80.oN 39507 repaP 7002 CSR and beyond: Business and the development challenge yraunaJ Marketa D. Evans, Ph.D. The impacts of globalization have produced strategic shifts in the landscapes facing both business and civil society. Both have come to play an increasing role in development and continue to adjust Marketa Evans is the to changing roles and responsibilities. Yet corporate social responsibility initiatives are often limited Executive Director of in impact and many NGOs continue to be suspicious of business intentions. There is now a need and the Munk Centre for opportunity to bring strategic partnerships between the two sectors to a more substantive level for International Studies at the University of Toronto. mutual benefit and improved results. The role of business in development is today's emerging markets, struggling with environ- The author wishes to thank Dudley Brown, Michael Collins, hot topic. The United Nations has formally ac- mental degradation, deep poverty, conflict, and and Michael Jarvis for helpful comments on earlier versions of knowledged the importance of the private sec- human rights issues. The subsequent corporate this paper, and Ted Thomas for tor in meeting the Millennium Development impact on local communities was frequently outstanding research support. Goals, and public/private partnerships abound, dramatic. A powerful argument was made that many under the rubric of Corporate Social multinational corporations could not simply ig- Responsibility (CSR). Often catalyzed by CSR nore the ripple effects of their overseas activities. initiatives,multi-stakeholder partnerships gained Business, it was suggested, had a responsibility ground, but collaborations between civil society to ensure that certain standards of behavior and and the private sector have much greater po- practice were upheld, even when operating out- tential. Business must become engaged in the side home markets, even when indigenous regu- development challenge, bringing with it the latory requirements were weak or absent. full weight of its core competencies. This paper CSR initiatives were one way to manage asserts that the incentives for deeper strategic these forays into uncharted terrains. A prolif- partnerships have never been more compelling; eration in CSR-related activity followed: codes there has never been a better time for dialogue of conduct, certification processes, voluntary between business and civil society groups that initiatives ­ by one count some 142 today ­ as goes well beyond traditional partnership ef- well as on-the-ground community projects ad- forts. dressing social and/or environmental problems, often constructed in collaboration with NGOs. Corporate social responsibility Good work has been done, and many lives have and beyond been improved as a result, but what CSR cannot After the fall of the Berlin Wall, Western multi- accomplish is a long-term collaborative agenda nationals began a more serious expansion into for development. CSR and beyond: Business and the development challenge As a result, corporations and NGOs too into policy dialogues with donors, business, and often still regard themselves in opposition ­ di- governments. vided on both values and interests, as well as de- But calls to increase the level of official de- sired outcomes. However, this view perpetuates velopment assistance are not likely to resolve the a false dichotomy between social and economic long term development challenge. Certainly aid interests. Business and civil society have in fact does much good work when well spent, work never had more scope and greater opportunity that the private sector is often unwilling, un- for productive engagement around international able, or unsuited to tackle. But regardless of the development. Their interests are converging due amount, aid cannot remedy underdevelopment. to changing strategic environments for both Economic growth is not sufficient for develop- parties. ment, to be sure, but it is absolutely necessary. A statistic recently cited by Jeffrey Sachs tells the The changing strategic environment tale. In 1820, U.S. per capita income was only for non-governmental organizations about three times that of per capita income in For many international NGOs, equitable, sus- Africa; it is now 24 fold higher ­ a huge disparity tainable development remains their primary in living conditions due to a tiny one percent dif- objective. Civil society groups are now vital ference in annual growth rates over time. to effective on-the-ground program delivery. Even if donors deliver on recent commit- Although concrete numbers are surprisingly dif- ments to increase aid budgets, such official aid ficult to ascertain, NGOs deliver a great deal of flows ­ some US$70 billion annually ­ will con- humanitarian relief ­ estimated at some US$6 tinue to be dwarfed by the annual flow of foreign billion annually. At the same time, civil society direct investment, now some US$250 billion per organizations have become more and more con- annum