Corporate social responsibility at the base of the pyramid
Denis G.Arnold a ,⁎,Andres Valentin b
a Department of Management,Belk College of Business,University of North Carolina,Charlotte,9201University City Blvd.,Charlotte,NC 28223,United States b
Belk College of Business,University of North Carolina,Charlotte,9201University City Blvd.,Charlotte,NC 28223,United States
a b s t r a c t
a r t i c l e i n f o Article history:
Received 1February 2012
Received in revised form 1May 2012Accepted 1September 2012Available online 15March 2013Keywords:
Base of the pyramid
Corporate social responsibility Ethical CSR Poverty Legitimacy Exploitation Empowerment Capabilities Human rights
International business
The base of the pyramid proposition holds that transnational corporations (TNCs)can pro fitably serve the needs of the poor at the base of the global economic pyramid.This article explores the ethical dimensions of business ventures targeting the 2.6billion moderate and extremely poor (MEP)at the base of the pyramid.It is shown that MEP populations are both cognitively and socially vulnerable,rendering them susceptible to harmful exploitation.We defend an empowerment theory of morally legitimate BoP business ventures and provide a multi-stage opportunity assessment process that allows TNC managers to determine when BoP ventures should be pursued and when they should be abandoned.This analysis is used to demonstrate the inadequacy of an instrumental,or economic,conception of corporate social responsibility (CSR)and to de-fend an ethical conception of CSR.
©2013Elsevier Inc.All rights reserved.
1.Introduction
The base of the pyramid (BoP)proposition (Prahalad &Hammond,2002;Prahalad &Hart,2002)holds that transnational corporations (TNCs)can exploit neglected entrepreneurial opportunities while simultaneously alleviating poverty by serving billions of previously ignored customers living in poverty.Prahalad (2004)describes the BoP as an invisible market of four billion people living on less than $2per day,waiting to be tapped.London and Hart (2004)describe it as a huge base of potential customers earning less than $1500PPP (purchasing power parity)per year.BoP strategies are recommended as win –win market opportunities that allow TNCs to do well by doing good.It is claimed that pursuing BoP strategies “means lifting billions of people out of poverty and desperation ”(Prahalad &Hart,2002)and enhancing the “dignity and choice ”of the poor via access to more goods and services (Prahalad,2004).At the core of the BoP proposition is the idea that socially responsible TNCs can simulta-neously improve their pro fitability while bene fitting the global poor.But,as will be argued,the validity of this claim depends on the speci fic BoP business venture,the ethical framework that is utilized to analyze
the venture,and the theory of corporate social responsibility that is employed.
Given a lack of uniformity in the literature regarding the size and the purchasing power of the BoP,this article begins by clarifying the scope of the BoP and the poorest segments of consumers wit
hin the BoP:those living in moderate and extreme poverty as de fined by the World Bank.Next,research in development economics and consumer behavior is utilized to characterize the vulnerability of the moderately and extremely poor (MEP).Karnani (2007)has claimed that the poor may be wrongly exploited by TNCs targeting the BoP,but the theoretical basis for claiming that some products or services are exploitative,while others are not,is unclear from his analysis.This article provides an account of exploitation that explains why marketing some products or services to the MEP is properly regarded as wrongfully exploitative.An exploitative approach is contrasted with an empowerment approach that respects the human rights of the MEP.A capabilities analysis is utilized to develop empowerment strategies for BoP ventures consistent with respect for human rights.A theory of serving the MEP grounded in the empowerment of the poor is defended and a multi-stage opportunity assessment process for implementing morally legitimate BoP ventures is developed.Finally,an empowerment theory of BOP ventures targeting the MEP developed in this article is utilized to demonstrate the inadequacy of the instrumental,or economic,conception of corporate social responsibility (CSR)and to defend an ethical conception of CSR.
Journal of Business Research 66(2013)1904–1914
⁎Corresponding author.
E-mail addresses:denisarnold@uncc.edu (D.G.Arnold),andy.valentin@gmail (A.
Valentin).
0148-2963/$–see front matter ©2013Elsevier Inc.All rights reserved.
