Small businesses and AI: Accelerating innovation and inclusion

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Highly confident, women entrepreneurs still face systemic barriers

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How data and AI can drive change: 4 ways forward

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Unlocking the power of small businesses to drive climate-smart inclusive growth

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Small, family-owned shops play a vital role in under-resourced communities worldwide. They are more than just local businesses; they are lifelines that provide essential goods, services and job opportunities. Mom-and-pop stores function as convenient one-stop destinations for everyday needs, and in areas where formal banking is scarce, they can offer small-scale financial services, contributing to financial inclusion.&nbsp;&nbsp;Today these local mainstays not only are essential for their traditional roles, but can also serve as catalysts for promoting sustainable consumption within their neighborhoods.&nbsp;Two Mastercard Strive Innovation Fund winners have developed novel solutions focused on reducing plastic waste through supply chains.Two winners of the Strive Innovation Fund,&nbsp;<a href="https://www.strivecommunity.org/programs/novek" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Novek</a>&nbsp;and&nbsp;<a href="https://strivecommunity.org/programs/alner" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Alner</a>, have developed novel solutions focused on reducing plastic waste through supply chains in their respective markets, Kenya and Indonesia. In this Q&amp;A, Ellen Jackowski, Mastercard's chief sustainability officer, asked the founders to share how these solutions further environmental sustainability in local communities while also supporting the growth and resilience of small merchants.&nbsp;&nbsp;Ellen Jackowski:&nbsp;Why is it so important to drive sustainable consumption? And what's the opportunity with small merchants, particularly in emerging economies?&nbsp;Bintang Ekananda, director and co-founder, Alner: We are facing a significant environmental challenge, particularly with single-use plastic pollution. In Indonesia, a vast array of products, including everyday items like soap, shampoo and rice are sold in multilayer sachets or pouches. These are predominantly distributed through warungs, the local neighborhood stores, which number in the millions across the country. These types of packaging are extremely difficult to recycle. Current solutions are mainly focused on downstream processes like recycling, but the global recycling rate stands at only 9%, and much of the packaging used in Indonesia is not recyclable at all.&nbsp;&nbsp;Zahid Mitha, co-founder, Novek:&nbsp;Small merchants drive commerce in developing markets — we're talking 70% to 90%. If you're trying to drive any form of sustainable consumption and you're not focused on small merchants, it's a waste of time.&nbsp;As for sustainable consumption, if we think about the fastest-growing populations, they're in developing countries like Kenya. This is where the world's future waste will come from, disproportionately. If we don't fix it here, we're creating huge problems down the line.&nbsp;

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Zahid Mitha

CO-FOUNDER, NOVEK

Jackowski: How does Novek's solution address this challenge?&nbsp;&nbsp;Mitha:&nbsp;Our solution allows consumers to come with their own containers and buy as much as they can afford at duka shops, small retailers that supply roughly 80% of consumer goods in Kenya. We provide dispensers at stores and technology across the supply chain. This eliminates wasteful packaging and helps grow micro-retailer revenue. Everyone wins: The consumer pays less, the retailer sells more and manufacturers make more.&nbsp;Jackowski: Bintang, how do you aim to reduce waste with your solution, and what's the role of warungs?&nbsp;Ekananda:&nbsp;We're tackling the issue of plastic waste pollution at its source by providing daily necessities in returnable, reusable packaging. Our materials are designed for at least 50 reuses. When the packaging reaches the end of its lifecycle, it is fully recyclable, offering a significant advantage over non-recyclable sachets and pouches that end up in the environment and (unmanaged) landfills.&nbsp;&nbsp;Our approach not only prevents waste but also leverages the extensive network of warungs. These small stores are not just widespread; they have close relationships with their customers, which can significantly aid in educating them about the importance of returning packaging for cleaning and reuse. Our sales points also include community-based waste collection initiatives and individual agents, including women working from home as micro-sellers.&nbsp;&nbsp;Jackowski:&nbsp;How does your solution entice consumers to change their consumption behavior, and what benefits does it bring to shopkeepers?&nbsp;Ekananda:&nbsp;Our model fosters partnerships with fast-moving consumer goods brands to source products and collaborate with small businesses for effective distribution. We use a deposit reward scheme, incentivizing consumers to return packaging, thereby creating a sustainable consumption loop. Our accessible and affordable system ensures our sales points serve all community members, promoting social inclusion and equity.&nbsp;&nbsp;Our small-business partners face numerous challenges inhibiting their growth. We empower these sales points with a mobile app, which allows them to retail zero-waste yet affordable everyday goods and provides a wealth of insights on customer behaviors and business performance. This strategy, coupled with our cash back system for returned packaging, promotes customer loyalty and boosts their monthly earnings by 10% to 15%, translating to around $30 to $50 per month.&nbsp;Jackowski:&nbsp;Zahid, how is Novek approaching it?&nbsp;&nbsp;Mitha:&nbsp;Consumers in price-sensitive environments change behavior when they're financially incentivized to do so — in this case through sharing the savings on packaging with them.&nbsp;&nbsp;Customers want to buy household staples, such as cooking oil and washing powder, in varying quantities, but they're not able to due to fixed packaging quantities. Further, smaller packet sizes cost disproportionately more for customers. Our vending machines, which are enabled by IoT, enable businesses to dispense micro-quantities. This gives dukas the opportunity to build their customer base and sell more. Our cooking-oil-dispensing machines led to a substantial uplift in sales for retailers.&nbsp;

