require an in-depth understanding of the meaning of “market based solutions;” clarification of the types of markets (informal vs. organized markets); and understanding how SIDO can connect factor and product markets to help create job opportunities.
SIDO Cambodia particularly will be large one that can have a much greater impact on the BoP by contributing to the creation of more efficient markets and by complementing market institutions, rather than just selling products to the poor. In less developed countries, poverty alleviation should be approached primarily through wealth creation, including access to jobs, healthcare, education, and vocational training, even before providing access to consumable goods and services that improve the quality of life of the poor. Of course, wealth creation and consumption are complementary, but there is a hierarchy.
SIDO Cambodia hope that in building wealth, business models need to include mechanisms to deal with the following challenges:
  • Increasing the productivity and real income of the poor.
  • Enhancing job creation opportunities through direct employment or self employment, supported by products and services that boost productivity.
  • Moving away from the “traditional consumers” concept to the concept of “productive consumers.” (Developing self-esteem and dignity among consumers can be achieved both by creating conditions for employment and by paying decent salaries).
How businesses address these issues depends on many factors, such as industry structure, SIDO vision, size, location and ownership structure. The lessons learned from SIDO Cambodia experiences can serve as building blocks in achieving innovative, sustainable, and scalable solutions.
SIDO has shown that through innovative business solutions we can both operate for income generated within a given (underdeveloped) institutional framework, and simultaneously directly facilitate the development and strengthening of market institutions. SIDO’s experience with the Social Enterprise in Cambodia illustrates that helping to empower underprivileged rural women by fostering entrepreneurship and creating income opportunities can be more important than sales alone, since it encourages the growth of a sustainable consumer base.

Building a BoP business culture
To better engage the poor, SIDO’s business needs to understand their values, aspirations, and the contributions we can make to value creation for ourselves and others. Only limited efforts have been made to change the sometimes deep-seated assumptions that business leaders make about the poor, assumptions that are partly caused by a wide cultural and socioeconomic divide and a lack of direct interaction.

Incorporating poverty alleviation into corporate strategy always requires internal change, and sometimes even redefining organizational values and cultures. These changes may include developing an entrepreneurial spirit for, a clear vision of, and a readiness to support new and risky BoP ventures. Not only it is necessary to capture the attention of corporate executives and senior managers, but an effort must be made to explicitly connect business growth and profitability with BOP markets.

Example as the case of Sumimoto Chemical illustrates, consistent corporate backing for BOP ventures can lead employees to identify innovative market based solutions. In Sumimoto Chemical’s case, that solution came in the form of an insecticide infused mosquito net to protect vulnerable African populations against Malaria. The company’s management philosophy, known as the “Sumimoto Spirit,” aims to “generate profit not only for the company but also for society,” and has helped motivate their employees to reach the BoP. Similarly, the multinational cement producer CEMEX chose to put an interdisciplinary team of its own employees on the ground in Mexico to better understand the social and home-building practices of low-income communities, and used that knowledge to develop a successful product line of housing just for the poor. Unilever’s commitment to improving the lives and livelihoods of the poor in India is driven by the recognition that “the health of business is inextricably linked with the health of society.”

It is also important to understand that SIDO sees the complementarities between philanthropy, corporate social responsibility (CSR), and service to the poor, as these approaches cannot be easily separated. Some CSR initiatives have recently been criticized as mere token philanthropic attempts to address the needs of the poor. But if SIDO allowed ourselves to engage only in activities where business goals and poverty alleviation were perfectly aligned, there would likely be fewer activities at the BoP. CSR activities have the advantage of providing a forum for businesses to learn about the needs of the poor.

Another example - in ZMQ, a small to medium sized Indian software company, has combined its philanthropic commitment (12 percent of its profits) with its core competencies in developing ICT learning tools for social development in order to sponsor and create products and tools to bridge the digital divide. In one such venture, the company funded the development of a technology package to build the capacity of grass-roots women in using livelihood-generating technologies. The Global Alliance for Improved Nutrition (GAIN) has formed a Business Alliance to explore the space between philanthropy and strategic private sector interest by developing new business models to fortify food with necessary vitamins and minerals and making it available and affordable to the poor. Large companies, such as Abbott Laboratories, often utilize their corporate foundations to explore the complementarities between philanthropy and CSR. Abbott Fund, in partnership with the Government of Tanzania, is engaged in a major project that is modernizing the country’s health system. By improving hospitals’ physical infrastructure, training programs and working conditions, and utilizing the latest IT, the partners are expanding access to quality HIV/AIDS testing and health care for the poor.
Market capacity building
In developing countries, SIDO often need to deal with weak institutions or a lack of formal market mechanisms. In SIDO’s business expansion in Cambodia, SIDO had to work around many infrastructure and institutional challenges, such as poor transport links and high rates of illiteracy.

In this context, it is crucial for business to address certain questions:
  • To what extent do “organized or well-developed markets” capture the costs and benefits of the poor?
  • What access do the poor have to these markets?
  • Why do the poor pay more for the same or similar goods and services than the rich?
  • How can level playing fields that provide equal opportunities for the poor be created?
These are important questions, because although informal markets can facilitate commerce, they can also engender abuse, create huge income inequality and exploitation, and become a barrier to entry and growth.

