"Can the private sector help reach the MDGs and so transform the lives of the poor?" by Djordjija Petkoski
Can the private sector help reach the Millennium Development Goals (MDGs) and so transform the lives of the poor? Can poor producers and consumers, in turn, transform business models and shape new opportunities for companies?
There is no doubt that the private sector needs to be and is a key partner in achieving the MDGs. The World Bank Institute and German capacity building agency, InWEnt, have hosted several forums in recent years that have documented many innovative business contributions to meet the goals, ranging from combating HIV/AIDS and other communicable diseases, through to addressing hunger and malnutrition, environmental concerns and education. Private sector action is not simply altruistic, but reflects a growing overlap in interests as development challenges are increasingly impacting the ability of firms to operate effectively.
As I outlined, jointly with my co-editors, in the June 2008 issue of the World Bank Institute’s Development Outreach magazine, business involvement in poverty alleviation is best addressed in the broader context of development. Poverty, with its economic, social, cultural, political, and moral dimensions should be approached in an integrated manner. Nestlé’s Milk District Model is a good illustration of this. By providing the opportunity for training, education and a steady income to poor rural farmers in exchange for a consistent milk supply, Nestlé effectively integrates poverty alleviation into its business model, for mutual benefit: the company increases its supply of fresh milk; poor communities benefit from job security, improved nutrition and an improved standard of living.
Broader business culture needs to change though, and this process can be long and difficult, especially for older, more established companies. Internal, structural change, such as strengthening – or redefining – organizational values and cultures, is needed, as is buy-in from top management. As companies incorporate poverty alleviation issues into corporate strategy, a clearer understanding of the complementarities between philanthropy, corporate social responsibility, and service to the poor is essential. The role of local companies should not be over-looked or underestimated either as new business models take into consideration both access to local knowledge and issues of trust. These are areas where local companies have a comparative advantage - incentivizing contributions to development along the full value chain is crucial for sustained impact.
The challenge remains to build on successful models and take them to the scale necessary to uproot pervasive poverty. This will require capacity building not just within the private sector to strengthen relevant competencies and skills, but also within governments and the international development community to recognize and facilitate private sector contributions. Partnerships are essential, but building successful partnerships requires addressing many nuanced and difficult questions - Who is in a position to change the rules of engagement with the poor? How can we best orchestrate various initiatives, provide incentives, and complement existing initiatives? We need to share examples, pinpoint what is working and what is not. We can learn as much from the many failures as from the successes. Last, but certainly not least, the primary initiative needs to come from within developing countries where progress towards the MDGs is most essential.
Djordjija Petkoski is Head of Business, Competitiveness & Development at the World
Bank Institute
There is no doubt that the private sector needs to be and is a key partner in achieving the MDGs. The World Bank Institute and German capacity building agency, InWEnt, have hosted several forums in recent years that have documented many innovative business contributions to meet the goals, ranging from combating HIV/AIDS and other communicable diseases, through to addressing hunger and malnutrition, environmental concerns and education. Private sector action is not simply altruistic, but reflects a growing overlap in interests as development challenges are increasingly impacting the ability of firms to operate effectively.
As I outlined, jointly with my co-editors, in the June 2008 issue of the World Bank Institute’s Development Outreach magazine, business involvement in poverty alleviation is best addressed in the broader context of development. Poverty, with its economic, social, cultural, political, and moral dimensions should be approached in an integrated manner. Nestlé’s Milk District Model is a good illustration of this. By providing the opportunity for training, education and a steady income to poor rural farmers in exchange for a consistent milk supply, Nestlé effectively integrates poverty alleviation into its business model, for mutual benefit: the company increases its supply of fresh milk; poor communities benefit from job security, improved nutrition and an improved standard of living.
Broader business culture needs to change though, and this process can be long and difficult, especially for older, more established companies. Internal, structural change, such as strengthening – or redefining – organizational values and cultures, is needed, as is buy-in from top management. As companies incorporate poverty alleviation issues into corporate strategy, a clearer understanding of the complementarities between philanthropy, corporate social responsibility, and service to the poor is essential. The role of local companies should not be over-looked or underestimated either as new business models take into consideration both access to local knowledge and issues of trust. These are areas where local companies have a comparative advantage - incentivizing contributions to development along the full value chain is crucial for sustained impact.
The challenge remains to build on successful models and take them to the scale necessary to uproot pervasive poverty. This will require capacity building not just within the private sector to strengthen relevant competencies and skills, but also within governments and the international development community to recognize and facilitate private sector contributions. Partnerships are essential, but building successful partnerships requires addressing many nuanced and difficult questions - Who is in a position to change the rules of engagement with the poor? How can we best orchestrate various initiatives, provide incentives, and complement existing initiatives? We need to share examples, pinpoint what is working and what is not. We can learn as much from the many failures as from the successes. Last, but certainly not least, the primary initiative needs to come from within developing countries where progress towards the MDGs is most essential.
Djordjija Petkoski is Head of Business, Competitiveness & Development at the World
Bank Institute
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