hahn-inclusive business, human rights and the dignity of the poor

Inclusive business, humanrights and the dignity of thepoor: a glance beyondeconomic impacts of adaptedbusiness modelsRüdiger HahnHeinrich-Heine-Universität Düsseldorf, Düsseldorf, Germany

In recent years, a considerable amount of research on adapted business for developing countries focused on theimpact such endeavours have on the respective companies as well as on the affected people. However, the mainemphasis within management sciences was on the economic outcomes or (even more distinct and often) on thequestion of how to integrate the poor into business models and value chains. Until now, further aspects of adignified human existence were merely covered as a side note. The article focuses on the influence of inclusivebusiness approaches on various aspects of human dignity and provides explorative insights as a basis for futuretheory building. The aim is to uncover how human dignity is affected by different business approaches for thepoor including and beyond economic outcomes. After giving an insight into the essence and meaning of humandignity in connection to various human rights, the articles refers to a number of illustrative cases of inclusivebusiness. The analysis culminates in the insight that dignity can be (and sometimes already is) assured andpromoted by deliberately including the poor into relevant value-added business processes. If this is the case,an enhanced dignity is not merely the result of increased incomes but stems from a variety of effects. However,such positive effects are not an inevitable outcome of any inclusive business initiative.

Introduction

‘Dignity’ is an important concept in ethical consid-erations of various sciences, for example geneticengineering (Balzer et al. 2000), philosophy of law(Ladeur & Augsberg 2008) or bioethics (Birnbacher1996). ‘Human dignity’ is frequently discussed espe-cially in those disciplines where the dignity of weakor dependent people is subject to decisions of morepowerful actors (such as in medical science; Norden-feldt 2004). Such dependencies can also be found invarious relationships within business and economics.

Therefore, looking at the broad range of literatureon ‘corporate responsibility’ or ‘business ethics’, itseems astonishing that – apart from a few notableexamples (e.g. Agassi 1986, Ulrich 2008, Wood &Karau 2009, Melé 2009) – there is no further discus-sion of the very basic category of ‘dignity’. Thesedeficits are striking especially in traditions ofWestern philosophy that are predominantly charac-terised by a distinctive and varied set of positionsregarding the very essence of human dignity (for theGerman stream of business ethics, see e.g. Bloch1985) but nevertheless do not cover this ground in

Business Ethics: A European ReviewVolume 21 Number 1 January 2012

© 2011 The AuthorBusiness Ethics: A European Review © 2011 Blackwell Publishing Ltd, 9600 Garsington Road,Oxford OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA

doi: 10.1111/j.1467-8608.2011.01640.x

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particular. However, several seminal ethical worksprovide an ethical reasoning for such an inclusion ofdignity (also in management sciences) as will be high-lighted in this paper with a special focus on inclusivebusiness for the world’s poor. By focusing on thisspecific segment of the world’s population, the papercontributes to the growing literature on businesswith and for the poor.

In recent years, concepts such as the ‘Base of the(Economic) Pyramid’ or ‘Social Business’ havereceived growing attention among business scholars(for timely literature reviews, see Nghia 2010 andMunir et al. 2010). Within this realm, the main ques-tion of the present paper is: how do business modelsdesigned to integrate the world’s poor affect thedignity and basic human rights of these people? Withthis emphasis, the paper introduces a so far largelyunconsidered facet in this specific stream of literatureand even in managerial sciences in general. Thefollowing analysis as well as the conceptual insightswill then be based on the reflection of a setof case examples from different extensive collections(http://www.nextbillion.net/research, http://cases.growinginclusivemarkets.org and http://www.wbcsd.org). In addition, the assessment is based onrelevant literature and project reports as well as onintensive field observations by the author in India,Indonesia, South Africa and several Southern Ameri-can countries. To allow for such an analysis in thefirst place, the general relevance of human dignitywithin business thinking needs to be reasoned.

Therefore, the paper is structured as follows: thefollowing section introduces the notion of humandignity and its relevance within a business contextby building on several philosophical roots, namelythe work of Birnbacher, Margalit, Sen and Spae-mann. For analytical purposes and for the sake ofclarity, human dignity will be related to severalaspects of human rights. The next section then out-lines various forms of inclusive business to highlightthe specific research focus. Afterwards, a set ofillustrative business cases, divided into the ‘sales’approach, the ‘microfinance’ approach and the‘grassroots integration’ approach, is used to high-light and discuss potential impacts of inclusive busi-ness approaches on human dignity and humanrights. A brief conclusion will pick up the notion ofdignity via inclusion.

Relating human dignity andhuman rights

When studying the notion of human dignity, it soonbecomes clear that, despite various definitionalefforts, there is still a high level of ambiguity prevail-ing. Spaemann (2010: 64), for example, declares a‘fundamentally moral character of human dignity’,while Balzer et al. (2000: 12) term human dignity as‘moral right not to be degraded’. In fact, as Johnson(1998: 339–340) explains, ‘dignity per se has no over-arching descriptive meaning, and cannot be usedalone as a capable tool for prescriptive uses’. Simi-larly Spaemann (2010: 52) notes that the meaning ofdignity ‘is difficult to grasp conceptually because itdenotes an indefinable, simple quality’. Conse-quently, numerous authors refer to certain ‘humanrights’ as well as to further derivative terms such asthe rights to freedom, shelter, provision and self-esteem to better frame ‘dignity’ (similar to Birn-bacher 1996, Nordenfeldt 2004). However, humandignity can be regarded as ‘something more funda-mental than what is expressed in “human rights” ’.(Spaemann 2010: 51). And indeed, within the Uni-versal Declaration of Human Rights (UN 1948), forexample, there is a distinct and direct connection andat the same time differentiation between the catego-ries ‘human rights’ and ‘human dignity’ (see articles1, 22 and 23 as well as the preamble in UN 1948), andalso the Charter of Fundamental Rights of the Euro-pean Union (European Convention 2000) indeed ite-mises human dignity by way of specifying varioushuman rights that may also justify the use of themore elaborate term ‘rights’ instead of the funda-mental but often undetermined ‘dignity’.

