End 2012: regulatory proliferation and fatigue

A look back over this blog in 2012 would reveal a number of recurring themes, for example:

• What is the role of the private sector in helping provide public goods in Africa -- what implications does an expanded role for (or set of expectations on) business have for policymaking? What strategic risks arise where firms take on a greater burden for example in social investment?
• How can we improve business-government relations and communications, including to define better the distinct responsibilities of each in relation to building more peaceful, prosperous, participatory societies? What risks arise where business takes more of a lead on socio-political issues?

Inequality gap as a private sector issue, too

Yet if I could choose one macro-theme touched on in many posts, it is the challenge the private sector faces -- at least in the continent I cover -- from growing social inequality and diverging social indicators (in other regions, I would add here what I think is a trend of greater nationalist and protectionist sentiment, including among supposedly more open-minded younger people). Poverty-reduction and social policy are clearly the responsibility of governments; yet firms and financiers have an interest in building more inclusive, educated, employed, empowered societies -- if not to maximise market size and depth then at least to mitigate the risk of social disharmony creating serious future disruptions to commerce.

Regulatory proliferation

Instead of these issues (more in 2013), I'll return to the theme of regulatory proliferation -- what does it mean for influencing responsible business conduct -- while trying not to see as growing regulatory and compliance fatigue what is only my own end-of-year need for rest!

It is December -- a year since I started blogging on this site.

For many, blogging means daily inputs responding to issues and events. Instead I've conceived of this site as a weekly or fortnightly missive on trends at the intersection of business and society.

One reason I've had for eschewing daily posts is a consciousness of just how saturated most people I know are with information and analysis. This internet-accelerated quantity does not necessarily lead to better quality insights or decisions. Concentration and constant stimulation do not go well together.

Might this proliferation problem not also be the case when regulating business conduct?

At a recent conference (see previous post) one obstacle raised to better governance of natural resources was the proliferation of voluntary and other initiatives to regulate contract and revenue transparency, conflict-free minerals, and so on. Corporate actors can become focussed on narrow compliance or reporting issues rather than thinking clearly and strategically about how to 'do well while doing good'. The US Dodd-Frank financial regulations are frequently cited as far too complex and lengthy, and likely mainly to keep lawyers well billed.

This is not the place for reciting the academic literature from regulatory theorists; and if I do not here give enough caveats about 'of course business wants less regulation' it is only to avoid saturating prose. Also, as an ex-lawyer myself I hardly disown the need for 'hard law' rules. Simple directives alone cannot govern all complex market transactions; and one cannot rely on self-regulation alone. So of course there is a place for codes of rules -- for example, to control to whom a gunshop business may sell military-style weaponry. Also, it is strongly arguable that regulation of business and investor responsibility is only just getting going, so why retreat from norm-building now? Moreover, I'm sure to blog in 2013 about how public policy should be comfortable with or indeed encourage multiple sources of regulatory influence in an incorrigibly plural world -- all the better to promote business practices more aligned to the sort of society we want for our children.

Yet despite all this, it is not obvious to me that 'more' is 'better' when it comes to changing behaviours.

A former China correspondent recently told me how in his view the phenomenal and rapid process of modernisation in that country came not from reams of codes and stipulations and directives. In his view it came in large part from a gesture -- the expression of a simple but powerful idea, a permissive or steering indication -- by the remarkable Deng Xiaoping. This described a destination, leaving it to others to map the particular steps.

So I end my last 2012 post wondering whether the most powerful ordering force for reconciling business and social values and needs might not be highly specific codes and regulations -- although no doubt enforceable rules and some detailed guidance will always be needed. Instead, the most influential driver of responsible business conduct might be what Marti Koskeniemmi called the 'regulatory idea' of (in his case) international law.

Customers, citizens, insurers, investigators -- all these will, if trends continue, recognise and reward (or regulate) where a business is trying to mitigate social harms and multiply social goods. It will take rules to tidy-up and trigger-on parts of this trend, but the transformative potential and power of greater business-society alignment lies in the idea, not the individual sub-clause; in the destination, not the detailed sub-section.

Proliferation of rules and schemes is valuable if it assists in stimulating socially-responsible business and delineating public and private sector responsibilities -- not if it obscures the relatively simple notion: do no harm.

Jo

Inclusive growth in Africa: the 'good-times gap'

Is there a name for the high expectations accompanying new major resource finds in sub-Saharan Africa? I will call it the 'good-times gap': the distance between what locals might hope to see, and the potential for a significantly less transformational outcome.

Last week I attended the 'Galvanising Growth' conference at Oxford's Blavatnik School of Government. Of the many issues that emerged, one stood out -- at least in the session on governance of natural resources.

One can approach that issue from many angles -- revenue transparency and management, conflict prevention, sustainability and environmental issues, or (which was the conference's intended overall theme) in terms of capitalising on natural resource wealth to deliver economic growth.

I think we all should have revised the topic explicitly to 'galvanising inclusive growth' and spent more time developing the points made by various speakers -- from Nigeria's finance minister to a senior Rio Tinto executive -- on the imperatives of local job-creation and appropriate sharing (as between investors, governments and communities) of both the revenues and responsibilities related to major resources projects.

On the Paul Collier-mediated resources panel, in my view one issue came through strongest: the problem of explaining, to those populations who should stand to benefit from newly-tapped resource wealth, the many caveats potentially involved in its realisation. The challenge is really one of education, of 'public relations' in its literal or deeper sense. Especially where youth unemployment is high, the disappointment from unmet high expectations can translate into political instability, or 'vuvuzela politics', resource nationalism and populist politics. Sometimes 'populism' is merely a call for fair terms or distribution, but it can have significant impact on investment. Poor information compounds it.

It is a problem shared by governments and firms exposed to the consequences. Often even the officials involved in negotiating deals may not fully appreciate the long timeframes and the potential for changed global conditions to substantially affect local projects, or other variables. Misapprehension is likely to be higher on the street. Listed firms are obliged to report finds or deals to the market. Increasingly, this information (often expressed in terms of billions of dollars of reserves or projected capital investment) is available in the host community. Yet its wider context may not be appreciated. Locals who receive news of a $1.2 billion dollar project may believe that this sum represents what will be transferred to government.

