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green@work : Magazine : Back Issues : Sept/Oct 2002 : Headlines

Headlines

Emerging Markets
Why sustainability is not just for rich companies in developed nations.

The role of business in sustainable development was a key element in the recent World Summit on Sustainable Development in Johannesburg. A new report released just a few weeks before the summit overturns conventional wisdom by showing that it does pay for businesses in emerging markets to pursue a wider role on environmental and social issues.

Developing Value: The Business Case for Sustainability in Emerging Markets challenges the myth that sustainability is only for rich companies in developed nations, and does not apply to the private sector in the emerging markets. Based on more than 240 real-life examples in over 60 countries, the study analyzes the “business case” for sustainability in emerging markets—the opportunity for businesses to achieve benefits such as higher sales, reduced costs, lower risks and enhanced reputation from better corporate governance, improved environmental practices, and investments in social and economic development. It is the result of a unique collaboration between the International Finance Corp. (IFC), the private sector arm of the World Bank Group; the strategy consultancy SustainAbility; and the Ethos Institute in Brazil.

Highlighting examples from businesses in Africa, Asia, Central and Eastern Europe, the Middle East and Latin America, the report refutes the argument that the business case holds only in developed markets and pinpoints many opportunities available to diverse businesses. Examining six business success factors and seven sustainability factors, the report finds the greatest evidence for business benefits in emerging markets in the areas of cost reductions, productivity, revenue growth and market access. On the sustainability side, environmental process improvements and human resource management represent some of the most significant opportunities for creating value.

“The report makes clear that sustainability is not an all-or-nothing, one-size-fits-all proposition,” says Peter Woicke, executive vice president of IFC, adding that Developing Value shows that sustainability is a pragmatic pursuit, not just an ideological exercise.

Developing Value aims to help business people in emerging markets identify opportunities to increase profits by making progress on sustainability, particularly owners and managers who are relatively new to sustainability. The report finds that every kind of company can find benefits, but the best opportunities depend on the particular drivers, circumstances and priorities of a business. It also calls on other stakeholders like government, NGOs, business customers and investors to strengthen the business case by putting pressure on companies with poor performance and rewarding those which make improvements in their sustainability activities.

A searchable database of case studies and further information can be accessed at www.sustainability.com/developing-value. Copies are available for sale at www.sustainability.com or at www.worldbank. org/publications.

SERVING THE WORLD'S POOR
In an article that appeared in the September issue of the Harvard Business Review, noted business scholar Dr. C.K. Prahalad and Dr. Allen Hammond, the World Resources Institute’s (WRI) vice president for innovation, argue that poor communities in developing countries represent fundamental new sources of growth for multinational corporations. They said that improving the lives of billions of the world’s people could also bring about a more
stable, less dangerous world.


The article, “Serving the World’s Poor, Profitably,” outlines the opportunity of reaching the four billion-person market at the bottom of the world’s economic pyramid. The authors said that companies can turn a fair profit while improving the quality—and often, lowering the costs— of goods and services that poor communities receive.

Poor communities today pay high prices for food, clean water, credit and other services—often far higher than middle class consumers in the same country—as a result of inefficient supply chains. “The collateral social benefits of providing poor consumers with real market choices can be enormous,” says Prahalad, the Harvey C. Fruehauf Professor of Corporate Strategy at the University of Michigan Business School. “The current downturn of the world’s markets and increasing globalization makes this approach very timely.”

The authors document strategies and business models already being applied in these new markets by a number of multinational companies and entrepreneurial start-ups, and show that these can lead to top-line growth, cost-saving economies and access to innovation. Moreover, they show how digital networks are providing low-cost distribution channels for these markets.

“It’s already clear that wireless networks are going to be the killer app for rural communities—creating a very low cost infrastructure that links them to markets and provides access to information,” says Hammond.

The authors cited numerous examples to support their arguments, case studies taken from the WRI’s Digital Dividend Clearinghouse, an interactive on-line knowledgebase tracking nearly 700 such projects in developing countries around the world.

 


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