To start elaborating on this thought, let me againrefer to Robert Spaemann’s religious/metaphysicalconcept of dignity in which he describes humandignity as being ‘about mastering one’s existence andthen displaying that mastery’ (Spaemann 2010: 55).With this notion in mind, the specific content ofhuman dignity and deduced human rights seem to beespecially relevant when looking at the world’s poor.Extreme poverty, for example, is described as a situ-ation in which people cannot even meet basic needsfor survival (Sachs 2005). They are chronicallyhungry, unable to access already basic health care orsafe drinking water and sanitation, cannot afford


© 2011 The AuthorBusiness Ethics: A European Review © 2011 Blackwell Publishing Ltd48

education for their children, often lack even rudi-mentary shelter and basic articles of clothing or oth-erwise. Moderate poverty offers only slightly betterliving conditions. Basic needs are usually met but justbarely. Beyond that, people do not have any furthersecurities (in terms of money or commodities). Theseforms of poverty thus characterise positions in whichdisplaying a dignified living might be limited byunfulfilled basic needs. Here, a first direct connectionof human rights and human dignity comes to the forein practical terms: for people living in poverty, anenhanced financial freedom arising from a regularincome or the allocation of competitively pricedstaple foods, water, sanitation, electricity or the likecan support a dignified living by reducing the need tobeg, to collect trash and leftovers or because it simplyhelps to overcome a life in the most desperate statesof poverty (of course beggars, trash collectors, etc.might also display their own dignity; however, theyseldom choose to live their life in such extremepoverty and are often frowned upon by others).

However, Spaemann also notes that humandignity can only be violated by human beingsbecause they are the only ones who can truly discernit. In a consequent interpretation, for example,so-called ‘inhumane’ working condition imposed bycollateral organisational management decisions (e.g.excessive working hours in insecure working condi-tions with minimum payment below the minimumlivelihood threshold) would thus not be regarded asviolating human dignity. In such a minimalist viewof human dignity, one could still display dignity bydeliberately rejecting such employment even if thiswould lead to starving. This, however, would onlysecure a person’s dignity by ultimately leading to his(dignified) death at the cost of losing the hope to livea dignified life in future. And indeed, beyond thisextreme, Spaemann’s metaphysical appreciation ofdignity also opens opportunities for non-humanactors to promote human dignity via the vehicle ofhuman rights. Respecting human dignity in thiscontext then stands for granting each individual acertain minimum of these rights (Birnbacher 1996)that need to be promoted irrespective of other con-ditions, since otherwise the opportunity for dignifiedself-presentation in life would be at jeopardy or inother words: the loss of such rights harms a human’sdignity as it strikes the person affected in fundamen-

tal aspects of his or her individual self-fulfilment.Thus, losing such rights hampers personal develop-ment while the advancement of these rights strength-ens the requirements for a dignified existence andreduces the danger of being degraded on groundsof insufficient livelihood or social and personalfreedom.

In joining this perspective, and for the course ofthis paper, human dignity is perceived as accumula-tion of human rights and further enabling subfactorsas illustrated in Figure 1. From top to bottom, eachrow adds detail on which area of living is affected byvarious aspects and subcategories of human dignity.Following, for example, Avishai Margalit (1996),‘human dignity’ can be framed as an overridingaspect of condign human existence. In a further step,we can break this down into the right to freedom, theright to shelter, the right to provision and the right toself-esteem as fundamental basic rights that mightcater to a dignified human existence. Yet, there arepossibly also other rights that directly or indirectlycater to a dignified living. However, within the limitof this paper, I refer to the four basic rights men-tioned because they encompass especially thoseaspects that might be impeded by poverty as centralto the following discussion.

These rights are usually not to be viewed indepen-dently. Unemployment or poverty, for example, isnot merely a deficiency of income, but also a directimpediment to dignity because it prevents furtherformation of skills, self-fulfilment and individualfreedom (Sen 1999). Thus, permanent and well-paidemployment can enhance a person’s dignity bydirectly improving his or her right to self-esteem aswell as by providing financial freedom that indirectlypromotes his or her right to freedom. Financialfreedom then again helps to improve other rightssuch as the right to shelter or the right to provision iffinancial means are used to acquire health care,housing, educational services and so on. Therefore,an improved right serves as an end within humandignity as well as a means to further improve otherdeduced rights.

Yet, Amartya Sen also provides a reasoning whydignity itself is a worthwhile object of studies. In linewith the finding of limited dignity because ofpoverty, he frames the ‘freedom to survive’ (Sen1999: 15) as a superior end of development.


© 2011 The AuthorBusiness Ethics: A European Review © 2011 Blackwell Publishing Ltd 49

Although he does not explicitly refer to human dig-nity, he nevertheless calls for exactly such povertycharacteristics as mentioned above to be overcome.Development as freedom to live a dignified life notleast includes the freedom to participate in the labourmarket and the freedom to enter markets. Both areimportant means contributing to development ofother aspects of freedom (which have been charac-terised as subcategories of dignity). Thus, the failureto provide these freedoms also denies related humanrights and thus ultimately represses the advancementof dignity. Moreover, extreme poverty cannot merelybe seen as a dramatic deficit of income but rather asa deprivation of capabilities that can be reflected ‘inpremature mortality, significant undernourishment. . . , persistent morbidity, widespread illiteracy andother failures’ (Sen 1999: 20), which precisely coversthe ground of human dignity as depicted in thebeginning.

These facts therefore illustrate various aspects ofvulnerability and again justify an inclusion of humandignity into business ethics thinking. Nevertheless,the breaking down of human dignity into less elusiveaspects of certain human rights enables a better (yetperhaps still not absolutely adequate) measurability,which is an important facet of any managementprocess. Therefore, this thinking allows us to assessdifferent business initiatives in their general impact

on these various aspects of human dignity, and con-sequently I will frequently refer to these subcatego-ries in the subsequent analysis.

