Alleviating Global Poverty Through
Profitable Partnerships:
Markets, Economic Well-Being
and Moral Vision
Laura P. Hartman
Associate Vice President & Professor,
DePaul University, Chicago, USA
Acknowledgment to Co-Authors:
 Scott
Kelley, DePaul University
 Patricia Werhane, DePaul University
 Dennis Moberg, Santa Clara University
The Simple
Underlying Principle
“If we can find approaches that
meet the needs of the poor in ways that
generate profits for business and votes for
politicians, we will have found a sustainable way to
reduce inequity in the world.”
- Bill Gates, address to Harvard University graduates, 2007
The Thesis
Poverty can be alleviated, if not eradicated,
both locally and globally, but only if we
change our narratives
about global free enterprise, and only if we
rethink our mindsets
regarding how poverty issues
are most effectively addressed.
So, let us review our
current narratives. . .
NARRATIVES
Moving from CSR as Responsibility or
Obligation to Moral Vision with Guile
Defining the CSR as Responsibility narrative:
“Companies are unlikely to engage in CSR under certain
competitive conditions or unless the institutional
environment is favorable” (Campbell, 2007) =

Preferring self-interest with guile, whenever possible

Firms are only going to engage in CSR when the
favorable environment already exists.
NARRATIVES
Moving . . . to Moral Vision with Guile
Defining the Moral vision with guile narrative
(alternative):

It is those firms with moral vision, moral imagination,
that will be vigilant for opportunities to act in ways
that are both socially responsible and will enhance
their long-term financial performance. (Moberg,
Werhane, Hartman 2008)

If a firm is strategic in its vision, it will identify those
self-interests in more opportunities.
A sustainable outcome orientation
The outcomes of a self-interested approach ≠
those of moral vision with guile.


In a growing global economy, with consumer saturation
among the rich countries, companies aiming for long-term
value creation must look to new markets, even to
potential customers who are very poor, and understand
these new stakeholders.
Otherwise, companies will simply function as extractors
from those communities, a strategy that cannot
contribute to new market development and thus will not
be viable in the long run.
Should big business have the responsibility to
save the world? –
The R of CSR can evolve to Strategy




“Corporations are not responsible for all the world’s
problems, nor do they have the resources to solve them
all.
Each company can identify the particular set of societal
problems that it is best equipped to help resolve and
from which it can gain the best competitive benefit.
Addressing social issues by creating shared value will
lead to self-sustaining solutions that do not depend on
private or government subsidies.”
Continued . . .
Source: Porter, M.E. and M.R. Kramer, “Strategy and Society: the link between
competitive advantage and corporate social responsibility”
Porter & Kramer: Bottom Line
“When a well-run business applies its vast
resources, expertise, and management
talent to problems that it understands and
in which it has a stake, it can have a
greater impact on social good than any
other institution or philanthropic
organization.”
Poverty alleviation is just one such
particular societal challenge



If in the realm of their core competence, firms addressing
this social issue can gain competitive benefit.
Their creation of shared value will lead to selfsustaining solutions that do not depend on private or
government subsidies.
If these firms will apply their vast resources, expertise,
and talent to poverty alleviation – a challenge in which
they now have a stake – they can have a greater impact
on social good than any other institution or philanthropic
organization
The Scope of the Issue Today

For purposes of this audience and presentation, I will not
cover other elements of poverty in any depth here.
 We are merely suggesting the issue of poverty alleviation as
one opportunity where multinationals can use strategy to
have a positive impact on multiple stakeholders, including
themselves.
 In this discussion, however, I would like to focus on the
possibility that, by turning a responsibility into a strategy
– in any arena – we are changing the mindsets sufficiently
to create successes where they could not before exist.
As an example,

Cemex distributed cement products - 2.5 million poor
in Guadalajara
 Typical construction time:
–
–

Over a year to construct a single room
Over 13 years to finish a modest, four-room dwelling.
Cemex offered financing to low-income families to
build or expand their homes.
One would assume . . .

