Chapter 14 Investing in sustainable business models at the base of the pyramid

Abstract

Using entrepreneurship and market forces is seen as one of the key ways to achieve poverty eradication, the first Sustainable Development Goal (SDG). Pursuing SDG1, many companies have applied traditional, narrowly focussed business models, often pursuing short-term profit maximisation. Such a narrow approach tends to create no or negative impacts on poverty and result in negative environmental impacts. If poverty is alleviated in ways that reinforce unsustainable consumption patterns, any positive effects on poverty are likely to be erased by the advancing effects of climate change that are foreseen to affect poor countries the most. It is therefore necessary to promote and support the development of business models that alleviate poverty effectively in sustainable ways. Responding to this need, this chapter provides guidance for investors on how to assess BoP business models and choose those that are likely to alleviate poverty sustainably. It uses recent analysis of three types of sustainable BoP business models to provide insights into aspects such as poverty alleviation mechanisms, growth mechanisms and potential sustainability risks. Drawing on these insights this chapter establishes investment requirements and provides a framework for matching the different types of capital with the right BoP initiatives and business models.

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