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Jackowski:&nbsp;How does technology enable your solutions?&nbsp;Mitha:&nbsp;Engineering is at the core of our product. Without the end-to-end hardware and software we've built to deliver basic goods, our solution wouldn't work.&nbsp;&nbsp;Small retailers often struggle with having a consistent supply of commodity products. The stockouts represent missed sales and lost revenue, and potentially the erosion of customer loyalty. Novek's IoT dispensing machines offer distributors real-time visibility into a retailer's inventory, ensuring there are no stockouts.&nbsp;Ekananda:&nbsp;At Alner, we empower small businesses with a digital solution, namely a mobile app, enabling them to sell zero-waste yet affordable daily products. The solution enables them to tailor promotional activities based on consumer habits, generating sales and increased revenue. All of this enhances business productivity, automating vital processes like inventory management while also facilitating direct reordering from Alner, reducing stockouts risk. By accepting digital payments, we ensure a consistent supply chain and enhance operational efficiency for our sales points.Jackowski:&nbsp;How will or how has the grant from Strive supported your efforts to scale? What's been the impact so far, and what's next?&nbsp;&nbsp;Mitha:&nbsp;So far we've touched tens of thousands of consumers' lives with lower-priced products, and many more with cleaner environments due to the elimination of several metric tons of plastic per month. We're now looking beyond Kenya to other markets where our technology can be implemented.&nbsp;Strive's support has been amazing in giving us the help and resources to develop a new adjacency (powders) that we wouldn't have otherwise started R&amp;D on. The opportunity both in terms of revenue and impact is massive — millions of single-use sachets are being disposed of every year in Kenya alone.&nbsp;&nbsp;Without Strive, we wouldn't have accelerated the development of a product that has led to a partnership with a global multinational.&nbsp;Ekananda:&nbsp;To date, we have already circumvented the use of 560,000 single-use, non-recyclable packaging items. Our bold objective is to prevent the usage of 10 million single-use non-recyclable items by January 2025. This would be equivalent to a reduction of 1,500 tons of CO2&nbsp;emissions or 260 economy-class round trips from Jakarta to New York.&nbsp;&nbsp;With the Strive funding, we plan to enhance our mobile app, introducing an array of features aimed at boosting small businesses' performance. These include offering improved training, peer-to-peer learning and gamification for competition. Digital payments expand the customer base, while push notifications will enable more timely, informed business decisions. Our data-driven approach optimizes inventory, predicts sales and boosts revenue for sales points.&nbsp;We estimate sales points could generate an extra $200,000, enhancing financial resilience. We aim to target 60,000 end users for a total of $150,000 in (consumer) cost savings, making our solution appealing, fostering loyalty and ensuring the longer-term sustainability of the zero-waste initiative.&nbsp;Learn more about the&nbsp;<a href="https://www.mastercard.com/news/press/2023/december/mastercard-strive-awards-nearly-2m-in-grants-to-11-innovative-organizations-supporting-small-businesses-across-the-globe/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Strive Innovation Fund winners</a>, including other award recipients who are developing small-business solutions linked to environment sustainability.&nbsp;Note: This Q&amp;A was edited for brevity and clarity.&nbsp;

Strive Innovation Fund winners aim to reduce plastic waste and promote inclusion with a focus on small shops in emerging markets.

How small merchants can help drive sustainable consumption