5 ways businesses can help to alleviate poverty

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Sreevas Sahasranamam, Professor, Adam Smith Business School, University of Glasgow, Vivek Soundararajan, Professor, School of Management, University of Bath

• Businesses are sometimes accused of creating poverty, but they can also play a crucial role in helping to alleviate it.
• Our recent research shows there are five key drivers organizations can use to help tackle poverty around the world.
• Many of these concepts are already being deployed successfully in countries in Africa and Asia.

At least 1.1 billion people globally are currently experiencing poverty, many in low- and middle-income countries. Recent research suggests such deprivation is often caused by a significant lack of resources, opportunities and capabilities such as a lack of employment or property rights, few or no assets, social exclusion and inadequate skills for employment.

As such, for-profit businesses can – and should – play a central role in efforts to alleviate poverty. But it’s important to recognise that, even as these organizations are trying to alleviate poverty, they could also be aggravating it by preventing people from participating in markets – for example, when they pay unfair wages, hinder self-employment or perpetuate marginalization.

Our recent research delves into how organizations have been engaging with poverty over the last 40 years to determine how market-based economies can become fairer for all. There are five main drivers that for-profit organizations can use to help alleviate poverty.

1. Creating a digital identity

Under the Aadhaar scheme in India, people are given a unique 12-digit digital identity that is linked to their biometrics. They can use it to open bank accounts and receive digital payments, or to get access to government services, or even receive credit on more favorable terms. This is because the ID creates a digital audit trail, which can also help people who might be working in jobs in the informal economy.

By accepting and even supporting the development of this kind of proof of identity, organizations can help low- or no-income people to participate in markets such as financial services or to enter the labour force.

2. Preventing illegitimate work practices

While organizations can help to alleviate poverty, it is also sometimes important to shield impoverished populations from illegitimate or influential entities that might stop them from earning a living in certain industries.

For instance, a study of waste pickers in Colombia found that the power hegemony of elites such as private companies, local authorities and media negatively affected the waste pickers. They were barred from access to waste, offered empty promises by local authorities, and had their voices silenced by the media and private companies when they tried to speak out about this lack of market access.

In such instances, it’s important to provide less powerful people – whether they are workers or customers – with regulatory support using local or international frameworks or agreements. An example of this is the agreement between the global banana giant Chiquita and the Latin-American Coordination of Banana Workers Unions (COLSIBA), struck in 2001. This was a first-of-its-kind international framework agreement for the agriculture industry and it aims to ensure minimum labour standards, adherence to national laws and regulations, and continuous monitoring of the agreement’s terms.

Another example is the Dindigul agreement signed in 2022 in the southern state of Tamil Nadu, India. This saw worker-led unions, textile mills and multinational organizations agree to work to end gender-based harassment in factories. It focused on measures such as enabling collective action, adopting global standards and establishing protections against discrimination.

3. Providing collective safety nets

In sub-Saharan Africa, Ubuntu (sometimes translated as “humanity towards others”) is a cultural characteristic that promotes community, creates solidarity among different groups and models humane leadership qualities. Organizations can work with community leaders to draw on such indigenous cultural values to overcome issues of corruption, violence and tribalism. This is important because societal inequalities and inter-group differences rooted in race or gender, for example, can stymie organizational poverty alleviation efforts.

Successful examples of this can be seen within the microfinance industry of some developing economies, where loans have been offered to self-help groups with great success. These self-help groups typically comprise women with strong social bonds, which instills elements of both peer support and peer-led discipline when it comes to the use and the repayment of these loans.

4. Thinking local

Similarly, organizations can integrate efforts to alleviate poverty into the local cultural fabric, using indigenous knowledge systems to help them to succeed. This could foster trust and reciprocity, mitigate information gaps and create more certainty for people engaging with these efforts.

Even when the benefits of a poverty alleviation scheme or intervention might be obvious, some communities might be less likely to participate if it is not sufficiently embedded within their local culture and ecosystems. For instance, even though the benefits of clean, efficient cookstoves are obvious, adoption has been poor in Guatemala because the use of these stoves goes against local social and cultural customs.

On the other hand, the tribal entrepreneurship efforts of Indian sustainable development group Shivganga Jhabua are based on forest-based produce and wood crafts. Similarly, the Beggars Corporation in the Indian city of Varanasi trains people who would otherwise be begging on the streets to become entrepreneurs and also provides support for them to sell their products and services. These entrepreneurs produce bags made of discarded locally-produced Banarasi silk patches, for example, or offer religious services linked to a local Hindu temple.

5. Creating partnerships

Collaborating with a range of stakeholders is vital, particularly when organizations lack the necessary capabilities for poverty alleviation. Government and civil society organizations can extend the reach of these initiatives, for example by enhancing local services or tailoring products to local needs. They might also help reduce programme costs by engaging closely with impoverished communities.

For example, organizations that receive support from India’s Universal Service Obligation Fund – which provides affordable, quality mobile and digital services in remote areas – can access benefits such as cost recovery, subsidies and market exclusivity through government partnerships. Similarly, large multinationals like Danone, Essilor and Renault have partnered with governments, NGOs and social enterprises to form the Action Tank – a non-profit association that aims to tackle poverty in France.

By understanding these drivers, businesses can help to create more successful ways to alleviate poverty, as management and entrepreneurs refine how they approach this crucial issue. It is only by fully recognising the role businesses play in both alleviating – but also aggravating – poverty that we can spark the important policy discussions and changes that will encourage a shift in how companies and governments think and act when trying to alleviate poverty.