Business and the mission to really make poverty history

There are still around 783 million people around the world living in extreme poverty. That's the level of poverty where families have to survive on less than $2 per day, where healthcare is an unaffordable luxury, and simply scratching together enough food to survive is a daily challenge. It's the level of poverty where, should environmental or civil disaster strike, you have little or no resources to fall back on. Without savings, adequate incomes or resources, the stark truth is that it is the world's poorest who are most at risk from death, disease, and violence, not to mention escalating climate threats.

The UN's first Sustainable Development Goal (SDG) wants to change this brutal reality - and fast. SDG1 aims to "end poverty in all its forms everywhere". The goal's sub-targets provide more detailed targets, pledging to eradicate "extreme poverty", defined as living on less than $1.25 per day, and halve the proportion of men, women, and children living in national poverty - that is to say poverty relative to their country's wealth - by 2030. The relative target means that while the primary focus for SDG 1 is on developing economies, it also has implications for the world's richest countries, many of which are characterised by deep and widening financial inequality.

It's an undoubtedly bold and ambitious target, and it comes first on the list of 17 SDGs for a reason, according to Lila Karbassi, chief of programmes at the UN Global Compact, a UN-backed agency that aims to help corporates engage with the SDGs.

She argues that almost every other SDG, from SDG7 (affordable and clean energy) to SDG2 (zero hunger) will feed into SDG1's target of eliminating poverty. "SDG1 is a slightly different than the other topics, in the sense that it would be the overall purpose of the SDGs," she tells BusinessGreen. "To achieve a world without poverty, to achieve development, to have some level of fairness, to reduce inequality - all of the other SDGs will have an impact on SDG1, even if the intent is not to target that particular topic."

But if the goals are indeed listed in order of importance, the huge ambition of SDG1 has not yet been matched by commensurate action. A global community still wrestling with the fallout of the 2008 financial crisis and a resurgent nationalism in many key economies has struggled to mobilise the kind of high profile co-ordinated anti-poverty campaigns - the governmental and corporate pledges to Make Poverty History - that characterised the Millennium Development Goals that were the forerunner for the SDGs. And there are worrying signs the new target could be getting ever more daunting. The most recent progress report on the SDGs from the UN, released in June, revealed that in 2016, for the first time in more than a decade, the number of hungry people in the world rose not fell. In fact, it climbed by 38 million to more than 815 million, driven by global conflict and increasingly frequent bouts of extreme weather - yet more proof that climate change will hit the poorest hardest.

It's therefore a viable argument to say green business are already inherently tackling SDG1 through efforts to mitigate carbon emissions and bolster climate resilience. Lower global greenhouse gas emissions reduces the risk of those extreme weather events that can devastate low- and middle-income countries. "Climate change, alongside conflict, is one of the big contributors to the growth in hunger for the first time last year," says Matthew Spencer, director of campaigns, policy and influencing at Oxfam. "And it's directly related to this question of 'how do we end poverty?'. So the efforts the best businesses are making to transform our energy and transport system are indirectly contributing to the reduction in the threat of climate change to the poorest people in the world. It's a long chain of causality, but it's a very real effect."

Globalisation is increasing power at the top of the supply chain - Matthew Spencer, Oxfam

But although companies may be indirectly helping the cause, many observers agree that too few are putting poverty eradication front and centre of their CSR strategies. A survey conducted earlier this year for the World Business Council for Sustainable Development (WBCSD) suggests SDG1 is one of the least prioritised goals by business, with just 18 per cent of companies ranking it as a top priority when they look at all 17 goals.

James Gomme, director of SDGs at WBCSD, believes this is because companies still see poverty reduction as a developmental challenge rather than a business imperative. "It's slightly removed from business compared to other SDGs in terms of its immediate recognition," he tells BusinessGreen. "So obviously you see something like SDG8 (decent work and economic growth), or SDG12 (responsible consumption or production), or SDG13 (climate action); that's all language that's very familiar with businesses which have engaged with sustainability over the past few years. Whereas [with] SDG1, the language is still very traditionally developmental, and is not necessarily [language] that business has been used to dealing with or interacting with in recent years."

But companies are mistaken if they think solving poverty is not a business issue. Mike Tuffrey, co-founder of sustainability consultancy Corporate Citizenship, argues businesses should see themselves as central to the poverty challenge. "What is business, if it isn't about wealth creation?" he tells BusinessGreen. "Business is an economic force, and for companies to have so low down their list of priorities the wealth creation force for business, there is a complete disconnect there."

He argues eradicating poverty relies on companies having an honest conversation about the slice of the pie workers deserve throughout the value chain, from executives and shareholders at the top of the pile to labourers and farmers at the very base of the supply chain. Public discourse over banker's bonuses is part of the same discussion as the need for Fairtrade supply chains, he believes. "How much should shareholders get? How much should senior executives get? How much should ordinary workers get? There are some pretty fundamental questions about who gets the money from business, which too many businesses are reluctant to answer," he says.

Oxfam's Spencer agrees. "What's happening is that globalisation is tending to increase power at the top of the supply chain, the retailers and the supermarkets, and they are getting an increasing proportion of the value of their supply chain, and small farmers who still make up the majority of agriculture in the world, are only getting a small proportion of that," he says.

