September 02, 2014

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The Business Solution to Poverty: Can Anyone Survive On Crumbs?

There is a huge gap between the day-to-day concerns of the Western world and people that live on $2 a day today.

Submitted by: Joe Sibilia

Posted: Sep 11, 2013 – 09:23 AM EST

Series: Book Reviews

Tags: poverty, social enterprise, impact investing, walmart, apple, coca-cola, iphone, economy, consumption, csr, composting, benefit corporation

 
Joe_sibilia_headshot

by Joe Sibilia

Editor's Note: Next week we begin an exclusive series with social entrepreneur, impact investor and author Mal Warwick based on his latest book The Business Solution to Poverty. He will explore the nuances of poverty, why conventional efforts to eradicate global poverty have failed, and why only business can actually end poverty. Stay tuned!

There are 2.7 billion people living on less than $2 a day. 

They love their kids. 

They want clean water.

They want shelter, food, and recreation. They’re just poor and have to concentrate instead on bare survival. 

How can we help them?

Paul Polak and Mal Warwick’s new book The Business Solution to Poverty gives us great advice on how to make some large-scale improvements that can impact millions. Before you think this is yet another parable on how to address poverty and social inequality in the world, just read Chapter 5. 

Along with an endorsement from former President Bill Clinton, Warwick’s indefatigable work ethic and Polak’s case studies and reputation combine to create an enriching and compelling read. 

Targeting Poverty: Doing Your Homework

Their moment du jour: the chapter that discusses what to do before you launch your business. Every single day, I get a call, email, letter, text, Facebook message, Linkedin request and/or a personal visit from someone wanting to start a social enterprise. Many have great ideas and are extremely the business plan to povertypassionate but mostly they’re the crumbs - a small effort compared to the scale of our problems.

Taking a closer look, I begrudgingly have to agree with Warwick that the impact social enterprises have had on poverty (an isolated metric) has been ‘minimal at best.’ But, the authors don’t stop at that dismal assessment. They compel us to think BIG. 

They want us to start businesses to serve the needs of people making less than $2 a day. They want us to concentrate on ‘building a business that will help transform the lives of 100 million poor customers over the course of a decade, earning annual revenues of $10 Billion and returning generous profits.’ 

Reading it almost makes addressing poverty sound doable and affordable.

Especially noteworthy is their emphasis on:

  • Ruthless affordability
  • Customer research
  • Having a product that must save or earn three times its costs
  • Insuring the product can be scaled to reach at least one billion people
  • Manufacturing that can be scaled to accommodate the need
  • Sell/deliver at least 100 million of them

The Fertilo: Simple Yet Scalable Solutions

For example, we have some buildings on Gasoline Alley - also the headquarters of CSRwire - in Springfield, Mass., that do not have water or toilet facilities. We’ve researched some composting options for human waste but have not had the courage to embrace any. A brief paragraph in the book outlines a project that led to the Fertilo, an affordable compost latrine for human waste that can create fertilizer. It’s designed to cost less than $100 and is refining its operations in Haiti.

It's a simple example of a product that can be scaled and used by millions.

When I reached the Chapter titled “The Corporation of the Future,” I thought I was going to get another lesson in Benefit Corporations. Instead, I got a wake up call with examples of what could happen to brands like Wal-Mart, Coca Cola and Apple if their competitors concentrated on “zero based iphonedesign and the bottom billions.”

An affordable iPhone for the masses and an inexpensive toilet could disrupt the business of these multinationals or add additional product lines with an ever extended supply chain that empowers many and solves a significant need.

Missing the Context

According to Warwick, however, there is also a huge gap between the day-to-day concerns of the Western world and people that live on $2 a day. Issues of sheer survival confront 2.7 billion people on a daily basis, and it’s helping these people through the conduct of business that continues to inspire him, he said over a phone call.

Warwick also felt strongly about why social enterprises are not scaling. He believes most impact investors are confused about taking more risk for a lesser return. The result: great impact deals are not getting funded. Social enterprises according to Warwick will provide great returns from a profitable enterprise that is actually solving a huge problem. There should be no confusion.

On the other hand, cause marketing has proved to be a value proposition to many multinational companies' employee engagement programs. But are these sufficiently scalable?

Before I talked to Warwick, I was skeptical about the authors' attitude toward social enterprise. But after talking to him and reading the book, the authors' practical advice and the examples, I began to realize that even though we support and applaud social enterprises, we still have a long way to go.

With this book as a guide, we might just get there.

Disclosure: Mal Warwick and Joe Sibilia served on the Board of the Social Venture Network for many years and remain good friends.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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