Inclusive business for the poor

This paper concentrates on the actual role that busi-nesses are taking to secure or advance the mentionedrights. The following considerations continue alongthe above-stated notion of ‘vulnerability’. In particu-lar, possible roles of business actors as ‘trustees’and/or promoters of minimum rights of the world’spoor will be elaborated. For some years, this segmentof the world’s population has increasingly gainedattention in business and academia. Concepts suchas the ‘Base (or Bottom) of the Pyramid’ (BoP) (e.g.Prahalad & Hart 2002, Prahalad & Hammond 2002,Simanis et al. 2008, London 2009, and many others)or social business (e.g. Seelos & Mair 2005, Yunus2007, and others) pursue the idea of pro-poor busi-ness that includes them into value chains and even-tually benefits low-income communities. The maindifference between both ideas lies in the incentivesand aims of the underlying businesses with a sharperfocus on possible profits in the case of BoP businessesand a distinct focus on the social aims of social busi-nesses. However, proponents of the BoP approach

Figure 1: Human rights as subcategories of human dignity



also frequently refer to the benefits the poor popula-tion might gain from adapted business models.Consequently, both approaches can be summarisedunder the notion of ‘inclusive business’ (e.g.Mendoza & Thelen 2008, Márquez et al. 2010, SNV& WBCSD 2008) and are discussed for their possiblewelfare-enhancing effects (e.g. Brugmann & Pra-halad 2007, Seelos & Mair 2005, London 2009). Thisfundamental idea is mainly derived from the obser-vation that business activities can contribute to thelong-term goal of poverty alleviation by embeddingthe neglected poor parts of the world population intoefficient value chains and market structures, both asconsumers and as producers or distributors. Themain emphasis of respective research within manage-ment sciences so far has been purely on the economicoutcomes as facilitator of human well-being or (evenmore distinct and often) on the question of how tointegrate the poor into business models and valuechains (see Nghia 2010, Munir et al. 2010, for anoverview of studies). Further aspects of a dignifiedhuman existence were merely covered as side notesregarding, for example, empowerment and skillbuilding (e.g. Kirchgeorg & Winn 2006, London &Hart 2004, Simanis et al. 2008), basic human rights(e.g. Hahn 2009), perpetuated social wrongs and ste-reotypes (e.g. Karnani 2007b), social value creation(e.g. Peredo & McLean 2006, Mair & Martí 2006,Yunus 2007) or self-esteem and respect (e.g. London2009). Within the mentioned works, however, theseissues are not discussed in depth. The present paperbegins to fill this gap.

Moving people out of the most desperate states ofpoverty by including them into global value chains tostrengthen their economic position could already helpto strengthen different subaspects of human dignity.Against this background, poverty alleviation througheconomic development and active (often innovative)inclusion of the poor is evolving into an instrumentthat promotes precisely the right to provision (e.g. offood, water, education or health care) as well as othersubcategories and enablers of human dignity (i.e.especially the rights to freedom, shelter and self-esteem). Within this paper, a specific focus on suchinclusive business with the poor is taken for tworeasons. First, as has been assessed above, peopleliving in poverty are especially vulnerable to externalinfluences (including the influence of business actors).

Therefore, preserving or facilitating human dignitybecomes especially relevant in this area. Second,inclusive business as an action-guiding model pro-motes possible courses of action for profit and non-profit companies to position themselves in relation tothe world’s poor and points out opportunities forenduring poverty alleviation by leveraging privatebusiness know-how and resources. Within thiscontext, the main focus of this paper is to analysepossible enabling roles of business actors and to paintthe picture of their actual influence on various aspectsof human dignity within their sphere of business. Theaim is to provide ground for further theory building asit seems that reality is at least partly ahead of theoryon business impacts on human dignity. The analysis isbased on the evaluation of a set of case examples fromdifferent extensive collections to shed light on thequestion how the framework of inclusive businesspositively or negatively influences human dignity.Thus, the goal of the present exploratory study is touncover how human dignity is affected by businessaction with the poor. To achieve this, a wide range ofempirical cases will be highlighted, and the relevanceof some of the most important examples for thevarious subcategories of dignity as depicted inFigure 1 will be outlined. For the purpose of trace-ability and reliability of data, the paper refers to anumber of well-documented and widely disseminatedempirical examples that will be used mainly for illus-trative purposes to conduct this analysis.

The impacts of inclusive business onhuman rights and human dignity

Referring again to Sen, it is ‘both the processes thatallow freedom of action and decision, and the actualopportunities that people have’ (Sen 1999: 17) thatfinally constitute freedom as an enabling factor ofhuman dignity. Thus, the idea of inclusive businessseems to be especially well suited to improve variousforms of opportunities: (a) to participate in thelabour market as result of an improved productionsystem and (b) to enter (consumer) markets as resultof an improved access to products as depicted inFigure 2.

The following case illustrations will help in review-ing whether and how far certain initiatives, which are



currently carried out in different parts of the devel-oping world, can meet such expectations. First,aspects of selling to the poor will be highlighted.Afterwards, microfinancing initiatives will be dis-cussed as mediators between production and saleschannels in developing countries. And finally, anapproach, which may best be termed as ‘grassrootsintegration’ and which concentrates on a productiveintegration of the poor, will be introduced. All threecategories offer a diversity of projects potentiallycontributing to different aspects of human dignity.Furthermore, the relevant measures and businessesare mostly well established and thus provide a solidempirical foundation for the following analysis.

The ‘sales’ approach

When specific approaches of business for the poorwere first discussed, they mainly covered aspects ofselling adapted products to a potentially abundantnew consumer group (e.g. Prahalad 2009). One of thecore aspects that relates to human dignity and rightsis that the poor were (and still are) often discrimi-nated against by a phenomenon called ‘povertypremium (or penalty)’ (Prahalad & Hammond2002), characterised by the almost paradoxical situ-ation that the poor regularly have to pay a multipleof the usual price (compared, for example, with an

affluent neighbouring district) even for everydaygoods such as staple foods, drinking water or basictelecommunication services (i.e. no luxury goods).This leads to a de facto exclusion from access to(physically available) goods for those parts of thepopulation that are already disadvantaged. Suchpoverty penalties can be observed as (sometimesstaggering) price differences for basic goods, staplefoods, pharmaceuticals or interest rates on credit(such premiums have also been reported for devel-oped markets such as the USA; see Fellowes 2006).

