Business and Poverty Reduction

Business enterprises are assuming a more active role in poverty reduction programmes and projects that aim to improve the well-being of low-income groups and the socially excluded. This has occurred in a context where poverty reduction has moved up the ladder of international development priorities, state capacity and responsibility for social protection in developing countries has been constrained, and the principle of co-responsibility for social development is being promoted as a core aspect of 'good governance'. Many large corporations and business organizations have responded through pro-poor philanthropy, “anti-sweatshop” initiatives, corporate social welfare, corporate social investment in local community development, and participation in global, national and local public-private partnerships associated with poverty reduction.

Parallel to these developments, there has been an expansion of so-called social or solidarity economy involving small producers and enterprises engaged in forms of production and trade that potentially combine mainstream economic objectives with social protection, redistribution and empowerment. This expansion is particularly evident in relation to fair trade schemes that pay small agricultural producers above-market prices for raw materials. Some countries have also witnessed a revival of cooperatives. More recently, the attention of scholars and donor agencies has focused on ways in which companies can contribute to poverty alleviation by stimulating entrepreneurship, consumer markets and supply chain networks at the so-called 'bottom of the pyramid', that is, amongst low income groups and poor communities that account for the majority of the world’s population (Prahalad 2005).

Various United Nations commissions, conferences and institutions have promoted these approaches. They include the World Summit on Sustainable Development, the World Commission on the Social Dimension of Globalization, the UNDP Commission on the Private Sector and Development, the UN Millennium Project and the UN Global Compact, as well as public-private partnerships such as various global health programmes and numerous projects in developing countries. IFIs, bilateral agencies, business associations and NGOs are also supporting such approaches.

There is considerable debate surrounding the effectiveness of these initiatives for alleviating poverty. Some see increasing corporate engagement in poverty reduction efforts as a necessary and innovative way of mobilizing much needed resources, pooling state-business-NGO capacities and competencies, and engaging dynamic private sector individuals and organizations that can complement the efforts of governments and NGOs. There are however concerns that the engagement of large corporations in poverty reduction efforts may amount to tokenism, are not congruent with national development priorities and needs. Some fear they are a smokescreen for increasing corporate competitive advantage, market share and institutional capture or are an approach that focuses too narrowly on social protection, as opposed to other crucial aspects of poverty reduction related to rights, empowerment and redistribution.

This project will examine the effectiveness of the contemporary business-poverty reduction agenda both in relation to specific initiatives and, more generally, as a strategic approach to reduce poverty and enhance the contribution of business to social, sustainable and economic development.

Research findings are being published in the forthcoming UNRISD flagship report (2010):
Utting,P. and Buchholz, R. “Business, Power, and Poverty Reduction” in Combating Poverty and Inequality, UNRISD 2010: Geneva.