Business can change the world for the better – but it needs enlightened leadership and bravery to see beyond the bottom line in search of more profound social goals, such as tackling global inequality. That’s where academic researchers can step in, providing the ideas and the ammunition to help develop sustainable, affordable, evidence-based solutions.
London Business School’s Wheeler Institute for Business and Development applies business insights to tackle the world’s biggest problems – and fosters a community of learning and practice to accelerate impact. We spoke to some of the inspirational young researchers whom the Wheeler Institute is supporting about the aims and ideals behind their visionary projects.
Using entrepreneurship to transform the lives of women
How business can empower women in developing economies is not a new field of research and the literature is home to countless studies. But they tend to suffer from a common drawback: they only focus on the economic outputs. Iris Steenkamp is determined to correct that imbalance by looking at the social outcomes of employment. Her work aims to empower women by integrating them into the economy in parts of the world where there are strong social biases against female labour outside the home.
Women in developing countries fare worse than men on many dimensions, including constraints on autonomy in decision-making, employment and mobility. This is especially the case in rural areas – the focus of Steenkamp’s research – where the status of women is often low (witness the Indian saying, “Raising a daughter is like watering your neighbour’s garden.”)
One reason for this is the belief that women provide inferior returns when given opportunities, training or education. But that view is increasingly anachronistic: estimates suggest that in India, for example, a 10% increase in female participation in the labour force would raise GDP by a massive 1.4%, or $700 billion. And, as Steenkamp is quick to point out, “Getting more women into the labour force is not just important for India – it is important for every country, developed and undeveloped.”
As Steenkamp explains, the social benefits are not purely economic: “One of the things we’re looking at is engaging women in sales and entrepreneurship – how engaging in sales activities can shape how individuals think and behave, and how it can even shape how their communities think of them and behave towards them. In one study, we conducted a randomised controlled trial with rural Indian women to study how the very act of selling products and services positively shapes their own thinking and behaviour.”
Steenkamp is convinced that encouraging female entrepreneurship can beget deep and long-lasting change: “We found that, by going out of their homes and engaging with other people and persuading them to adopt health-improving products, we can simultaneously transform lives, increase profit for the firm, and transform the saleswomen... the act of selling successfully can lead to psychological and personality change for women that, in turn, leads to roles with more authority that could have a profound impact on life outcomes for generations to come.”
And the potential gains are not one way: “I greatly admire the women that I work with. I have learnt so much from them, I’ve learnt about life and persistence. These women are so strong – I’m humbled by the way they get on with life, seizing opportunities no matter what life throws at them. None of this would have been possible without the Wheeler Institute’s funding and support.”
Democratising information through mobile phones
Many development agencies and businesses today attempt to leverage information to try to improve the lives of those living in extreme poverty. The problem, often, is that an information barrier inhibits their attempts. That is why Alp Sungu’s research initiatives in the slums of Mumbai, India share a common theme: understanding human interaction with the digital world in places where death from malnutrition and disease is part of day-to-day life.
He explains: “My advisor, Professor Kamalini Ramdas, and I are aiming to generate insights into a part of the world where most successful businesses are failing to integrate due to a bi-directional information barrier. The poor in developing countries do not have access to relevant information that has been long enjoyed by people in developed nations, and we have no real idea about many aspects of how they live [so] there are fewer chances for ideas to meet and for innovation to happen. We are focusing on pathways to reduce this barrier by leveraging business insights.”
Their research investigates how economically poor users spend their time on their mobile phones and how to reduce their information isolation. Sungu says: “One reason poverty still exists today is that the poor are isolated from information and markets. This makes mobile phones a fundamental tool for the development agenda because they are a cheap and scalable way to achieve a global democratisation of information. Mobile phones have received great attention from the United Nations and developing country governments. Numerous initiatives subsidise mobiles and provide useful information to people in extreme poverty, such as advice on basic hygiene and agricultural advice for farmers, and provide access to mobile banking.”
How the very poor perceive their mobile phones is underresearched, so the researchers conducted surveys to try to understand usage. “In Mankhurd, the slum community with the lowest human development index in Mumbai, we found that users perceive their phones as a source of entertainment [such as] streaming films and sporting events,” reveals Sungu. “Users often exhaust their data and face challenges accessing advancement-enabling information. Once you finish your data, you do not have access to the internet, greatly reducing information access.”
The solution therefore lies not merely in new technology, but in new perceptions, says Sungu: “Finding ways to change how underprivileged users use their mobile phones is going to be important in increasing their impact on pushing back poverty.”
Environment? It’s the economy, stupid...
Before his PhD, Diego Kaenzig’s work focused on monetary policy, but – as with so many of the researchers whose groundbreaking work is funded by the Wheeler Institute – he came increasingly to realise that much of the focus in his subject area essentially was missing the point: not enough resources were going into understanding climate change from an economic perspective.
“At some point I realised that climate change is the defining problem of our time,” he says, “and not enough resources are going into researching the economic impact. For its scale and importance, it is not a well understood issue. I want to change that and the public perception of economists – it isn’t just about numbers but people’s lives.
“If we want to tackle global warming, we must understand the economic impact. There are many connections between the environment and the economy, and it’s crucial to understand these interactions. The role my research plays is raising awareness of the economic risks that come with rising temperatures and the frequency of extreme weather patterns.”
Kaenzig believes that, for people to change behaviour, “politics, business and finance all must work together to make a change... it can’t be solved by one stakeholder.”
