Business Impacts on Millennium Development Goals: A Virtuous Cycle or a Coin Toss?

Thursday, September 15, 2005

A new World Business Council for Sustainable Development report profiles corporate initiatives to alleviate poverty, but focuses less attention on how business may confound such goals.

The notion that business plays an important role in alleviating poverty and other United Nations (UN) Millennium Development Goals (MDGs), a main topic of discussion today at the UN’s 2005 World Summit, has been well established by academics C. K. Prahalad and Stuart Hart. The World Business Council for Sustainable Development (WBCSD), a global coalition of 175 companies committed to sustainability, furthers the case with the release today of a report on 14 member projects (of 66 in the works) making advances toward achieving the MDGs.

“As world leaders gather in New York to review progress on the Millennium Development Goals, it is becoming increasingly apparent that we are falling far short in meeting these vital targets,” states WBCSD’s C?cile Churet, lead author of the report entitled Business for Development. “[S]trengthening the role of business–the prime engine of wealth creation–in development efforts offers a tangible, sustainable opportunity to bolster our efforts to combat poverty.”

The profiles make a strong case that “inclusive business,” or corporate initiatives geared toward the three billion people living in poverty at the bottom of the pyramid (BOP–as opposed to the privileged 75 to 100 million perched atop the economic pyramid), represents a win-win situation. In addressing the unmet needs of this huge market, corporations profit not by large margins but by volume. Furthermore, companies are developing “social impact” tools to measure the positive effects of business on disadvantaged communities where they operate the world over.

The report also documents increasing movement away from adversarial and toward collaborative relationships between companies and nongovernmental organizations (NGOs)–13 of the 14 case studies include such partnerships. For example, Proctor & Gamble (ticker: PG) collaborated with AmeriCares and the International Rescue Committee to provide enough of its PUR water filters for more than 10 million liters of potable water to Sudanese refugees fleeing the genocidal regime in Darfur to northern Chad.

The report candidly admits some of the critiques of the case for inclusive business, including its environmental implications.

“If we succeed in raising the standard of living of some three billion people, this will undoubtedly dramatically add to the stress on our environment,” Ms. Churet allows, then quickly explains positive “leapfrog” benefits of solutions to this dilemma. “[T]here is a great opportunity to design, from the outset, innovative solutions and technologies that will minimize the negative impact of increased consumption on the environment.”

Indeed, ensuring environmental sustainability is one of the eight Millennium Development Goals, as is developing a global partnership for development. Other MDGs include reducing child mortality, improving maternal health, promoting gender equality and empowering women, combating HIV/AIDS, malaria, and other diseases, and achieving universal primary education.

However, the report is less candid about how business initiatives may advance certain MDGs while simultaneously curtailing others. For example, the report details how BP (BP) promotes the development of small- and medium-sized enterprises (SMEs) along its supply chain through an Enterprise Centre it opened in Baku, Azerbaijan in 2002.

“In 2004, BP’s direct spend with SMEs, local JVs [joint ventures] and state-owned firms reached $200m, and the company did business with over 200 local SMEs,” the profile states.

However, the profile underemphasizes the primary reason BP is in Azerbaijan: to exploit the Baku-Tbilisi-Ceyhan (BTC) pipeline, and it completely elides that fact that the project is the subject of persistent and ongoing critiques due to its social and environmental impacts. The CEE BankWatch Network, an NGO with members from 10 Central and Eastern Europe (CEE) countries, has compiled a laundry listof reports finding fault with the pipeline, for example potential human rights abuses in Turkey and environmental threats to sturgeon stocks in the Caspian Sea.

“The environmental and social problems caused by this project may be in Azerbaijan, Georgia, and Turkey but these problems are a result of decisions made by the British government and British companies,” said Hannah Ellis, a campaigner for Friends of the Earth UK, just yesterday. “It is now time for the British government and BP to take responsibility for the environmental and social problems they have caused.”

While BP may be creating benefits for SMEs in Azerbaijan, the report does not place them in the context of the social and environmental problems created by the pipeline.

“Business is good for development and development is good for business,” the report touts, depicting the two propositions as complementary components in a virtuous cycle.

Or, put differently: “Economic and social development at the bottom of the economic pyramid are the two sides of the same coin,” says Prof. C. K. Prahalad, author of seminal The Fortune at the Bottom of the Pyramid, of the WBCSD report. “This study highlights both the opportunities and the impediments.”

Prof. Prahalad is accurate in stating that the study looks at both opportunities and obstacles, but he assumes that development at the BOP necessarily creates positive social and environmental impacts. Perhaps a better way to visualize the proposition is with the coin as a whole representing economic, social, and environmental development at the bottom of the pyramid. However, one side represents positive advancement towards achievement of Millennium Development Goals, and the other side represents social, environmental, and economic negatives for the BOP.

Flipping the coin, there’s an equal chance of landing on either side.

Put differently: the cycle is clearly powerful, but it is not necessarily virtuous.

Source: CSR Wire (link opens in a new window)