Many colleagues working in corporate external affairs, corporate responsibility etc., spend a lot of their energy on social impact / social investment reporting where the audience is the market, the potential regulator, the Western media or NGO world, all in the home country. Yet from a risk perspective, the main audience that suggests itself is perhaps in the host country where projects are actually situated. Major mining and hydrocarbons projects that have triggered many media headlines -- and boosted GDP growth projections -- seldom directly create as many jobs, at least for the less-skilled. Helping to stimulate local economic opportunities while addressing job-creation expectations will remain pressing challenges for extractive sector firms and their host governments.

If 'uncertainty' is an indicator for risk calculations, the uncertainty of host populations about what developing their resource entails is a relevant issue on which risk-mitigation and 'external relations' might focus. It is tricky: how do firms stimulate a national conversation about new revenue wealth and its management -- and in the process, say, manage overall popular expectations -- without either trespassing into government's zone or triggering its disapproval, or other unexpected consequences? How do firms align themselves with government education programmes, if any, on the new resource?

One other stand-out theme from the expert panels was this: the immense difficulty, whatever the design of one's policy, of implementing public policy generally. The humility that shared experience suggests we should harbour on implementation is not unrelated to the 'good-times gap': if policymakers should be more realistic about what is really do-able, one can see why there's a need to dilute the expectations of recipient / host communities about major resources projects.

As we know, and may come in future to see more starkly, greater awareness + unmet expectations = a source of instability risk for investors and governments. Yet from the perspective of a transparency activist -- of which there were a few at the conference -- these high hopes might also help fuel local demand for greater accountability on the part of state officials for the proceeds of natural resource extraction.

Jo

Various previous posts (for example, here) have dealt with dilemmas where the private sector attempts overtly to enter public policy debates in Africa.

Many previous posts deal with the related issue of firms 'educating' counterparts in government about their constraints or contingencies -- and problems with thinking of it like that.

Last week's post, including the Blavatnik conference link, is here.

Regulation, values and strategic competition

Public intellectuals should be making a stronger case that anti-corruption laws and other 'values-based' regulation are not disadvantages for Western firms in strategic competition for access to African natural resources.

This week I'm attending the 2nd 'Challenges of Government' conference at Oxford's Blavatnik School.

There Paul Collier will be moderating the session 'Managing Natural Resources for Growth' against the background that resources booms have often driven "inequality, conflict, and stunted political development".

This reminds me that earlier this month Collier wrote an op-ed in The Gaurdian arguing, among other things, that US, EU and other anti-corruption regulations give rival (he meant Chinese) firms competitive advantages in the race to secure mineral, energy and land resources -- but that these rules were a vital part in a strategic conflict of values, as follows:

"The west's economic battle with China will be lost: power will inevitably shift. The battle of values can be won, and if it is won the shift in economic power will be less consequential."

In my next (post-conference) post, I hope to revisit these issues in light of discussion at the Blavatnik event. For now, a few things -- because I think Collier's thought-provoking piece (albeit on a well-trodden 'contest of values' literature) missed an opportunity to be more persuasive. The piece does not make the case for how, in the long term, doing the right thing (in regulating offshore business behaviour) can also be the smart thing (provide long-term strategic advantages to Western firms). I intend to ask Collier whether it is not possible to make an argument addressing firms' strategic self-interest and not just our sense of right. That might help build corporate support for such practices, seen for example as part of longer-term protection of commercial interests from various risks.

The late Karen Ballentine led the best research on the malign problem structure of the lack of a 'level playing field' and collective action problems relating to regulating for more responsible business. Collier ought to have used his op-ed to explain why 'winning' the battle of values would be a significant economic victory, not just (an important) moral one. That is the case he needs to draw out to convince policymakers and regulatees of the strategic importance of such laws.

Moreover -- and a topic for another post -- Collier's argument does not factor in how Chinese firms involved in higher-profile African resources deals might over time face (and are already to some degree facing) a degree of greater regulatory attention from Beijing over their behaviour in Africa. Collier's argument is, in effect, that the West has a moral duty towards African countries to regulate for responsible business conduct. Yet perhaps Collier should write less on what the West can do to 'win' versus China in Africa, and more on what can be done by policymakers to help promote inclusive, transparent and socially-responsible management of African resources, whichever foreign nation seeks to exploit them.

Jo

A previous post reflected on the risk that regulation intended to improve listed companies' social performance might have undesirable consequences -- here.

Collier's piece is here.

Business after conflict

This week in Nairobi (November 28) is an interesting conference 'Business after Conflict' to discuss, among other things, what donors can do to attract and support investment and promote conflict-sensitive business practices in places like South Sudan, Guinea, Ivory Coast.

There is much to be said. Cambridge University Press is next year publishing my book on engaging the private sector in peacebuilding, so for now just a brief thought about one practical idea for conferences like this.

Its a thought we discussed last week (November 22) in London under the umbrella of the Invest in Africa initiative. And it relates, like that initiative, to what major private investors -- not donor or host governments -- can jointly and individually do to improve the post-conflict investment regulation climate and mitigate both the perception and reality of regulatory (and other kinds of) risk in such settings.

Responsible businesses do not wish to operate in a regulatory vacuum, but some post-conflict settings will display serious weakness in regulatory institutions. In such exceptional cases there's an argument for firms helping -- by secondments of their own staff, or sponsored salaries of transitional experts, for example -- to boost the capacity of local government counterparts in (re-)creating and managing a stable regulatory climate.

In my experience, often a big mining firm entering a fragile setting will poach the best local talent to work within that firm's local offices. Yet it might make more sense for the firm to support the government's retention of such staff within the regulator, to improve the framework under which they operate.

