Inclusive business: Getting rid of the sweatshops

By Felipe F. Salvosa II, Publications Division Chief, Philippine Institute for Development Studies

All too often, the burden of ensuring that growth is inclusive falls on the shoulders of the government. But it’s also possible to involve the private sector in the effort, which, at the same time, will make them ethical and responsible corporate citizens. In a way, this is hitting two birds with one stone.

Ethical trade was the focus of the EADN, PIDS, and GDN Japan Joint Session on “Fostering Inclusive Growth in East Asia: The Role of Various Sectors in Society” session at the GDN 14th Annual Development Conference.  The session was lead and chaired by Josef Yap, president of the Philippine Institute for Development Studies. During the session, speakers agree that inclusive business is becoming increasingly popular, as consumers are increasingly aware of the need for businesses to become more ethical and to get rid of the so-called “sweatshops.”

Sato Kan Hiroshi of GDN Japan is advocating the “marriage of development and business” which is a way of poverty reduction through consumption. Hiroshi, in his paper Ethical Trade as A Tool for Inclusive Development, he notes that businesses have acknowledged the risk of product boycotts as consumers become more socially aware. He argues that business with ethics and development with efficiency will overlap, and a widening overlap may lead to more inclusive development. Hiroshi presented three viable strategies: “bottom of the pyramid” or BOP business schemes, cause-related marketing, and social business. He enumerated BOP business examples cutting across the health, electricity, security, nutrition, transport, and communication sectors.

Poverty and development, meanwhile, are very popular topics for marketing. An example is the fair trade movement, which tells consumers that some of the payments for the products will be for the benefit of communities producing them. This could even lead to a different kind of rivalry among corporations – a competition for goodwill. For instance, when chocolate maker Cadbury announced that it would use 100% fair trade cacao in its products, rival Nestlé followed suit. In social business, meanwhile, profits are plowed back to the enterprise, not to shareholders.

Talking about “Development Inclusiveness in the Greater Mekong Subregion (GMS),” Srinivasa Madhur, Director of research at the Cambodia Development Research Institute, explains that most countries in the region have already become middle-income countries, but they have a “large and unfinished agenda,” such as improving health and education services. GMS countries, which include Cambodia, Laos, Myanmar, Vietnam, Thailand, and two Chinese provinces, (Yunnan Province and Guangxi Zhuang Autonomous Region) are no exception to the “impossible trinity of inclusiveness.”

Finally, Roland Mendoza of the Asian Institute of Management, believes that efforts to promote ethical businesses may be imperfect solutions, but still, they are laudable innovations. Citing the economist John Maynard Keynes, Madhur said the political problem of mankind is to combine three things: economic efficiency, social justice, and individual liberty.

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