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2.Poverty and vulnerability at the base of the pyramid
The extremely poor live on less than$1.25per day,the moderately poor survive on less than$2.00per day,and together they constitute a market of2.6billion people(The World Bank,2011).The limited purchasing power of the extremely poor has led some researchers to conclude that BoP strategies are unlikely to be helpful to them (Santos&Laczniak,2009).More commonly,researchers implicitly or explicitly presume that the moderately and extremely poor,as well as those earning slightly more than$2.00per day,will benefit from having a wider range of consumer choices made available to them.However,the concept of“benefit”is ill-defined in the literature and the assumption that products or services purchased by the poor are beneficial to them is widespread(Ireland,2008;Prahalad, 2004).The implication seems to be that the MEP are much like Western middle-class consumers,only with fewer consumer choices and less purchasing power.This characterization of people living in extreme poverty is unwarranted.Considerable research has been undertaken on the social and economic experiences of people surviv-ing on incomes below$1.25or$2.00per day(Banerjee&Duflo,2007, 2011;Collins,Morduch,Rutherford,&Ruthven,2009;Narayan, Chambers,Shah,&Petesch,2000).This research provides valuable insights into the spending habits,m
企业管理专业indsets,and vulnerabilities of the MEP and provides much needed context for assessing the ethical dimensions of targeting the poor as consumers.
2.1.The size and nature of the BoP market
There is a lack of consensus in the BoP literature regarding the size and income levels of the market.This lack of clarity can lead to incon-sistency in the analysis of business ventures directed at the BoP. Researchers often introduce their work with different statistics on the population,spending power,and income levels of those at the BoP.For example,Prahalad and Hart(2002)define the BoP as4bil-lion people living on less than$1500per year and thisfigure is used by Anderson and Markides(2007),London and Hart(2004),and Seelos and Mair(2007).Prahalad(2004)defines the BoP as4billion people living on less than$2.00per day and thisfigure is used by Altman,Rego,and Ross(2009),Stefanovic,Domeisen,and Hulm (2007),and Webb,Kistruck,Ireland,and Ketchen(2010). Hammond,Kramer,Katz,Tran,and Walker(2007)define the BoP as 4billion people living on less than$3000per year and thisfigure is used by Fitch and Sorensen(2007).
Some of the variation in the literature can be attributed to the base year for purchasing power parity(PPP),but this does not explain the large deviation from World Bank data commonly cited in the
devel-opment economics and poverty literature.The World Bank has pub-lished the so-called“dollar per day”and“two dollar per day”poverty lines since1981.Estimates from2002showed2.8billion people living on less than$2.00per day,not four billion(The World Bank,2011).The current World Bank population estimate for those living below$2.00per day is2.6billion(The World Bank,2011).
Clarity regarding the size and purchasing power of the BoP is helpful for at least two reasons.First,clarity provides a reliable basis for assessing the size of the market opportunity and evaluating the feasibility of the BoP proposition for TNCs.Prahalad(2004)estimates BoP spending power to be$13trillion.Our analysis of World Bank data showed that those living below$2.00per day totaled2.8billion at that time.Thus, we conclude that the size of the market opportunity for TNCs is overstated using Prahalad's estimate of a BoP population of4billion living below$2.00per day.
Hammond et al.(2007)estimate BoP spending power to be $5trillion based on a population of4billion people living below$9.05 per day and Karnani(2007)defines the BoP in2005as2.6billion peo-ple living below$2.00per day along with the World Bank and estimates their spending power to be$1.42trillion in PPP terms(The World Bank,2011).Because Karnani(2007)estimates are derived using the same PPP base year as Hammond et al.(2007),those living between$2.00 per day and$9.05per day would represent$3.58trillion in spending power at PPP terms.If the BoP is taken to include this segment as
well,it is a much larger market opportunity.However,the issue is not merely defining the scope of the BoP but differentiating between market segments in order to better understand the needs of individuals living at different levels of poverty(Kotler,Roberto,&Leisner,2006). The differences in the needs and purchasing power of,for example, individuals living at$6.00per day versus those living at$1.25per day are significant and should inform entrepreneurial TNCs seeking to serve these markets.
