Modern markets, both export and domestic, can be powerful agents of economic development. Significantly, the businesses in these modern markets possess leverage to expand economic opportunity and create value for both business and society. One way this is achieved is through the inclusion of those positioned at the base of the economic pyramid – in business’ core value chains – as suppliers, service providers, or consumers.

Companies have long recognised that through ‘partnering in development’ they can secure supply, find new markets, and build their reputation with consumers, investors, and host governments. They are now realising that there are distinct financial advantages to investing in such relationships. Following flat-lining growth forecasts in developed economies, emerging economies are a critical area of future commercial growth and expansion for many firms, and this project aims to build a cache of piloted examples where development and profit are complementary outputs.

New business models seek to expand economic opportunity to include smallholders – who constitute the majority of the rural poor – contributing to poverty reduction and also serving core commercial interests at the same time. This offers the potential for significant multiplier effects for social and economic development.

The aim of new business models is to turn corporate social responsibility (CSR) into an active process, whereby businesses consciously make commercial choices that are innovative and bring about changes in the value chain that have wider benefits for development. By ‘mainstreaming’ CSR into core business, durable development impacts can be achieved with sufficient scale.

This realisation is not automatic. For instance, there remain several perception issues in the fresh produce industry. Despite the potential for expanded economic opportunity from sourcing from smallholders, many businesses perceive large-scale farms to be more able to minimise transaction costs, and to better meet quality and quantity demanded by modern markets. In situations where smallholders are still the mainstay of supply to modern markets, for example in cocoa, the inclusion is typically under terms that leave them highly exposed to fluctuations in demand, price, and costs of complying with standards.

For a more in-depth analysis of New Business Models for Sustainable Trading relationships read our report here.