Boys carry water in Jowhar, Somalia | Credit: United Nations / Tobin Jones

It is an extremely challenging discussion for businesses to engage with. For all the talk of wanting to invest in businesses with a purpose, most shareholders still want to see dividends moving in one direction. The war for talent coupled with the eroding of union power in many economies means senior executives can always make the case for a large chunk of the pie. And while many customers want to support businesses that take good care of their supply chain they also remain highly price sensitive.

However, a growing number of experts argue that redirecting more global capital towards helping the poorest citizens would not only put business behaviour more in step with the ambitions of the international governmental community, but would also offers clear business benefits.

For example, investing in educating farmers can not only boost incomes for some of the most vulnerable labourers, but help firms with agricultural supply chains deploy techniques to improve yields, preserve natural capital, and boost resilience in the face of changing climatic patterns and increasingly extreme weather.

Many corporate powerhouses now accept this argument. Food giant Mars recently provided one example with the launch of its Sustainable in a Generation plan earlier this year and a promise to fix the world's "broken" supply chains. Mars CEO Grant Reid declared a "monumental" effort is needed from business to meet the SDGs, setting out a $1bn programme to improve the environmental and social impact of the food giant's own supply chain. Targets include a goal to slash 67 per cent of greenhouse gas emissions from its value chain by 2050 and to "meaningfully improve" the working lives of one million people in its value chain.

Much of the work is also focused on alleviating poverty among smallholder farms that supply Mars. A €120m Livelihoods Fund for Family Funding, set up by Mars, Danone, and others, aims to improve incomes for farmers while also tackling food security issues and restoring ecosystems.

Female cocoa farmer inspecting cocoa trees | Credit: Mars

The Sustainable in a Generation plan only began last year, and research is now underway by Mars' newly established Farmer Income Lab to establish the most effective strategies for lifting smallholder farmers out of poverty. "It is early days but we have already got a huge amount of energy, interest, attention, and focus going on, both within Mars and across the stakeholder community that's interested in these issues," says Marika McCauley Sine, vice president for global human rights at the company. "One of key elements is long-term relationships with farmers, rather than short term transactions. It's thinking about the business relationship as long term and enduring… So it's less perhaps a traditional philanthropic approach, and it's more a business-oriented long-term approach to trying to do business with smallholders. And the theory of change there is that it could, we hope, drive greater benefits to them and benefits to the business as a whole."

Facing such issues head on is essential to Mars' future growth, McCauley Sine tells BusinessGreen. "Consumer goods companies that produce food, whether it's for people or pets, are fundamentally reliant on agriculture to succeed, to grow and to thrive," she says. "So unless smallholder farmers, and farmers of all types, across our extended supply chain are thriving we are not going to be able to thrive and grow as a business. So this is very key to the future of our business and the future of other businesses in our sector. We certainly see that whether it's through Healthy Planet interventions or groundwater land or greenhouse gas, or whether it's through our Thriving People work, these are all material ways that we need to engage in these supply chains if we want to have access to these resources in the future."

But if Mars is working to address environmental concerns and poverty in one fell swoop, companies should be aware that climate friendly actions do not always come hand in hand with poverty alleviation. Karbassi from the UN Global Compact warns that unless well managed environmental action and fighting poverty can end up "in contradiction".

"If you look at the issue of access to energy…coal may be the cheapest way but it is also most damaging way in terms of the environment to produce energy," she points out. "I think the two are at odds. There is the concept of leapfrogging, and having access to the new types of renewable technologies and not repeating the mistakes that we had in the industrial world in the past 30 or 40 years. But it's not an easy fix. There are other issues, for example with regards to land rights and deforestation, which may be at odds with the topic of poverty alleviation. In some communities the only ways to have an income and use resources is to cut forests and use the land for agriculture, but that also has a very damaging effect on climate change."

Others argue that advances in clean technology and climate policy are helping to make these trade-offs much easier to navigate. For example, there is a growing understanding of the conflict between food production and first generation biofuel production with investment flowing into the development of more sustainable feedstocks. Similarly, plummeting renewables and energy storages costs coupled with a wider acceptance of the damaging externalities associated with coal pollution means the circumstances where coal really if the cheapest source of energy are becoming rarer by the year. Consequently, the World Bank and many other development banks have felt comfortable tightening their coal investment policies to only back new projects in the most exceptional of circumstances. 

The secret to avoiding a clash of SDG priorities is to consider the goals holistically, rather than in isolation, argues Karbassi. She urges firms to apply the 10 UN principles of the Global Compact as a first step towards the SDGs, before zeroing in on any single goal. The principles set out a series of basic guidelines for businesses, requiring them to actively guard against corruption and human rights and labour abuses, while also applying the precautionary principle to environmental impacts and encouraging the adoption of green technologies.

"We consider that if all companies in the world were to adhere to the 10 principles of the Global Compact already there would be enormous progress towards the SDGs," says Karbassi. "And we also consider that the most impactful way for companies to contribute to the goals is to have an approach that integrates, at the very least respect and support for human rights, for labour rights, for the environment and for activities against corruption. So in other words, the 'do no harm' dimension for sustainability is the baseline for action on the SDGS."