The phenomenon that large parts of the world’spoor cannot participate in many economic activitiesis due to such striking economic disadvantages. Ifsuch premiums result, for example, from higher risks(and cost) involved in selling to the poor, such differ-ences have to be regarded as direct (negative) sideeffects of the respective market systems. However,price driving forces are not only, for example, ineffi-cient distribution channels and ‘regular’ middlemenbut predominantly a prosperous and price-inflatinginformal economy (Schneider & Buehn 2009) as wellas local monopolies (Prahalad 2011). They resultfrom the fact that the poor are largely ignored bygovernments (which can be regarded as main address-ees, for example, for improving infrastructure orfighting the shadow economy and local monopolies)and businesses (which could possibly step into the gap

Figure 2: Modes of impact in inclusive business approaches



and help to establish efficient markets). As a conse-quence, they can be regarded as a particular form ofdiscrimination in terms of article 7 of the UnitedNations Universal Declaration of Human Rights,which claims that ‘all are entitled to equal protectionagainst any discrimination’ (UN 1948). Of course,such a form of discrimination cannot be directlyattributed to specific entities because, for example,missing infrastructures for transport, information,and energy in rural areas in developing countriesindeed do collectively hamper the capacity to act forany kind of business. Nevertheless, since poverty pen-alties and also the unequal availability of everydaygoods are well known and widely visible in manydeveloping countries, such disparities (and discrimi-nations) inhibit human dignity via an unfulfilled rightto provision, self-esteem and maybe even freedom(of choice). Against this background, successful andinclusive sales initiatives (i.e. businesses selling prod-ucts especially adapted to the needs of the poor; see,e.g. Prahalad 2009, for a plethora of examples) ofteninnovatively overcome such hurdles and thus mayhelp alleviate such discrimination and directly fosterhuman dignity. They tend to reduce poverty premi-ums because of their lower prices and products thatare adapted to the specific needs of the poor, and theyalso open up opportunities to take part in everydaybusiness life.

The reduction of poverty premiums thus enhancesthe opportunities of the poor to participate in theirimmediate (market) surroundings and thereby alsoenhances their social acceptance (similarly to Pra-halad 2009). This can significantly help to improvetheir sense of self-esteem, which again builds a directconnection to human dignity as discussed in thebeginning. A notable example of such an initiativecan be found in 2006 Nobel Peace laureate Muham-mad Yunus’ Grameen Bank ‘Struggling MembersProgramme’ (see http://www.grameen-info.org),which has already turned more than 100,000 beggarsin Bangladesh into bank members, for example, byoffering interest-free loans. The Bank regards thebeggars as customers, although the loans are free ofcharge. The programme tries to facilitate a ‘dignifiedlivelihood’ for these people with the aim of makingthem regular associates of the Bank in the long term.To achieve further acceptance for its members, theprogramme assigns badges to the participants who

can now identify themselves as members of GrameenBank, thus providing them with the reputation of anationally recognised institution and fostering theirsocial acceptance with positive effects on self-esteemand, eventually, human dignity.

Moreover, a reduction of this sort of price dispar-ity would generally set free at least parts of the verytight financial budget of the poor. This is especiallyrelevant for those people who were previously depen-dent on, for example, informal loans with excessiveinterest rates (acquired through unofficial pawnshops, suppliers of ‘street credit’ or similar) or had tobuy overpriced ‘poverty premium’ goods often com-pletely exhausting their already extremely limitedincome. This newly established freedom of choice foraffordable products may allow access to basic goodsand an increasing living standard. This couldenhance not only the right to freedom but also theright to shelter and provision if the released financialresources are spent on relevant goods and services,and it opens up the chance to enhance formerlyneglected social rights.

However, an inclusion of the poor as (new) custom-ers inevitably opens up the question of whether a mereselling of certain products might not also trigger nega-tive social consequences. This becomes especiallyapparent with products such as alcohol or drugs, butit is also relevant for less controversial goods when,for example, ill-informed or irrationally acting con-sumers spend their tight income on non-vital things(Karnani 2007a, b). One might argue that it is allabout free choice and that everybody should have theopportunity to consume what he or she wants (Pra-halad 2011). However, in extreme cases, this couldeven endanger the survival of themselves or theirfamilies when it leads to a substitution of spending forfood, shelter and medical care or otherwise. Theseproblems seem to be especially relevant when lookingat an often poor education, high illiteracy rate anddeficient information channels leading to individualpreferences that might be easily manipulated (whichwould inhibit free choice). This directly leads to thequestion of whether systematic and well-directedsales activities for certain goods such as tobacco prod-ucts or alcoholic beverages targeting the poor mightnot induce negative substitution effects and thusinduce exactly the opposite of what was just proposedas positive impacts on human dignity above.



Another example of dignity-related impactbeyond mainly economic effects is the intensely dis-cussed example of skin whitening creams providingcustomers with a lighter skin, which is commonlyperceived as a beauty feature in many cultures.Apart from also being non-vital, the product itselfcould already be questioned for negatively affectinghuman dignity. It is argued that it reinforces a ste-reotype prevailing in many (especially developing)countries that lighter skin is somehow ‘superior’ todarker skin (Karnani 2007b). Such a reinforcement(which often was even deliberately supported by cor-responding commercials for such products) wouldnot only increase the risk of errant consumer spend-ing as described above, but it would also directlyimpede human dignity by reducing the social accep-tance of people with darker skin and thus hampertheir right to self-esteem. In the long run, this couldeven lead to discrimination, and thus finally have animpact on the right to freedom if people with darkerskin are not treated as equals, for example, whenapplying for a job.