A second reason for clarifying the size and purchasing power of the BoP is to facilitate the assessment of the ethics of TNCs exploiting market opportunities among populations living at different levels of deprivation.Targeting vulnerable groups raises distinctive ethical issues.As with any vulnerable consumer group,such as children, the elderly,or the handicapped,BoP populations are particularly susceptible to harm to their well-being from market transactions relative to less vulnerable populations.Their vulnerability may be exacerbated if they are also very young,old,or handicapped.In his extended theoretical analysis of the concept,Brenkert defines the vulnerable in market exchanges as those with“qualitatively different experiences,conditions,and/or incapabilities,which impede their abilities to participate in normal adult market activities”(Brenkert, 1998:13).The vulnerable are less able to protect their own interests and are susceptible to being“swa
yed,moved or enticed in directions which might benefit others but which might harm their interests”(p.14)as a result of their unique circumstances.Individuals at the BoP are both cognitively and socially vulnerable.
The cognitive vulnerability of those living at the BoP is a feature of illiteracy or limited education.The illiteracy rate in nations with high BoP populations is substantial.In Bangladesh that rate is52%,for India 39%,and for Nigeria32%for those15and older(CIA,2011).Poverty makes it difficult to attain education,even when it is provided at no cost by governments,because of the need of children to leave school to help support families(where the median size is between seven and eight),because of poor quality education,and because of the inability of illiterate or partially literate parents to support their children's education(Banerjee&Duflo,2007).Educational opportunities are also lost when young children are bartered,sold,or orphaned,as a result of the desperate poverty of their parents.
Social vulnerability is a result of poverty itself.Poor consumers spend to compensate for their penury and to feel a sense of belonging. Chakravarti(2006),drawing from Sen(1999),argues“the psycholog-ical reality of the BoP is revealed in sub-normative choices,self-defeating preference structures,and confused contradictions and preference reversals that block paths to self-improvement”(p.367). In a study of Brazilians living on less than US$8per day,Barki and Parente(2010)found that the poor have
“a stronger need to compen-sate for a dignity deficit and low self-esteem”and“a high level of aspiration to feel socially included in society”(p.21).These psycho-logical traits make them vulnerable to market transactions that can undermine their well-being by reducing their ability to consume basic goods.
2.2.The composition of the BoP and the MEP
To better assess ethical issues that arise in serving BoP consumers, providing an account of the composition of the BoP is necessary.In order to resolve the inconsistencies discussed above,and to provide clarity with respect to the analysis undertaken in this article,the BoP is defined in the following terms.Consistent with Hammond et al.,the entire BoP is defined as the population of4billion people earning less than$9.05per day($3260per year at2005PPP)who primarily transact in the informal market economy.
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However,rather than use the problematic segmentation of the BoP by Hammond et al.,our analysis is
grounded in the economics and poverty literature that already enjoys broad academic support. Consistent with standard usage in development economics,mode-rate poverty is defined as those earning$1.25to$2.00per day and extreme poverty as those earning less than$1.25per day(Fig.1). This allows for the clear identification of the most vulnerable members of the BoP:those living in moderate or extreme poverty. Approximately 1.4billion people live in extreme poverty and 1.2billion people live in moderate poverty for a global population of2.6billion MEP.
Our representation of the BoP differs from The Next4Billion (Hammond et al.,2007)by utilizing fewer segments.Hammond et al.use six annual income segments to describe the BoP:$500, $1000,$1500,$2000,$2500,and$3000.While wefind that these income segments are beneficial,only36countries have population and expenditure data for each segment.For the many countries for which population and expenditure data are not provided researchers can only deduce the populationfigures for the entire BoP($3000and below)without knowing what percentage of the population belongs to each income segment completely.In our alternative approach we utilize World Bank data to establish tiers4and5,which describe the MEP within the BoP.This approach uses household survey data from115countries and thereby represents a more robust picture of the MEP than the36countries used in Hammond et al.(2007).
