ERB PERSPECTIVE BLOG

By Tamar Koosed

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Robert Stansfield/DFID, via Wikimedia Commons

It’s been really fun exploring BoP ventures here at the Erb Perspectives Blog and hearing from some of you about the work you’ve been doing on the topic. We close our series acknowledging the progress that’s been done around poverty reduction and touching on the next generation of challenges for companies looking to create shareholder value and improve the standards of living for low-income communities.

Oftentimes, in our quest for improvement, we focus on the negatives, also known as “lessons learned” if you are in the international development field or as “opportunities” if you are in the private sector. We took on this focus while writing this blog series, pointing out why so many BoP ventures have failed and what strategies they could implement when trying again.

However, we, as a global community, have done a lot to reduce poverty in the last 20 years. According to the World Bank, in 1990, 42% of the world’s population lived below the $1.25/day poverty line. That rate fell to 21% in 2010.1  Poverty was halved and this is no small feat.

Many economists attribute this largely to the rapid growth in GDP in populous and initially impoverished developing countries, like China and India. But the trend is true for all regions, when there’s growth there are declines in absolute poverty. Good macroeconomic policies and ensuring there is rule of law are important contributors to growth, but so are trade and the ability of the country and its citizens to be integrated into the global economy. Businesses have an important role to play in this regard and promote GDP growth by selling and buying products and services.

But it will take more work and incredible ingenuity from businesses, and governments alike, to move the remaining billion people across the poverty line. Many of those that were lifted out of poverty were just below the $1.25-a-day threshold, making it harder now to get people who are deeper in the poverty cycle above the same mark. Importantly, the remaining billion are also the hardest to reach in countries that are already growing or are living under unstable and failing governments.

Number of people below the poverty line, in millions 2

below-poverty-line

Evidently, those that crossed the poverty line benefit from products and services that lead to shared prosperity, like good quality and affordable reading glasses for the poor, as living on $1.26 a day is not conducive to good standards of living. So there’s much work to be done.

Businesses will continue to tackle the challenges of creating good products that have social value, finding the balance between product costs and consumer price, raising awareness to create demand, and finding early stage financing. But as incomes rise around the world, the persistent challenge for businesses that aim to contribute to poverty reduction will likely be reaching those that need them most. Those living in poverty will more and more be in hard to reach areas of developing countries or simply reside in unstable, failed states. Businesses will need to find reliable and scalable distribution channels to simply reach those that need them most. A lot has been done to reduce poverty and improve standards of living, but much more needs to be done. I am certain entrepreneurs are up for the challenge.


1. [Dollar, David, Tatjana Kleinerberg, Aart Kraay. August 2013. “Growth Still Is Good for the Poor.” The World Bank. [http://goo.gl/z758aA].]

2. [Chandy, Laurance, Natasha Ledlie, and Veronika Penciakova. April 2013. “The Final Countdown: Prospects for Ending Extreme Poverty by 2030.” The Brookings Institution. [http://goo.gl/Qsx2CV].]

 

TamarTamar Koosed is the founder of MANAUS Consulting. She has experience in the area of impact assessments and international development and has conducted several independent evaluations of BoP business models and helped disseminate successful strategies in the field. She has worked closely as a consultant with Opportunities for the Majority, an Inter-American Development Bank Initiative that promotes and finances market-based, sustainable business models to deliver quality products and services for the base of the pyramid in Latin America and the Caribbean. She has recently been appointed to the World Economic Forum’s Global Shapers Community in Brazil, where she is originally from. The community is a network of young leaders with potential for future leadership roles in society. Tamar dedicates her professional career to uncovering creative and effective solutions to development challenges.

 

Read other posts from this BoP blog series:

Social Enterprise: Understanding the Base of the Pyramid
The Business Case for BoP Strategies
Distinguishing Between Demand and Need in the BoP
Incubating Expertise: Fostering Partnerships within the Community
Should corporations promote development?
Tips on Early Stage Financing for BoP Ventures

 

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By: Kristine Schantz

By marissaorton (Sweatshop project  Uploaded by Gary Dee) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

By marissaorton (Sweatshop project Uploaded by Gary Dee), via Wikimedia Commons

Today’s global supply chain creates economic opportunity overseas and cost savings for U.S. businesses, but comes with limited visibility and control of the working conditions where goods are sourced and manufactured. At a recent gathering sponsored by the Erb Institute, students explored supply chain sustainability in an effort to better prepare ourselves to address this issue as business professionals.

