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SATO Kan Hiroshi, Institute of Developing Economies GDN 14th Annual Global Development Conference 19-21June 2013 Manila, Philippines
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Ethical Trade as a tool for Inclusive Development
GDN 14th Annual Global Development Conference 20 June 2013 Asian Development Bank ,Manila
SATO Kan HiroshiInstitute of Developing Economies
Photo by F.IkegayaPhoto by Sumitomo Chemical Col
Development and Business
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• ①People wants more efficiency for Development / Aid industry need more Fund for Achieving MDGs
• ②Consumer demand more social responsibility for Business
Development(Aid)
AltruisticEthical
Business(Trade)EgoisticEfficient
①Needs Efficiency ②Needs
Social Responsi
bility①Needs More Fund
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Development sector’s approach to Businiss
• UNDP: Business call to action,
GSB ( Global Sustainable Business) • UN: Global Compact• IFC: Inclusive Business Leaders Forum• USAID:GDA ( Global Development Alliance )• DFID: Challenge Fund• JICA :BOP Business support grant
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Why private business should be social/ethical ?
• For the sake of avoiding boycott risk
• For the sake of profit (BOP Business)
• For the sake of sustainable supply chain.
• ・・ But, the meanings of ethical varies: environmentally friendly, workplace condition, living wage, no discrimination, philanthropic investment etc.
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Avoiding Risks
• Information of discriminated, oppressed, suffered and poor people in a value chain will spread quickly through advanced ITC and NGO networks.
• Ethical Consumer “I don’t want to buy Sweat shop products”
• High risk of Boycotting
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と Manufacturing
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ProductionConsumers
Procurement
Distribution
Developingcountries
Industrialized countries
Value Chain and Risks
environment
Child labor
Global Value Chain
safety
price
Manufacturing
Living wage
safety
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BOP Business
• Business targeting at the lower income strata less than US$3,000 ( PPP ) .
• Making goods and services affordable and available for BOP.
• BOP are expected to be not only consumers but also producers and distributers (BOP 2.0).
• BOP people are now included into Business landscape. =Inclusive Business.
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Concept of BOP Penalty• BOP are considered as out of the market
and distribution network (exclusion) therefore ・・・・・・
• They should buy with few choices
• Lower quality (overdue, fake, inferior) goods, in exchange for higher money
• Overcoming a lot of difficulties to access
• Poor people are obliged to pay higher cost than rich people ( BOP Penalty )
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Poverty Reduction through Consumption
• If a good become available more easier and cheaper, life will be more stable
• If a good become more durable and better quality ( even if the price remain same ) , standard of life will be uplifted.
• Private investment for producing better quality goods with cheaper price benefits for economic growth and poverty alleviation.
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Concept of BOP Business
• BOP people are Sleeping consumers• Low benefit but mass amount• Future Volume Zone • Poverty reduction through consumption
Base of the Pyramid
less than $3000
Poverty Reduction through
Consumption
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BOP Business Examples
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Health :Privent Malaria
Electricity: Education and health
Transportation: Income
Communication: Opportunity
Nutrition: Enjoy Eating
Communication :Security
Cause Related Marketing = CRM
• Ethical as a tool for marketing
• Poverty and development are very good topic for CRM
• Fair trade tells consumer that some part of the payment will contribute the betterment of producers life (not only living wage but also education, health and sanitation, infrastructure building and human rights)
• Environmental certification are also popular.
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Goodwill competition?
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Cadbury declared all Dairy milk will be 100% Fair Trade cacao. Nestle followed to make 100% Fair Trade KitKat
Social Business
• Variety of social business models are innovated
• Fee for Service/Cross Subsidy Pricing
• Social marketing
• Development oriented Social enterprise
・ Grameen model of Social Business = no dividend for shareholder
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Marriage of Development and Business
• Business with Ethic and Development with Efficiency will Overlap
• Widening overlapping area may lead to more inclusive development
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Efficient Development
Ethical Business
Social Business
SocialEntrepreneur
Private companies
BOP Business
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