The ‘microfinancing’ approach

The microfinancing approach gathers differentforms of financial services positioned to serve thepoor (Markson & Hokenson 2003). It aims specifi-cally at strengthening the poor as an integral part ofbusiness value chains, as well as at the developmentand exploitation of potential sales markets, becauselack of access to credit is often regarded as one of themain impediments to economic development of thepoor (Hermes & Lensink 2007). At the core of suchmicrofinancing stands the concept of microcredit(see, e.g. Hassan 2002), that is, credit that is charac-terised by particularly small loan values and oftenexceptionally short credit periods. There has beenextensive research on microcredit so far, which,however, mainly focuses on the economic impact(e.g. Armendáriz & Morduch 2010, Banerjee &Duflo 2010, Giné et al. 2010, Karlan & Zinman 2010,Pitt & Khandker 1998) as well as on factors influenc-ing the effectiveness of such credit (e.g. Armendáriz& Morduch 2010, Field & Pande 2008, Cassar et al.2007, Ahlin & Townsend 2007, Karlan 2007).Aspects beyond economic development and thefunctioning of such microcredit have rarely been dis-

cussed. In the following, a set of illustrative caseexamples serves as a starting point to elaborate onsome more subtle and sometimes hidden effects ofmicrolending.

The business model of Grameen Bank, whichoperates as a cooperative wholly owned by its (poor)customers, serves as a role model for numerous othermicrofinance – and especially microcredit – initia-tives (Yunus & Jolis 1999). Microcredit specificallyoffers adapted credit volumes and credit terms tothose willing to do business, thus allowing them toenter the business community sometimes for the firsttime. Such kinds of basic access to markets andcredit appear especially relevant when looking ataccompanying measures of welfare and developmentpolitics (see The World Bank 2007). A closer look atthe concept of human dignity according to Figure 1reveals that the various forms of microcredit candirectly or indirectly support different aspects ofdignity, namely the right to shelter, provision or evenself-esteem, as the following cases illustrate. Follow-ing the idea of ‘assistance to self-help’, such an alli-ance between material (or financial) impulses andimprovements in social (welfare), is indeed part ofthe vision of most microfinance approaches that spe-cifically aim at assisting small- and micro-enterprises(e.g. Franco 2007, Osei 2007, Rok 2007).

The main focus of adaptable (and often quiteinnovative) credit terms is on interest rates that arecompatible with the specific business environmentmainly in developing countries. However, micro-financing in general also aims at overcoming thebarrier of missing securities, property rights, legaltitle and personal documents of the borrower as wellas an often inadequate connection to basic infra-structure to create a functioning business environ-ment and investment climate. Besides GrameenBank, which contracted almost 3 million microenter-prise loans in January 2011 (Grameen Bank 2011),numerous other examples illustrate the range andscope of this approach: the Peruvian Mibanco issuedmicrocredits amounting to US$1.6 billion in 10 yearsto people who had often never had access to formalbanking systems before (Franco 2007); the Austra-lian and New Zealand Banking Group (ANZ) plansto supply 140,000 of the rural poor on Fiji withadequate financial products (e.g. by using so-called‘mobile banks’);1 in Uganda, the Remote Transac-



tion System (RTS)2 offers an innovative solutionto simplify and decentralise banking services; inBolivia, the private finance fund Prodem uses specifi-cally adapted technologies to reach even the illiterateand those only speaking indigenous languages(Hernandez & Mugica 2003); and Edu-Loan inSouth Africa was created to facilitate investments inpost-secondary education, and thus helping some400,000 socially disadvantaged by providing themwith cumulative loans of more than US$140 millionin less than 10 years (Baddache 2007).

An even more direct social advancement can beobserved in cases where microfinance activities aretailored to support particular parts of the popula-tion. By giving roughly 97% of its credits to women,Grameen Bank (see http://www.grameen-info.org)directly contributes to specific social goals such asarticle 20 of UNCED’s 1992 ‘Rio Declaration’,which states that ‘women have a vital role in envi-ronmental management and development. Their fullparticipation is therefore essential to achieve sustain-able development’. Targeting women, especially inmasculine societies, can help to overcome seclusionof women, which is often to be found in the respec-tive countries (Pitt & Khandker 1998). Similar to theGrameen Bank, the Russian Forus Bank also explic-itly defines women as a preferred target group (Rok2007), specifically enhancing social acceptance oftheir female customers.

These cases of microfinance can now be categor-ised according to their impact on human rights andhuman dignity as illustrated in Figure 1 andaccording to their relationship to various aspects ofinclusive business as illustrated in Figure 2. At firstglance, microfinance initiatives can be regarded asserving a specific sales market for adapted financialproducts with the poor as accentuated customergroup because they explicitly aim at supplying thepoor with appropriate banking services. Addition-ally, microcredit directly enhances the overall salesmarket potential in developing countries by releas-ing additional capital and enabling additionalspending (upper part of Figure 2). When diggingdeeper into the aims and impacts of microcredit,another underlying idea comes to the fore, which isto strengthen the production system rather than theconsumption system. The credits are supposed tofacilitate investments into small businesses and

improve the ability to support the livelihood of thepoor. Earmarked credits such as in Edu-Loan are avery specific form of such aid because they caterdirectly to the improvement of know-how andknowledge of the recipients and thus are able tostrengthen individual human resources of the poorpopulation. Additionally, microfinance approachessuch as Prodem or RTS similarly improve transac-tion capacities but also opportunities for personalsaving or other financial services that can increasethe ability to enter into professional business rela-tions sometimes for the first time (lower part ofFigure 2).

Referring to Figure 1, all these projects cater tovarious aspects and categories of human dignity. Asdiscussed, the right to freedom is directly supportedby an enhanced financial freedom and an improvedchoice in terms of increased credit supply. The effectof reduced poverty premiums on interest rates addsto these aspects because credits from informalsources such as moneylenders or merchants areusually much more expensive than those fromformal sources such as banks or microlending insti-tutions (Banerjee & Duflo 2010). The sheer supplywith credits or banking services may also directlyfoster the right to self-esteem for the people con-cerned, especially when these products are offeredfor the first time. Such a supply then recognises thepoor as valued customers, which has rarely been thecase before. Although all described microfinancemodels can have such a direct dignity enhancingeffect, Grameen Bank’s ‘Struggling Members Pro-gramme’ is a noteworthy example of a very explicitform of increased self-esteem through inclusion.Furthermore, Grameen Bank as well as Forusexplicitly improve women’s social acceptance as asubcategory of human dignity for this large and for-merly often neglected or sometimes even oppressedgroup.

