Tag Archives: responsible business

October 18, 2011 · 5:00 pm

The Big Question: Why should companies care about ‘inclusive growth’?

By Graham Baxter, Global Programmes Director – IBLF

9/11 marked the beginning of a decade in which unbridled economic growth was brought to a shuddering halt by the financial crisis.

It was characterised by large-scale unemployment, marginalised youth and a yawning gap between the rich and poor. That decade culminated in 2011 – the “year of indignation” as aptly coined by Gideon Rachman of the Financial Times – a year in which the frustration of the excluded spilled out onto the streets, from Tottenham to Tunisia.

The International Business Leaders Forum believes the challenge of social exclusion is no longer the prerogative of governments and must be addressed by business -  the creator and purveyor of jobs and the main guarantor of social inclusiveness.

The private sector has a vested interest in avoiding social instability. Even without open conflict, the seething indignation of the excluded – whether the Naxalites in India, the urban migrant in China, the ‘rebels’ in Libya, or the ‘hoodies’ in London – damages and destroys social stability and hence business growth.

So what should companies do?

They need to base their business model on the concept of ‘Inclusive Growth’ whereby they consciously include the world’s ‘have-nots’ as employees, suppliers or customers. This is the best opportunity in years for companies to address social exclusion directly, not as part of a philanthropic commitment, but as a core part of their business.

Over the last decade, many leading multinationals have gone out of their way to focus on the excluded in the community through their social investment and employee engagement initiatives.  While these programmes should not be denigrated – they deliver tangible results and benefits to many individuals and their families – their impact will always be marginal relative to the scale of the challenge.

It is through their core business activity that companies can make the biggest difference and have the most profound impact on society.

There are already examples of this in action taking place in countries such as India, where for instance telecoms and financial services companies provide the rural poor with access to their services. Or take some of the companies participating in the Business Call to Action initiative in which IBLF is a partner. Through IBLF-run workshops in Mumbai, Jakarta, Hanoi and elsewhere, we have discovered and promoted an exciting range of imaginative approaches by MNCs such as Coca Cola’s Micro Distribution Centres in East Africa, Diageo’s sorghum initiative in Cameroon or Anglo American’s Zimele model (now being transferred to South America from South Africa).

These are tried and tested ideas, not development theories – and they work. Inclusive growth is not an act of charity or mere “social responsibility”, but a way of simultaneously accessing and growing some of the world’s biggest untapped markets, while supporting social development.

Business – working in partnership with governments and civil society – can generate innovative, collaborative business models that specifically include the excluded.

If global business leaders and their companies direct just a fraction of their intellectual and financial resources to this challenge, it would be a mighty contribution to help us move on from a decade of indignation to one of inclusion and widespread prosperity.

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Filed under Cross-sector Partnering, CSR, Entrepreneurship, Inclusive Business, Leadership

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July 8, 2011 · 12:47 pm

Six essential mindsets for long-term leadership

By Jo Wackrill, IBLF

Today, there is widespread consensus that short-termism on the part of business leaders is not serving society, the environment or even business itself.

In response, there have been many calls for ‘responsible’ leadership. These are a reminder that ethics, integrity and high business standards are essential characteristics of business leaders if they are to regain the trust of society. But re-orienting business leadership towards long-term objectives will take a lot more than that. When we take these considerations into account, businesses become much more complex to manage with trade-offs and conflicts between long and short term priorities.

 So what are the characteristics of the Global Executive in leading for the long term? Tomorrow’s leader is a high integrity individual who:

…. Sees the connections

An effective leader sees the clear links between business sustainability, societal progression and environmental protection. The business world can no longer afford to be insular. The relentless drive for short-term performance must be balanced by concern for long-term outcomes.

… Sets bold targets to raise the bar

There is no room for a ‘business-as-usual’ attitude or incremental change. Companies such as Unilever with its Sustainable Living Plan and Marks and Spencer with Plan A, among others, have set comprehensive, specific, quantifiable and far-reaching targets across all brands in their portfolios. They are committed to large-scale organisational transformation to position their companies for harmonious coexistence with the communities in which they operate.

… Sees the possibilities for shared value

Rather than being overwhelmed by the enormity of problems and seeking to manage them as risks, these individuals are able to see the possibilities for business and societal interests to be mutually self-supporting. This takes curiosity, courage and open-mindedness.

… Embraces difficult problems

Effective leaders tackle the challenges that arise when setting ambitious long-term goals, and actively engage people in making progress on problems.  Setting challenging but necessary goals mobilises employees to face, rather than avoid, tough realities and conflicts.

