Use of the so-called inclusive business (IB) model remains low among Philippine companies, but more of them have expressed interest in adopting it, a joint study by the Board of Investments (BOI) and the United Nations Development Program’s (UNDP) Istanbul International Center for Private Sector in Development (IICPSD) has revealed.
Released on Monday and conducted in partnership with the country’s most prominent business associations, the “Business+ Philippines” study presents the results of a baseline survey among the country’s firms to understand how much they know about and engage in IB, and identifies the challenges and opportunities for adopting the model in their operations.
The results provides valuable insights on the level of inclusiveness among the 223 companies involved in the study.
The Group of 20 (G20) (2015) defined IB as “a private sector approach to providing goods, services and livelihoods on a commercially viable basis, either at scale or scalable, to people living at the base of the economic pyramid (BOP), making them part of the value chain of companies’ core business as suppliers, distributors, retailers, or customers.”
IB offers an opportunity to not only generate profit, but also help those at the BOP, and thereby contribute to reducing poverty in the country.
The study gave respondents a set of questions on how and to what extent they included the poor in their core businesses. Following the IB definition, the respondents were provided six different entry points for the poor in a business model: being an employee, consumer/customer, supplier, distribution channel member, entrepreneur or local community.
The highest level of inclusiveness was achieved by allowing the poor to become employees, followed by investing in less developed neighborhoods, and emphasizing the poor in companies’ business strategies.
“However, the entry points that would have contributed greatly to sustainable human and economic development—such as doing business with the poor as entrepreneurs, suppliers or distribution channel members—had relatively lower scores, followed by the lowest scores of the poor as consumers,” the study said.
It also said 33.6 percent of the participating companies did not even target the poor as customers or consumers, while 26.9 percent and 22.9 percent did not do business with them in their distribution channels or as suppliers, respectively.
“While the report showed that the current levels of awareness and engagement of Philippine companies in IB are low, it also highlighted the strong interest among the respondents in adopting and strengthening IB practices within their companies,” the study said.
It noted, however, that there are already a number of emerging IB models in agriculture, tourism, health, and education, but many of the companies using them were unaware about it.
Social enterprises showed the highest levels of inclusiveness with the highest scores in all entry points, followed by large national companies; multinational corporations; and micro, small and medium enterprises (MSMEs).
Among the recommendations for increased IB adoption include raising awareness, building capacity, encouraging collaboration and initiating certain policy interventions to create a more inclusive and business-friendly business environment.
“The study highlights the needed synergy between the government and the private sector in creating an enabling environment for IB. The BOI’s inclusion of IB in the 2017-2019 Investment Priorities Plan builds on the Business+ recommendation to create more policies supporting [it]. This further gives the government a proactive role to “IB-tize” businesses to spread the benefits of growth to the poor,” Trade Undersecretary and BOI Managing Head Ceferino Rodolfo said.
UNDP Philippines Country Director Titon Mitra said that, while the Philippines experienced economic growth over the last few years, “ poverty and underemployment, especially among the youth, remain significant issues.”
Mitra said 21.6 percent of the country’s population continue to be in “deep poverty.”
“Efforts countering poverty have not been inclusive enough for growth to be felt by the underserved. The Philippine government, guided by the 0+10-point economic agenda of the President and the Philippine Development Plan 2017-2022, is accelerating efforts to uplift MSMEs and increase human capital and investments, especially in the countryside,” he added.
Mitra said IB is still an unfamiliar concept to most Philippine companies and the enabling environment for it still needs to be improved.
“This is where the Business+ becomes relevant. IB models can help in making those at the BOP become part of and really benefit from the growth process. IB offers opportunities to go beyond traditional business models to ensure both commercial success and social impacts,” he added.