Other specific projects such as Edu-Loan more-over increase education opportunities, thus alsodirectly strengthening the right to self-esteem and, inthe long-term perspective, also indirectly, the abilityto earn a living with the same effects as mentionedabove. Other possible indirect effects are also mani-fold. If microfinance indeed helps to build sustain-able income opportunities, for example, for smallbusiness owners, this indirectly improves other rights



by enabling them to acquire additional goods andservices from new and stable income sources. Suchsuccessful microfinance schemes might influence theright to shelter and the right to provision becausefinancial freedom allows access to products that werenot affordable before.

These positive aspects should not, however, divertfrom some inherent problems that might also have adirect negative impact on the dignity of the borrow-ers. Many microcredit schemes build upon a grouplending model in which groups are made jointlyliable for repayment (Yunus & Jolis 1999, Hermes &Lensink 2007). These approaches thus harness socialcollateral to mitigate non-payment risks. Karlan(2007), for example, indicates that social ties areimportant in assisting monitoring and enforcementefforts within groups and that such monitoring andenforcement of credit repayment is positively relatedto group performance. While this regularly leads tohigh repayment rates, it can also lead to what Karim(2008) calls an ‘economy of shame’. She describeshow in-group peer pressure affects individuals when,for example, members of a lending group publiclyscold others who fall behind on their loan paymentsor violate their property rights by breaking into theirhouses to find assets that could be used to repay theloans. Moreover, Giné et al. (2010) showed thatgroup lending increases the propensity to take risks,especially for the most risk-averse people within agroup. While group credits indeed create an implicitinsurance against investment losses, the cost for thisinsurance is borne in large part by the most risk-averse borrowers, thus leading to an asymmetricallocation of benefits. This could negatively affectfinancial freedom and social security of some bor-rowers, and it also shows a very subtle form ofin-group discrimination because it penalises a spe-cific personality trait, namely risk aversion. As a con-sequence and due to the fact that joint liability doesnot necessarily prove to be more effective than indi-vidual liability, Grameen Bank and other microfin-ance institutions have already refrained from grouplending (Armendáriz & Morduch 2010, Banerjee &Duflo 2010). Despite the success (and praise) formany microlending efforts or similar projects, sucheffects always have to be kept in mind to paint acomplete picture of their (possible) effects on humandignity.

The ‘grassroots integration’ approach

The active facilitation of financial independence isthe central aim of other initiatives that can collec-tively be summarised by the term ‘grassroots integra-tion’.3 The mutual aspect of all these initiatives is thesystematic inclusion of the poor as active element inall (productive) phases of (potentially global) valuechains as illustrated in Figure 2. This thinking isbased on the fundamental insight that the poor are abasic building block of society, especially in develop-ing countries. Their broad inclusion in local entre-preneurial value-creating processes can then beregarded as an important – indeed central – elementto foster stability and wealth in regional terms. Thiscan be observed in the gradual development of acorporation’s role as employer or contractor for thepoor on the one hand and in the gradual evolution ofsolid customer groups also for their goods on theother. However, numerous examples from variousindustries indicate that not any inclusion of under-privileged people can indeed be framed as being aninclusive business. The extensive debate on sweat-shops and a possible race to the bottom (see Scherer& Smid 2000 and numerous others) indicates howsuch an ‘inclusion’ foils the idea of a dignity-enhancing integration of the poor.

Yet, a variety of empirical cases illustrate positiveoutcomes of well-designed inclusive business modelsfor aspects of human dignity of the poor. ‘Microfran-chising’ initiatives, for example, aim at intensifying orbroadening small- and micro-entrepreneurship in thepoor population (see, e.g. Gibson 2007; and withconcrete examples, see also Hoyt & Jamison 2007,Magleby 2007). They seek to transfer the advantagesof well-known franchising forms to low-incomeentrepreneurship. With its small capital require-ments, microfranchising appears to be especially wellsuited to replicate successful (and inclusive) businessmodels. By establishing self-employed entrepren-eurial jobs, microfinancing can strengthen humandignity by directly enhancing the self-esteem of newmicro-entrepreneurs. Furthermore, the creation offinancial independence through employment andincome perspectives can foster the individual right tofreedom and indirectly also to shelter and provisionfor beneficiaries according to Figure 1. With its agri-cultural division’s initiative ‘e-Choupal’, the Indian



multibusiness conglomerate ITC was able to breakinto the information monopoly held hitherto by localmiddlemen on the regional domestic markets for agri-cultural products (Annamalai & Rao 2003; http://www.echoupal.com). ITC established centralisedrural Internet facilities offering direct access to therelevant market data for smallholder farmers. Thisstep was ground-breaking because it is often simplelack of transparency in the market that hinders localpopulations gaining adequate earnings from theirproducts when selling far below the actual marketprice, either because they are uninformed about thereal market prices or because better informed middle-men push them to sell. These low sale prices on localmarkets can be characterised as poverty penaltiessimilar to the sales-related premiums discussed above.By eliminating these ‘poverty deductions’, the initia-tive strengthened the relative market power of morethan four million farmers in roughly 40,000 villages inIndia (Deveshwar 2011), which led to a sustainableimprovement of their expected incomes. At the sametime, these changes were the prerequisite for ITC tostreamline its supply chain by introducing regionalprocessing centres, which enabled the direct purchaseof agricultural products from the farmers rather thanvia the intermediate local markets. Notably, thisnurtured reciprocally the self-esteem of the farmersbecause they were now regarded as equal tradingpartners, sometimes for the first time. Along with animprovement of their transaction capacities, theproject finally induced a significant improvement oftotal market efficiency (Karnani 2007a) resultingfrom all these effects.

