Millennium Development Goals: Profit has a Place at the Base of the Pyramid

Tuesday, June 22, 2010

The death in April of C.K. Prahalad, the academic who identified the “fortune at the bottom of the pyramid”, was a loss to many – and particularly those who believe business has a role in achieving the Millennium Development Goals (MDGs), the list of eight targets drawn up by the United Nations in 2000.

However, Mr Prahalad’s work lives on: many companies are looking at ways to address the development goals – which include poverty reduction, gender equality, battling killer diseases and environmental sustainability – not through charity, but through profitable activities.

Part of this means treating the poor as consumers and coming up with products and services that improve their lives at an affordable price. Returns on these products and services may be low, but companies often see it as a way of entering markets they would otherwise be unable to reach.

Moreover, the idea is that companies can achieve profitability in these markets through scale – the number of consumers at the base of the pyramid (living on less than $2 a day) is estimated at 4bn.

In some cases, companies are stepping in with financing schemes to help low-income communities buy what they need to improve their lives.

In Mexico – which is facing a housing crisis – Cemex, the building materials companies, is helping low-income families to buy materials and construction services through a savings and credit programme.

However, achieving the development goals is not only about giving poor consumers the products and services they need.

Success will also mean finding ways to include the poor in global supply chains, giving them the chance to become economically independent and to generate sufficient income to feed and educate their families.

Source: Financial Times (link opens in a new window)