2.3.Vulnerabilities of the moderately and extremely poor
Research by poverty and development scholars shows that the MEP live in a cycle of poverty and deprivation that causes cognitive and social vulnerabilities.Adults and children living in moderate and extreme poverty are subjected to a state of mental distress, depression,and a feeling of hopelessness,which ultimately affects well-being and alters their ability to aspire to a better life(Narayan et al.,2000).For the most part,the MEP are excluded from the formal market economy;instead,operating in a web of informal networks.“They have houses but not titles;crops but not deeds;businesses but not statutes of incorporation”(de Soto,2000:7).Often times, the MEP are socially excluded and taken advantage of by other poor members in the society who are marginally better off.According to Sachs(2005:20),“They cannot meet their basic needs for survival. They are chronically hungry;unable to access health care,lack the amenities of safe drinking water and sanitation,cannot afford educa-tion for some or all of the children,and perhaps lack rudimentary shelter.”
The harm to well-being,to which the MEP are susceptible because of their vulnerability,may take many forms such as a decline in caloric intake,malnutrition,ill-health accompanied by loss of income,or death.For example,individuals living in moderate and extreme poverty may be swayed or
enticed to forego the purchase of basic goods for their families,harming the general physical and psycholog-ical capabilities necessary for human functioning.
Despite technological advances in agriculture and rising incomes, MEP households are consuming less food and survive on1400calories on average per person,roughly half of that needed for a healthy diet (Banerjee&Duflo,2011).Adult malnourishment adversely affects current daily activities,long term welfare,and wages,while creating higher demand for medical care(DeRose,Messer,&Millman,1998). Child malnourishment severely affects development,growth,cognitive ability,and occupational performance in adulthood(Chavez,Martinez, &Soberanes,1995).Studies show that the MEP are not maximizing their caloric intake,often acting as if they are not malnourished by not spending more of their available income on extra food.According to Banerjee and Duflo(2007),unhealthy patterns of food,alcohol,and tobacco consumption among the MEP are quite common.In Mexico, for example,as high as8.1%of the household's budget goes to alcohol and tobacco.Impoverished urban MEP consumers in China spend as much as46%of income on tobacco(Liu,Rao,Hu,Sun,&Mao,2006). An estimated41.8million Chinese fall into poverty because of excessive cigarette spending each year(Liu et al.,2006).
Banerjee and Duflo(2011)point out that countries such as Mexico and India have seen an emergence
in fast-moving consumer goods, oftentimes packaged in small sachets.The rising demand for such goods seems to correlate with falling food consumption.These behav-iors are attributable to what Macarov(2003)describes as“norms, which are marked by very short term objectives and a live for the mo-ment tendency”(p.46).These studies underscore the critical trade-offs that MEP households make against providing necessities such as nourishment,education,and healthcare.
The vulnerability of the MEP is exacerbated by their inability to manage social and economic risks as a result of having limited access to assets(Alwang,Siegel,&Jorgensen,2001).When the MEP are sick or injured,or when crops fail,there is little recourse other than family, and typically no savings and no insurance to cover expenses or lost income.The higher an individual's placement among the economic tiers,the better an individual's ability to manage risk.The susceptibility of the MEP to harm as a result of their vulnerability is unique relative to other economic tiers for two reasons.
First,their lack of assets is significantly greater than those at higher tiers leading to a greater inability to manage risk than those in tiers1–3.Second,the potential harmful outcomes of those in tier 4are greater than those in tiers1–3.Those living in moderate poverty are at direct risk of slipping into extreme poverty and suffering great-er malnutrition and ill-health as a result.Those living in extreme poverty at tier5have little margin for reduced consumption and,as a result,are at risk of severe acute
malnutrition and
death.
BOP
4 billion
people below
$9.05 per day
MEP
2.6 billion
people below
$2.00 per day
Fig.1.The economic pyramid.
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Finally,those living in the range above$2a day,but near that figure,will often experience similar vulnerability to those living in moderate poverty making the population of vulnerable poor larger than2.6billion.A person living on$1.95a day and a person living on$2.25a day,for example,are likely to experience similar cognitive and social vulnerabilities.The line between the MEP and the remain-der of the BoP should not be understood as hard andfixed.Under-standing the vulnerabilities of the MEP can help scholars and practitioners to better understand the vulnerabilities of the BoP in general.
In summary,the2.6billion people that comprise the MEP live in multidimensional poverty and are both cognitively and socially vulnerable.This vulnerability contributes to them making sub-optimal purchasing decisions relative to their well-being,understood as the capacity to function well.Understanding this vulnerability will allow us to provide an account of the exploitation of the moderate and extremely poor and a theory of morally legitimate TNC ventures targeting these potential customers,producers,and workers.