U-M students do not need to travel far to view an example of the domestic impact of global manufacturing. Our once booming “Motor City” now offers only a fraction of the manufacturing employment it once did, as automotive supply chains now source parts from around the world to assemble domestically under U.S. American logos. These practices raise many questions for both consumer and business: What exactly is ethical sourcing, how deep into supply chains are companies required to go and what tools are available to assess and implement supply chain sustainability efforts?

By practicing global sourcing, companies take on risk associated with the working conditions and broader governance context of their overseas suppliers, including labor and human rights issues, environmental standards and safety concerns. This reality, coupled with an increasingly curious and informed consumer public, forces businesses to look further along their supply chain than ever before. The tragic Rana Plaza collapse in Bangladesh captured the concern of the public and major clothing companies, from H&M to Walmart. The multinational corporation response to these incidents has varied. While some maintain a “we didn’t know, this is our suppliers’ responsibility” stance, others have delved into navigating this ambiguity and complexity with responsible sourcing initiatives and reinforced transparency efforts. Continue reading

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Andy-cropRemarks by Faculty Director, Andy Hoffman at the 2015 Erb Institute Graduation dinner

Mark Twain once said, “the two most important days in your life are the day you are born and the day you find out why.”  Here at the Erb Institute, we know we had no involvement in that first day.  But we hope we had everything to do with the second.

Here in your years at Michigan, you took classes and learned about the issues we face and the models and tools for addressing them.  But the key to this second day is that it is not what you learn in class; it is developed in the “in-between” time.  It is not something you can intellectualize; it is something you have to feel in your heart.  It is not what you know; it comes down to what you believe. It is about learning the conviction of your beliefs.  Finding a purpose that goes beyond a job or a paycheck, beyond what you want for yourself, and leads you towards a devotion to something bigger.  And, I believe, this is what will make all the difference in your years ahead.

You develop this by first putting yourself in the company of others who think and feel deeply about the same things that you do, and second by taking the time in reflection to discern what you truly believe.  The opportunity to do that here is, I believe, something you cannot get elsewhere – this community and this culture to lay the foundation for your calling or your vocation. It is what will get you out of bed every morning and what will get you through the tough times.  And you will have tough times.

There are days when I get tired of this stuff and have to turn off the radio when I hear another news story about climate change.  And there are days when I get discouraged that change is just too hard…when a US Senator throws a snowball on the Senate floor to “prove” that climate change is not real, or the State of Florida can ban the use of the words “climate change.” But I keep trying.  Let me offer three of my own beliefs that keep me going. Continue reading

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acc8e9ca-ecb6-4afb-950d-7f0691ef96caRemarks by Managing Director, Terry Nelidov at the 2015 Erb Institute Graduation dinner

I would like to add two words to what Andy just said – “empathy” and “service”.

One of my learnings from the Institute’s alumni engagements around the country last summer is that business is hungry for leaders who not only know how to get things done, but who know how to work well with other people. The word “empathy” came up again and again in alumni conversations – especially from alumni who have been working for a while – as the most important attribute to be an impactful leader.

The word came up again in January when I met with the sustainability department of a partner auto company to brainstorm possible areas for collaboration. We started the conversation asking what they need from SNRE and Ross grads. Interestingly, the first word out of their mouths was “empathy”.

In essence they said that MBAs seem to have all the technical skills they need, but they also need managers who are able to reach deep down into other people’s hopes, fears, and dreams to understand what everyone at the table needs from a collaboration in order to get it done.

We already talk a lot about stakeholder engagement in business. For me the difference is that if stakeholder engagement is about what others are thinking, then empathy is about feeling what they’re feeling.

It was Bill Drayton, who coined the term “social entrepreneurship”, who said, “We have to teach empathy as we do literacy.”

