Sustainable Businesses Can Unlock More Than US$1 Trillion in Latin America and the Caribbean by 2030
Business leaders and entrepreneurs can unlock new market opportunities worth more than US$1 trillion and generate up to 24 million jobs in Latin America and the Caribbean (LAC) by 2030 through sustainable business models, according to Better Business, Better World LAC, a new report released today by the Business & Sustainable Development Commission (BSDC).
“For the past several decades, much of Latin America and the Caribbean have been centers of democracy and free trade, and made considerable progress reducing extreme poverty, by as much as two-thirds,” said Mark Malloch-Brown, chair of the Business and Sustainable Development Commission. “This progress, however, is being undone by the rising threat of social and economic inequality, corruption, environmental degradation and climate change. Better Business, Better World LAC is a call to action to companies—from Argentina to the Virgin Islands—to pursue sustainable business models by showing what is at stake: more than USD $1 trillion in new market value and a more inclusive, stable, prosperous region by 2030.”
Better Business, Better World LAC is part of a series of reports, first launched in January 2017, which makes the business case for the Sustainable Development Goals, or Global Goals—17 objectives to eliminate poverty, improve education and health outcomes, create better jobs and tackle environmental challenges by 2030. The research shows companies pursuing strategies aligned with the Global Goals could open economic opportunities across 60 “hot spots” worth more than USD $12 trillion and generate up to 380 million jobs globally by 2030. Better Business, Better World LAC breaks down the estimated US$1.2 trillion of regional economic value across four key systems:
- Food and Agriculture: US$328 billion
- Cities: US$336 billion
- Energy and Minerals: US$321 billion
- Health and Well-being: US$223 billion
"A secure, sustainable supply of the raw materials for our brands and products is essential to the future growth of our business," said Paul Polman, CEO of Unilever, a company with a strong and growing presence in the region, having recently acquired Quala, a Latin American consumer goods company, and Mae Terra, a Brazilian organic foods company. "We are committed to sourcing our crops sustainably, both to protect the planet's resources and environment while also improving the livelihoods of the farmers in our value chain. For example, sourcing our soy oil sustainably in Latin America is particularly important to eliminate deforestation and preserve biodiversity, which can be negatively impacted by soy cultivation.
However, to achieve change at scale, we need to go beyond what we can achieve in our own operations and with our suppliers. That's why we work with farmers, companies, governments and NGOs to support sustainable production. It's about embedding sustainability across our value chain everywhere we operate." Paul Polman is also a Business Commission founding member.
Over the past 15 years, the Latin American and Caribbean region has achieved substantial social and economic improvements, including reduced poverty, inequality and hunger. But there are significant environmental and social challenges facing the region, putting its future economic growth and stability at risk. Extreme weather events linked to climate change, including droughts, floods, and hurricanes, are intensifying in the region, and the costs are rising. The 2017 Atlantic hurricane season has already been the costliest on record, with damages from Hurricane Irma alone in the Caribbean valued at US$30 billion. On the social front, average unemployment in the region rose above 8 percent in 2016. Although women’s participation in the region’s labor force, at 53 percent, is now above the 50 percent global average, gender inequalities in the workplace remain. Almost a third of women still have no income source of their own.
One regional company that sees the opportunity such challenges represent is Mesoamerica, a private equity investor based in Bogota, working in Spanish-speaking Latin America, which founded Globeleq Mesoamerica Energy (GME). Along with its partner, Actis, Mesoamerica built it into the largest private renewable energy company in Central America, generating more than 1.5 TWh (terawatt hours) per year, before selling its assets to a local group in 2017. Mesoamerica and Actis are now co-investing in Zuma Energía, Mexico’s second-largest renewable energy company.
“As asset managers, the Better Business, Better World report has challenged us to think beyond what opportunities Latin America presents to deploy capital by asking how can capital be put at the service of the region instead,” said Luis Javier Castro, founding partner and president of Mesoamerica, a private equity investor in Spanish-speaking Latin America. “This logic has been instrumental to broaden the scope of our analysis and develop sound investments strategies that, by addressing some of the most pressing challenges of the region, will yield superior financial, social and environmental returns.”
The Business Commission has identified 20 of the largest opportunities across the four systems, which account for nearly 80 percent of this prize. The top five include forest ecosystem services (US$193 billion); affordable housing (US$154 billion); risk pooling in healthcare (US$110 billion); circular models in automotive (US$60 billion); and renewable expansion (US$41 billion).
According to the report, 24 million jobs could be generated through SDGs-aligned business models in the region. Developments in urban construction, mobility and infrastructure could generate an estimated 11 million jobs. Almost one-fourth of the total employment potential in Latin America and the Caribbean – around 6 million jobs – comes from just one opportunity: affordable housing. Pursuing Global Goals opportunities could create nearly 6 million jobs specific to energy and materials, more than 5 million in food and agriculture, and around 3 million in health and well-being.
To unlock these opportunities, the report argues that business must bridge the investment gap needed to achieve the Global Goals by 2030. According to the UN, it is estimated that Latin American and Caribbean markets should invest 6.2 percent of their GDP in infrastructure each year, or US$320 billion dollars across the region, every year to 2020 to satisfy the most immediate infrastructure demands. Blended financing—where public and philanthropic bodies take on the high risk and more policy-sensitive tranches of investment—can fill the funding gap and help bring in private investors at lower risk.
Today’s release of the report is a highlight of the World Business Council for Sustainable Development’ (WBCSD) Council Meeting in Mexico City, 16-19 October. “The SDGs provide businesses with a new lens through which to translate global needs and ambitions into business solutions,” said Peter Bakker, CEO & President of the WBCSD, a business organization promoting sustainability, and a BSDC Commissioner. “The Better Business, Better World LAC report underlines how companies operating across Latin America and the Caribbean can harness these solutions to help better manage their risks, anticipate consumer demand, build positions in exciting growth markets, and strengthen their supply chains, while also moving the region towards the delivery of the sustainable and inclusive future that the SDGs represent.”
The Business and Sustainable Development Commission argues, however, that business cannot achieve the Global Goals alone. In order to unlock these opportunities, companies can take the first step by aligning with the UN Global Compact’s 10 Principles and the UN Guiding Principles on Human Rights. They can also earn its license to operate by paying its fair share of taxes, especially in a region where corporate tax evasion cost 6.7 percent of regional GDP in 2016. Governments must work with business to tackle corruption and illicit financial flows, as well as create enabling policies to support growth, competitiveness and productivity. Finally, civil society must continue its important work monitoring companies and holding them accountable. As we move closer to 2030, the world will need more companies working closely with civil society to ensure the fulfilment of labor rights, gender equality and environmental stewardship.
“The UN Sustainable Development Goals can seem overwhelming: 17 Goals and 169 targets, but this report allows business leaders to see the fruits of the forest—that is, the economic opportunity the Goals represent, particularly for small-to-medium enterprises and innovative digital visionaries,” said Laura Alfaro, Warren Alpert Professor of Business Administration at Harvard Business School, former Minister of Planning of Costa Rica and member of the Business Commission. “It also shows how a new social contract can build on the region’s past successes, making it a leader for the rest of the world."
The Business and Sustainable Development Commission is grateful to the Inter-American Development Bank Group for their partnership in creating the report. It also thanks Mesoamerica, the GSM Association, Climate Policy Initiative, Ericsson, and the World Business Council for Sustainable Development for their support and input.
Business leaders can learn more about aligning their companies with the Global Goals at businesscommission.org/join.