3.An empowerment theory of morally legitimate BoP ventures
In this section several of the theoretical aspects of the BoP propo-sition are developed.A basic feature of the BoP proposition is the idea that BoP activities are morally legitimate.However,previous research on BoP activities has not provided an adequate theoretical basis for distinguishing between morally legitimate and morally illegitimate BoP activities.Moral legitimacy has been defined as“a positive nor-mative evaluation of the organization and its activities(Suchman, 1995:579).This section explains how BoP business ventures can be understood to be morally legitimate or morally illegitimate.To facili-tate this theoretical development,an account of exploitation is provided,an interpretation of the meaning of“benefit”in the BoP proposition is provided,and an account of the relationship of the BoP proposition to human rights is defended.
3.1.Exploitation
At the core of entrepreneurial activity is the exploitation of oppor-tunities(Casson,1982;Shane&Venkataraman,2000).BoP theorists argue that TNC managers neglect many opportunities because of“or-thodoxies”in assumptions and practices(Prahalad&Hart,2002:4) that lead them to neglect the BoP as a viable market.The“dominant logic”into which they have been socialized leads TNC managers to emphasize large unit packs,high margins per unit,and high volume sales(Prahalad,2004:49).What has been missing in most TNCs are managers who can imagine alternative strategies that will allow them to exploit BoP populations with the aid and assistance of knowl-edgeable local experts.However,as noted above,BoP strategies have also been criticized precisely because they are exploitative(Karnani, 2007;Santos&Laczniak,2009).This dispute over the moral legitima-cy of exploitative entrepreneurial activity at the BoP points to a need for theoretical development of the ethical dimensions of BoP strate-gies.To advance understanding of the ethics of BoP strategies it will be useful to clarify the role of exploitation at the BoP in general and of the2.6billion MEP in particular.
In ordinary language usage,it is common to refer to the utilization of a resource as exploitation.For example,one might exploit a hilltop vista to build a house or one might exploit a mineral deposit or a
fishery for economic gain.In these cases,exploitation stands in for ‘use’and carries with it an amoral connotation.Let us refer to this as the utilization meaning of exploitation.In entrepreneurship,this use of the term is commonly employed in characterizing the identifi-cation and targeting of underutilized,previously unknown,or newly created,possibilities to create positive outcomes.In the case of BoP business ventures,the intended outcome is binary in that it is intended to be both positive for the TNC and for the customer.The benefit for the TNC is profits,but the precise benefit for BoP cus-tomers is not always clear in the literature.We will return to the issue of positive outcomes for BoP populations below.
The meaning of the negative use of the term,exploitation,invoked in discussions of BoP strategies remains unclear.However,the use is clearly intended to connote harm.Let us refer to this as the harm meaning of exploitation.Wood(1995)has defended the position that the exploitation of people(as opposed to nature)always involves one party taking advantage of the weakness or vulnerability of anoth-er party(Arnold,2003).However,taking advantage of the vulnerable should be understood as a necessary condition rather than a sufficient condition for exploitation.In market economies,entrepreneurial firms routinely take advantages of the vulnerabilities of competitors to exploit market opportunities,and this is commonly regarded as legitimate business activity.But when i
s exploitation morally wrong? Exploitation may be understood as wrong when it fails to respect human rights,especially basic human rights.
3.2.Human rights and international business
Human rights theory has played an important role in international business ethics and corporate social responsibility since Donaldson (1991)provided a theory of TNC human rights duties(Arnold,2010, 2013;Campbell,2006;Cragg,2002;Cragg,Arnold,&Muchlinski, 2012;Kobrin,2009;Wettstein,2012).The TNC duty to respect human rights has a two-fold ethical justification.First,human rights are grounded in the idea that agency,or the capacity of autonomous action, is worthy of respect and that individual persons should be respected by those persons or organizations with whom they have relationships (Arnold,2010).In the case of TNCs,this includes relationships with cus-tomers as well as other stakeholders such as employees.