But I wonder if empathy can really be taught. I prefer to think about how to create the opportunities to simply experience it. Fortunately, Erbers are exceptional at this, mainly because of who they are and the paths they’ve taken to get here. Continue reading

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By: Andi Waghelstein

My interest in becoming an Erb Institute student began, perhaps not unlike others, with a desire to make a positive impact on the world. Gaining work experience in emerging markets was not originally on my to-do list for graduate school, but after a MAP project in Zambia and a summer internship trip to China, I realized the benefit of expanding my pursuit of a global education to include developing economies. Impact can happen everywhere, and I recognized my interest in pursuing opportunities outside of the U.S. for impact oriented work in areas like healthcare, sustainability and the bottom of the pyramid (BoP).

My most recent opportunity was through the International Business Immersion class at Ross. The semester long class is run through the William Davidson Institute with the topic of Healthcare Delivery in Emerging Markets, and provides an immersive healthcare fieldwork trip over spring break. My team’s project was located in Trincomalee, Sri Lanka with the Grace Care Center, an orphanage and eldercare facility. My student team was tasked with looking at sustainable monitoring programs of non-communicable diseases such as hypertension and diabetes in the elderly community at Grace Care Center and in the surrounding city. Our class spent the first quarter discussing what healthcare in emerging markets looks like, including the challenges these countries face from populations with lower incomes and less infrastructure, as well as the opportunities that exist from decreased regulations and communal societies. Continue reading

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Remarks by Faculty Director Andy Hoffman at the 2014 Erb Institute Holiday Gathering

I’d like to start with a vignette. I play in a casual summer golf league that is as much about beer drinking banter as it is about hitting a golf ball. We don’t generally talk about work. But one day Greg, a fellow golfer, asked me, “Hey Andy, what do you do for a living anyway?” I told him that I was a professor and that I studied environmental issues. He asked, “Do you mean like climate change? That’s not real, is it?” I told him that the science was quite compelling and that the issue was real. His next question was, “are you a Democrat or Republican?” I told him that I was an independent. He replied, “So what do you think about Al Gore?” I told him that I thought Al Gore had called needed attention to the issue but that he unfortunately also helped to polarize it as a partisan issue.

I think about that conversation often. Greg was not challenging my ideas, he was questioning my motives. He was trying to find out if he could trust me enough to listen to what I had to say, to figure out if I was part of his cultural community, his tribe. And I can imagine the hesitation he may have had in broaching this topic. Might I get condescending and give him a science lecture, challenging his lack of deep knowledge on the issue while asserting my own? Or, would I begin to judge him and his lifestyle, critiquing his choice of car, house, vacation habits or any one of the multitude of “unsustainable” activities that we all undertake? Or, might I begin to pontificate on the politics of the issue, complaining of the partisan split on the issue and the corporate influence on our political system? These are all plausible and unpleasant scenarios that lead people to avoid this topic.

These conversations come up enough—you’ve probably had one—that it is worth asking: What are we trying to get out of these discussions? Are we trying to change “heart and minds” or are we trying to make a point? Do we want to allow them a face saving way to come to their own conclusions or do we want to win, forcing them into acquiesce? In short, what is your theory of change?

This is a question we all have to ask ourselves.  While you are learning about the work that needs to be done to bring about a sustainable world, you also have to learn about how to help people to change the way they think. Continue reading

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Remarks by Managing Director Terry Nelidov at the 2014 Erb Institute Holiday Gathering

We were bringing all our thinking together under the pillar of “Sustainability Change Agents” – with an emphasis on systems thinking, including both social and environmental sustainability, and global perspective.

It was October and November that proved transformational for us, starting with the Erb Town Hall meeting, where students first asked the question that resonated with us for weeks afterwards …

“Is this enough?”

Is a change-agent approach within the current rules of the game enough to move from merely reducing unsustainability to promoting true sustainability? Or do we need to also be thinking about how to change those rules of the game – indeed changing not just individual companies but entire industries, business models, and eventually markets and economies – in order to achieve the deep sustainability that we all feel so passionate about?

This same question, “Is this enough?”, was echoed in the student focus group we had two weeks ago, with the encouragement to think bigger and bolder, given all the human, knowledge, and financial resources that the Erb Institute brings to the discussion.

