Business and inequality

Anna Triponel

July 22, 2022
Our key takeaway: Inequality—within communities, within countries and across borders—is growing and is becoming entrenched. The Business Commission to Tackle Inequality and the World Business Council for Sustainable Development put it plainly: “Inequality is not a fact of nature, but a product of our systems, which can change.” Businesses should acknowledge their role in creating and exacerbating social and economic inequalities, but should also recognise their substantial power to reduce inequality. Key steps include ensuring respect for human rights, enhancing access to essential products and services, creating decent work and paying fair wages, distributing the benefits and risks of business equitably, supporting rather than eroding government actions to tackle inequality and taking urgent action to slow climate change and prevent nature loss. 

The Business Commission to Tackle Inequality (BCTI) and World Business Council for Sustainable Development (WBCSD) published Tackling inequality: The need and opportunity for business action (July 2022), highlighting the role “for business leaders to take action on inequality”:

  • Inequality is a systemic risk: The report underscores the depth of the inequality problem. For example, “[t]he top 10% of earners receives nearly 52% of total global pay, while the lowest-paid half of workers receives just 8.5%” and “[s]ince 1995, the richest 10% has accumulated more than 20 times more wealth than the poorest 50% combined.” Meanwhile, macro trends are exacerbating inequality, including the COVID pandemic, the climate crisis, technological disruption and armed conflict. The consequences of inequality are wide-reaching. Research highlighted in the report shows that many people are both dissatisfied with their current circumstances and pessimistic about the future. Likewise, inequality is reducing trust in institutions like government, business, the media and civil society and simultaneously compounding a rapid erosion of social cohesion and fueling civil and political unrest: “where inequality is higher, people are less willing to take action to improve the living conditions of others, participate in civic life at lower rates (for example, through voting), and more frequently believe in conspiracy theories.” BCTI also points out that “[i]nequality acts as a threat multiplier, increasing the impact of crises ranging from pandemics to climate change.” For example, according to research by Oxfam and the Stockholm Environment Institute, “the richest 10% of the population generate approximately half of all carbon emissions, while influencing others to aspire to similar high-carbon lifestyles.” In turn, the Intergovernmental Panel on Climate Change (IPCC) has stated that inequity increases individual and societal vulnerability to climate risks and impacts. Ultimately, this is likely to negatively impact the world’s ability to fight climate change; “enormous differences in assets, resources, and access to power increase the risk that the costs and benefits of climate action will be distributed unfairly, with disadvantaged populations likely to incur the biggest costs and realize few of the benefits. People will work against the transition to net-zero if they feel they are being left behind.”
  • Businesses have a clear case for action: BCTI acknowledges that many common business practices contribute to inequality. For example, at a workplace level, companies may be paying low wages and reducing benefits, using gig and contract labour that puts workers in a precarious employment situation, offshoring or eliminating jobs using technology, fighting trade unionisation and discriminating in hiring, promotion and compensation. In the marketplace, companies are “under-investing” in developing innovative, affordable and inclusive products, services and business models, while deploying advertising and using data that can reinforce social and economic inequality. Within the supply chain, they may put downward pressure on their suppliers by pushing prices down and pressing for faster delivery and extended payment terms. Companies are also influencing the overall business landscape by avoiding taxes and lobbying for “looser regulation, weaker protection for workers and consumers, and lower taxes.” At the same time, BCTI believes that addressing inequality will ultimately strength the business operating environment by increasing economic growth, building political stability and containing global crises. It will also benefit companies directly by ensuring their license to operate, attracting and retaining talent, attracting consumer, increasing access to capital, building resilient supply chains and keeping ahead of regulatory changes. 
  • An agenda for action: BCTI presents a six-pillar agenda for businesses to reduce inequality. This includes respecting human rights in line with the UN Guiding Principles on Business and Human Rights: “This responsibility is central to the business agenda for tackling inequality because human rights are, in effect, the baseline requirements of a level playing field.” Companies can also look to increase access to essential products and services in underserved markets, since they provide the “lion’s share” in comparison to governments. Creating decent jobs and fair economic opportunities can help ensure “that the workforces of today and tomorrow are skilled and empowered to manage the complex disruptions now unfolding in the world of work, from rapid technological evolution to the transition towards a net-zero economy.” Businesses should seek to distribute value and risk equitably between shareholders, workers and business partners at all levels, while acknowledging that though governments make public policy, business “profoundly influences the process and its outcomes. Companies must use their political influence and tax practices to support, and not hinder, government action to enhance equity and create equal opportunity for all.” Finally, companies must take action to reduce their emissions, halt nature loss and support nature’s recovery. 

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