to developing states. The problem is not, vinced that crises are often man-made, suggest- as some would argue, too much foreign invest- ing that long term impact requires policy change. ment, but rather too little, especially to those As a result, civil society is increasingly inserted poorest states that would benefit the most. This suggests an impera- tive to shift the dialogue ­ civil Figure 1: Foreign direct investment and official development assistance flows to developing countries, 1990­2004 society objectives moving to 300 harness the potential of cor- FDI inflows to developing countries ODA from OECD development assistance porate strengths, not simply as countries to developing countries 250 a source of revenue for a par- ticular project, but as a true 200 partner in the development (US$) 150 challenge. Flow 100 The changing strategic environment 50 for multinational corporations 0 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Multinationals are facing sim- Year ilar seismic changes. We may Note: Much of the recent increase in global ODA flows has been the result of debt relief, which amounted to over US$30bn between 2005 and 2006 (OECD, 2005), and reconstruction spending in Iraq, which have come far from Milton amounted to over US$2bn in 2004 alone (Development Initiatives). In 2003, 40% of the total increase in ODA went to Iraq and Afghanistan (DI, 2005). Friedman's famous adage Source: IMF, 2003; UNCTAD, 2005a. that "the social responsibility of business is to increase its Figure 2: Foreign direct investment inflows to developing countries by host profits," but the case for so- region, 1970­2004 cial engagement too often re- 100 mains cast as business going 90 beyond its core mandate. This 40 countries/territories receiving highest 80 FDI (includes CIS and SE Europe) is shortsighted. total) Remaining 140+ countries of 70 Business is embedded in (% society; it cannot thrive with- inflows 60 out social order and social FDI of 50 acceptance. For a long time, share 40 the "society" that mattered 30 was largely domestic and Regional concerned with domestic is- 20 sues; today it is increasingly 10 global. Global social values 0 are in flux. According to a 1970 1980 1990 2000 2004 Year 2005 Gallup/GlobeScan poll, Source: UNCTAD, 2005b. surveying 50,000 individuals across 60 countries, the war on terror remains a priority for 10% of respon- business has "too much power;" other interna- dents, but 12% want priority accorded to elimi- tional surveys by GlobeScan reveal that corpora- nating poverty, 14% to protecting the environ- tions have the lowest positive ratings and highest ment, and 16% to closing the gap between the negative ratings of any "global economic actor" rich and the poor. from a list that includes NGOs and international Globalization and transparency are magni- organizations. And the news from the United fying these societal shifts, going to the heart of States is no better ­ only 6% of Americans have long term profitability, the license to operate, "confidence" in big business, with 72% believing and the social contract. corporate wrongdoing is "widespread." Private Multinationals have been major beneficia- sector activities have long generated negative ries of globalization and have made the case that externalities but the profitability consequences free trade and economic growth are good for were muted by poor information and weak ad- all, including the poor. But business has largely vocacy. Don Tapscott and David Ticoll, in The failed to recognize that growth is but one com- Naked Corporation, argue that a sheltered cor- ponent of human development,and that it can in porate environment is a relic of the past; trans- fact exacerbate poverty, inequality, and conflict. parency is transforming the strategic landscape Consumers, voters, contractors, employees, and for business. All this suggests that business is shareholders, in both developed and developing increasingly vulnerable to regulation, legislation, economies, have rising expectations of business and social backlash. Business must demonstrate in the modern world ­ even as our judgments both at home and abroad that it can be a mean- of corporate performance are in freefall. This is ingful part of a comprehensive solution. stretching business well beyond its usual areas of Thus, business would similarly benefit from expertise. a new strategic dialogue with civil society. Rather Consider these recent bracing statistics. A than seeing NGO partnerships as simply a tac- multi-state 2005 Gallup/GlobeScan survey sug- tical way to deflect activism, or as a quick way gests that nearly half of respondents think that to earn a public relations boost, corporations should proactively engage NGOs as powerful ing, and scope out long term practical avenues learning partners that provide insights into the for moving forward together. Better outcomes, it risks and opportunities of the shifting societal seems plausible to suggest, would surely result. environments. Sources Moving "beyond CSR" Adelman, Carol C. 2003. "The Privatization of Foreign Aid: So, what next? This paper suggests that funda- Reassessing National Largesse."Foreign Affairs,November/ mental changes in the operating landscapes of December. both business and civil society open new space CBS News. 2002a. Poll: Little Faith in Big Biz. CBS News. for strategic engagement. We need to move "be- ------. 