Economic growth in emerging markets has outpaced the growth of the supporting institutions that make up the broader context in these markets. There are many ‘contextual gaps’, which can give rise to political, social and environmental challenges. For businesses, both multinational and local, these markets offer some of the most promising growth opportunities.
These businesses cannot afford to wait for governments, grassroots enterprises or civil society to close the contextual gaps; nor can they rely on prevailing business-as-usual practices to automatically overcome or resolve the gaps. Businesses must actively find ways to reinforce the contexts that support the very markets they need for sustaining their growth aspirations.
In the face of these challenges, leading businesses are investing in initiatives to close the gaps through a variety of sustainable and inclusive business activities (SIBA) that address the contextual gaps and create social, environmental and economic value.
Our investigation of SIBA, involving primary research of over 40 companies, is novel in its focus on corporate incentives. One of our key findings is that the motivation to pursue such practices ranged from “maintaining competitive position” as the leading motivator, followed by “avoiding reputational damage”, “avoiding future supply disruptions”, and “capturing revenues and building loyalty.” “Avoiding regulatory disruption”, “responding to internal demand from employees or shareholders”, and “differentiating products” were the least motivating. These findings have implications for how much priority investments in SIBA can garner within a typical corporate decision making structure.
In our study of situations where companies have been the most active in promoting SIBA, there are five key elements that characterize successful SIBA: cost recovery; alignment with core businesses; ability to leverage partnerships; positive outcomes for society and the local environment; and scalability. Our research has several practical implications. The research identified the key barriers and potential remedies that companies should implement to overcome these barriers.