Second,TNC human rights duties are defended on contractualist grounds(Cragg,2002;Donaldson,1991).Here,the argument is that the very reason that corporations are permitted to exist is to allow people to come together to make productive contributions to society. To accomplish this end corporations are granted such rights as property, ownership,and freedom.In v
irtue of being granted these rights, corporations have reciprocal duties to respect the rights of others, including the basic human rights enjoyed by real persons.These two arguments are compatible and together provide an overlapping justifi-cation for the view that corporations operating in different nations have a duty to respect human rights independently of the ability of host-nation governments to police and remedy human rights violations.
The adoption or endorsement of human rights norms for business by the United Nations(UN)and other global civil society organizations and the attendant adaptation and endorsement of human rights duties for TNCs by many companies themselves are important trends in interna-tional business ethics.In2011,the United Nations Human Rights Coun-cil endorsed a new set of global guiding principles for business:the UN “Protect,Respect and Remedy”Framework.The UN Framework calls upon business enterprises to respect the rights of all persons and to provide remedy when those rights are violated(Ruggie,2008).The UN Framework is itself an extension and articulation of elements of the UN Global Compact,a strategic policy initiative for businesses that facilitates the incorporation of ten universally accepted moral principles into business policy.Firms gain moral legitimacy when they act in a manner consistent with justified international human rights norms.
Many businesses highlighted in BoP case studies,such as CEMEX, Coca-Cola,ITC,and Unilever are among the over8700current busi-ness participants in the Global Compact.The specific human rights that the UN Framework calls upon businesses to respect,and those to which signatories of the Global Compact have pledged to accept, are those included in the International Bill of Human Rights(which includes the Universal Declaration).Among these rights is Article25 (1)of the Universal Declaration,which states in part that“Everyone has the right to a standard of living adequate for the health and
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well-being of himself and of his family,including food,clothing,housing and medical care and necessary social services”(The United Nations, 1948).
MEP populations live in deprivation of the human rights to subsis-tence and well-being,and this deprivation undermines their ability to exercise other rights(Sen,2009;Shue,1996).Capabilities are needed to attain subsistence and the ability to function well is necessary for the attainment of well-being.Business ventures may either enhance or inhibit human capabilities to function well.
Harmful exploitation of MEP populations occurs when TNCs take advantage of the cognitive and social vulnerabilities of the MEP in ways that violate or undermine their human rights.Such exploitation is an example of morally illegitimate TNC activity.This account has the advantage of explaining morally illegitimate ventures targeting the MEP as well as allowing for morally legitimate ventures targeting the MEP.However,further analysis is needed to provide a more fully realized theory of morally legitimate TNC ventures targeting the MEP.
3.3.Utility
Products and services marketed to the BoP may either improve the welfare of individuals or it may exacerbate the poverty of individuals. For example,affordable clean energy sources for a community may improve health and living standards.Companies such as D.Light are bringing clean energy through the sale of solar-powered LED lanterns into BoP markets in rural India(Shukla&Bairiganjan,2011).Howev-er,tobacco products will typically cause a decline in welfare by harming health and diverting money from basic needs.As we noted in the introduction,an essential feature of BoP ventures is the prom-ise of benefitting BoP populations.There are at least two ways of char-acterizing the benefits to BoP populations in general,and the MEP in particular,that business ventures may bring:increased utility though the satisfaction of desires,or increased achieve
ment of human rights via the capacity to function well(Sen,1999).Clarifying these two ways in which the benefits to consumers may be assessed will provide us with additional conceptual tools for building a theory of morally legitimate TNC ventures that target the moderate and extreme poor.
Consider utility enhancementfirst,focusing on the MEP.With re-gard to food or consumer goods,for example,more choices can be seen as enhancing the possibility of utility satisfaction.An MEP con-sumer,in this view,is made better off by being presented with more opportunities to choose from in the marketplace(Ireland, 2008;Prahalad,2004).Shops stocked with candy or sweets,tobacco products,sugary carbonated beverages,alcohol,skin whitening cream such as Unilever's controversial Fair and Lovely product,and lottery tickets provide the poor with more opportunities to satisfy de-sires.To the extent that the satisfaction of desires is the end,then the benefits of the product will be determined by the market demand among the MEP.Business ventures that tailor alcohol or tobacco products to the MEP,for example,and are rewarded with increased revenues,benefit the MEP on the utility view.Sales might be expand-ed,for example,by increasing the alcohol content of beer using local ingredients while reducing the volume per unit to reduce costs,or by adding to the nicotine content of the lowest grade tobacco to increase repeat sales and selling cigarettes in packs with fewer cigarettes to lower the price.
