Does Integrity Matter in BOP Ventures? The Role of Responsible Leadership in Inclusive Supply Chains

Abstract

Does responsible leadership matter when assembling an inclusive supply chain at the Base-of-the-Pyramid (BOP)? Current literature implicitly assumes that it does not. BOP scholars initially focused on the importance of shaping innovative and disruptive offerings, with radically improved price–performance ratios. Subsequent studies tended to focus on barriers to implementation of large-scale ventures at the BOP. Their common characteristic was the fact that the attributes and roles of the individuals involved were deemed unimportant. If the opportunity was there, provided barriers were removed and the right value proposition was offered, the inclusive venture should take off. We evaluate three cases of leaders who succeeded in building inclusive ventures at the BOP, in contexts marked by institutional voids—where formal markets were weakly structured or nonexistent. Building a viable business under those circumstances entailed two tasks: imagining what is possible and then turning that vision into a reality. We found that, in carrying out those tasks, individuals do matter. Sampled cases show that working with nontraditional partners in inclusive supply chains requires more than aligning material incentives. Our analysis suggests that responsible leadership (RL) with a strong ethical foundation can provide powerful leverage to ensure buy-in and commitment from the various actors involved. We show how RL can impact organizations and external stakeholders through positive upward spirals. Our analysis contributes to the literature on BOP and RL by confirming, extending, and challenging existing knowledge. We propose two novel attributes (catalyst and social innovator) and argue that context matters, influencing how RL is operationalized and defined. Understanding the critical role of RL in the construction of inclusive supply chains adds a critical missing link that sheds light into the micro level of new business creation, development, and consolidation at the BOP.

Appendices

Appendix 1: Complete List of Interviewees

WOK	RUNA	GUAYAKI
Founding Entrepreneurs (× 2)	Founding Entrepreneur and Partner	Founding Entrepreneur and Partner (× 3)
Operations Manager	Foundation Director	Foundation Director
Administrative Manager	Ecuadorian Exports Promotion Agency Representative	Regional Director
Store Manager	Kichwa Farmers Association Representative	Organizational Consultant
Administrative Clerk	Development Bank of Latin America (CAF) Officer in Ecuador	Sales VP
Procurement Manager
Financial Manager
Quality Manager
Service Manager
Suppliers (× 2)
Workers (× 3)
Organizational Consultant
Note: The number between parentheses denotes that for those positions, more than one interview was held.

