Combating Poverty: Innovative Business Approaches

July 2007 Volume V, Number 5

Net Contents

I. Network Presentation
Key Findings
Perspectives

II. What’s New

III. The Women’s Network for a Sustainable Future
The Concept of the Network
Contact Information
Sponsorship Opportunities

I. Network Presentation

A big thank you to those who took the time to attend WNSF’s luncheon panel on June 22, 2007 entitled ” Combating Poverty: Innovative Business Approaches” hosted by the New York Regional Association of Grant Makers (NYRAG). The session featured speakers from IBM and Deutsche Bank, as well as the co-authors of “Untapped: Creating Value in Underserved Markets,” who explored new business approaches to combating poverty in both developing and developed countries.

Key Findings

  • Success for both companies and society can come from creatively finding ways to use the company’s core technologies or businesses to further social ends.
  • Social programs can prove to be a positive way for companies to enter new markets.
  • When looking to combat poverty, it pays to keep an open mind about the poor, eschewing prejudices about the business acumen of the poor, such as whether they will repay loans.
  • One obstacle that holds companies back from programs on combating poverty is a general lack of urgency about the problem, but communities can encourage corporate accountability by raising the issue and communicating their expectations of business.
  • Alleviating poverty doesn’t mean just finding products to sell to the Bottom of the Pyramid, but also training, hiring and buying from them.
  • Getting accurate community information, adapting to local culture and changing internal business perspectives are key to corporate success in combating poverty.

Perspectives

Welcome:
– Ann Goodman, Executive Director, WNSF

Moderator:
– Michele Kahane, Director, Clinton Initiative; WNSF Board of Directors; Co-author “Untapped: Creating Value in Underserved Markets”

Speakers:

  • Gary Hattem, Deutsche Bank, Managing Director
  • Stan Litow, IBM, President of IBM Foundation, VP, Corporate Community Relations and Corporate Affairs
  • John Weiser, Principal, Brody, Weiser, Burns; Principal author: “Untapped: Creating Value in Underserved Markets”

Stanley Litow is the President of the IBM Foundation and IBM’s Vice President for Corporate Community Relations and Corporate Affairs. He heads global corporate citizenship efforts at IBM, which contributes nearly $150 million across 170 countries. Under his leadership, IBM has developed innovative technologies to: help non-literate children and adults learn to read; help people with disabilities access the Internet; create a humanitarian grid to power research on Cancer and AIDS; and develop technology to increase economic growth and small business development.
Litow discussed the topic of combating poverty in light of IBM’s nearly 100-year history. Starting as a technology company with a core business in electric typewriters, it became a global computer company.
Traditionally, the main way companies tried to combat poverty was to make contributions to causes. Now, companies are starting to recognize that building sustainable value inside the business helps build sustainable communities. But, while many companies are aware of this principle, not all recognize that employees are the core, that they are the ones involved in the community they live in and thus tie the company to the community. IBM has a past of aiding the economic development of communities within which it locates it facilities. For example, in the 1950s, the CEO of IBM was looking to see where to put a plant. The plant became a first desegregating its work force before the Civil Rights Act.
IBM’s CSR activities can be divided into two categories: microfinance and technological innovation. For a decade, IBM has invested in microfinance projects, providing its commercial investors with $80 million in return within the past two years. In addition, IBM builds upon its core value of creating innovation for customers and the world by developing technology that is tested and marketed in social settings. This technique allows for investors to recognize the innovative product, see it being utilized in the real world setting, and develop the technology to apply to other uses. IBM thus creates a brand value by being seen as an innovator. For example, . Litow has encouraged the company to find a way to use its voice recognition technology to teach reading. The project builds business value for IBM by putting its technology to a new use, testing and marketing it in social settings, and, as it is recognized by investors, developing the technology further to solve other problems—further building IBM’s brand value as an innovator.
Stanley identified three main challenges faced by IBM. One of the main challenges IBM faces as it works to be a corporate citizen is the ever-present need to justify the business value in investing in communities. While research in labs is valued by traditional businesses, working in communities is more innovative, yet not readily accepted. As explained above, IBM uses innovative technologies in social settings, allowing investors to see results before adopting it commercially. In addition, this technique is utilized as a way to enter markets.
Another major challenge is the need to recruit and retain talent. IBM currently engages employees in a virtual community called “On Demand.” Building on the process, the company now also engages employees virtually to set core values through a “Values Jam.”
Developing new markets is also challenging. IBM believes in investing in social innovation, and in the people in countries where it operates. Social programs can serve as a way to enter new markets. For instance, IBM’s first foray into India was via a corporate social responsibility program. Now the company employs 70,000 people there. IBM’s basic believe is that business value is created through: technology, people, and profits.

