It’s time for companies in the Latin America to think harder about what corporate responsibility mea

Thursday, November 3, 2005

The fourth Inter American Development Bank conference on corporate responsibility in Latin America took place recently in Santiago, Chile. Previous conferences have been held since 2002 in Miami, Panama, and Mexico. This magazine has attended similar events in Brazil in 2003, and last year?s Mexico conference.

What is becoming apparent in the region is that enthusiasm can only take the corporate responsibility movement so far. While the number of corporations beginning to report on corporate responsibility across Latin America is rising rapidly, and the keenness of business, government and civil society groups is important, the movement needs now to develop in two main ways.

First, corporate responsibility in Latin America must become more rigorous, professional and clear in its purpose. Second, it must be developed with a focus on regional stakeholder priorities.

On the first point, rigour of research is vital. The new report by the Inter American Development Bank on corporate social responsibility in small business in Latin America (which found that conviction, not cash, is what matters) is among the first of what needs to become a wave of research and conclusions based on solid empirical research combined with social science considerations.

The development of both European and US corporate responsibility thought has previously been stunted by poorly planned and ideology-influenced reports. These regions, with their huge economic advantage, are now beginning to understand the paramount need for solid, peer-reviewed research that is respected in business schools. The work of the European Academy of Business in Society and (to a degree) the Enhanced Analytics initiative is evidence of this recognition.

Professionalism should also become a focus for Latin Americans. Future conferences and meetings should focus on manager needs, alongside greater stakeholder considerations and engagement. Knowledge-sharing workshops and practical, proven guidelines are needed. And Latin American companies must create a management role and purpose for corporate responsibility managers, and support them financially and politically.

Clarity of purpose is vital too. Many companies still do not know why they ?do? (or try to do), corporate social responsibility. Thinking the notion through so that companies stop talking about paying tax or obeying the law as social responsibility is key to future progress.

The smart companies, such as Chile-based Grupo Nueva, are realising that corporate social responsibility must be linked to long-term business strategy. An example is a change of business model by Grupo Nueva, a wood-products group with operations in 15 countries, mostly in South America. The group sees that population growth is swelling its customer base, but its customers are becoming poorer as economic expansion fails to keep up. So the group has changed its approach to revenue growth forecasts, looking 15 years ahead to see how it can produce profitable goods and services for a larger base of poorer consumers.

I did it my way

Linking corporate social responsibility with strategy is probably the most important development for companies in Latin America.

As the Harvard historian David Landes notes in his book ?The Wealth and Poverty of Nations?, culture counts. Companies in Latin America have a huge enthusiasm advantage over their US and European cousins. They should not let this go to waste. While the protestant-influenced, individualistic business models of many Anglo-American firms has pushed them forward economically, it has set them back when it comes to compassion, compared with companies developing in predominantly Catholic nations.

Anglo-American firms? financial advantage has been selfishness, and while Latin American managers can learn from their processes, management systems and number crunching on corporate social responsibility, they must not lose their personal desire to seek social change for the better through business.

It has become apparent to Ethical Corporation that the current corporate responsibility priorities of Latin America?s companies are, and should be, different to their US or European counterparts. Perhaps most importantly, adapting CSR methodologies in line with Latin America’s development needs is a vital next step. Economic growth encouragement and ?bottom of the pyramid? poverty reduction strategies mean more in the region than they do in more fortunate nations to the North. Corruption too, is a key issue that business can seek to tackle, and is a much greater barrier to economic and social change than it is in North America or Europe.

Latin American chief executives should note this and, while taking in the lessons from the North, remember that corporate social responsibility in their region must be locally moulded for the priorities of their stakeholders.

As so many companies are family owned, less stock market pressure on share prices means these chief executives can think in the longer term. They should take advantage of this, while multinational firms (which have often led the movement in the region in their own way) need to remember that policies cannot simply be exported from headquarters in Madrid, New York or London. Such mistakes can be expensive for these firms, as Newmont, Bechtel, Shell and countless others have found to their cost in recent times.

High commodity prices and economic luck (such as is seen in Argentina currently) mean that Latin America has a temporary advantage over some other regions while times are good and the oil price high. Senior managers should not waste this, and must seek to embed corporate social responsibility considerations across management, departments and corporate strategy while the financial position encourages it. An understanding of the value of building trust with civil society groups through accountable practices is the important next step.

Governments must play their part too, often as partnership broker and facilitator, and by grasping that progress is not always about more or less regulation. Governments must make sure they do not create a compliance culture or that regulation is left to do too little. Becoming more open and accountable themselves and making real, visible strides on internal anti-corruption would be a good start in their new role as corporate social responsibility catalysts.

Source: Ethical Corporation (link opens in a new window)