Moreover, re-entering or interested firms can work together (and with local chambers of commerce) in such a scheme. Donors [in theory] coordinate in post-conflict settings -- so should firms, even those ostensibly competing. All probably gain from the reduced financing cost, for example, of a setting with a better reputation for regulatory capacity.

Donors and multilateral agencies -- and civil society watchdogs / capacity-builders -- would have a role to play in triangulating such relationships to avoid the risk that business will compromise its own local regulators by capturing these institutions or distorting their activities (or be seen as doing so). Secondees would avoid crowding-out local regulatory talent by gradually handing over roles.

I wrote on this in a previous post on the need to explore ways that good business can help build the environment that good businesses find attractive:

"... Attracting good firms to risky places is hard enough as it is ... it seems sensible to be more flexible about firms (not just donors) ... helping host governments with things like boosting the capacity of local regulators to regulate in a predictable, purposeful way. In such relationships lie many points to leverage for more responsible business conduct, and higher governance standards by public officials."

Jo

The previous post I've quoted from is here.

See the Invest in Africa initiative (founded by Tullow Oil) here.  

After the MDGs: the private sector and development

Last night I watched the latest 007 film, Skyfall. It reminded me how so many past Bond films have featured SPECTRE, the global criminal organisation plotting to wreck havoc for its own often commercial ends. In my PhD interviews with UN officials, those who had considered the role of business in their mandate at all often tended to think that the private sector was comprised mainly of SPECTRE-like entities. I found that the consequent distrust and suspicion by officials inhibited the scope for them to co-opt business in pursuit of public goals.

2013 is just around the corner, and beyond that lies 2015, such that policymaking is turning to what priority development goals should replace the 2000-2015 Millenium Development Goals (MDGs). How should these be selected and framed? Who should / will likely decide these issues? What role should / will private firms and foundations play in the process?

This past week saw the announcement of a strategic partnership between the firm I work for and the UN Global Compact. This extends our earlier collaboration with them in identifying and explaining what macro-trends will shape the corporate sustainability agenda in the short, medium and longer terms (see here).

The corporate agenda is one thing. But one theme of this blog is the influence of private firms and foundations on public policymaking, including their input into framing global development priorities and discourse. That is, the envisaged and de facto role for the private sector extends (as it does for civil society*) beyond collaborating or cooperating on the achievement of development goals; it includes contributing to decisions on what those goals should be -- even if decisions about the formal agenda are political ones for duly constituted public authorities.

One strategic factor for public policy, especially in an era of fiscal austerity, is to frame a development agenda that aligns as far as possible with commercial realities and interests (so as to ensure corporates are incentivised and on-board) while also manifesting sustainable development imperatives (so as to engender or require transformed ways of doing business more responsibly).

One strategic factor for (big) businesses with global footprints is to try and influence a development agenda that maximises the commercial opportunities inherent in concepts such as 'green growth' while mitigating the social and environmental risks to long-term profitability. Since, in theory, most firms have an interest in seeing more peaceful and prosperous societies, they have incentives to support a formal development agenda calculated to help with this larger goal.

As we did with the 2012 Rio+20 summit, I think we'll see a much larger role played by private business and foundations in the lead-up to the post-2015 development agenda. Indeed that process of policy-shaping has already begun. Many of these actors have far more resources (and in-house long-term planning capacity) than UN member state governments.

As I've written before, there are many good reasons for care when it comes to business input into policy, even if this is already far more pervasive than most policymakers admit. The corporate world is not filled with SPECTRE-like conglomerates, but nor were we all born yesterday. A healthy objectivity is needed, even if governments do not have a monopoly on virtue.

Yet if a global internet or social media firm, for example, were to start pushing for greater recognition of the role of access to information in achieving development goals, is this necessarily something to resist simply because of who happens to be driving it? If business is showing an interest in the highest level of development policymaking, this is probably a good thing. The evil genius of SPECTRE lives on in many ways in the contemporary world -- but in striving to seek and find new paths to sustainable development we should be confident and not yield too readily to unproductive superstitions about corporate influence on public policy.

Jo

* The question of whether business or business federations (eg chambers of commerce) are members of 'civil society' or a distinct other category -- for purposes of formal inputs into policymaking -- is something on which policymakers, including the UN system, have been ambivalent. I'll return to this important question in another post. Intuitively, one tends to distinguish between a non-profit foundation or federation and a corporation, even if the latter supports the former.

Social licence: the neglected dimension

In response to a recent email I've mulled over a blogpost that ponders 5-6 topics, at the interface of business and society, that might be good research topics for students.

But it is Sunday night -- so I mention only one: is there anything that large project corporates (mining and energy) operating in less-developed settings might learn, by analogy, from the experience of UN and coalition-type forces in drawing-down or exiting fragile and / or post-conflict states and situations?

Richard Caplan launched his latest edited collection Exit Strategies and Statebuilding (OUP, 2012) recently, here in Oxford. Such literature deals with statebuilding projects by foreign powers typically following armed interventions such as those in Iraq and Afghanistan. The analogy? Well I think there is scope for more research on what is involved in large extractive industry operators scaling-back or exiting certain settings, and wonder if the 'exiting statebuilding' literature holds some possible insights.

Of course the analogy has many holes, in particular because international statebuilders (at least UN-mandated multidimensional peace operations involved, at some level, in building and supporting the institutions of conflict-affected states) are exercising public authority and responsibility; firms are not doing so even though they may cooperate closely with local government officials or become de facto local public service-providers. Nevertheless, mega-projects in often remote parts of under-developed regions in Africa often become important sites for wider social and economic activity. That is, a major project does not have to reach the scale of a 'state-within-a-state (like Firestone's Harbel plantation in Liberia) to nevertheless be, or promise to be, a major developmental node in its area. This makes the winding-down of such a site a significant and challenging event for such settings.

Caplan's recent book is not the only relevant 'hook' for blogging on this now; the other is how mineral-rich, politically-fragile Guinea is still absorbing the implications of the (also recent) decision by mining giant Vale to suspend its Zogota iron ore mega-project given difficult global conditions in the sector. This project was seen as a major pillar in supporting the country's continuing post-2010 recovery from five decades of corrupt, authoritarian and arbitrary rule.

