Doing Business With the World – WBCSD Report
For those of us who spend most of our waking hours thinking about BOP news and activities, who already know the buzz words, the acronyms, and the fact that microcredit is only the tip of the iceberg? well, sometimes we lose sight of one of the most important audiences: the business and government decision-makers who are just starting to explore the value of these ideas as they begin to crop up on mainstream radars.
That’s why I?m very happy to see that the WBCSD (World Business Council for Sustainable Development) has done an admirable, concise, and smooth job of presenting all this “new” thinking on the role of business in development in its recent report, “Doing Business with the World–The New Role of Corporate Leadership in Global Development.” (Nicole Goldin over at Changing the Pyramid has provided a solid review of its main tenets).It is, after all, those with sharp minds and a preference for high quality presentation, efficiency and social compassion that these ideas should appeal to. That BP, Anglo American, GE, Statoil, Toyota, and other prominent MNCs have their signatures on the report is laudable, adds weight, and is in keeping with many of their extensive corporate responsibility strategies.
It’s not to be expected that the WBCSD’s report would reflect anything but confidence about the role that very large MNCs are well-positioned play in this space; however, this is also something that serious thinkers shouldn?t gloss over. The report is in no way lip-service to business? positive social development role, but even a detailed read of the report doesn?t resolve contradictions that MNC actors (and government decision-makers) will still face in the current international business environment.
One area where this is particularly important is in the WBSCD’s assertions about the importance of viewing SMEs (Small and Medium Enterprises) as the frontline of business forces leading development:
Local entrepreneurs, microenterprises and small and medium enterprises (SMEs) form the backbone of global economic activity? SMEs bring social benefits, particularly in developing countries. They understand the communities within which they operate and are able to provide goods and services tailored to local needs and at costs affordable to local people.
The report cites government regulatory frameworks and the financing-gap (see Ana Escalante’s recent writing on this issue) as the primary obstacles to the growth and stability of SMEs. It goes on to list ways that MNCs can actively support SMEs through their in-country activities, such as focusing on local sourcing and capacity-building.
But one thing the report doesn?t mention is something that Professor Anand Kumar Jaiswal also questioned in his recent blog on NextBillion:
Whether MNCs can cater to BOP markets in a similar way like SMEs is an important question. It is well accepted that performance of SMEs and local firms suffer as a result of the growing presence of MNCs owing to factors such as MNCs? initial lower local content of inputs, their siphoning off local demand and their capacity to attract and recruit superior workforce by offering better pay packages (Aitken and Harrison, 1999, quoted in World Bank, 2002). MNCs? dominance of BOP markets may result in weakening and possible closures of SMEs, the impact of which on employment opportunities and livelihood for low income communities can easily be predicted.
This is part of the reality of the international business climate–MNCs, regardless of how much they believe in SMEs as “valuable partners” and “an important source of? market information,” also pose a challenge for SMEs. In addition to the reasons listed by Professor Jaiswal, MNCs can dry up local credit availability, move their profits abroad when expedient, more easily arrange advantageous tax agreements with governments, and move their operations elsewhere when it makes economic sense to do so.
The WBCSD takes an important step in making innovative thinking about business? role in development accessible and inspiring. Yet, for those business leaders, managers, government officials, and others who will seriously act on these innovations, there will still be tough questions. Even as MNCs are certainly part of the solution, they will still find themselves sometimes caught in a catch-22 of also being an integral part of the problem.