Since Cemex was appealing to the BoP Mexican
market, they had virtually no competition!
 Without competition, traditional theory (self-interest
with guile) would predict market exploitation since
there would be no institutional forces supporting CSR.
 Yet, it was apparently moral vision with guile that
drove Cemex leaders to its proactive CSR - they were
willing to forego competing on price where they had a
clear advantage and instead invest in building an
institutional infrastructure among their customers.



Required: Customers participated in
savings groups
In return: Participants were offered
technical assistance, educational
programs, guaranteed quality
materials and delivery, guaranteed
prices, and free storage of materials.
To Cemex: profits of $1.5 million
(2005), anticipated expansion into
Colombia, Venezuela, Egypt and the
Philippines
Insights for Poverty Alleviation:
Changing the mindsets

The poor do not lack resources.
 Poverty alleviation is an evolving, dynamic
process.
 Poverty is often the result of patterns of
exclusion.
 Feasible approaches to poverty reduction have
been and can be created through commerce.
Evidence of:
Entrepreneurial Cunning

Moral imagination drives moral vision but, in many
circumstances, it is incomplete without guile, that
exercise of cunning that accounts for sustainable
responses to institutional opportunities.
 The following are a series of corporate actions that
demonstrate the entrepreneurial cunning component
that comprises moral vision with guile.
 We offer these not as an exhaustive list but rather as a
useful starting point.
1. Rudimentary Institution Building

As we saw in the Cemex case, firms appealing to BoP
markets find it valuable to use rudimentary institution
building as a form of entrepreneurial cunning.

By encouraging and facilitating the formation of
buyers’ cooperatives, political action networks, or
community self-help associations, firms essentially
create new stakeholders through which to negotiate
and conduct commercial activities.
2. System Engagement and Systems
Thinking

Focuses on the nature of the relationships a firm builds with
its stakeholder institutions.
 Ongoing cooperative relationships with local stakeholders
in place of far less sustainable one-shot market
transactions.
 Involves the firm not just in a one-to-one relationship but in
a system of interactions with customers and local
communities. This, in turn, requires “systems thinking.”
Example - Finance Partnerships:
SELCO of India

SELCO brought reliable, affordable and
environmentally sustainable electricity to 45,000 small
businesses through a small, solar home electrical
system
 It linked customers with microfinance partners,
financing systems based on a share of future earnings.
SELCO of India
It was SELCO’s readiness to escape the traditional
mental model and to conceive of rural Indian
customers as participants in a vast cultural and social
system that marked their moral vision.
 SELCO realized that trust and confidence could only
develop if the company benefited others in the
customer’s local area through partnerships.

3. Stakeholder Solidarity

Stems from an attitude of identification and alliance
that only comes from prolonged contact with local
stakeholders (e.g., potential employees and customers).

As a result, company strategies are chosen that are not
just respectful of stakeholder customs, but also that
represent wishes, habits, and practices that this group
has but may not express.
Example: ONIL Stove
Donald O’Neal noticed that poor women cook over
dangerous three-rock, open fires inside their homes,
causing respiratory illness and severe burns, and
contributing significantly to air pollution.
 He decided to design a better method of cooking.
 He lived among them and studied the cultural as well
technological issues associated with cooking in
Guatemala.
 Two years later, he had designed a solution made
principally of cement and called the ONIL stove.

But where are the big guns?

So far, our examples have focused on entrepreneurial
ventures, often locally operated, in countries known for
corruption, non-enforcement of a rule of law, and many
other institutional barriers to market entry.
 The costs seem too large, the margins too low, and the
opportunity for loss of shareholder value and reputation
seem too great.
 But, taking a systems approach combined with moral
imagination, moral cunning, and a concern for poverty
alleviation, we find increasing global involvement in
BoP markets.
Systems Engagement:
BHP Billiton




BHP Billiton is the largest diversified resources company in
the world
In 2001, BHP Billiton expanded an enterprise loan program it
had established in Mozambique, where it runs an aluminum
smelter.
During its original project (“Mozal”), its use of contractors
from the local community on the project was not successful.
However, as with Cemex, BHP found that the most effective
way to increase local participation in the later project was
through building local institutions to support an infrastructure
which would then support BHP’s business objectives.
Systems:
BHP Billiton

BHP participated in the development of the Small and
Medium Enterprise Empowerment and Linkages Program
(SMEELP) which helped to provide contractors with the
skills necessary to compete for BHP contracts, ultimately
benefiting themselves, their communities and BHP.