Other cases show similar effects: the joint venture‘Grameen Danone Foods Social Business Enter-prise’ has the designated goal to provide the poorpopulation in Bangladesh with affordable and nutri-tious dairy products. It cooperates deliberately andexclusively with local peasants as suppliers for rawmaterials and employs solely local small and microentrepreneurs as distributors (see Schrader 2010).Furthermore, the initiative explicitly aims at improv-ing the health situation of underprivileged children,offers professional non-profit training in farm man-agement to aid smallholder farmers and supportsthem – in line with the microfinancing approach –with affordable microcredits to finance investmentsin equipment and livestock (Govind 2007). Similarly,

the model of the South African utility companyEskom is multifaceted. A specific aspect of its ‘BlackEconomic Empowerment’ programme is the award-ing of contracts specifically to formerly disadvan-taged black entrepreneurs with a special focus onand sponsorship for women-led companies. Thecentral aim is to offer systematic assistance formarket partners indicating possible steps out ofpoverty, for example, by conducting consultingprojects on potential company growth (WBCSD2005).

A mainly distribution-centred approach can befound in the project ‘Shakti’ (which may be translatedas ‘ability’ or ‘force’) of Hindustan Unilever Limited(HUL), the Indian subsidiary of the multinationalconsumer goods company Unilever. As withGrameen Danone Foods, this project seeks to buildoccupational perspectives as well as an orderlylivelihood by directly integrating the poor into thedistribution network of HUL. To achieve this goal,the company includes underprivileged women (todate already amounting to more than 45,000) asquasi-independent ‘Shakti-dealers’ in its distribu-tion channels. In this way, the company reachesconsumers (that were previously not served in morethan 100,000 Indian villages) in rural areas (see http://www.hul.co.in/sustainability/casestudies/enhancing-livelihoods/Shakti.aspx; Ionescu-Somers et al. 2007,WBCSD 2005: 42). This generates a classical ‘win-winsituation’ by offering possible ways out of poverty toa multitude of people (i.e. the Shakti dealers and theirrelatives) while simultaneously developing a com-pletely new business segment for HUL.

The continuously growing collection of successfulcases of ‘grassroots integration’ can be completed bythe interesting example of the Colombian electricitysupplier Union Fenosa (see Peinado-Vara 2006). Thecompany was confronted with the fact that individ-uals – so-called marañeros – mostly in rural areas,frequently installed illegal electricity (bypass) linesfor their own advantage. However, despite its beingentitled to do so, Union Fenosa did not take legalaction (which might in any case have been consid-ered reasonable if only for security reasons): ‘apartfrom representing lost business to the company andbeing illegal, this activity was a safety hazard for all’(Peinado-Vara 2006: 66). Instead, the companydesigned a programme to professionally train the



marañeros and subsequently involving them as inde-pendent subcontractors responsible for distribution,service and sales.

These examples can now again be classified accord-ing to Figures 1 and 2. As was shown, Union Fenosatapped into the local knowledge of the marañeros byusing them as a resource pool and, thus, providingsecure employment. By (quasi-retrospectively) legal-ising their behaviour, the company also helped todirectly strengthen the individual’s dignity via animproved societal reputation, via an improved self-esteem of this population group (supported by theirgain in reputation) and also via a more secure incomeand employment situation (with possible indirecteffects on other rights as discussed above).

In the case of ITC’s e-Choupal, increased marketefficiency and improved market opportunities (as wellas increased sales prices) for peasants again directlyenhance their freedom of choice. Furthermore,improved financial freedom may in turn indirectlyalso facilitate the right to shelter and provision ascategories of human dignity if increased financialresources are spent on relevant goods and services.Apart from these predominantly financial aspects, theintegration of farmers as a direct resource pool intoITC’s value chain for procurement and productionpurposes reportedly results in improved self-esteemof the involved peasants. This mainly arises from aworthy inclusion into everyday business processesinstead of them feeling like a supplicant to powerful

middlemen at local markets. Likewise, Eskom’s‘Black Economic Empowerment’ programme adds toan improved social acceptance of formerly neglectedgroups, thus improving the fundaments of humandignity in a similar way to the promotion of women’srights at Grameen Bank and Forus Bank.

The Grameen Danone Social Business Enterpriseand HUL’s project ‘Shakti’ both tap into the resourceas well as into the sales aspects of inclusive businessmodels. The introduction of adequate products espe-cially designed to meet the needs of the poor not onlyrecognises them as valued customers, possibly addingto an enhanced self-esteem, but may also help toimprove the supply of vital products such as food,hygiene products or the like. On the resource side, theinclusion into different stages of the respective valuechain not only improves the income situation (of theHUL’s Shakti dealers and Grameen Danone’s small-holder farmers) but also fosters their individualknow-how, thus indirectly again enhancing theiremployment and income prospects.

Discussion and categorisation of impacts

In combining the main aspects of Figures 1 and 2,Figure 3 categorises possible impacts of inclusivebusiness efforts on human dignity. It distinguishesthe effects on the poor as customers (served withadapted products and services) from the effects onthe poor as pool of resources (which includes them

Figure 3: Matrix of inclusive business impacts on human dignity



into corporate value chains). In both categories,direct effects immediately influence various humandignity aspects. Indirect effects, however, stem fromsecondary impacts in cases when an improved itemof human dignity (e.g. financial income) also influ-ences other aspects of dignity (e.g. provision withfood or education).

Direct consumption-based effects thus derive fromthe supply of appropriate products and servicesfor the poor and immediately influence certainhuman rights. Microcredit, for example, introducesan adapted product (small and comparatively cheapcredits) and thus caters to hitherto unfulfilleddemands for financial services. The extended choiceof adapted credits (or other forms of banking ser-vices) immediately improves the right to freedom notonly via an improved financial freedom but also byproviding options that were not available before.Moreover, the right to self-esteem may also beaffected by the improved array of products if – in thecase of microcredit – it reduces the necessity for thepoor to deal with unofficial money lenders and thusinstead being recognised as fully fledged customersand member of society. Grameen Bank’s StrugglingMembers Programme is an exceptional example ofsuch an outcome. From the sample of grassrootsintegrating activities, the sales aspects of HUL aswell as of Grameen Danone additionally point outthe viability and importance of such business modelsfor aspects of human dignity. They aim at catering tounfulfilled and potentially vital needs.

