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The private sector: a key partner for sustainable development


The world is off-track to achieve many of the Sustainable Development Goals (SDGs) by 2030, according to the latest UN SDG progress report. The development funding gap is estimated at USD3.9 trillion [CAD5.3 trillion], which cannot be met by governments and donors alone.

The private sector is a key global actor and major source of employment. It deploys significant resources, including financing and technical expertise. As such, it is a critical player in the development landscape, with the ability to design, scale and sustain initiatives if incentives and conditions are right. At the same time, the private sector can have a negative impact on society, when the pursuit of profit comes with a heavy cost that is borne by others.

IDRC’s approach to private sector engagement is organized around three key outcomes:

  • creating a robust evidence base through new, actionable research on approaches at the intersection of private sector actors’ priorities and global development agendas;
  • developing a strong enabling environment, via policies and regulations that influence private sector actors towards positive action on the SDGs; and
  • increased resource commitment, via improved dialogue and resource mobilization to enable private sector actors to adopt and scale sustainable solutions.

IDRC is working to advance these outcomes through an array of initiatives that aim to harness and amplify the contributions of private sector actors towards building a more sustainable and inclusive world. This article highlights a diversity of experiences and key learnings for how IDRC engages with the private sector to achieve these three outcomes.

Creating a robust evidence base

Our experience so far indicates there is no “one size fits all” approach to identifying the intersection of private sector actors’ priorities and global development aims, though in all cases IDRC begins with the development challenge and then looks for ways in which the private sector could help address it.

With this principle in mind, public calls for proposals have led to innovative private sector collaborations with organizations like Agriculture and Climate Risk Enterprise Ltd. (ACRE) Africa, a private insurance company, and the development of new, climate-smart picture-based crop insurance for smallholder farmers in Kenya. This product was found to improve farmers’ demand for insurance and their investment in agricultural production.  

In Latin America, dialogue and the pursuit of mutually shared interests resulted in an initiative with the Aspen Network of Development Entrepreneurs (ANDE) to support small and growing businesses to measure their social impact with a gender lens. Through this collaboration, numerous gender lens tools and resources were developed with local researchers, resulting in evaluations of enterprise gender-equity policies and insights on how women experience empowerment through companies’ supply chains. This led to enhanced business operations for gender equality, which also benefited firms as it exposed additional training needs among their female suppliers on matters such as product processing and quality.

Private sector actors can also play a knowledge brokering role, linking producers and users of knowledge to facilitate its dissemination and eventual use. The approaches that private sector partners take can vary and are often defined by their purpose and mandate, but the aim is still to move knowledge into action. For example, as a for-profit company, ACRE will likely continue disseminating information around its new insurance product, as doing so is how it drives revenue growth and helps mitigate risk for vulnerable farmers, increasing their resilience to extreme weather events. ANDE‘s institutional mandate includes promoting knowledge sharing with its members on evidence, challenges and opportunities for small and growing businesses; this is part of the role and function ANDE plays for them. This knowledge sharing is particularly valuable as many members are small firms that may lack the resources to create new knowledge on their own to a significant degree.

Developing a strong enabling environment

This outcome of our approach to private sector engagement is creating an enabling environment to influence the private sector towards positive action through work on public policy and regulations. These policies can generally be categorized into two groups: “enabling” policy and “mitigating” policy.

Enabling policy is defined as a change primarily intended to expand opportunities or ease of doing business for a sector or specific types of firms. For example, IDRC is supporting research in East Africa to assess policies and identify barriers for women-owned businesses to participate in public procurement opportunities.

Evidence from this research demonstrates the importance of systems change across our private sector engagement work, and how engaging with policymakers as the target of research can result in positive impacts for a range of businesses. It has also shown how other complex, interrelated barriers (such as restrictive sociocultural norms, corruption and access to finance) can accompany legal and policy challenges, and how complementary initiatives are needed for reforms to realize their full potential.

Mitigating policy is defined as a change to reduce the access to or impact of a good or service that has harmful impacts on the consumer and/or society (i.e., tobacco), or to address other unethical firm conduct. Policy or regulation changes here could affect the profitability of firms in related industries.

A noteworthy example is IDRC’s programming to enable consumer-friendly front-of-package (FOP) nutrition labeling in MERCOSUR countries, with an emphasis on Brazil and Argentina. This project contributed to a mandatory new nutritional label policy in Brazil in 2020 and a new food labeling law in Argentina in 2021. Experience in both countries reinforced the importance of building on local policy stakeholder networks and leveraging their relations within the political environment, as well as the significance of a well-defined policy challenge for projects that are relatively short in duration.

Increased resource commitment for sustainable solutions

Our experience indicates that engaging with the private sector can lead to increased resource commitments by and for the private sector in different ways, to promote inclusive, sustainable growth. Through an initiative with the Private Financing Advisory Network (PFAN), firms working on climate adaptation were supported to develop a business case for private financing and pitch them to a panel of investors. This approach proved to be successful, resulting in additional funding commitments for a number of entrepreneurs.

Beyond financing, non-monetary resources are an important element to also consider. New data, information or technology transfer between private sector firms, or from public to private actors, can be equally as important as an influx of funding and enable a business to grow and develop in other ways.

Innovation and a culture of risk-taking are also common themes across partners and entrepreneurs under this outcome. Villgro Africa has been working with IDRC to expand access to research and development (R&D) for healthcare tech startups, through small grants and by facilitating linkages between entrepreneurs and public research organizations. Villgro, the businesses supported and researchers have all shown a willingness to invest their efforts in an idea, even if the evidence base for doing so is limited at the start. This openness to taking and supporting calculated risks is critical to driving progress on business and development goals.

As a research-for-development funder, IDRC plays a unique role supporting the generation, sharing and use of research evidence. Our ambition of contributing to a more sustainable and inclusive world means we are also making investments to scale impact. The experiences captured to date on IDRC’s strategic private sector engagement outcomes are promising, and new approaches continue to be tested and refined. Through strong impact measurement and a culture of learning, IDRC remains committed to exploring innovative ways to harness the private sector in the service of achieving global development goals.