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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