Growing bottom lines with social impact

Inclusive businesses in the food sector.
Melanie Epp
Friday, 25 November 2016
By Melanie Epp
Inclusive business approaches directly improve the lives of the poor by making them part of the value chain of a  companies' core business.
Inclusive business approaches directly improve the lives of the poor by making them part of the value chain of a companies' core business. Fotolia.
According to The World Bank the roughly 4.5 billion low-income people in developing countries spend more than $5 trillion a year collectively. Of that, they spend $2.3 trillion a year on food and beverages alone. It stands to reason then that businesses that target those consumers and establish local sources of supply will be able to take advantage of this incredible growth.

Furthermore, by connecting segments of those populations with viable markets, businesses have the ability to bring people out of poverty. This is what is referred to as an “inclusive business.” Markus Dietrich, co-founder and director of ASEI Inc., spoke on inclusive business models at this year’s International Egg Conference in Warsaw, Poland.

What is an inclusive business?
According to the G20 Inclusive Business Framework, inclusive business approaches go beyond corporate social responsibility and philanthropy, and impact investment by connecting poor people to markets. “[Inclusive business approaches] encompass business approaches that directly improve the lives of the poor by making them part of the value chain of companies’ core business as suppliers, distributors, retailers, or customers,” said a report from the G20 meeting in Istanbul in 2015.

According to Dietrich inclusive businesses have the opportunity to capture corporate growth and market opportunities while enhancing brand value with key stakeholders. In building an inclusive model, businesses also reap added rewards: gaining social license to operate, future proofing the supply chain and attracting and retaining talent.

Dietrich knows all about designing an inclusive business model. He is, after all, an inclusive business specialist with extensive experience in research, consulting and project development. He is regularly recruited by leading corporations to develop inclusive business models aimed at corporate growth and social impact. Dietrich is also co-founder and CEO of Hilltribe Organics, a social enterprise producing free-range and organic eggs with hill tribe communities in Northern Thailand. Hilltribe Organics is the first certified organic chicken farm in Thailand; its products are available in all major supermarkets.

Existing inclusive businesses
There are many corporations who have already put their sustainability plans into action. Unilever, for instance, launched its Sustainable Living Plan in 2010. The plan is a blueprint for the company’s sustainable growth. Similarly, Mars established the Cocoa Sustainability Initiative and committed to being sustainable in a generation. To support a long-term goal of Creating Shared Value, Nestlé made 38 commitments that it aims to be by 2020 or earlier. Here in North America, McDonald’s Corporation has decided to stop using eggs from chickens raised in cages over the next decade.

But it’s not just food service and processers that are creating inclusive business models. Businesses involved in primary production are challenging older models with the goal of lifting communities out of poverty. The 3 million farmers who work for Amul Dairy Cooperative in India, for instance, all benefit directly from the company’s success. The cooperative is so inclusive that even a farmer with a single cow can join. Locally, a group manages milk collection and pays farmers on the spot.

Inclusive businesses in the egg industry value chain

There are examples of inclusive businesses around the world, including in the breeding, machinery and primary production sectors, said Dietrich, who highlighted several examples where business opportunities created better lives for those involved. In Ethiopia, for example, diets are deficient in protein. Indigenous chicken breeds have a survival rate of 50 percent. Birds produce fewer eggs, mature later and are prone to disease.

Mekelle Farms saw an opportunity to increase egg production by 500 per cent, thereby increasing smallholder farmer incomes. Higher egg production will both increase the supply of protein to rural and urban households, said Dietrich, as well as lower the cost of protein, making it more accessible.

Similarly, in India, poultry farmers have millions of low-productivity birds in back yards. Their flocks aren’t generating enough income, nor are they providing enough food. There, Keggfarms helped make low-income families more food secure by addressing the egg and meat issue, as well as providing opportunities for farmers, explained Dietrich. Keggfarms also create a micro entrepreneur network selling day-old chicks that have a longer life expectancy.

Keggfarms has received high praise for its business model. It is even a case study on Social Enterprise at Harvard Business School, said Vipin Malhotra, CEO at Keggfarms.

Realizing that per-person poultry meat consumption will rise faster than it will for pork and beef, especially in Africa, machinery company Surehatch saw an opportunity to build connections in South Africa. Surehatch, said Dietrich, focuses on Kenya’s smallholder market, emphasizing the idea of chicken production as a business opportunity. The company trains farmers – more than half of them are women – and helps them to create profitable businesses that provide a steady annual income.

Dietrich’s own inclusive business, Hilltribe Organics in Thailand, triples farm incomes, helping to bring families out of poverty. Regular and predictable income, he said, helps improve their quality of life.

Developing your own inclusive business
Thinking about developing your own inclusive business model? In a recent report, the Food and Agriculture Organization of the United Nations (FAO) noted that there are some 475 million small farmers globally, creating a huge potential supply chain for future inclusive business owners. A good start, said Dietrich, is making the move from corporate social responsibility to inclusive business models. This can be done by partnering with social enterprises and seeking support and financing from an inclusive business ecosystem.

Can eggs make a difference? Dietrich thinks they can. At the United Nations Sustainable Development Summit of September of 2015, world leaders agreed to adopt the 2030 agenda for Sustainable Development. The agenda includes 17 Sustainable Development Goals, including eliminating poverty and hunger, and improving health, education and gender equality. Of the 17 goals, Dietrich said that egg production addresses at least eight: no poverty; no hunger; good health; gender equality; good jobs and economic growth; responsible consumption; life on land; and creating partnerships for the goals.

“We have proved the point that eggs have the potential to create substantial social impact,” concluded Dietrich. “Having a predictable and regular income has completely changed their lives.”

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