Inclusive business

Last year, President Duterte approved inclusive business as among the investment priorities in the country.

The Group of 20 (G20) has 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, making them part of the value chain of companies’ core business as suppliers, distributors, retailers, or customers.

IB models are now eligible for pioneer status under the Investment Priorities Plan (IPP) 2017-2019 of the Board of Investments and are entitled to five years income tax holiday.

According to the World Bank, inclusive growth is a two-way challenge of ensuring well-paying income opportunities for informal workers to increase as quickly as the rapidly growing formal sector opportunities.

This complex challenge, the WB said, requires synergies among government, businesses, and civil society, for innovative and systemic solutions.

Government, it emphasized, plays a crucial role in developing an overarching framework for various stakeholders and creating an enabling environment to facilitate linkages to address pressing societal challenges.

The Duterte administration has laid out a 10-point socio-economic agenda for the next six years, aimed at lifting an estimated nine million Filipinos out of poverty by 2022.

According to the Department of Trade and Industry, it is now exerting conscious effort to accelerate the trickle down effect of economic growth through IB initiatives that sustainably tighten the link between businesses and poor communities.

To qualify for BOI incentives, the larger companies should integrate small and medium enterprises in their value chain. The companies should also implement their inclusive business models during a three-year period.

According to Trade Undersecretary and BOI managing head Ceferino Rodolfo, the impact of Inclusive Business goes beyond social impact to make a difference in issues like environmental concerns.

It has been noted that vulnerable people who get integrated into Inclusive Business models are finding opportunities for well-paying jobs, raised incomes, and increased roles in responding to challenges related to the environment.

This is how Filipino companies like EcoIngenuity Inc. and Gandang Kalikasan Inc. (GKI) are making an impact in the lives of communities they work with.

As companies with inclusive business models, EcoIngenuity Inc. and GKI tap suppliers, distributors, or partners with poor communities. Inclusive Business models can also tap the poor as consumers by making relevant products or services accessible to them.

GKI operates the beauty brand Human Nature which strictly adheres to the environmental and safety principles of the Natural Products Association (NPA), a Washington DC-based non-profit organization that serves as a natural products industry watchdog to protect consumers from unsafe products.

Meanwhile, EcoIngenuity is the company behind the brand Jacinto & Lirio which creates multi-functional and sustainably made leather goods out of water hyacinth. Known as the most damaging aquatic plant, water hyacinth has infested communities by the Pasig River and Laguna de Bay. Water hyacinth contributes to higher flood levels because it clogs waterways. In communities where there is water hyacinth infestation, fish kills are rampant, and the rate of water-borne diseases are high.

The communities that work with both GKI and EcoIngenuity found opportunities to gain useful skills, increase their income levels, and connect with relevant markets, the BOI said.

Human Nature’s suppliers of raw materials, such as citronella, coco nectar and lemongrass come from more than 23 communities and social enterprises across the Philippines. In the communities located in Bukidnon and Camarines Norte, women make up at least 40 percent of the workers. Most of the farmers have limited education and rely on subsistence farming to make a living. They have no land of their own, and because they are found in remote areas, they have limited exposure to their potential markets.

To help farmers raise their income, Human Nature builds on the capacity of the farmers, provides support and seeds, and buys their raw materials at fair, above-market prices. For example, Human Nature purchases citronella oil at 40 to 60 percent above market value.

Part of Human Nature’s capacity building efforts for marginalized communities are skills training, values formation program, and the allocation of profits for scholarships. The scholarship recipients receive training and education for agri-social entrepreneurship.

Aside from supporting farming communities, 58 percent of Human Nature’s workforce hail from low-skilled, marginalized sectors in Manila and Laguna. Employees receive 68 percent more than the legal minimum wage so that if they belong to a family of four, they can enjoy better standards of living.

Similarly, EcoIngenuity’s Jacinto & Lirio also provides women with opportunities. All of Jacinto & Lirio’s beneficiaries are women from seven different communities in Pasig City, Rizal, Laguna and Pampanga. Most of them are stay-at-home mothers from Rizal who live in water hyacinth-infested rural areas. The women learn to utilize water hyacinth as material for multifunctional and stylish leather goods such as planners, journals and bags.

The women also learned to offer services like embroidery, laser etching, and creating full colored prints. This helped increase their households’ income, to better provide for their family’s needs.

Aside from creating leather goods, they get linked to relevant markets, BOI added.

But according to a joint study by the BOI and the United Nations Development Program’s (UNDP) Istanbul International Center for Private Sector in Development (IICPSD), use of the IB model remains low among Philippine companies, but more Filipino firm have expressed interest in adopting it.

According to the study, 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.

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.

UNDP Philippines country director Titon Mitra said IB is still an unfamiliar concept to most Philippine companies and the enabling environment for it still needs to be improved.

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