State of the Corporate World

Consumers of the Future. Provincia de Maputo, Mozambique

In a recent Financial Times daily newspaper, one page in the front section contained two articles that were symbolically important as reminders of where we are as a society.  On the top of the page, Michael Skapinker penned “Fleet-footed companies can outrun their critics”, which argued convincingly that strong global companies now feel a need and a reason to be more socially responsible.  Below that, Louise Lucas wrote that “NGOs and businesses have found collaboration can help them achieve their respective goals”

I find several things remarkable about these articles.  First, both cover subjects – corporate social responsibility and NGO / private-sector collaboration respectively – that were not even part of the collective agenda two decades ago.  When I worked in humanitarian relief operations in the mid-1990s, corporations were seen as the enemy.  Slightly less the enemy than overtly military forces, perhaps, but it was hard to see the good Canadian oil player Talisman was doing with investments in northern-controlled Sudanese oilfields during the war, or how the sweat shops that produced most of Nike’s sneakers were helping the poor in southeast Asia and China.  Today apparently, that stigma is rapidly being forgotten.  Second, our society seems to have rocketed quickly past the stage of gently approaching these subjects and settled right into a number of established and widely-accepted axioms:  Saving lives of the poor is no longer philanthropy, contends Lucas (quoting Dan Bena); it’s “guaranteeing you will have employees of tomorrow and customers of tomorrow”.  Or, in Skapinker’s article (quoting Nike’s CEO) ; “The age of abundance is over.”

The main transition here is one that has occurred on the corporate side.  As a longtime humanitarian myself, I find it hard to believe that even the most principled NGOs could have kept away had the corporates shown any interest.  But for a long time they did not, and that was precisely the problem.  A blue-chip company like IBM, making most of its revenue from northern markets, simply was not concerned about the situation in Rwanda.  As NGOs, our big struggle was to get anyone, anyone at all, to act as if they cared.

Can we attribute the rapid role reversal of corporates from disinterested and distant bystanders to engaged global citizens to globalization?  To the fear of embarrassment by anti-corporate campaigners such as Greenpeace, Occupy, and others?  To Bill Gates, who made it cool for the massively rich to show they really cared?  To collective corporate shame around the abysmal performance of high-profile corporate banks, and their role in the current global recession?  To Bono?  It’s hard to say, but the point of the these two articles that is reinforced by scores of others on a daily basis is that corporates now do care.

In much of Nuevva’s work in Africa, we collaborate with companies that envisage and realize huge profit upsides.  Extractive industries are the most obvious cases where – if things pan out right – the profits can be literally hundreds of times the cost of investment.  The feeling on the ground seems to be that so much profit is at stake; to risk imperiling it by being too greedy and refusing to share just does not make good business sense.  So these businesses do share, and often look to do so from the very earliest stages of a project.  We know of a mining project in Guinea that employs forty thousand people in its CSR initiatives, but less than five thousand in its mining operations.  The message is clear.  Spend now on community outreach and goodwill strategies, and we’ll be in a better spot later to extract the profits we’ve come for.  In a world of materialistic consumerism and exalted individualism, this model seems to make broad sense.  And if corporate executives gave as much or more than they make themselves to good humanitarian causes that benefit those around them; would they be so reviled for their exorbitant compensation packages?

Perhaps this new Africa model has something to teach the world at large.  If we summarize the model with a figurative profit equation, we could show the following numbers:

  • Investment = 10,000
  • Investors = 100
  • Gross Profit = 1,000,000
  • Expected ROCI = 10,000%, or ten units in return for each unit invested
  • People Affected by Investment (such as inhabitants of an area to be mined) = 25,000
  • Minimum Meaningful CSR Investment Per Capita = 1, or 25,000 in total
  • Adjusted Profit After CSR Investment – 975,000

We can see why mining companies no longer argue with the mathematics, not to mention the politics and public relations.  In a post-colonial world, stamping out opposition by force or coercion is much less acceptable and harder to hide.  Modern companies buy it out instead, then promote their CSR strategies in line with their corporate identities.  It’s a nice thing for an investor to read, and is understood to be just as much about risk management as it is about philanthropy.

So what are the dangers of this new commercial order, and what do we need to worry about?  Or is this evolution of commercial activity poised to revolutionize the way corporate structures engage with the world around them?

First, as with any philanthropic or goodwill effort, we need to concentrate on ensuring the quality of the investment.  It doesn’t matter how large the CSR investment if it is poorly managed, just as most bad aid proves entirely useless and even counterproductive.  Second, we have the risk of a moral hazard, where CSR needs are assessed, investments are made, and impact is evaluated all by the same entity – the corporate structure that pays for it all.

The remedy to both of these problems is collaboration and specialization.  Corporates should collaborate with NGOs and other organizations that have years of experience vetting and understanding real development needs.  And both corporates and NGOs need to specialize to be more effective.  There is no organization, the Millenium Villages notwithstanding, that have shown long-term broad-based effectiveness in dealing with all of the problems that underdeveloped communities encounter.  Keep it simple, do it well, and make real progress.  For this new commercial order to realize its potentially revolutionary impact, CSR needs to be approached very studiously and to adopt the most effective strategies and partners.  That is the way to move past risk management and arrive at the real win-wins.

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2 Responses to “State of the Corporate World”

  1. juzaho87
    June 4, 2012 at 5:48 pm #

    do you have a fb fanpage

    • mbader
      June 4, 2012 at 7:03 pm #

      Hi. Yes we do on facebook.com/nuevva. Thanks for liking us!

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