Bottom of the Pyramid

The term bottom of the pyramid (BoP) refers to the lower two thirds of the economic human pyramid, those 4 billion people living in abject poverty. More broadly, it refers to a market-based model of economic development that promises to simultaneously alleviate widespread poverty while providing growth and profits for multinational corporations (MNCs). The approach is also known as base of the pyramid (avoiding the negative connotations of the earlier term) and as sustainable livelihood business. It is increasingly adopted by firms in different industries (e.g., household goods, energy). Alleviating global poverty was identified as a top priority in the United Nations Millennium Goals. Unlike traditional aid-based models of economic development, BoP approaches recast poverty as an economic opportunity for MNCs. The basic argument has three premises: (1) the world's poor constitute massive growth opportunities and profit potential for multinational enterprises, (2) such companies are uniquely qualified to unlock the economic potential of these difficult to access markets, and (3) bringing the poor into the global economy will simultaneously generate fortunes for firms while solving the problem of global poverty.

Critics of BoP approaches note two crucial challenges, governance and sustainability; neither challenge is currently well addressed. Effective governance mechanisms and bodies are needed to regulate, monitor, and oversee the development of markets and effective competition, and like MNCs, they must transcend national sovereignties. Raising the consumption levels of the world's 4 billion poor dramatically requires radically new business models and technologies to avoid disastrous impacts on the earth's ecosystems; governance mechanisms are needed to enforce the adoption [Page 186]of radical resource efficiency measures and clean technologies across a multinational playing field.

Four billion poor people constitute a staggering market opportunity, but without buying power (income) and transaction capacity (credit, infrastructure, distribution systems, and other institutional frameworks), the poor are locked into poverty. BoP approaches contend that MNCs in particular have the incentive (growth opportunities), the financial resources, and the capabilities (low-cost mass production, marketing expertise, international experience) to produce and distribute appropriate, affordable products at high volumes and razor-thin profit margins. Working with political actors, small businesses and entrepreneurs, and aid organizations to overcome selfreinforcing poverty traps, MNCs supply goods and services, provide credit and social engineering, help reduce corruption, and facilitate growing empowerment. Engaging in BoP demands significant innovation, new business models, and organizational learning and offers opportunities for sustainable entrepreneurship. Once initiated, economic activity becomes the engine for continuing wealth generation and growth.

Bringing the poor into a global economy as active participants in consumption and production has significant implications for the notion of sustainable development, which depends equally on healthy social, ecological, and economic systems. To the degree that BoP approaches can empower the poor and alleviate poverty, they strengthen economic and social systems. Raising consumption levels of 4 billion people currently living at or below subsistence levels, however, massively increases the demand for energy and resources while producing pollution and waste. The strain on the natural environment will be devastating unless increases in consumption are achieved through radical improvements in resourceefficient, clean technologies, as well as effective regulatory schemes.

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