It begins with trying to form consensus on the issue among economists, analogous to the scientific consensus on global warming: “There isn’t a strong consensus among economists. The issue is the uncertainty, therefore we have to understand global warming in economic terms and how this uncertainty affects the economy. Global warming is affecting business decisions and this is where we as researchers can play a role.”
The next step is to change behaviour among business leaders by incentivising them to adopt new business models. “Investors can play a crucial role in changing behaviour by investing in environmentally friendly business models. For example, I’d like to see investment companies produce more financial instruments, so the general public can invest in green companies.
“Climate risk has many parallels to the 2008 financial crisis, in the sense that it is a systemic problem. It could be very bad for the economy and it could be irreversible.”
And while some analysts see environmental positives in the pandemic-enforced slowdown, Kaenzig believes that any progress has been at great economic cost and is unsustainable. Instead, he argues, economists need to see global warming as an inequality issue:
“Economists aren’t seeing the whole issue because the poorest are the least connected. If we can demonstrate the connection between inequality and the environment, we can construct economic arguments for change – arguments we will need more than ever as government economic support in the pandemic for those out of work is gradually withdrawn.”
How to direct billions of pounds of investor cash into development issues
Assessing companies based on environmental, social and governance (ESG) criteria is not new and – driven by factors including social activism, client demand, a new generation of fund managers and the establishment of the United Nations’ Sustainable Development Goals – the investment industry has developed a veritable arsenal of products to measure a firm’s ESG metrics. (Governance metrics, for example, include looking at the makeup of the board, the length of tenure and independence of its members, and the number of women and BAME members.)
To help attain the UN SDGs, part of the aim of ESG is to direct investment money away from certain industries, such as fossil fuels, which tend to score poorly in terms of sustainability – but the SDGs will not be met without significant corporate action. As a former investment manager (including a stint with BlackRock, the world’s largest asset manager), Kevin Chuah has first-hand experience in the growth of ESG investments and is intent on putting his insider knowledge to maximum use to help accelerate the necessary action by companies.
His research focuses on how and the extent to which investment firms pay attention to the sustainable development agenda – then how to push them to do more. “The first step to taking action is paying attention to these issues,” he says. “The challenge, empirically, is trying to work out what investment firms are paying attention to. The way that a lot of research and management is carried out is to look at the text that these organisations produce, [such as] press releases. The way I’ve gone about it is to focus on their Twitter feeds.”
It is a crucial difference: whereas firms can pretty much say what they like in corporate puff pieces, industry regulation limits what they can tweet. Twitter is thus providing Chuah with a consistent flow of statements by investment firms, helping to highlight the disparity between what they claim to do and what they actually do.
“The challenge is shifting the industry towards focusing on these issues,” Chuah says, “but some investment firms haven’t been willing to make that transition. The impact I’m trying to have is to shed light on these reluctant investment firms and, by understanding what drives their behaviour, we can push the whole industry in this direction.”
The findings will also be used to generate insights “to inform key changes in the way we invest our pensions and savings.” Whatever else it may achieve, Chuah’s work will likely have a lasting legacy in terms of the language of ESG discourse: it includes compiling and disseminating an SDG dictionary to standardise how researchers study different goals in a consistent way.
Sharing the risk of cybersecurity
It was the 2017 “Wannacry” global ransomware attack that first motivated Rustam Jamilov to explore the impact of cyber-attacks on the public at large. What he found was truly alarming. “We don’t necessarily feel the impact of cyber-attacks in everyday life as citizens, but businesses certainly do,” he says. “We are just one major cyber-attack away from this being the focal point of all our discussions – and not just in policy circles.”
If that’s true of developed economies, the threat to lives and livelihoods is exponentially greater to institutionally fragile environments with poor penetration of training and education, especially in the event of large-scale, state-sponsored cyber-attacks that can potentially affect entire populations and geographies.
Jamilov is determined to help redress the lopsided equation through a particularly innovative approach: spreading the cost of cyber protection to protect citizens globally. He explains, “Apart from being less well hedged against cyber-attacks, developing economies lack access to insurance. It’s paradoxical that a country which is, on one hand, struggling to put bread on the table is, on the other, in dire need of business services if it is to lift itself out of poverty. The answer is for the cost of cyber protection to be built into all our lives – maybe we need onebig attack to make people sit up and take note.”
His project uses state-of-the-art machine-learning algorithms to analyse the texts of firms’ quarterly earnings announcements. The research adopts tools from computational linguistics and identifies dialogues with references to such textual combinations as “cyber incident”, “data breach” and “ransomware risk”.
The aim is to interrogate the data to try to understand who the most vulnerable firms are. In which sectors do they operate? What are their characteristics? Is risk preventable or insurable? And which institutions and societies are most likely to be the worst affected? Based on that information, the algorithms infer the mental process that guides the cyber terrorists in selecting their targets.
Jamilov explains: “When targeting, say, the banking or the manufacturing sector, it’s important to know whether victims of cyber-attacks are picked at random or based on some kind of risk factor. In the latter case, identification of these factors of vulnerability would be of first-order importance for policymakers.”
Another arm of the study tracks the impact of realised and disclosed cyber-attacks on firm’s performance and stock prices. “If the value of the firm is at risk, the welfare of the stockholders is at risk, and potentially the welfare of the workers is as well,” Jamilov points out. “Cyber risk can have direct implications for firm investment, employment and the income streams of both workers and stockholders. If we can demonstrate this, we will have shown that cyber-attacks are a source of systemic risk. This is not so easy to do, given severe data limitations. “Thanks to the Wheeler Institute, we have been able to apply a novel empirical approach to a new dataset. We hope that our work will raise the much-needed awareness among policymakers.”