The relationship between business and development initiatives and systemic change is the core focus of this paper. The key question is to explore whether and how pro-poor business approaches can go beyond individual company value chains, to drive shifts in broader market systems.
The study relies on analysis of a series of case studies to draw conclusions regarding the degree to which pro-poor business initiatives go beyond delivering benefits for individual companies and value chains, and address wider systemic change.
Key findings:
- Initiatives based around existing company value chains, including initiatives that were company-led and those undertaken as a partnership between a company and a development agent, lacked a systemic approach. This finding does not suggest that these initiatives fail to tackle poverty, but that direct impacts are limited to actors within company value chains. On the other hand, initiatives where new companies were created or where platforms of actors came together in response to challenges were more likely to be systemic in approach.
- Amongst the existing company initiatives, there may be many reasons why they are ill-suited to deliver systemic change. These companies may be too much part of the existing system and therefore while they may seek more pro-poor impacts, they have little or no incentive to drive substantial change. Niche innovations that may lead to systemic change are generally pioneered by entrepreneurs or relative outsiders to the system. In addition, even where systemic change may be in the interest of an existing company, they may be unlikely to capture sufficient gains compared to the costs to that company, with significant benefits accruing to others.
- However, while initiatives led by existing companies are not, generally, designed for systemic change, it does not mean that they never address systemic challenges. In most of the initiatives some issues arose that were systemic in nature – affecting not only the company and its value chain, but many others too.
- Amongst initiatives that do target systemic change, there are a wide range of approaches that companies and their partners can adopt to strengthen and stabilise innovations, meaning they are increasingly ready to break through more widely. These include developing mutual understanding, creating new organisations, raising awareness and capacity amongst those involved in or targeted by the innovation, creating and making available new information about the innovation, public policy engagement and influence, developing a wide community of supporters, addressing missing public goods and addressing power relations.
- Strikingly, however, two of these approaches that are particularly relevant for initiatives targeting poverty and development were weakly present and implemented: building mutual understanding of the system and addressing power relations. A critical part of what defines a system is how its power relations and structures operate, and this in turn has a direct impact on poverty and inequality. The failure to be inclusive of diverse perspectives and to deal with issues of power are at the heart of many of the key criticisms of pro-poor business approaches.
Implications for development agents working with companies:
- Based on the evidence reviewed, there are a number of implications for development agents who work with business and are interested in fostering wider systemic change.
- Working with a new company or a platform involving a network of existing organisations provides a more likely starting point for systemic change than working with a single, existing company, especially one that is heavily embedded or dominant in the current system. However, working with new companies or platforms does not guarantee a systemic approach. Radical innovations, rather than incremental improvements, are also needed.
- A partnership with an existing company on pro-poor business generally means concentrating on impacts within a company’s value chain, and generating win-win results that deliver both public and commercial benefits. However, development agents can play a crucial role in influencing aspects of these initiatives to be more systemic in approach.
- Development agents should seek to avoid circumstances where benefits created through company initiatives are contingent on factors that can undermine positive systemic change. Crowding in around a new innovation that has poverty reduction potential is often desirable from a power perspective and can also signal that an innovation is becoming the dominant design.
- There needs to be more investment by development agents in ensuring that mutual understanding of the boundaries of the system, its characteristics and challenges are defined through engagement with diverse stakeholders.
- Development agents should invest in efforts to evaluate systemic outcomes and impacts of initiatives, looking for indicators that innovations are stabilising, such as the appearance of powerful actors in the support network or the stabilisation of learning processes in a dominant design.
- More effort needs to go into identifying and prioritising systemic challenges and potential interventions. For example, some efforts to identify ‘binding constraints’ that act as barriers to systemic change, as well as to explore the political economy of removing those constraints, should be part of the process.