How small business can play a big role in humanitarian crises

Article published on world economic forum website on 01/13/2017

If the 125 million people in need of humanitarian assistance around the world lived in a single country, it would represent the 11th most populous nation on earth.

The United Nations Secretary-General’s High-Level Panel on Humanitarian Financing – which I was humbled to serve on – noted this fact when it published the outcomes of its deliberations earlier this year. Unfortunately, as the group also reported, the international community is increasingly unable to finance these growing needs.

The problem is likely to get worse before it gets better. The UN raised more money ($24.5 billion) for humanitarian assistance in 2014 than in any year on record while still recording its biggest-ever shortfall in humanitarian financing, with only 62% of global needs covered. In other words, the growth in costs is outpacing the ability of the humanitarian system to raise more funds.

How can the world’s needs be expanding so much faster than its generosity? Most stakeholders agree that one of the biggest drivers of the shortfall is the changing nature of humanitarian crises themselves. Historically, the cost of responding to humanitarian crises was split equally between natural disasters and human conflict. Today, 80% of humanitarian needs are caused by conflict – often with complex political dimensions – with most being recurrent or protracted crises. The average length of conflict-related displacement now reportedly stands at 17 years. These trends are putting sustained pressure on a humanitarian system that was designed for short-term emergencies.

Another striking aspect of the funding crisis is that the private sector is not doing its share. A shockingly low 4.8% of global humanitarian appeals were met by private sector donors in 2014. There are reasons for this, including the trust deficit that has emerged between the private and humanitarian sectors, and the historical tendency of humanitarian agencies and non-governmental organizations to treat the private sector as a checkbook rather than a true partner. However, it must be remedied if the international community is to make better use of the full range of assets at its disposal.

Encouragingly, some changes are already underway. Today, there is a growing willingness in the humanitarian sector to make better use of the private sector’s skills, capabilities and diverse networks rather than just seek financial donations. For example, the World Food Programme has partnered with MasterCard since 2012 to streamline aid distribution with the use of electronic payments technology. The expertise of logistics and insurance companies is being tapped to develop innovative solutions to some of the humanitarian sector’s key operational challenges. Discussions are also underway with Islamic financial institutions about creating more innovative sharia-compliant social finance bonds dedicated to addressing urgent humanitarian needs.

Steps are also being taken to make it easier for the private sector to collaborate with humanitarian agencies and NGOs. The “Connecting Business” initiative launched this year by the UN’s Office for the Coordination of Humanitarian Affairs (OCHA), the UN’s Office for Disaster Risk Reduction, and the UN Development Programme is one such development, giving the private sector a smoother entry point into the often-bureaucratic humanitarian system. At the same time, the private sector’s independence (and a more brutal focus on results rather than institutional processes) is helping to bridge the divide between humanitarian and development work, breaking down some of the barriers that have created inefficiencies in the past.

However, one layer of the private sector that is too often left out are the world’s small and medium enterprises (SMEs). This is a significant missed opportunity. SMEs make up 90% of private sector companies and generate half of employment worldwide. Beyond their economic importance, SMEs are also often small and nimble, are intrinsic parts of local communities, and are commonly already present in remote areas when crises hit. This makes them natural candidates to play a bigger role in addressing humanitarian needs. However, few formal mechanisms exist to coordinate their involvement in disaster prevention, preparedness, and response operations. As a result, one of the largest and most ubiquitous sources of private sector energy and goodwill is being squandered.

That is a big part of the rationale behind a new private sector-led initiative known as SME4H (short for “SMEs for Humanity”), launched at the World Humanitarian Summit last May. SME4H is creating an online portal where humanitarian needs can be posted by governments, humanitarian agencies, NGOs, and others, including SMEs. SMEs can respond to needs that are geographically close or technically relevant to their skills and capabilities, independently or in partnership with other public and private stakeholders. The initiative seeks to boost the resilience of local SMEs (and by extension, their communities), support the creation of jobs and economic activity, and improve coordination between local businesses, aid agencies, and NGOs.

There is nothing revolutionary about this idea. The UN has long been a believer in the power of public-private partnerships (PPPs) to achieve better humanitarian outcomes. According to the OCHA, PPPs already contribute “funds, in-kind donations, employee mobilization, cause-related marketing, or expert services” to humanitarian initiatives. However, if we focus too much on the capabilities and clout of big business we can overlook the contributions that can be made by local SMEs, and the long-term social and economic impact we can generate by involving them more actively in humanitarian-focused PPPs. Conversely, it has been documented how humanitarian aid can have unintended negative consequences on local businesses when they are not adequately engaged in its delivery.

Ultimately, there is nothing small about the world’s SME community. This extensive network of businesses could be having a much bigger impact on the ability of fragile communities to prevent, withstand and respond to humanitarian disasters. However, that requires the humanitarian sector and the international community to coordinate more actively with local SMEs and engage them more deeply in humanitarian responses. By doing so, we can seek to make humanitarian aid more of a long-term investment that leaves a lasting economic legacy on affected communities long after a crisis ends.