I've blogged about what might be called 'the Zogota syndrome' before -- see the tail end of this post here:

* 'No mining!' Some mining-related community protests, such as in Peru and elsewhere, can be crudely characterised as largely opposed to a mine's operation at all, where locals see or expect no net benefit.

* 'No mining?'  By contrast the Zogota syndrome involves another form of problem, whereby far from opposing mining operations, communities protest because the mine is not in fact going ahead as planned, and employment and other prospects will not be met.

I see so much of the literature on corporate responsibility, mining-as-development, social license to operate, etc as focussing on two areas of social invesment: entry / exploration / start-up, and normal operations. But while there is a solid literature on regeneration and restoration activities at the end of a mine's life, a third area is relatively neglected: the considerations of strategy (and principle) involved where social and political expectations of mining-related benefits will not be met because the operation is mothballed or stalled significantly. If we're approaching the end of a commodities super-cycle, the Zogota-style ('do not go!') protest above may prove more common than the anti-mining form of social protest, raising potential reputational and other risks for firms.

What might the experiences of military and civilian contingents in exiting statebuilding operations suggest for firms exiting major projects? I look forward to reading someone's research on this!

One theme of the statebuilding literature (see Charles Call's work, for example) will be applicable: the debate on what counts as 'success' in such endeavours, thus enabling exit. Who defines success or completion -- the statebuilding authority or the 'recipient' population / government? In the mining or energy firm analogy, what a firm sees as adequate provisions for its drawdown in operations may fall far below local expectations, provoking resistance to the exit. Such 'exit-resistance' might be just as heated as the resistance often encountered to the entry or operation of such projects.

The corporate responsibility / social investment literature arguably focusses too much on the up-front questions and places too little emphasis on the back-end of projects, the exit phase; in such situations familiar questions such as the division of roles between company and host government will become particularly acute -- especially where the latter was looking to the former to provide the sort of services and opportunities that will now not be forthcoming.

Jo

Business and government: building trust

Many things need to change if we are to see more meaningful public-private cooperation on meeting development goals. An important yet simple one may be public service mindsets.

Here I mean those working in the foreign aid departments of major Western donor governments. The recent mantra about engaging the private sector in development (especially as austerity constrains the aid budget) has not necessarily resulted in a greater enthusiasm or pragmatism in talking with companies whose conduct in developing countries may enhance or complement the aid agenda.

Last week I had a conversation about corporate lobbying and private sector access to government policymakers. Typically, the concern one encounters is of undue and unseen influence by some business interests while other struggle to get a decent audience with government. (It is of course a question of balance -- see previous post here.)

Here I am talking of the reverse situation: where public policymakers seek to influence corporate policy. Of course that is what regulation involves, but I mean more generally a practice of seeking out conversations with business, exploring avenues to create 'shared value' by coordinating, for example, corporate social investment spending with official aid projects -- where and to the extent appropriate.

Even where they accept or embrace the notion of securing their 'social license' to operate, many business actors might have a range of reasons to be cautious of being approached by officials for discussions about making more explicit or substantive contributions to development outcomes. For instance, the well-known 'slippery slope' fear that firms might be left to carry the bulk of the responsibility for providing public infrastructure and social services in developing country settings.

This caution about talking to business exists on the part of officials, too. But much of it may be unjustified and a missed opportunity.

A number of recent experiences reinforce a finding I made in my PhD research about the reluctance that many in the UN system display for engaging with business in post-conflict peacebuilding. That is, I think public servants working in the development field largely have a blindspot for how business can positively affect their goals. Ignorance of the commercial world, suspicion of its agendas and people, fear of being 'tainted' by association -- these are some of the reasons why policymakers' recent rhetoric on engaging more with business on issues of mutual interest is not matched by action.

Take a recent London event exploring how Japanese and UK firms and government departments can cooperate towards responsible business opportunities in Africa (see here). There Sir Malcolm Bruce MP, chair of the parliamentary committee on international development, argued that the biggest obstacle to scaling-up these sorts of relationships was that most of those working within the Department for International Development (DfID) did not perceive business as a relevant development actor that should be understood, met, partnered.

There are (and this blog has explored) myriad reasons to be sceptical or cautious about the ways that business and government interact; DfID's role is not to enhance the interests of one or other firm, but to serve UK national interests and the global development agenda. It is also important not to perpetuate myths about private sector efficiency or altruism. Nevertheless, much of the existing appropriate scope for getting more out of the developmental potential of business-government cooperation is wasted. I think this mindset problem in officialdom is a large part of that.

Jo

The new pragmatism: imperatives and ideals

I do find it remarkable how so many people find it remarkable that there is so much that business and governments can find to agree upon in terms of developing Africa and sustainable development generally.

In the sources I read, hardly a week goes by without someone -- policymaker or politician or practitioner -- speaking in sincere-but-excited terms about the scope for harnessing private initiative in the pursuit of public objectives.

Austerity, acknowledgment of shared interests and a twist of Asian-led competition in African investment (and development) modes has turned an ideal about finding avenues for greater public-private cooperation into an imperative for doing so.

At the same time that the public sector needs private capital and commitment, at least some parts of business and finance are feeling or finding a need to reach out for public sector endorsement, reassurance, legitimation and facilitation, especially when operating in more controversial settings or sectors.

I was fortunate to be in Oslo last week (congratulations to the fledgling Norway-Africa Business Association!). I was among hosts who think it only normal that their government take an interest in how Norwegian firms conduct themselves abroad. Yet they also seem to think it only normal that Nordic businesses operating in African settings be encouraged to help local governments build their regulatory and other capacities. Now there are many reasons to be very cautious about unduly close relations between business and government in weaker governance zones. But since many projects will go ahead anyway, and business will influence government officials anyway, it seems to make sense to attempt to structure this, keep it visible, find ways good business can help government build the environment that good business finds amenable to operating in...

