We know the facts. Humanity’s annual demand on natural capital and ecosystems exceeds Earth’s capacities. Around 75% of the planet’s land areas are substantially degraded, and we have already lost 80% of our forests, undermining the wellbeing of 3.2 billion people. According to EU stats, by 2030, the demand for food, water and energy is expected to increase by 35%, 40% and 50% respectively. Climate change is further jeopardizing ecosystems and food security, with rising sea levels, more intense storms, heat and drought having devastating effects on human health.
If environmental degradation and climate change are challenging humanity’s future on earth, inequality is undermining the planet’s current social cohesion. Over the past 20 years, we have added nearly two billion more people to the global population, and further intensified our ecological footprint. By 2030, the global middle class is expected to grow from the current three billion to more than five billion people, with the attendant increases in material consumption, waste generation and greenhouse gas emission.
The Key Challenge of our Time
What’s clear is that incremental reduction in negative impact via traditional social responsibility programs is not sufficient. There are too many linkages between living in unhealthy environments and the vicious cycles of poverty, so aiming to eradicate poverty first before addressing the environment will simply not work. Indeed, the SDGs will not be achieved without a more inclusive and environmentally sustainable form of economic growth. The idea of inclusive green growth is crucial because it addresses market failures and externalities, while simultaneously ensuring broader market participation and equity.
Fortunately, since the late 1990s, two exciting new commercial developments have burst onto the global scene, providing a springboard for the transformation required to achieve inclusive green growth. One revolves around the commercialization of new clean technologies; the other around better serving and including the poor at the base of the income pyramid (BoP). Both are exciting, but the problem is that they have evolved as separate communities.
The challenge of our time, therefore, is to figure out how to bring these two worlds together and enable a global “green leap.” This would ensure the commercialization of new clean technologies that guarantee sustainable green growth, while extending the economic benefit to low-income and vulnerable communities.
A Proving Ground for Sustainable Solutions
Because new green technologies are often distributed and disruptive in character, the base of the pyramid is an ideal place to focus initial commercialization attention. There are a lot of social needs in these communities, and thus they provide an ideal trial-and-error market to test products and services, and see how effectively they provide solutions to social and human challenges. China’s towns and small cities, Brazil’s favelas, and India’s rural villages present such opportunities. Even the growing divide between rich and poor in the developed world—in Europe and the United States, for example—offers such potential to leapfrog. Imagine the Paris suburbs or the city of Detroit serving as new hubs for incubating tomorrow’s sustainable and inclusive solutions, to take just two examples. Once established, such technologies can then “trickle up” to the established markets at the top of the pyramid—but not until they have become proven, reliable, affordable and competitive against the incumbent infrastructure.
Indeed, emerging technologies may hold the keys to solving many of the world’s environmental and social challenges. These include traditional clean technologies focused on areas like sustainable agriculture, distributed generation of renewable energy, biofuels and point-of-use water purification. But they also include other new technologies that have the potential to be used in a sustainable way. For instance, wireless information technology can help reduce the need for cable and related infrastructure; blockchain can allow users to measure and thus reduce environmental externalities through the value chain; artificial intelligence can be applied to maximize the efficiency of resources, reducing material consumption; and 3D printing can dramatically reduce distribution costs and the environmental impact of products.
A Roadmap to an Inclusive Economy
In our new book, “The Green Leap to an Inclusive Economy,” we aim to present the new business thinking required for a more inclusive and sustainable economy that does not leave anyone behind, respecting both people and planet. With the participation of more than 30 contributors from over 20 different countries, the book has been structured around seven strategic transitions based upon the business value chain and its relation with a new, inclusive business ecosystem. Each transition has been illustrated through in-depth case studies that showcase the challenges and opportunities of venturing with low-income communities in different geographical and cultural contexts – as well as providing a detailed description of the tools that have been proven to enhance the innovation of business models to address the issues. A few of these case studies include:
- Lessons learned in last-mile distribution: This study involves Chakipi Acceso, an enterprise that aims to solve the last-mile logistics in rural and peri-urban areas in Peru, Colombia and Haiti, building a distribution network of women who serve their own communities. The project was implemented to generate a bridge between rural consumers and formal sector manufacturers, in order to develop third-party distribution enterprises to fix this gap.
- A rewards program for underserved communities: So+Ma vantagens is a rewards program that aims to change citizens’ waste management habits and increase entrepreneurship opportunities in low-income communities in Brazil, using waste as a social coin. It allows beneficiaries to exchange their waste for food, short-term capacity building courses, or other rewards to improve their lives.
- Upscaling and accelerating inclusive business: The Strategic Advisory Services Programme on Inclusive Business aims to improve the inclusive business practices and BoP strategies of Egyptian companies in the fast-moving consumer goods sector. This is designed to take full advantage of the market potential of low-income communities and deliver long-term results.
- Disseminating knowledge online: The Knowledge Online Platform was designed within the EU DEMOWARE initiative to assist water managers and SMEs that are looking to implement a new water reuse scheme, by facilitating strategic planning and project management while providing an understanding of organizational capacity gaps.
- Promoting affordable housing solutions: The main objective of the Centre for Affordable Housing Finance in Africa’s Housing Guide is to help solve the gap in the global housing market, primarily by describing the market potential and suggesting ways for companies to engage. The Guide especially targets the BoP by helping companies develop sustainable and affordable housing solutions tailored to the specific needs of low-income groups.
By telling these stories, our aim is to provide a roadmap for how to make an inclusive and sustainable economy a reality, where opportunity and prosperity are available to more consumers, business owners and community members – while addressing the risks to the natural environment we all depend on.
Ultimately, we believe the transition towards a new form of sustainable capitalism is possible, driven by a market system focused on innovating new, sustainable production and consumption patterns. We envision a more inclusive market that ensures more equal economic opportunities for all, and an environmentally sustainable economy where decisions and strategies reflect the full value of resources, as well as the costs of waste and pollution. We hope this book can make a valuable contribution to those who, like us, are looking to accelerate the development of inclusive businesses for the benefit of society and the planet, improving the lives of low-income communities through sustainable business solutions.
Editor’s Note: NextBillion will be giving away a free chapter of “The Green Leap to an Inclusive Economy” in our e-newsletter, NextBillion Notes, all month. Click here to subscribe.
Stuart L. Hart is Professor and the Steven Grossman Endowed Chair in Sustainable Business at the University of Vermont Business School, USA.
Fernando Casado Cañeque is Founder and Director of the Centre of Partnerships for Development (GlobalCAD) and Principal and Knowledge Steward of the BoP Global Network.
Photo courtesy of geralt.