Business and Development: a confused marriage

The Edelman communications and public relations firm recently released “Business and International Development,”a survey of what businesses are expected to contribute to internationaldevelopment and what their responsibilities are. The participantssurveyed were anonymous, but represented leaders from the business,NGO, and media community. (25 Fortune 500 executives, 10 NGOexecutives, 6 journalists, 4 investment analysts).

The surveyrevealed the general confusion about how much and in what domainsbusiness should engage in international development(ID). I won’tsummarize the findings here, I’ll just mention the ones that surprisedme or stimulate further questions. Your thoughts and comments (from the most basic to advanced) are welcome-don’t be shy!

1)All groups seemed to recognize that businesses can and should engage inactivities that benefit local communities, and can do so profitably.That’s an encouraging and huge change in perception. Some of thebenefits listed:
-creation of jobs and enterprises “Establishing facilities and creating jobs are , in my opinion the best thing a company can do.” (Financial services company)
-infrastructure-related improvements which increase access to/reduce costs of technology, nutrition, water and sanitation
-microfinancial services
-managerial expertise conferred to local NGOs, other groups, government

2) Ispartnering with NGOs necessary? NGOs and MNCs both expressed desire towork in partnership, not in antagonistic cat-and-mouse games.Businesses and media, though sometimes skeptical of NGOs (“The bad ones are really only campaigning to get attention and to raise funds. They are not really interested in collaboration“) also recognized that NGOs can be valuable partners to improve delivery (and profitability) of services because they have “local knowledge” and are “tapped into real needs.” They can also confer credibility to an MNC and “help monitor projects.”
From their own perspective, NGOs recognized that sometimes they were a “hindrance to making real progress in development,” but insisted that heavily critical NGOs were as necessary as collaborative ones. Whyis this the case? Would NGOs as a group lose credibility if they allpartnered with the private sector? I’ve only seen effective examples ofnon-profit-for-profit collaboration (including WRI). Thoughts?

3) The survey showed general dissatisfaction with MDGs.The media described the goals as “too vague,” while businessesconsidered the expectations grandiose. Obviously, the Goals areexpressed broadly, in order to be as inclusive as possible, but now here’s the challenge:how can one quantify MDG goals or couch them in economic terms? PerhapsGapminder is on the right track: it brings complicated MDG data to life (checkout the dollarstreet program on Gapminder, it’s a great visualizationof households from $1 to $100/day).

4) Maybe telling eachcompany simply to clean up its own mess is a practical way to quantifythe amount that MNCs should contribute. One NGO in the study claimedthat the “biggest opportunity for the private sector to make an impact”would be for every company to work “on their own footprint and theirown supply chain.” Is this true? Would that be sufficient?

5) MNCssaid there is a limit to how much a company can contribute whileremaining profitable and loyal to shareholders, and complained that “solving social and evnironmental issues [is] not really their expertise/skill level.”This is clearly a failure of imagination. Responsible businesspractices and reducing social and environmental footprints are not justtrendy, they’re becoming a norm as consumers and businesses alikerealize the importance of sustainability. Businesses can stagnate andbecome obsolete (see Xerox, Compaq, or Polaroid for examples ofSchumpeter’s classic “creative destruction“) when more innovative start-ups (see Kodak, Google, and Dell) or they can adapt.
Walmart, here’s looking at you.

5)Inone exercise, participants from all groups (media, business, NGO) wereasked to name what companies they considered major supporters ofinternational develpment goals. The outcome was *very* interesting: 15companies were named (only those cited multiple times were recorded),but not one was named by all three groups. Furthermore, no company waslisted by both NGOs and the media. Why do you think THESE companies,above all others, get recognition? (see the diagram)

Whydid so few get consensus? NGOs and media had no overlap. Can NGOs beconsidered “closest” to the action, and should their voice beconsidered most accurate? Does this imply that the media is the mostout-of-touch in regards to development?

6) In a related issue,One media respondent acknowledged that the media is “leery” of giving”free ads” to companies, even the socially responsible ones. It’s truethat congratulating a company for good corporate citizenship skirts theline between reporting and publicizing. How can one incite the media torecognize effective and innovative BOP activity? Can they do so
and maintain credible, critical impartiality? Are awards from credible NGOs a sufficient way to publicize successful models?

7)Finally,something I am personally interested is one of the challenges cited byMNCs for doing businesses: corruption. As highlighted by the latest Transparency Int’l index, the World Bank’s Doing Business rankings, and the 2005-6 Global Competitiveness Report, there are some countries where bureaucracy (Ivory Coast: 569 days to obtain business licences) and corruption (Ghanaians pay the equivalent of USD$1095 a year in bribes)are so endemic as to make bright-eyed entrepreneurship nearlyimpossible. Unfortunately and predictably, those are the countries thatneed business most.

But who should take charge of reducingcorruption? Government can only do so much without brutal crackdowns(hey, it worked for Singapore). I believe that businesses can spearheadtransparency. One business model that has proved succesful in curtailing corruption is franchising, because the employee-owner is a stakeholder in the legitimacy and efficiency of the business operation.

Anotherbusiness model that works profitably and transparently are Microfinanceinstitutions (MFI). MFIs catered credit services to the low-incomesector, which heretofore was served only by loan-sharks, and madecredit available legitimately. (I’d love to know the amount of wealththis has shifted from informal and illegal markets. Consider that inCameroon, Ghana, and Nigeria, people spend 20% of GDP/capita on bribes.) More encouraging, these MFIs often operate in countries mostnotorious for corruption, beginning with Bangladesh (this year ranked 2nd to last. For companies to operate under such conditions must demand incrediblepatience –and it wouldn’t surprise me to find out that even they haveto grease a few palms to get their businesses registered. Nonetheless,they bring a higher standard of transparency.

Finally–to those of you who read the Edelman report–did you notice how often the media had the same (but more vague) reponses to questions as businesses?