Related indirect consumption-based effects canagain be illustrated by certain microfinance initia-tives if, for example, microcredit might help toimprove the borrower’s ability to earn a living in thelong run. It may also indirectly cater to other aspectsof human dignity such as the right to shelter and theright to provision. Although it was argued thatvarious forms of microfinance aim at strengtheningthe production system, the mentioned examples allfall into the category of consumption-based effects.The reason is that microcredits or other forms ofmicrofinance do not directly integrate the poor intoproductive value chains but rather indirectly facili-tate integration by supplying supportive financialservices and serving them as customers. Neverthe-less, they might have never been able to participate asproducers if it were not for microfinance, so that

these services can indeed be regarded as facilitator ofresource-based effects as explained as follows.

Microfranchising, however, builds directly on thepoor as pool of resources. The direct resource-basedeffects of these business models seem to be suitable todirectly foster human dignity via the subaspects of animproved right to self-esteem and to (financial)freedom. This again may in turn trigger secondaryeffects (i.e. indirect resource-based effects) such asan improved right to provision or shelter if micro-franchising indeed leads to financial freedom ofmicro-entrepreneurs. The group of grassroots inte-gration approaches produced further cases of directresource-based impacts. For example, ITC, HUL,Eskom and Union Fenosa especially facilitate theright to self-esteem for an underprivileged group ofpoor (peasants, women, black entrepreneurs andmarañeros). Virtually all mentioned cases of grass-roots integration also illustrate a possible impact onfinancial security of those being integrated into inclu-sive business ventures, again with all the possibleindirect resource-based effects impacts on adjacenthuman rights.

Conclusion: dignity via inclusion

In conclusion, all these examples bridge back to theinitial question of how human dignity can be consid-ered in business ethics and corporate action. In thebeginning I quoted the UN Declaration of HumanRights as well as the European Charter of Funda-mental Rights, which both offer a rather vaguereference to human dignity, which is then furthersubstantiated by describing pivotal human rights. Byreferring to the works of Sen, Margalit, Spaemannand Birnbacher, I then itemised human dignityclaiming that each individual should be granted aset of minimum rights – in particular the rights tofreedom, shelter, provision and self-esteem, whichcan be regarded as hygiene factors for humandignity.

The paper then illustrated two main aspects incombining inclusive business and the poor with aquest for human dignity. First, there are large partsof the world population whose dignity is at stakebecause of their poor living conditions, discrimina-tion tendencies, unsatisfied basic needs or otherwise.



While this observation seems more or less obvious,the second emphasis is even more meaningful. Byputting inclusive business as illustrated in Figure 2into the centre of thinking and also by exemplifyingthe explicit as well as implicit impacts of the detailedinitiatives, approaches, cases and examples on suchrights, the thesis ‘dignity via inclusion’ gives a goodidea of how human dignity can be respected in busi-ness behaviour and action. In fact, the empiricalcases indicate that business already contributes toseveral aspects of human dignity. Notably, suchcontributions include more than ‘just’ financial im-provements for the poor but involve aspects ofrecognition, (self)-respect and inclusion, as was indi-cated by the assessment of human dignity in thebeginning. This translates into a call for an extensiveintegration of the poor into the respective relevantvalue chains that, however, always has to considerpotentially oppressing effects on dignity as expressedthroughout the discussed categories of inclusivebusiness.

The analysis provides ground for further (not leastnormative) reasoning and theory building regardingthe influence and possible roles of business forhuman dignity. Therefore, the focus of this paperwas mainly on how business actors actually affectdignity rather than developing why they (should) doso. Building on different approaches within the areaof inclusive business, four basic categories of influ-ence on human dignity could be derived from thecase analysis: direct consumption based, indirectconsumption based, direct resource based and indi-rect resource based. Building on these insights andcategorisation, the growing literature on corporatespheres of influence for human rights (see Ruggie2010, Wettstein 2009, and others) can be a worth-while starting point for further research with nega-tive and positive direct and indirect consumption aswell as resource-based effects to validate the findingsand to provide policy recommendations for bothpolitics and business.

Acknowledgements

I would like to thank Gerd Rainer Wagner andAlbert Weale for their advice and suggestions onearlier drafts of this paper. I would also like to thank

the anonymous reviewers for their helpful commentsthat helped to improve the paper considerably.

Notes

1. ‘UNDP and ANZ Bank partnered to devise viableand innovative commercial banking services, sup-ported by a financial literacy training programme.The investment comprises a fleet of 6 mobile banksthat travel on a regular schedule to 150 designatedrural villages and settlements. The ability to changethe mandated proof of identify required to open abank account enabled ANZ Bank to offer productssuch as loans and savings accounts to those commu-nities who lacked official documentation. In the first5 months of operation, 17,000 women, men andschool children are beginning to save regularly andover 1,500 villagers have acquired valuable moneymanagement skills’ (UNDP 2008: 108).

2. ‘The RTS is based on the use of sturdy hand-helddevices that can communicate over GSM cellularnetworks. Combined with the use of smart cardsgiven out to clients and microfinance agents, thesystem allows [those agents] . . . to collect crucialfinancial data in the field and . . . to transfer the datadirectly into . . . computerized . . . systems. The RTSeliminates the need to prepare, transport, and enterhand-written reports, reducing costs for rural opera-tions. In addition, electronic collection of data raisesclient confidence . . . as well as reducing fraud’(Magnette & Lock 2005: 2). A similar service isoffered by Vodafone and Safaricom in Kenya (seeKarugu & Mwendwa 2007).

3. The term ‘grassroots integration’ in the notion ofthis paper is derived from the McKinsey paper ‘Agrassroots approach to emerging-market consum-ers’ (Beshouri 2006). This approach takes the politi-cal concept of ‘grassroots performance’, whichdiscusses the inclusion of grassroots democracy intothe general political decision-making process (see,e.g. Fleisher 2003), to the economic sector of societyand in this special case to the world’s poor.

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