Wednesday
March 30
2011

Martin Herrndorf

Inclusive Business and CSR ? How To Grow Local Innovation Clusters? Reflections From Cali

Is inclusive business a social responsibility, or a real, profitable business opportunity? Some reflections on how local business owners might receive the “ping-pong” of social responsibility and business principles from a forum held in Cali, Colombia.

Do concepts like ’base of the pyramid’ and ’Inclusive Business’ – thought up in US business schools and preferably discussed at invitation-only or $1,300-priced conferences hundreds of kilometres away from poor communities – really enter into the mainstream practice of businesses located in or close to poor communities? Do local business leaders really care about the “endless opportunities” and “fortunes” that academic thought-leaders proclaim? Or do they smell another foreign buzzword storm, turn their back, and continue with business-as-usual?

This post first provides some background on the forum and the discussions and then draws some general conclusions for the broader BoP community.

On the forum

At a local forum in Cali, Colombia, local business leaders and academics joined to discuss the dynamics of social responsibility and inclusive business in the region. The forum, held at the regional University Del Valle, was organized in record time – by a ad-hoc team formed by members of the university, Sucromiles, FortaleceRSE, Endeva and NextBillion. The goal was to give an impulse into the local business and academic community – but also to explore some topics with wider relevance for the BoP community.

About 80 people attended the event – among them, local business leaders, faculty and media representatives – to follow the presentations and an engaged, and sometimes heated, debate. Real-time twittering and pictures were provided by @Sucronutrientes.

The input

I was invited to open the forum with an overview on Corporate Social Responsibility and inclusive business, preparing the ground for the presentation of “best practices” – as well as the lessons learned by the different actors in the process:

Eliana Villota, head of social business at Sucromiles, a local chemical company, reported on their efforts to improve nutritional conditions in low-income communities. The company has developed an innovative health supplement that addresses widespread calcium deficits in Colombia. It especially targets elders and pregnant women. It currently experiments with different sales channels – traditional sales through retailers, an agent model with the “Tri-Caldamas”, and new, “strategic” sales channel like local health stations, or informally through social groups of elderly women, etc.

Second was Maurice Armitage, General Manager of SIDOC S.A, a local steel producer. He reported on its community investments: The construction of parks and the symbolic “repainting” of houses in Siloé, a low-income community. Based on these more charity-driven efforts, SIDOC also helped locals to become paint manufacturers and painters, and has established purchase relationships to local scrap resellers.

He was echoed by David Gómez, a community leader from Siloé. He reported on his work with the community, with a focus on the experiences with SIDOC and other businesses. He stressed how important it was to be on an “equal level” for negotiations, and how the business had to earn the trust of the local community over time.

The last ’case study’ was provided by Wilson Giraldo Yagüé, from WWB Banco de la Mujer. The local microfinance organisation was a pioneer in the industry, and what Wilson Yagüé called the ’king of the market’. Over time it has experienced growing competition, and had to react with new levels of service. The credit analysts, who visit potential borrowers in their homes and businesses, can now enter client data via handhelds, and automatically approve loans at the business place itself.

The examples were rounded up with Arabella Velasco, who coordinates the programme Cali Como Vamos. She provided some amazing statistics and details on employment and economic inclusion in Cali.

Some lessons and conclusion

The forum, especially the ensuing discussion, were revealing for me on several levels – on the motivation of businesses, on approaches to overcome the “if only” of public policy and on the force of regional competition.

Lesson 1: Reputation rules.

I personally may have underestimated the value that reputation has for local business owners, especially for successful ones. This also shows in the concept of “social responsibility” was given more space by speakers, and it attracted more interest form the audience, then the one of “inclusive business”. This interest in responsibility and reputation seems to have three aspects.

First, it’s an intrinsic motivation: Business owners really want to contribute. Asked why has company chose Siloé for his activities, Maurice Armitage answered that he grew up in the neighbouring community, and that it was just a natural decision for him.

Second, it’s linked to recognition: After being on the safe side economically, people want to be seen as a ’good citizen’ in the community (this could be especially relevant in Colombia, and Cali in particular, where tons of “dirty money” were made over the decades).

Last, reputation can be a competitive issue. Maurice Armitage made the case for Sidoc. As a local steel company in a country without major iron ore production, he is exposed to severe international competition. But he promised himself to “win locally here in Cali, and win in the social field”. And in fact, Sidoc has been able to buy steel for recycling from local scrap resellers, also due to its reputation in the community.

Lesson 2: Overcoming the “if only” of public policy

At several points, “if only” arguments relating to public policy broke out. “If only” there were coordinated efforts to promote employment, “if only” the city government would comply with its promises, “if only” they made the necessary investments in public infrastructure. And while local bodies in Colombia may have improved their track record over the years, especially in the area of public transport, a lot needs to be done.

While the “if only” can paralyze efforts for inclusive business, the forum also showed how it can be overcome. David Gómez, the community leader from Siloé, Cali, has grown action from pressing community needs and concerns. Resources are “scrambled together” from donations, public donor money, volunteer time and a lot of energy. The businesses present illustrate another perspective – taking the “patient money” to build inclusive business, step by step and in the scope possible, to prepare future, bigger efforts.

Lesson 3: Competition works (also between regions).

Localisms can be strong in Colombia. The event was opened by not one, but three video hymns (the Colombian national anthem, the Valle del Cauca regional anthem and the Universidad del Valle university anthem).

These localisms go much beyond symbolism. At the end, intense discussions broke out on the question of whether there are stronger efforts by business in Cali or Medellin. Why are efforts by the “Paisas” (people from Medellin and surrounding) so visible, when “ours” are not? How can we grow clusters, how can we better coordinate our efforts, and make them more visible? How can we create local synergies? Who can lead the efforts? Similarly, the presentation of “Cali Como Vamos” featured statistics comparing Cali to other cities, with careful notes on where and why Cali scores better or worse.

Could regional competition be a driving force for inclusive business? Can inter-regional competition be the trigger to foster intra-regional cooperation and help to move beyond local competition concerns? And could these forces work beyond Colombia – Chiapas vs. Oaxaca, Karnataka vs. AP?

Conclusions – how can we grow a million local communities?

It was inspiring to see the force and local networks growing around the idea of CSR and inclusive business in a community like Cali. Reaching the billions currently excluded from our economic system will require lots of “local hubs” – places where:

  • trust grows between poor communities and businesses, and both learn to effectively collaborate;
  • both poor communities grow the capabilities to run inclusive business projects;
  • academics and consultants exist that can support these activities effectively;
  • graduates and advanced professionals take “inclusive business” as a natural next challenge in their career;
  • companies engage in a “race-to-the-top” outpacing each other in community investments and inclusive business development efforts.

As a summary: Where inclusive business becomes a matter of course! I’m happy and grateful to have seen the first efforts of this “perfect storm” forming in Cali (and hope to have contributed my ’soplo’).

Have you witnessed similar efforts elsewhere? What has worked well in other communities?

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Categories
Entrepreneurship
Tags
Base of the Pyramid, business development, corporate social responsibility