So, we decided to step up to the challenge! We are keeping our first pillar squarely focused on getting things done for sustainability here and now – with today’s alumni, with today’s jobs in today’s companies. And we’re adding a second, more aspirational and decidedly more transformational pillar, challenging us to be constantly asking ourselves, “What’s next?” How are industries, business models, and marketplaces fundamentally transforming – down to the core business, social, and consumer values that drive them – in pursuit of a sustainable world? In other words, how is the very role of business in society being redefined? Continue reading

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Andy Hoffman, University of Michigan and Jenna White, University of Michigan

This summer, Pope Francis plans to release an encyclical letter in which he will address environmental issues, and very likely climate change.

His statement will have a profound impact on the public debate. For one, it will elevate the spiritual, moral and religious dimensions of the issue. Calling on people to protect the global climate because it is sacred, both for its own God-given value and for the life and dignity of all humankind, not just the affluent few, will create far more personal commitment than a government call for action on economic grounds or an activist’s call on environmental grounds.

Making a case on theological grounds builds on long-standing arguments in the Catholic catechism that environmental degradation is a violation of the seventh commandment (Thou shalt not steal) as it involves theft from future generations and the poor. Against such a moral backdrop, the very call to “make the business case to protect the global climate” – a common tactic to argue for action on climate change – seems rather absurd. The pope’s statement will shift the tenor of the public and political conversation in needed ways. Continue reading

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Andy Hoffman, University of Michigan

Last week, California Governor Jerry Brown described Senator Ted Cruz as unfit to run for office because of his “direct falsification of the existing scientific data” on climate change. Cruz fired back that “global warming alarmists” like Brown “ridicule and insult anyone who actually looks at the real data.” Here we go again.

This is but the latest example of the toxicity of the public debate over climate change.

To detoxify the debate, we need to understand the social forces at work. On the one side, this is all a hoax, humans have no impact on the climate and nothing unusual is happening. On the other side, this is an imminent crisis, human activity explains all climate changes, and it will devastate life on Earth as we know it. Amidst this acrimonious din, scientists are trying to explain the complexity of the issue.

To reach some form of social consensus on this issue, we must recognize that the public debate over climate change in the United States today is not about carbon dioxide and greenhouse gas models; it is about opposing cultural values and worldviews through which that science is viewed.

The opposing sides in this rhetorical war have less to do with the scientific basis of the issue and more to do with the ways in which people receive, assess and act upon scientific information. To move forward, we have to disengage from fixed battle on one scientific front and seek approaches that engage people who are undecided about climate change on multiple social and cultural fronts.  Continue reading

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By Tamar Koosed

By DFID - UK Department for International Development (Flickr: Lighting the way home in Sindh, Pakistan) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

By DFID – UK Department for International Development, via Wikimedia Commons

It’s been a busy start to 2015, sorry for the long hiatus! If you have been following this BoP blog series, you’ve explored different BoP business models and factors that may impact market penetration and profits, along with the need to account for community needs when developing and implementing a BoP strategy.

This post goes back to the beginning and discusses the need for more early stage financing for innovative BoP models. Seed capital allows companies to test and prove business models so these become ready for scaling up efforts and for traditional investors. But the the lack of early funding for BoP models curtails business participation in economic development and translates into missed opportunities to better the lives of low-income populations. How can these BoP ventures move away from the concept phase and into the early stages of funding?

 

BoP ventures are often faced with many challenges during their early stages of growth. Finding early stage funding is not a simple task and seems more difficult for BoP businesses when compared to more traditional investments. Oftentimes BoP ideas are difficult to benchmark and there is no market equivalent to angel investors (affluent individuals willing to provide capital for a business start-up in exchange for equity or for debt that can be converted into company shares) for these strategies. This lack of seed capital shrinks the pipeline of BoP businesses and impacts the number of ventures that eventually qualify for traditional capital investments. As a result, the thin pipeline stifles social impact. To circumvent these challenges, businesses have accessed creative early financing strategies such as grants, impact investors with patient capital, and even crowdsourcing. These options are described below. Continue reading

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