Gary Hattem is Managing Director of Deutsche Bank and heads its Foundation and Community Development Finance Group. He is responsible for the firm’s lending, investment and philanthropic activities targeted to disadvantaged communities and oversees the firm’s corporate citizenship activities for the Americas. Deutsche Bank is a European-based investment bank, with asset management activities primarily for the institutional market.
Gary began by explaining the increasing competition amongst banks for lending to low-income individuals. This was mainly due to their belief that their loans might not be paid back. However with the passage of the “Community Re-investment” law, banks are now required to re-invest in the communities in which they operate. And the portfolios have done very well: Deutsche Bank invested about $1 billion, writing off just $100,000 in bad loans. This kind of success now has banks competing for low-income customers. Gary identified major challenge for Deutsche Bank include: differentiating itself from its competitors, building its brand in places where the Bank is growing, and institutionalizing corporate social responsibility initiatives externally so that the community work continues even if the bank moves.
Mr. Hattem mentioned that there’s a general lack of urgency about the issue of poverty. One thing communities can do to support corporate social responsibility is to raise their own expectations of companies to encourage corporate accountability.
To overcome the challenges corporations face in implementing poverty-combating initiatives, they need to develop better metrics to measure the benefits to communities; expand dialogue across sectors, and scale partnerships. John Weiser is a founding partner of Brody, Weiser, Burns and co-author of “Untapped: Creating Value in Underserved Markets.” John initiated his remarks by alluding to the fact that companies that are visible to the public are well aware of the need to incorporate sustainability into their business strategy. However, businesses that cater to other businesses can be slower in adopting this concept. . In addition, he stressed that innovation in corporate responsibility comes not just from selling products to the consumers at the so-called Bottom of the Pyramid, but also from hiring, training and buying from them. There are already some business models illustrating the latter; for instance, the Corporate Voice for Families and fair trade programs, which aim to bring the concerns of those at the bottom of the pyramid to the fore, via proper compensation (fair trade) or lobbying forces (Corporate Voices). Of course, there are some well-known disaster stories of corporate involvement in combating poverty, such as New Century lending to sub-prime market and is now facing difficulty collecting. In another example, Andeo won contract to manage water in Puerto Rico, but walked away from multi-million dollar contract because it hadn’t accurately predicted the cost and was not able to sufficiently increase the price of water.
To avoid disasters, declared John, companies need to follow five steps:

  • Get accurate local information
  • Adapt to local culture
  • Change internal perceptions
  • Create partnerships
  • Improve local environment, e.g., education

II. What’s New

  • WNSF’s annual Businesswomen’s Sustainability Leadership Summit, this year dubbed “Sustainability and Innovation: Women’s Business Leadership,” will take place on October 2 in NYC. For registration visit http://www.wnsf.org or write to info@wnsf.org
  • WNSF will continue its China Dialogue series this fall–in Beijing. WNSF Executive Director Dr. Ann Goodman will speak on Women and Consumer Trends at the annual CSR conference, “Consumer Rights and CSR,” sponsored by the Center for International Business Ethics in Beijing. Dr. Goodman will be joined by Prof. Shi, Secretary General of the China Association of Women Entrepreneurs, featured at a WNSF luncheon panel last spring, and at whose 2006 Beijing conference on women and sustainability Dr. Goodman also spoke.
  • Stay tuned for announcements of WNSF’s next luncheon roundtable, to be scheduled this fall.

III. The Women’s Network for a Sustainable Future

The Concept of the Network

The Women’s Network for a Sustainable Future (WNSF) provides a forum for businesswomen to congregate, reflect, and act on the convergent issues of corporate social responsibility and sustainable development. Through meetings, training and simple electronic support tools, WNSF facilitates the exchange of experiences and best practices, building a community of businesswomen who can serve as powerful change agents for corporate responsibility sustainability in the US and internationally.

The Women’s Network for a Sustainable Future is a 501c3 organization. Gifts are tax deductible.

For more information, please contact:

Ann Goodman, Executive Director
Women’s Network for a Sustainable Future
Please direct inquiries to: info@wnsf.org

Board of Directors:
CHAIR: Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Marlys Appleton, Vice President, Investments, Sustainability, AIG; Dianne Dillon Ridgley, Director, Interface Inc. Board; Karen Flanders, Director of Sustainability, Coca-Cola Co.; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, Executive Director, WNSF; Sarah Howell, Director, Corporate Communications, BP; Michele Kahane, Special Projects Director, Center for Corporate Citizenship, Boston College; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Joyce La Valle, Senior Vice President, Interface Inc.; Anita Roper, Director of Sustainability, Alcoa Corp.; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation.

This issue of Net Notes was written by Monika Kumar. WNSF thanks founding sponsors AT&T and the Ford Foundation for their generous support.

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