2002b. Poll: Economy Worries on the Rise. CBS The Business and Development yond CSR" ­ to a dialogue that engages core News. Davis, Ian and Elizabeth Stephenson. 2006. Ten trends to Discussion Papers encourage debate competencies and fundamental interests on both watch in 2006. McKinsey Quarterly, January regarding the different forms of sides. A first step might be the encouragement of Deutsch,Claudia.2005.December 9.New Surveys Show That private sector action for development a more nuanced understanding of each other's Big Business Has a P.R. Problem. The New York Times. and the sharing of best practices. The series is one initiative of the respective core competencies and motivations, Development Initiatives. 2005. Global Humanitarian Assistance Update 2004-05. Business, Competitiveness and with the goal of pushing corporates and NGOs Dollar, David, and A. Kraay. 2002. "Growth is Good for the Development Program of the World to eventually see themselves as equal, but dif- Poor." Journal of Economic Growth, 7(3): 195­225. Bank Institute. Authors are committed ferent, partners in the development challenge. to fostering sustainable and equitable Easterly, William. 2006. The White Man's Burden: Why the development and effective multi- Currently, there is insufficient opportunity to West's Efforts to Aid the Rest Have Done So Much Ill and So sectoral partnerships. Little Good. New York: Penguin Press. engage in those sorts of exchanges. The view that Friedman, Milton. 1970. "The Social Responsibility of development is a job for governments, and that For information on the Business, Business is to Increase its Profits." The New York Times aid does it best, is just as out-moded and coun- Competitiveness and Development Magazine. September 13. Program, and additional copies of terproductive as the view that human develop- Gallup International. 2005. Voice of the People. http://www. this issue, please contact Djordjija ment needs can all be met by the private sector voice-of-the-people.net/ Petkoski, Program Leader at GlobeScan. 2006. Trust in Institutions. Toronto: GlobeScan. or that business can remain aloof from its social dpetkoski@worldbank.org or visit Goldsmith, Arthur A. 2001. "Foreign Aid and Statehood in environment. http://www.developmentand Africa." International Organization, 55(1): 123­148. business.org/. There have been some encouraging steps InternationalMonetaryFund.2003.ForeignDirectInvestment taken by leaders on both sides. The Kimberley Trends and Statistics. Washington, D.C.: International Series Editor: Michael Jarvis Monetary Fund. Process on conflict diamonds began with a dia- Klein, Michael, and B. Hadjimichael. 2003. The Private logue between Global Witness and DeBeers; the Design: James Quigley Sector in Development: Entrepreneurship, Regulation, and Oxfam/Unilever project on Unilever's economic Competitive Disciplines. Washington, D.C.: The World Disclaimer: The views published are footprint in Indonesia, and SABMiller's ground- Bank. those of the author and should not be McKague, K. 2005. Compendium of Ethics Codes and breaking multistakeholder dialogues on its sus- attributed to the World Bank or any Instruments of Corporate Responsibility. Toronto: Schulich tainable development strategy are just a few affiliated organizations. Nor do any School of Business, York University. of the conclusions represent official examples. Key learning experiences are found OECD. 2005. Aid rising sharply, according to latest OECD policy of the World Bank or of its in all these examples, as are clear lessons about figures for 2004. Organisation for Economic Co-opera- Executive Directors and the countries the difficulties that can result from such deeper tion and Development. they represent. Sachs, Jeffrey. 2005. End of Poverty: Economic Possibilities for partnerships. Our Time. New York: Penguin Press. This paper was printed on stock Policymakers could promote the idea of a Tapscott,Don,andTicoll,David.2003.TheNakedCorporation: containing at least 40% post- development toolkit ­ one in which aid, private How the Age of Transparency Will Revolutionize Business. consumer waste. capital flows, debt relief, economic growth and New York: Free Press. UNCTAD. 2005a. Foreign Direct Investment­Beyond 20/20 other tools ­ are all accorded standing. Both sides WDS. New York: United Nations Conference on Trade would benefit from the creation of space to ex- and Development. plore mutual problems, develop a collaborative ------. 2005b. FDI Inflows, by Host Region and Economy, agenda for action, share knowledge and learn- 1970­2004. New York: United Nations Conference on Trade and Development.