Attracting good firms to risky places is hard enough as it is. Since others will fill the space, it seems sensible to be more flexible about firms (not just donors) helping to build government capacity. We must find policy frameworks that help us with what is acceptable and desirable, and what is inappropriate, in firms helping host governments with things like boosting the capacity of local regulators to regulate in a predictable, purposeful way. In such relationships lie many points to leverage for more responsible business conduct, and higher governance standards by public officials.

This Thursday I'll be attending the Asia House workshop on private investment and development in Africa. The participants here are unremarkable in the sense that they see it as entirely appropriate to explore business-to-business cooperation in taking up the supporting tools that governments provide to facilitate 'larger and responsible' investment in Africa (see here).

For those interested in tangible progress on sustainable development goals there is much to celebrate in the new pragmatism from governments (whether of the developing or donor variety) and the private sector (both corporates and financiers) about working together.

The imperative is to transform the rhetoric about public-private partnerships for African development into models and modes that are not removed from (or preferably that are designed to run with) commercial realities.

The ideal is that such partnerships maximise the space that exists for building-in incentives for more socially responsible and inclusive investment.

For my part, I don't tire of the term 'principled pragmatism', nor do I see why one should sigh at the oft-used term / concept 'win-win'. Where ideals and imperatives find common cause there is considerable scope for creating new norms of practice at the intersection of human development and economic growth and the business dimensions of building better societies.

It is probably most unfashionable to quote Cecil John Rhodes, but since there is so much to do, and so little done, it only makes sense to try and do much more together. Unremarkable, one would have thought.

Jo

Branson's 'Plan B': Better business in Africa

Does capitalism in Africa have a 'Plan B?' -- a version more promising yet socially-environmentally palatable and politically possible?

Sir Richard Branson last week launched his 'Plan B' initiative -- as The Economist describes it, a small group of business leaders who will campaign for reforms to make capitalism more socially responsible and more inclined towards addressing long-term issues such as climate change.

Much of what is happening in contemporary sub-Saharan Africa appears to involve a search for suitable models: an overarching idea about what development should look like and the relative roles of the public and private sector -- along with all sorts of hybrid initiatives -- in delivering both individual prosperity and public goods.

This search for a 'meta-narrative' to guide economic growth may be nothing new, but nor is there yet a post-'Washington consensus' consensus. African policymakers' perceptions of China's rise and developed economies' woes are the obvious backdrop for these debates, which are largely dumb to all the lessons and literature on the limits of transmitting or transplanting one model of governance or development to another setting.

This search -- and the appeal across Africa of the 'Beijing consensus' / state capitalism -- makes especially relevant, in this decade, the question of what model of capitalism (or aspects of it) will prove most persuasive or pervasive in various African settings, and what indicators will matter in judging performance -- the quality of growth, including its capacity to address inequality.

Will African policymakers find ways to enable the private sector to do well while doing some good, or is such an enquiry naive in the context of heirarchical market economies that may be neither liberal nor communitarian, and where politics so often matters far more than policy, and public/private distinctions are less easily discerned? What was the Plan A in Africa -- has it demonstrably failed, requiring a Plan B, or was there no African setting that exhibited type-A capitalism anyway? Can African economies avoid the angst and analysis and just leapfrog straight to Plan B ('nice' capitalism) or are current patterns structurally entrenched and impervious to reform?

One reaction to the Branson idea labelled it 'fascist' for suggesting that modifications to unrestrained free enterprise were appropriate. Yet the (anti-fascist) democratic impulse is what drives many of the voices calling for Africa's development to be greener, friendlier, more inclusive. It involves a constituency that mainly looks to the state to ensure that this happens, even while most African entrepreneurs (from street hawker to super-tycoon) find the state, when not being an irritant, largely absent or irrelevant. African capitals have not experienced direct equivalents to the 'Occupy Wall Street' phenomenon -- but governments are in little doubt of the mass expectations to deliver electricity, jobs, services. How private enterprise behaves or belongs in such scenarios -- scapegoat or strong deliverer -- is something governments are working through. This is hardly the end of history.

I see this search for models in many areas I work on: east African governments with new-found offshore gas wealth wondering how to develop these, and manage the resulting revenues, more like Norway has than Nigeria -- more East Timor (Timor Leste) than Equatorial Guinea. More responsible policymakers in these settings are asking what an appropriate, viable model for natural resource wealth management will look like. To the west, Nigeria's current presidency is trying to sustain momentum on ambitious policy reforms that go to the heart of broader notions of the state's role in major sectors of the economy. South Africa's ANC, channeling (as it sees it) Brazil and others, is rather painfully exploring what role private finance and business plays in its vision of the 'developmental state'.

During a rail journey to London on Friday I chatted with a schoolgirl whose Economics essay assignment asked her to write on whether the government had a role in addressing poverty or whether this ought to be left to market forces. Simplistic stuff, you might say -- except that its the gist of this year's US presidential debate, and not long after the train journey I sat in a meeting with a major development finance outfit. There we discussed fairly 'back to basics' things: if we are to devise a compelling (accurate-yet-aspirational) agenda for Africa-focussed developmental funding with a commercial bottom line, what does all the current fashion for promoting 'public-private partnerships' as the engines of growth and poverty-reduction actually mean? Where exactly should the state's role end and that of commercial actors begin, even if they share the same broad social development agenda?

The more one looks, it seems to me, the more Tony Blair's remark earlier this year -- that Africa is in a 'post-ideological era' where Cold War-style debates are long dead -- makes no sense. It is not just that 'the state is back' (in many settings is never went away, even if it never matured). It is that deep political imperatives -- especially the need to create jobs for the continent's youthful, restless populations -- are challenging African leaderships to devise models that appease both those holding scarce capital, and local forces imbued with a new assertiveness about the local value-addition that investment must bring to be seen as legitimate.

Perhaps above all -- and even if one's only interest is essentially a conservative one, continuity not sudden change -- a Plan B for Africa would need to focus on social inequality. That is, increasing inequality gaps in many African settings from Lagos to Luanda mean that any Plan B must, to be sustainable, include ways to ensure new-look capitalism's benefits are not limited (wait for the mixed metaphor) to A-listers.