Appendix 2: Responsible Leadership Roles: Analysis of Villegas and Prior

Responsible Leadership Roles	Benjamin Villegas (Wok)	Alex Prior (Guayaki)
Leader as Steward	Villegas: “Unrestrained growth is incompatible with Wok's concept. It may be good for others, but not for us! In fact, if today we decided to open 10 new restaurants in a year, we probably couldn't because of the limits imposed by the environment and by our community-based procurement model. It's not like opening one more McDonald and carbon-copying a successful model. That's part of Wok's essence” (Reficco et al. 2018, 1180). Villegas has led Wok steadily forward, in pursuit of his vision of sustainability: For nineteen years, this Asian food restaurant chain has worked towards becoming a sustainable business (Taborda 2017)	“For Pryor, mere conservation was not enough. He saw himself as a steward of the environment. Combining this revelation with their belief that a market-oriented solution could expand the forest, the group tried to fashion a way to address these social and environmental ills using business principles. Constructing a business model to expand forests called 'market-driven restoration,' they fashioned a set of principles that would guide Guayakí’s approach to doing good by doing well” (Russo and Crooke 2016, p. 1)
Leader as Visionary	Villegas: “Wok is a right for everyone... because food isn’t the only important aspect of our business: our employees, providers, and clients are our allies, and the environment is our home” (CECODES 2015)	Pryor: “We set as our mission for the year 2020 to restore 80 thousand hectares and a thousand families. 200 thousand acres” (Berger and Lomé 2018). “What is the vision of Guayaki: through the global culture of yerba mate, we shall be able to generate more ecosystems and more communities.” (Personal interview) “We measure success by the acres of rainforest protected and reforested, the number of native communities assisted with a sustainable livelihood, and the contentment and inspiration of our employees” (Russo and Crooke 2016, p. 6)
Leader as Servant	Villegas: “True health involves, first and foremost, respect—respecting people, customers, suppliers, the community and the environment.... Wok used to pay Red de Frío 57% over average market prices and nearly ten times as much as intermediaries’” (Personal interview). “Villegas shows a sense of responsibility and belonging towards Colombia and the poor local communities and multiple stakeholders that participate in his business. He was able to recognize and respect and tend to the various needs of his stakeholders and followers while mobilizing the stakeholders towards a common goal of a ‘healthy restaurant.’ He showed authentic willingness and desire to support others and to care for their interests and needs” (Jaén and Cifuentes 2018)	Pryor: “Basically, it is about talking to the producers so as to understand their needs and find a solution together. But it was not easy at first to propose this form of work to the small yerba growers, as they were used to having rules imposed on them by intermediaries” (Berger and Lomé 2018, p. 3). “Whenever I approached a community, my method has always been to collaborate and co-create” (Personal interview)
Leader as Coach	Wok Restaurant Manager: “I wouldn't know how to begin expressing my gratitude to my bosses, as they have always been eager to lend their ears and see how we were doing. They knew they had to be close to their employees and to make sure they were comfortable in this company, and to follow up on any issue that came up. I had never had anything similar in my previous jobs” (Personal interview)	N/A
Leader as Architect	Villegas was the architect of ethical and inclusive organizational policies. “Wok pays community fishers about 10 times their best foregone alternative, and offers customers lower prices for better perceived quality, while respecting restrictions in fish supply dictated by biological imperatives (in ways the rest of the industry largely neglects). Yet, their community-based fish supply chain substantially improved their margins. For example, the new model almost doubled the margin of contribution of a tuna sushi order (from about 35% to 67%), a most popular product... Wok's representative products is sold 24% below competitors' prices, despite a market which considers Wok's offering as being of higher quality... This deliberate policy was founded on respect for customers and the value they would capture as they patronize Wok. In the words of Wok's CEO, “it's about pricing responsibly to make the business viable with reasonable margins. We try to be respectful and fair, heeding Wok's market conditions and costs rather than competition drivers” (Reficco et al. 2018, p. 1180)	Pryor made sure that management systems and incentives pursued goals aligned with sustainability: “We measure success by the acres of rainforest protected and reforested, the number of native communities assisted with a sustainable livelihood, and the contentment and inspiration of our employees” (Personal interview)
Leader as Storyteller and Meaning Enabler	“My philosophy was that food should be affordable for many people... As Wok's first menu stated 'because food is everyone's right’... The vision of MundoWok... is that of a purer and healthier world... this is the vision we have for the company and we communicate it to our employees... The Wok logo is a star, which communicates care for the fisheries, for our trees, our mountains, our agricultural lands” (Villegas 2016)	Pryor: “We want consumers to know that, when they purchase Guayakí products, they are boosting the demand for a product that makes renewable resource management sustainable, not only for the rainforest but also for the communities living there” (Personal interview)
Leader as Change Agent	In 2015, Villegas was one of the signatories of Fogón Colombia, with other professional cooks, a manifesto which took various bold public positions. “We understand cooking as an instrument of education and awareness of society. From there we want to influence and coordinate our lines of action with different levels of society and the State.... We want to engage and participate in the national agenda on the following topics... We are committed to protect, document, use, and disseminate the inventory of seeds and vernacular products that today tend to disappear due to the implementation of questionable economic policies.... The existence of child hunger and malnutrition as a result of unbalanced economic policies is inadmissible. No more Colombians starving... Our environment is everything and we want to protect it” (ProColombia 2018)	“We organized meetings and invited opinion and local leaders—such as local administration officials or members from the Brazilian equivalent to Argentina’s National Farming Technology Institute (INTA, for its Spanish acronym). Every workshop was different, so we invited a large variety of people: academics, business leaders, people from NGOs—like Brazil’s O Boticario or the local equivalents of the Wildlife Conservation Society or The Nature Conservancy. The excuse for the invitation was, of course, yerba mate trade” (Personal interview)
Leader as Networker	Villegas understood leadership as a platform for inclusion through which he could weave relationships, in which he positioned himself as equal. Villegas and his team created “Wok World” as a space that served to strengthen the relationships between providers, employees, and clients by holding cooking events and conferences (Lobo et al. 2014)	Pryor: “I continued coordinating the annual workshops myself. We set the date and then, together, we convened key people to participate. We work sharing strengths, opportunities, challenges, and dreams. Then we work in small groups that may be related to topics such as ‘gender’, ‘quality’, ‘production’, ‘youth’. There are materials such as cards, markers, playdough, and suddenly someone says, “I start”, and the ideas, the drawings, the words begin to come out. With all that material then we covered the corridors of the city hall. And from there, things that are the result of the common denominator are triggered. If I have to think about how we started doing it, I think it was something I learned experientially in my years in California, from the community decision-making culture: if we make a mistake, we're all wrong together. You know, that in the communities was quite countercultural!” (Personal interview)
Leader as social innovator	Villegas led the creation of broad-based coalitions of multiple stakeholders: fisherman and farming communities and associations, not-for-profit NGOs, for-profit enterprises, and public agencies (Reficco et al. 2018, p. 1173). He went to great lengths to educate the public in responsible consumption, even at the risk of alienating customers and losing sales. Commenting on Villega's policy, his partner Ricardo Macías, stated: “A marketing expert would say, ‘you’ve made a mistake, because you are losing sales,’ but I think that our message goes beyond selling.... From a marketing standpoint, this is a weird strategy. On the one hand, we wondered if it was wise to jeopardize our sales, but, on the other, we were certain this was the right way to go about it” (Personal interview)	Pryor: “Our business model is a market-driven restoration one. Success measurements for this scheme take into account three pillars: economic viability, social justice, and environmental care. And we want consumers, for their love of mate, to become the force that guides the market towards conservation and community development by paying a fair-trade price” (Personal interview)
Leader as Catalyst and an effective rainmaker	“Anyone can have an idea. Even a good one. But not everyone is ready to turn that idea into something real. Something that grows, that involves many people and that continues to make us feel the same passion that we experienced the day that we originally came up with this idea. That’s how Wok began...” (Deckers et al. 2015)	“We were the first to lobby for yerba mate to become a certifiable product within fair trade. Back then there was nothing but banana, coffee, cocoa, and sugar; then, they started to incorporate more. Since there was not enough volume at the international market level, at first, they simply ignored us... Remember: there was no regulation, there was no country in the world with a food code that defined what was an organic product when we started. What is now the IFOAM (International Federation of Organic Agriculture Movements) did not exist” (Personal interview)