A new IDS Practice Paper finds that existing frameworks used by donors and NGOs to analyse the impact of business on development are falling short.

By making assumptions about who benefits from business activity and only reporting select outcomes, frameworks such as those used by the UK’s Department for International Development (DFID) and Oxfam give an incomplete picture.

Across the international development sector, opinions are mixed as to whether businesses can contribute to development while also profiting (a concept termed ‘Inclusive Business’, sometimes referred to as Bottom of the Pyramid or Corporate Social Responsibility). While some see Inclusive Business as an opportunity to achieve development impacts at scale, others see the approach as ‘business as usual’ that exploits the ‘bottom of the pyramid’ (i.e. the largest, but poorest socio-economic populations).

In her new paper, Measuring the Inclusivity of Inclusive Business, IDS researcher Elise Wach argues that these debates need to be grounded in accurate and complete information about the impacts of businesses.

Launching the research, she says: ‘Existing frameworks give an incomplete picture of the actual impact of business activity. Without reliable information, there is the potential to promote practices that aren’t beneficial to development, and overlook practices that could make a real difference. More, better quality, and less partial evaluations are needed to ascertain the impact of business approaches on development.’

About the research

Wach analysed two impact evaluation frameworks: the INSEAD Economic Footprint, and the Oxfam Poverty Footprint. She also analysed monitoring and evaluation (M&E) frameworks used in initiatives from the Department for International Development (DFID), the United Nations Development Programme (UNDP) and the World Business Council for Sustainable Development (WBCSD).

The paper provides practical suggestions to enable practitioners to improve evaluations and M&E frameworks. Wach argues that while ‘inclusivity’ will always be subjective, practitioners need to make clear the linkages between outputs and outcomes and impacts, and, importantly, who decides them, and based on what assumptions.

The potential of Inclusive Business

With the scale and scope of inclusive business models, many see an enormous potential to contribute to development goals with minimal external support. M-PESA is often cited as a prime example: with start up support from DFID, Vodafone mobile transfer and banking services have now reached 18.5 million individuals.

Recognising this potential, donors such as UNDP, DFID, and USAID are increasingly supporting inclusive businesses. At the same time, the private sector is also recognising the benefits that ‘inclusive’ approaches can offer.

With this potential and enthusiasm, Wach argues, accurate information is all the more needed to enable donors, businesses, and policymakers to identify and respond to potential opportunities as well as problems.