Jo

- The article from The Economist is here.
- I've discussed these themes in other posts, see those labelled 'private sector', in particular the one critical of Blair's 'end of history' comment, here.

Business and nationalism: foreign policy attribution

Are there potential African analogies to the way that recent anti-Japanese nationalism in China included calls in China for boycotts of Japanese products?

The issue illustrates the potential rapid (and rabid) emergence of a nexus between high geopolitics and the ostensibly apolitical sphere of private firms and consumers:

* So it is that contested Beijing-Tokyo (and Taipei) claims to the Senkaku ('Diaoyu') Islands have led recently to campaigns in China to boycott Japanese electronics, cars and other goods, and indeed to violence targetting such. Moreover, iPhone mapmakers are now more conscious that hosting a map stating one status or another may be taken as a corporate endorsement of a state position.

* So too French winemakers over twenty years ago suddenly found their produce boycotted by Australasians not because of anything relating to how it was made (or tasted) but -- as my colleague Stephanie Hare reminded us -- as a mark of protest against the French government's persistence with South Pacific nuclear tests.

But this blog focusses on Africa. What scope exists for acute periods of high nationalist (or racial) sentiment, stirred up by popular reactions to foreign policy-level / state-to-state issues, to manifest as boycotts or violence against firms and individuals -- not because of any conduct on their part, but only by virtue of their association with the country whose foreign policy actions or positions are seen locally as problematic?

[We can put aside South Africa's recent government regulation compelling vendors to label goods made in Israeli settlements beyond the 1948 borders as made in the 'occupied Palestinian territories'. That is a different case, one of state action, founded in a classic foreign policy position dispute, affecting private commercial conduct.]

Bigger transnational firms may be advised to develop a 'corporate foreign policy' to anticipate or respond, among other things, to cases where they face public pressure in a host state as a result of being associated, in local minds, with the geopolitics of their home state.

South African retail and telecoms firms doing strong business in Nigeria this year experienced a brief period of turbulence as Nigerians responded to a diplomatic dispute between the two countries over visa issues.

But I think that in the main in Africa, future boycotts or violence that we may see targetting foreign firms or businesspeople are more likely to be relatively unorganised (and so possibly more dangerous) and based on local grievances about perceived exploitation or comparative success, than about indignation following the attribution, in effect, of their countries' foreign policy.

The saying that 'all politics is local' is particularly apposite in this sense. In most conceivable African scenarios, a firm or its brands or staff are far more likely to be exposed on the basis of local social, environmental or governance performance than local anger at the Great Games of its home state.

[By 'foreign' I here mean non-African: there is no shortage of intra-African xenophobia, for example against Congolese smalltraders in north-eastern Angola, Somali stallkeepers in South Africa or Burkinabe migrants in Ivory Coast.]

Foreign firms and businesspeople are often vulnerable to being political scapegoats -- especially as economic times get tougher -- but in general, and until the link is explicitly made in some way in some context, it is embassies rather than businesses that will feel the force of any local protest at some state-to-state insult or insinuation.

Jo

Ps - This post ties in with last week's (on dilemmas for CEOs speaking out on politicised policy issues).

It also relates to a recent one on corporate diplomacy in Africa -- briefly discussing the potential, across the continent, for locals to attribute many of the actions of individuals or firms to their government of origin. The example there (Chinese nationals and attribution to Beijing) might create image management issues for the government, although it is also arguable that local perceptions of Beijing's influence might restrain groups from violent acts against Chinese nationals and stimulate greater local government protection. In this sense, being a firm or businessperson attributed to a major power may provide both a shield and a source of vulnerability from organised or spontaneous violence or boycott.

[Speaking of 'attribution', I'd like to acknowledge the recent discussions with work colleagues on which this post has partly drawn].

Public policy, private leadership and social media

Does leadership always involve decisive overt action? When does good leadership by a firm on a issue of significant public interest suggest one stands back rather than steps forward?

We have just ended our annual 'Global Horizons' conference, where one of the most interesting panels looked at leadership -- and the communication dimensions of this -- in a 'wired world'.

Debate included not just social media as a tool of (and something impacting) states' foreign policy, but also the policy of social media firms in dealing with states using their platforms in this way, with censorship / self-censorship on content that affects public policy issues like security or human rights, or firms' policies in designing applications intended to promote popular participation in governance and accountability.

(The recent reaction to a Youtube video deemed offensive to Islam has of course given further impetus to these debates, discussed previously -- here).

The panel at our conference spoke about the risks and limitations of social media platforms, but tended largely to adopt the view that leaders (from whatever sector) who did not use Twitter and other tools risked losing the initiative. Nature abhors a vacuum, went this argument, and if one doesn't fill it with one's position, others could distort or swamp that position.

However, it strikes me that there will be cases where leadership by a private sector executive (or group of them) on an issue that has spiked in public importance might sometimes involve saying less, not more.

That is, contrary to the idea that leaders should 'not just stand there, but do something!', might there not be circumstances where the better position is 'don't just do something, stand there'...?

What do I mean?

I was running the Africa discussion group where some participants were interested in discussing South Africa's recent mining sector unrest. One issue that corporate leaders continue to grapple with in that country is how far and when to raise their head (singly or as an industry) 'above the parapet' on hotly-debated, highly-politicised issues.

I don't purport to have any particular insight or experience on the tricky question of how CEOs of big mining firms should show leadership on issues that appear to rise above labour relations and become part of national debates about livelihoods, access to essential services, free expression and so on. Business leaders played a central role in facilitating government-ANC negotiations that led to the end of apartheid and democratic elections -- how's that for 'private sector, public world' -- but this was principally a behind-the-scenes role. The mining (and wider business community) in South Africa has been internally divided on the utility of entering public debates on issues such as proposed mines nationalisation in that country.