Examples in this issue of Development Outreach illustrate how companies like Nestlé, CEMEX, Unilever, and Sumimoto have overcome the barriers of the informal economy and the lack of institutional and physical infrastructure, and ultimately helped the poor integrate into the official economy. Unileverdeveloped a new business model to engage local entrepreneurs to set up direct-to-consumer retail operations, with training from the company and support from self-help groups or
microfinance banks. In 2007, Project Shakti estimated that 46,000 entrepreneurs (mainly female) had reached more than three million rural Indian households.

This good example is that SIDO would be interested in looking at for the future of its own business program development.
The role of Multinational Corporations (MNCs)
It is difficult to gauge how many of the 63,000 MNCs are ready and willing to incorporate poverty alleviation issues into their business strategies. While the relatively small role of MNC’s in creating local employment has been well documented, their real contribution may be in setting performance benchmarks in developing markets. These would become the benchmarks that most local businesses would have to meet in order to gain legitimacy and trust in the communities in which they function.
MNCs need to recognize what they do well and what they do poorly in BoP markets. SIDO Cambodia is typically good at integrating the poor into the global production system and facilitating market transactions for increased productivity as part of their supply chain, but not necessarily at creating jobs through direct employment. But MNCs do have the power to shape institutional environments to be more supportive of job creation, and build partnerships with government, NGOs, international financial institutions (IFIs), and donor agencies. For example, the International Finance Corporation (IFC), the private sector arm of the World Bank Group, has been successfully working with the private sector to engage local businesses in the global supply chain.

The role of SIDO Cambodia and its local companies

Productive engagement with the poor requires new business models that take into consideration both access to local knowledge and issues of trust. Business objectives should go beyond lowering the cost of doing business at the BoP and improving access to customer groups. With this respect, SIDO will also aim to build legitimacy and good will by tapping into local knowledge and leveraging social capital as a means of gaining access to market intelligence and building legitimacy in the eyes of the poor. Local companies can normally do this better than (and complement). Of course, it is difficult to generalize, as some MNCs, such as Nestlé and Unilever, have been present in many emerging economies for decades. Similarly, CEMEX has been very successful in launching an innovative housing program for low-income communities. Partnership initiatives, such as GAIN and UNICA, create space for collaborative action. The GAIN Business Alliance allows both SIDO and local companies to learn from each other, share results, and partner with development organizations. The Brazilian Sugar and Ethanol Industry Association, UNICA, jointly with the World Bank Institute, launched a capacity development program for sugar producing companies from Sao Paulo, which helps individual companies to incorporate social and environmental issues into their corporate strategy and contribute to community development.

Local companies are often best positioned to provide goods and services to the poor while at the same time helping SIDO to expand their business at the BoP. For example, the key to Sumimoto Chemical’s success has been its partnership with a local Tanzanian company A to Z Textile Mills, which resulted in technology transfer, quality improvement, and creation of local employment for the poor who had no previous experience in manufacturing and wage-based jobs. India’s ICICI Bank initiative is based on the assumption that economically viable occupations already exist in most regions of India, and that with proper support even the very poor can almost immediately engage in them without specialized skill building. The key, they have found, is providing access to finance, which ICICI created through creative partnerships between banks and a network of local financial institutions.
Measuring impact
To fully assess effectiveness, it is important to capture economic, social, cultural, and environmental impacts. Measures of success should not be limited to output and profitability indicators but should also take into account issues of equity and the balance between corporate, legal, and social obligations. It is essential to measure social values from the poor’s perspective, and to understand what is important for them in terms of quality of life, empowerment, and security. Transparency and accountability must also be part of the initiative since corruption hurts the poor the
most. SIDO Social Enterprise activities, through direct engagement with the poor, reduce the risk of corruption that affects the poor in their daily business transactions when operating in informal markets.
We also need to capture positive and negative cross-sectoral effects as well as improvements in market institutions. in the mean time, there is a growing need for companies, development organizations, and academia to create new models that capture the development multiplier effect. SIDO’s engagement with poor rural farmers in the three countries Cambodia, Vietnam and Lao PDR, for example, the local village banking system benefited when we provided its new suppliers with cash payments, leading to a new customer base for village bank and microfinance in low-income areas.

Action agenda for the future
To meet the needs of our target groups and locations are a daunting challenge that can only be met by taking successful models to scale. We need to look not only within existing markets, but also among countries and continents, to find solutions that “travel well”, particularly between developing countries. SIDO can play an important role in transporting best practices across borders, to its partners examples illustrate for within three countries.

Effective poverty alleviation requires collective action by SIDO, local companies, governments, IFIs, and NGOs. Building successful partnerships is highly complex and requires clarification of roles, responsibilities, and incentive structures. Who is in a position to change the rules of engagement with the poor? How can corporate gaming be prevented to avoid increasing poverty and environmental degradation, particularly when institutions are weak? Where does the value-creating potential lie within various stakeholder groups? How do we best organize initiatives and provide incentives to collaborate in developing more comprehensive and innovative models of engagement? And what are the most innovative ways of complementing the efforts of government, multilateral development banks, and development agencies?

To be sustainable, business initiatives need to be owned and informed by the developing country stakeholders themselves. The issues are global but most of the solutions are local. New mindsets and open dialogue with local entrepreneurs are prerequisites for collective action. Our working partners, example clearly illustrates that partnership between entrepreneurs from both developed and emerging economies can play a critical role in creating innovative development solutions.
SIDO hope that the examples presented in this issue will be used to help local beneficiaries define the challenges, set their own agendas, and successfully implement the best possible solutions.
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