Of course, tackling the most extreme poverty is no easy challenge. Many of the world's poorest communities reside in some of the most unstable regions of the world, such as the conflict zones of the DRC and Sudan.

Doing business in these regions, in any traditional sense, is difficult, admits Oxfam's Spencer. "Business has been a really big part of the success of lifting half of the world's extremely poor out of that category," he says, "but the remaining one billion is a very different shape of problem. Because it's got that fragile state conflict element very strongly to it, it's harder to see where international business can make an impact - because frankly governments and NGOs are struggling to make an impact in those countries which are falling apart."

A Tanzanian woman cooks on a clean cookstove, which improves air quality and curbs deforestation | Credit: Russell WatkinsDepartment for International Development

Biotechnology giant Novozymes has first-hand experience of how difficult it can be to establish humanitarian projects in countries where governments are marred by underfunding or corruption, and basic infrastructure is sorely lacking. Adam Monroe, president of the Novozymes Americas region, tells BusinessGreen how five years ago the firm was working on developing a distribution system for clean biofuel for cookstoves, in a bid to curb local deforestation and air pollution in Africa. It wasn't the technology that prevented the project from scaling, he explains, but the difficulties Novozymes encountered operating in a developing nation. "If you want to think of it from a pure technology solution perspective, they work out really well," he says. "From a roadblock perspective there are other angles involved, like who gets to share in the income of small scale production… [the problems are] developing economy governance issues." While Novozymes is still a committed participant in UN programmes to support the SDGs, Monroe says the firm would be keen to collaborate with partners on any similar projects in the future rather than attempt another such scheme alone.

If businesses often have to work with governments and NGOs to help some of the poorest people in the world, they can also have a crucial role to play in tackling wider poverty and inequality. Spencer is keen to point out that while extreme poverty may the most pressing challenge there are other parts of SDG1 that urgently need addressing. "There are many more people who have escaped extreme poverty but are still living in poverty," he says. "They might be living in slums, unable to get basic healthcare, have poor working conditions or very commonly wages that don't allow them to feed themselves or their families at all times.

"This is the next level up from being on $1.25 dollars per day - this might be $5 or $6 a day, where there are still some really serious challenges to their wellbeing. And that's where I think business will continue to play a really important role, either in transforming the prospects of many of those people, or if we are not careful they could exacerbate some of the inequalities that could keep people in poverty."

Viable sustainable development also, of course, depends on sufficient capital. Financing is a major issue for the SDGs, with the goals requiring $3.9tr a year to be being invested in developing countries by 2030, according to World Bank estimates. With current investment levels standing at $1.4tr a year, that leaves an annual investment gap of $2.5tr to fill - which sounds like an enormous sum, but in reality will only require the redirection of 1.5 per cent of global assets under management into sustainable development.

To spark this redirection of global capital, UN Global Compact's Karbassi says two bottlenecks must be addressed in the current funding system. "One is the availability of financial instruments and products, as part of the pipeline of projects that investors can push for," she says. "So it is [green] bonds, but it's also simply investment products that can be credibly positioned as having an impact on the SDGs."

Just 17 per cent of firms report on poverty in the context of business development

The second, she says, is the need for some standardisation over measuring the impact of investments. Blackrock, and other asset management companies, are putting an "enormous amount of resources" into developing frameworks for assessing societal impact of finance products, but such efforts are not harmonised to ensure comparability and consistency. "The quality of the data is not that good," Karbassi warns. "It's very hard even for a company developing a particular project or activity to come up with an assessment of the exact impact their project is having on society. So if you bring that up to scale and you aggregate it at a financial product level, it's very hard to have meaningful data. The availability of data in itself is difficult, and there's a lot of competition in terms of who gets access to that data, and then once you get access to that data how do you make sense of it?"

A study released earlier this year by the Global Reporting Initiative suggests that as a first step on this journey, it is crucial companies start to report on their commitment and work to eradicate poverty as part of their sustainability reporting framework. While many firms do already report on their poverty fighting activities, most do so through a philanthropic lens with little focus on the business impact of their decisions, according to the study of 107 corporate sustainability reports. Just 17 per cent of firms reported on poverty in the context of business development, the paper found. "The findings of this study suggest the need to move forward from a strong base of investment in philanthropy and community engagement, toward strategies that can reach scale," the GRI concluded. "These could include more proactive deployment of direct economic value distribution strategies in the poverty context of the country or community they are operating in, or unlocking the potential of including and serving the poor as a part of the company's core business."

Not only will this help society develop a more granular understanding of the private sector's role in poverty alleviation, but it will also help individual businesses understand the specific risks and opportunities presented by tackling SDG1, the paper notes.

For the generation of business leaders raised on a diet of hard-hitting television appeals for humanitarian aid, ending poverty might seem like a challenge for governments and charities, not the business community. But once the very real financial, environmental, and ethical ramifications of ignoring SDG1 are teased out - as well as the business opportunities for those that get it right - it quickly becomes clear that ending poverty is a challenge that businesses should seize with both hands.