… Balances head and heart

Many business leaders are accustomed to rational decision making, yet it is also easy for them to slip into a purely compassionate response to social and environmental problems with virtually no real business case.  Tomorrow’s leaders can see very clearly the difference between a solely compassionate reaction and the new business drivers, and harness the emotional turbocharge that comes from aligning good business with doing good.

… Is a “tri-sector” athlete (a term attributed to Joseph Nye of the Centre for Public Leadership at Harvard)

These individuals are able to operate effectively across three sectors: business, society and government. The social and environmental problems that are impacted both positively and negatively by global business operations are too complex to be solved by businesses alone. To achieve long-term sustainability, business leaders will need the ability to work in a different way with different sectors.

The Challenge Ahead

For the majority of businesses, there is still very much a focus on traditional short-term financial measures of performance. CEOs often approach challenges to long-term sustainability with a risk mitigation attitude aimed at making merely incremental adjustments to the status quo.

Why is this the case? Demands for short-term performance are often so intense that there is little time to reflect on longer-term priorities or to change direction. Public policies, investment environments and ownership structures often constrain even those business leaders who are committed to a long-term focus.

And getting these issues onto the executive team agenda will start with the recognition that long-term business interests are fundamentally and inextricably linked to environmental, social and economic stability.

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May 15, 2011 · 5:52 pm

Will the UK Bribery Act take the global compliance industry to a new level?

By Brook Horowitz

The UK Bribery Act comes into force on 1 July, making companies – and their senior officers – liable if their employees, distributors or third-party contractors pay or receive bribes.

This includes direction to British firms on how they can conduct their daily business not only in the UK, but elsewhere too. And it allows the UK’s Serious Fraud Office jurisdiction around foreign companies that do business in the UK.

Now the very countries the UK government is targeting are the ones experiencing the biggest difficulty in controlling corruption. Russia and the CIS Republics, the emerging Asian markets and the majority of the Latin American countries find themselves in the bottom half of Transparency International’s latest Corruption Perception Index. The most rapidly growing markets of Brazil, China and India fare only a little better.

For the biggest multinationals listed in the US, much of this is not new. Over the last few years, the US has prosecuted several companies under the Foreign Corrupt Practices Act (FCPA). Getting it wrong entails huge fines, inestimable losses in reputation, business and legal expenses, and even prison sentences for the senior executives involved.

The UK’s new legislation goes even further. For example, facilitation payments, a traditionally acceptable tool in the day-to-day operations of companies in difficult markets, are outlawed and corporate entertaining is circumscribed. Precisely how the law will be implemented remains to be decided following a consultation by the Serious Fraud Office with the business community, but by any standards, this legislation will take the global compliance industry to a new level.

The challenge for business is two-fold: how can companies continue to grow their investments and operations in countries where corruption is commonplace, while limiting their exposure to the new anti-corruption legislation? And how can these countries be encouraged to reduce corruption in the long-term? As it happens, the multinational companies are a critical part of the solution.

Leading companies already have internal codes of conduct, accompanied by a sophisticated array of procedures such as internal audit, whistle-blowing, and employee training. Assuring constant attention to compliance within the company is only the first step in creating “islands of integrity” in high-risk markets. By the same token, a company’s willingness to step away from a deal if the conditions for compliance are not right is an important part of getting the message across in corrupt environments.

Transferring such values beyond the company into the supply chain is a challenge of a completely different order. The best line of attack is a collective action approach by the leading suppliers to a specific industry. A code of conduct instigated by the major suppliers, supervised by a neutral third party such as an NGO or business association, and signed by all market players could be a game-changer. A similar approach could also form the basis for “integrity pacts” in public tenders, where bidders and issuer sign up to a set of principles and a rigorous monitoring process.

Business leaders can make a significant contribution to changing attitudes towards corruption in emerging markets. At IBLF’s regular forums in Russia and China, top executives already share with their local counterparts their experience on how to create a corporate culture based on the principles of good governance.

As non-executive directors on the boards of the “emerging multinationals”, many experienced executives can significantly influence corporate behaviour. Through a combination of informal exchanges, board-level appointments, mergers and acquisitions, and day-to-day operations, global leaders effectively can mentor the new generation of leaders in the emerging markets on new ways of doing business. By so doing, they reduce their own companies’ exposure to corruption and create a level-playing field in which they can compete, improve their local partners’ awareness of global ethical standards, and accelerate the integration of the emerging markets into the world economy with all the social and economic benefits that this is likely to bring.

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Filed under Business standards, corruption, CSR, russia

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