To illustrate the inadequacy of the utility view,consider the case of The Coca-Cola Company(TCCC)in Uganda.TCCC has developed a net-work of micro-distribution centers(MDC's)in African BoP markets that generate annual revenues in excess of$550million(Business Call to Action,2008).TCCC relies on the MDC model as its main distri-bution channel in Uganda.Studies confirm that the MEP spend signif-icant portions of their income on sugary products(Banerjee&Duflo, 2007;Gordon,2007).However,there are at least two problems with targeting the MEP as new Coca-Cola consumers.First,there is a lack of relevant disposable income to consume the product in the first place.17.6million Ugandan's are MEP consumers,yielding be-tween$1.50and$3.50of free monthly cashflow after accounting for expenditures on necessities such as food,housing,water,and ed-ucation(Hammond et al.,2007).Ugandans in this category would have to make important trade-offs in order to regularly consume Coca-Cola.
These trade-offs are pronounced when we consider that the data shows that the same group spends between$3.00and$4.50on hous-ing and between$1.75and$2.92on water on a monthly basis. Depending on local price,the purchase of a single Coca-Cola beverage can represent10–30%of an Ugandan's monthly housing and water expense alone.From a capabilities perspective,Coca-Cola is not in the best interest of MEP consumers in Uganda even though they are able to buy the product(Hammond et al.,2007).
Second,Heller,Burt,and Eklund(2001)found significant associa-tions between soda consumption and dental caries among individuals over25in the United States,the world's richest nation.Dental caries among individuals under25,however,are not significantly correlated with soda consumption in the United States.The authors attribute the difference to the widespread use offluorides since the1960s.In BoP markets,the poor are more likely to suffer from high levels of dental caries because of the limited use offluorides and lack of dental hygiene from a young age.A South African study found that parents “visit a dentist only when the child is symptomatic”(Gordon,2007: 183).Using health services only when emergency symptoms arise is typical in a BoP setting.In fact,97%of Ugandans spend just$1.25 to$7.25per month on health services(Hammond et al.,2007), suggesting that due to limited incomes overall,consumers behave reactively rather than proactively.In summary,while MEP consumers will purchase Coca-Cola products,the consumption of those products will divert income from more basic needs and contribute to poor health.
As this example illustrates,increasing the consumer choices of vulnerable populations does not always improve well-being and may contribute to a reduction in well-being.More consumer choices, accompanied by marketing,may lead individuals in circumstances of dire poverty to purchase alcohol products rather than millet,or accept usurious loan terms from a commercial micro-lender in order to
celebrate a religious festival.Utility reflects a person's current mental state,and current mental states often do not take into account future states of affairs.In the case of MEP consumers, mental states are shaped by malnourishment,the hardship of living without basic goods such as running water,electricity,or sanitation, feelings of social estrangement,and the emotional consequences of losing family members to disease,starvation,or fatal injuries while laboring.The cognitive and social vulnerabilities of individuals living in the MEP provide them with reasons for making consumer choices that are not consistent with their ability to function well.Based on the foregoing analysis we conclude that enhanced utility does not always benefit the MEP and sometimes results in harm to the MEP.
3.4.Capabilities
A second way of characterizing the benefits of ventures targeting the MEP is in terms of their ability to provide opportunities that enhance the capabilities of the MEP to function well as human beings. The capabilities approach is“a species of a human rights approach”and has been employed by the United Nations Development Program in its annual development reports since the1990s in order to evaluate the attainment of human rights(Nussbaum,2007:21;see also Sen, 2005).The capabilities approach is a philosophical framework that emphasizes the importance of human functionings to well-
being and stresses the importance of the capability to function well in allowing humans to maximize their well-being(Sen,1993,1999, 2005,2009).
To function well is to engage in activities and to experience states that a person would have reason to value.Examples of activities
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