Inclusive business: the next challenge

Investing in oil, gas and mining (OGM) projects in developing countries over the next 20 years is likely to be much greater than the total invested in international aid. If this investment is designed and managed to maximize sustainable economic opportunities for local communities, it can represent a major contribution to the achievement of the Millennium Development Goals in many countries. Involving local businesses and especially small and medium enterprises (SMEs) in the project supply chain is a crucial part of this opportunity because of the vital role these businesses play in promoting job creation and distributing the benefits of economic development more widely.

In light of this, Engineers Against Poverty (EAP) has produced an eight-page briefing note to guide OGM companies on how they can maximize the contribution of local enterprises to the supply chain of their projects in low-income countries. The briefing note provides a practical guide to OGM supply chain managers and technical end users on maximizing the involvement of local enterprises in the project supply chain. The first part of the guide addresses four key questions: first, why engage local enterprises in the project supply chain? second, how do you define local enterprises and what can they supply? third, what are the key challenges for supply chain managers and technical end users? and finally, how can these challenges be overcome?

The World Business Council for Sustainable Development (WBCSD), in collaboration with SNV Netherlands Development Organization, published an issue entitled Promoting Small and Medium Enterprises for Sustainable Development. It explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains. It describes some of the comparative advantages of SMEs and the challenges they face in developing countries.

In the mining industry, Anglo American offers an example of inclusive business in South Africa. In 1989 the company launched the Anglo Zimele initiative. The initiative’s aims are to provide historically disadvantaged South Africans with access to mainstream business opportunities; create sustainable, commercially viable enterprises driven by people from marginalized sectors of society; and contribute to the sustainable development of mining communities. Anglo Zimele’s activities have focused on three primary areas: providing business development services aimed at strengthening the capacity of local businesses, creating procurement opportunities to facilitate the inclusion of these firms in Anglo American’s value chain and, finally, supporting local participation in South Africa’s mining industry through start-up funding. Anglo American also supports additional community development programs that generate livelihoods and provide micro-financing at the local level.

Another interesting case is the mining company Rio Tinto in Canada’s Northwest Territories, which illustrates best practice in creating economic opportunity for targeted segments of the population. There were two significant drivers behind Rio Tinto’s efforts to expand economic opportunities in Northwest Territories. First, the company was driven by its corporate commitment to sustainable development, and, second, a significant development in the regulatory regime provided for meaningful participation of the indigenous communities in the regulatory bodies and processes governing resource development in Northwest Territories.

In collaboration with a host of local partners, including government authorities and representatives of indigenous groups, Rio Tinto made a commitment to the sustainable development of Northwest Territories by providing significant training, employment and business opportunities to benefit local residents. Such partnerships need to integrate the various ways through which extractive industries can contribute to the national economy – in addition to their contributions to national budgets. These include the procurement of goods and services, product distribution and sales, employment, and strategic social and community investment. It is hard work, but this is the next great challenge in creating fair conditions for everybody.