[Book Review] Make Poverty Business: Increase Profits and Reduce Risks by Engaging with the Poor

from Social Funds

by Bill Baue

The co-authors provide a blueprint for on-the-ground managers of multinational corporations to create sustainable profits and reduce country risk by helping alleviate poverty.

SocialFunds.com -- Hiding in plain sight amidst a clear and convincing articulation of the business case for multinational corporations (MNCs) to advance poverty alleviation is, oddly enough, a diatribe against corporate social responsibility (CSR). Craig Wilson and Peter Wilson, the (unrelated) co-authors of Make Poverty Business (Greenleaf 2006), attack CSR from the right (the business of business is business) and from the left--kind of. In essence, they say if true poverty alleviation is the ultimate goal, then a business initiative integrated into core operations that generates sustainable profits is a better solution than a CSR add-on that may be more intended to enhance reputation or appease stakeholders.

Hard to argue against, but many in the CSR community would say that the former solution--the integration of social (and/or environmental) considerations into core business operations--is true CSR. Hollow public relations does sometimes masquerade as CSR and that sorely needs to be criticized. But the question arises, is the anti-CSR tirade necessary in a book on business's role in poverty alleviation?

The book probably could have advanced its primary objective without the rant, but it does raise fascinating questions about what CSR really is and how best to achieve social goals--such as poverty alleviation. Furthermore, it reveals the honest character of the co-authors, and so lends credibility to their main argument. Readers certainly cannot complain that the co-authors are hiding their true colors--they amusingly and effectively wear their irreverence on their sleeves.

Case in point: they skewer the guru of poverty alleviation through business, University of Michigan Professor CK Prahalad, author of the much-celebrated 2004 book The Fortune at the Bottom of the Pyramid.

"If we weren't so publicly committed to ethical business, we'd probably have him shot," say the Wilsons. "[W]e argue that to see the poor only as potential consumers misses half of the story."

The other half that Prof. Prahalad misses? The poor as employees and suppliers, as well as business mechanisms that benefit the poor. One example of such a mechanism is good governance that enables hefty corporate tax contributions to actually enhance the lives of the poor instead of being siphoned by corruption.

The Wilsons criticize Prof. Prahalad for over-reliance on case studies as if they are easily replicable, and promise not to rely on case studies. They generally keep their promise, but of course do cite specific instances to illustrate points. For example, they exemplify the value of partnerships by telling the story of GrameenPhone, a partnership between the Grameen Bank (of microfinance fame) and Telenor (ticker: TELN), the Norwegian telecommunications company.

Telenor wanted to reach the five percent of urban Bangladeshis (which represent more than the entire Norwegian population) who could afford cell phones. Grameen had local knowledge, as well as incentive to work with Telenor on the rich urban population in exchange for setting up Grameen Telecom, a separate nonprofit that provided cell phone coverage to the vast rural population. Grameen Telecom purchased cell phone services from Grameen Phone at half price, and used the existing network of Grameen Bank microfinance clients as "village phone ladies" who set up microenterprises by "renting" a single phone to multiple villagers.

A classic win-win-win: Telenor reaped huge profits, Grameen helped its microentrepreneur clients add another service to their menu, which in turn helped alleviate poverty by making communication technology accessible to the poor.

"In addition to direct benefits to the poor as customers, Grameen Phone also became the biggest foreign investor in Bangladesh, the second biggest taxpayer, and one of the country's largest employers . . . " the Wilsons write.

So the authors prove guilty of the same reliance on case studies as their target, Prof. Prahalad, suggesting that their targeting of him had more than a bit of grandstanding to it. Their stated intention is to instead advance a set of non-prescriptive recommendations that real-life managers in developing country markets can adopt, and they do achieve this.

Their main exhortation is for on-the-ground practitioners to take on a "poverty perspective." This perspective is not a philanthropic exercise but rather a means of creating sustainable profitability, reducing country risk, and securing solid connections with the local community. Many of the specific recommendations align with best practice on social responsibility. For example, the authors advocate for consultation with local people--beyond self-appointed "community leaders."

They do not extend this as far as promoting free, prior, and informed consent (FPIC), the preferred terminology of social responsibility advocates. Perhaps this is due to their aversion for the vernacular of social responsibility, and perhaps it is because their recommendation falls short of the "free, prior, and informed" part of the term--though they do support all of these notions individually elsewhere in the book.

Indeed, it appears that the authors' oppose the surface trappings of CSR more than the substance underpinning social responsibility. Many social advocates have begrudgingly admitted that business and the profit motive, when conscientiously practiced, can be effective mechanisms for achieving social justice--such as poverty alleviation.

The Wilsons seem to be sitting in the very same chair on the other side of the fence. They crow that business and the profit motive are the primary tools capable of achieving poverty alleviation (citing World Bank studies to prove their point), but seem somewhat begrudging to admit that this may also advance social justice.