This systems thinking will guarantee its sustainability
–
Once the project is over, the Mozambique government will
assume management of the program in order to assure local
control of the activities and its foreseeable future, including
partnerships with other organizations who will utilize the
contractors.
Institution Building and Solidarity

In India, there are an estimated 660,000 diarrhea-related
deaths per year, a problem with known preventative
measures as simple as hygienic education and access to
anti-bacterial soap.
 BUT: While Hindustan Lever, Ltd. (HLL) had an advanced
distribution system in urban areas, it could not replicate
them in rural areas.
 The sheer vastness of the task had discouraged many other
MNCs from entering these areas, a challenge facing NGOs,
developments, and government as well.
Unilever’s Lifebuoy Soap Campaign


But, “the company does not coat it in the ‘do-goody mantra’ of
corporate social responsibility. It states openly that it wants to
make washing hands with soap a habit – especially after going to
the toilet and before eating – in order to sell more bars of its
Lifebuoy soap.”
“Profitability will guarantee what all development projects need:
consistent support. ‘It’s the fact that we hope to make money
which makes our involvement sustainable,’ she says. ‘This can’t
be a fashion if we are a soap company. When we say ‘we’re in
this for the money’ it helps, because people know we’re not
going to leave next year when the chairman’s wife finds a new
charity.’”
Jopson, B. “Unilever looks to clean up,” Financial Times (November 14, 2007)
Show me the Money!!
“We’ll be smiling all the way to the bank.”



Unilever Uganda soap sales per annum: €1m ($1.5m,
£700,000)
But “only 14 per cent of Ugandan adults used soap to
wash their hands after going to the toilet.”
“Imagine if we change behaviour, if every household
starts to wash hands with soap,” says George Inholo,
Unilever’s head in Uganda. “We’ll be smiling all the
way to the bank.”
Jopson, B. “Unilever looks to clean up,” Financial Times (November 14, 2007)
These shifting mindsets have produced:

Appropriate and effective incentives,
 Stakeholder interest maximization,
 Economic growth, and
 The potential for the reduction of both poverty
and the unfulfilled needs of the abject poor.
Embracing the concept of
“profitable partnerships”
means an effort towards new mindsets:
From maximizing profits
To simply making more
profits
From short-term
shareholder gain
to medium/long term
perspectives.
From working for people
to working with people.
From charity &
philanthropy
to profitable partnering!
What have we learned?

Institutional structures in developing economies should
not be assumed to be insurmountable barriers to
market entry in global settings.

Rather, such structures can facilitate entry without
compromise if one couples moral vision with cunning
and guile.

Indeed, if any progress is to be made in alleviating
global poverty, such forms of guile and cunning are
imperative.
Much to be learned:
tentative conclusions

MNCs need to develop and to encourage and nurture
moral imagination.

Proactive CSR at the BoP requires mental models that
both individualize stakeholders and break through
those mental models that condemn millions to the
vicious cycle of poverty.
Much to be learned:
tentative conclusions

Leaders must be systems thinkers. In addition to
considering stakeholders (institutional or individual)
one at a time, they must consider existing and potential
interactions and interrelationships.

There is no substitute for immersing oneself in the
experience of those stakeholders with which one
intends to partner. Engagement requires an intimate
knowledge of a partner’s experience. (á la Paul Polak,
Out of Poverty)
Whether there is a “fortune” at the base of
the pyramid or only sustainable profits is
inconsequential.
That there are profits in markets
previously overlooked and ignored is of great
consequence to both poverty alleviation
efforts and to the sustainable development of
global companies in the new flat world of the
Twenty First Century.
Ability need not begat responsibility.
Ability need only inspire us to care more
effectively and as much for
others as we do for ourselves
and our stakeholders.