There is a role for business leadership on public policy issues in Africa, especially (as my last post intimated) where governments are unable or unwilling to address, for example, social issues that perpetuate injustice (and might potentially disrupt business activity). Indeed, I can imagine writing many a post decrying the lack of private sector leadership on some issues. Moreover, CEOs are often entitled and probably well advised to put their side of a story that has entered the public domain in an acute or serious way.

However, I can envisage many circumstances where 'leadership' by corporate actors involves saying less, not more, on an ongoing issue.

The main issue in corporate leaders speaking out on public debates -- whether through loudhailer or Twitter -- will be credibility.

If that is so, most of the leadership that firms could show might amount to deeds, not words. So while big business in African settings may need to ensure its contributions and constraints are better appreciated in the wider community, I do not think this necessarily means an over-active media profile on hot, hard case debates. Often it may be more appropriate -- and safer for firms -- that officials lead on politicised policy issues.

I think of these lines in Rudyard Kipling's great poem on leadership, 'If':

'If you can keep your head when all about you
Are losing theirs and blaming it on you ...

... And yet don't look too good, nor talk too wise...'

Talking too wise can have difficult consequences for firms grappling public policy dilemmas (some social media platforms may not be amenable to wise talk ... ).

In the regions I cover, credibility will remain at a premium in the content of CEO communications -- whatever their medium -- on issues at the intersection of business, politics and society.

Jo

Reluctant regulatees -- or reluctant regulators?

As many who follow Africa continue to take in the near- and longer-term 'meaning' of the events at Marikana mine last month (see the last post), I'm thinking about the tendency to cast the private sector as a set of reluctant regulatees, eluding well-meaning policymakers at each possible turn.

In many cases, what we have are reluctant regulators (not to mention incapable, captured or other ones -- another time).

A lay person could read the stories on South Africa's mining sector, especially labour relations, health and safety, and social investment issues, and develop the impression that the government has dragged firms, kicking and screaming, to deliver on wider development imperatives and aspirations.

This is not necessarily the story. In many cases, major firms (perhaps from self-interest, but at least 'enlightened' self-interest) have seen the longer-term risks for example from HIV levels in the workforce, and not waited for government directives. On some issues, business leads government in South Africa -- tho of course it is an elected government's prerogative and duty to ensure private actors meet public goals.

Consider the excellent doctoral work by researchers in this town like Gus Selby and later Charles Laurie into the vexed question of land reform to address historic injustices in Zimbabwe: I'm loathe to over-simplify, but one neglected dimension to that story -- often portrayed as ZANU-PF dragging recalcitrant white farmers to negotiate land redistribution -- is how the Commercial Farmers' Union saw the long-term risks of inaction on this issue and tried to get a reluctant / distracted / whatever government to move on the issue gradually and sustainably.

Rather than an apologia for the private sector, its worth noting that the story is less often as one-sided as it seems.

I think, incidentally, of my colleague Andrea B's comments on the regional tourism outlook in east Africa. While it is probably in all East Africa Community (EAC) countries' net interests to work quickly on helping enable more seamless travel for foreign tourists (eg by devising a common tourist visa), on this and many other issues, it is private operators who are forging ahead.

As Richard Dowden noted at our conference last year, in Africa so much of the stories of innovation and progress happen despite the state, not because of it (this is not an argument for weak states, much less a contribution to the US presidential 'what-role-for-the-government' debate!).

Moreover, as an early post ('Who regulates who?) noted, much of the safety and other regulation that we value and that is likely to run with the grain of commercial realities started life off not as public prescription but private initiative between members of an industry. The risk of spaces that might nurture self-serving cartels must be balanced with acknowledgement that not all the regulation that matters comes down from above or takes legislative form.

Anyway, the basic point is that in hard cases -- land reform in southern Africa is such one -- it cannot be assumed that the narrative is one of enlightened regulator and reluctant regulatee. The challenge, as the mentor-esque John Braithwaite has shown, is in catalysing virtuous circles of regulatory dialogue that involve suasion and persuasion as much as stipulation and resistance; or regulatory neglect.

Jo

Public order and private firms: Marikana shootings

For a blog exploring the intersection of private sector activity and public interests, last week's police-mineworker shootings in South Africa reflect key issues and dilemmas in their starkest -- and saddest -- form.

The widely reported police shooting of over 30 illegally striking workers near Marikana platinum mine northwest of Johannesburg -- unprecedented in the post-apartheid era, but sadly and eerily reminiscent of it -- is still resonating through South African society and politics.

Much has already been written and said; with funerals, trials, public inquiries and attempted mine-reopenings ahead, much is yet to be done and said, including at the level of national politics.

Yet since this is a blog called 'Private Sector - Public World', I feel obliged to offer some further insight. After all:

* The shootings -- and the week leading up to them -- illustrate the complex blurring, by no means limited to South Africa or indeed mining, between what is a labour relations issue (involving government-regulated processes, but in essence a matter between the employer and workers) and a public order one; between an issue managed simply by mining private security and a serious policing issue; between pay-related demands on one particular site and politics-related debates at a national level.

* This area of the country has seen mines develop at a far faster pace than the provision of related social infrastructure; much of what is provided for workers, families and hangers-on comes from the firms themselves. Well before the shootings, the Rustenberg area threw into sharp relief the duties and dilemmas of firms and governments in providing public goods -- in relation to a sector (platinum) highly vulnerable to significant global economic downturn.

[In the most recent post, I'd speculated whether a possible wider downturn across mining sectors would result in increasing frequency and intensity of protest action, as margins narrow (for firms) and expectations are dashed (for existing or want-to-be staff) -- see here].

The above factors suggest Marikana is a test case of what it means for a private firm to operate in the very centre of the spotlight of public concerns.

Yet it is not clear to me what one can sensibly add, in terms of the subject-matter of this blogsite, to the various media and commentator reflections to date on the Marikana shootings.

One risk to avoid is armchair / analyst arrogance. At the office during the last few weeks we've forced ourselves again to note how 'resolving' the Syria crisis is not simply a question of policymakers seeking analytical clarity and then acting accordingly: the issues are hard, hard, hard; events run of themselves, with multiple considerations and variables; we know far less about the future than we like to pretend.

So it is with my thoughts about Marikana for this blog ...

... For clients' purposes, we are obliged to offer what insight we can about what this means, for instance, for near- and longer-term ANC politics, or debates on mining sector transformation in South Africa (on which see past posts on nationalisation and resource nationalism, e.g here).

... For the purposes of this blog, is it enough to say that Marikana shows that, all analysis put aside, the issues arising for private firms operating in an inevitably (sometimes starkly) public world are sometimes just hard, hard, hard?

Admitting as much is not just an act of easy abdication of the role of analyst. It is a reminder of the difference between armchairs and hotseats.

Boardrooms need armchair analysts -- potentially valuable sources of dispassionate objectivity -- but the most visible and vital intersections of business and society will often occur at close range, move quickly, and -- yes -- be truly difficult.

Jo

Corporate diplomacy in Africa: austerity and downturn

The effects of the current era of budget austerity on the capacity of state foreign diplomatic services raises interesting questions and dilemmas about corporate diplomacy.

I here mean firms, mainly in the extractive industries, engaging directly with their host governments on major public policy, reform and governance issues -- traditionally the remit of bilateral diplomacy or aid bodies -- and acting (or being perceived) as 'ambassadors' for their home country.*

The issues are ones both for public policymakers and for corporate strategists.

They are by no means new issues, and the idea (or rather fact) of major corporations acting to some extent as foreign policy organs of their home state attracts controversy about the notion of 'private empire' or improper influence, and questions about the proper extent of private authority. It is a topic I covered extensively in doctoral work, but is also closer to the heart: I was born in a country (Zimbabwe) established by a private crown-chartered shareholder company in the late 19th century...

So while the issues are not new, two events in the last week in countries I follow prompted this post:

* Zambia Local mineworkers caused the death of a Chinese supervisor during minimum wage disputes. If only in symbolic terms, this is a significant development in a country where the role of Chinese firms and businesspeople has created diplomatic difficulties for Beijing, with Zambia being seen as something of a 'test case' on the 'China in Africa' debate.

* The Sudans Last week too, news of the intended resumption of South Sudan's oil production (a key sticking point in tense relations with Sudan) came a day after Hillary Clinton's inaugural visit there.

The latter is interesting because while public diplomacy (Clinton, Thabo Mbeki and others) might appear to have broken the oil deadlock, it is equally plausible that this resulted also from pressure from firms invested or interested in the sector. Now in the Sudans these are principally Chinese firms, and distinguishing between public and private -- sometimes hard enough, historically, with major global energy firms -- is often difficult if not untenable in such cases.

(Angola's state-owned oil conglomerate Sonangol is a prime, emerging and African example of the seamless and unsurprising fusion of foreign policy with commercial aims).

However, the Zambia example involved a mine privately run by Chinese nationals. Beijing is conscious that many Africans will attribute the conduct of expatriate Chinese nationals to some grand design, whereas it can by no means be assumed that Beijing has interest in or influence or control over everything Chinese nationals do or dig up in Africa. Still, the mine incident shows how -- for better or worse -- private actors' conduct can affect public diplomatic relations.

Of course many former actual ambassadors and foreign service officials work in government relations for multinationals (part of the blur in this area, probably inevitable, and not necessarily problematic) -- but many corporate employees act de facto as ambassadors either by design or by locals attributing them that status.

For many Western countries, the issue arises sharply in light of the effects of current austerity regimes on the capacity of foreign services. My colleague Tom Wales last week published an interesting brief on how, as their global footprint has broadened, Canadian mining industry executives have increasingly been playing the role of de facto Canadian ambassadors in developing countries (eg technical and governance advice) even as austerity is shrinking Canada's formal presence in many of these countries.

Here one potential 'for better' upside to austerity's effects on public diplomatic capacity is that governments such as Canada's can harness the strengths, resources and influence of major firms in support of objectives from conflict prevention to building governance capacity in host developing countries.

Arguably, it makes sense for public policymakers to look for ways both to 'civilise' the conduct abroad of firms associated with the country, and to encourage firms to contribute to foreign policy objectives such as building local regulatory capacity in resource-rich poorer countries.

However, aside from the public policy risks involved in any such 'outsourcing' are the risks for firms: twin events involving fatalities in Guinea this week are revealing:

* In the north-east, locals protested in effect against the operations of a foreign-owned mine, saying it had attracted criminality to the area.
* In the south-east, locals protested in effect in favour of a foreign-owned mine, albeit aggrieved that its opening date had been postponed and hoped-for jobs not realised.

As we probably now enter a downturn in global commodities demand, the latter situation is more likely to be common and may test firms' diplomatic capacities, especially where they lack formal diplomatic assistance, just as provision of social services by firms can create expectations that prove difficult to manage.

Jo

* I would partly distinguish 'corporate diplomacy' from 'corporate foreign policy' -- though clearly related: see previous post here.

I also do not mean 'private diplomacy' (ripe for its own blog post, the now-prevalent role of private individuals and outfits, such as the Centre for Humanitarian Dialogue in Geneva, in attempting to supplement governments, the UN and other bodies by engaging in conflict prevention / resolution mediation and influence, and other forms of so-called third track diplomacy. For one slightly out of date mapping of these bodies, see here).

PS - Days after this post my good friend Dr Jabin Jacob wrote this on whether Indian and Chinese oil firms might lead (and moderate) the way and ways of their governments: here.

Responsible investing and corporate form

How does the form that a business or investment vehicle takes affect the likelihood and effectiveness of it pursuing and achieving responsible investment goals?

Last week the Johannesburg Stock Exchange (JSE) held a discussion on trends in responsible investment. The JSE is acknowledged as a world leader in developing listing and reporting requirements that in principle promote better achievement on (or at least attention to) non-financial performance (social impact, carbon footprint, and so on).*

Ostensibly, the publicly-listed company (especially in a bourse like the JSE) is the vehicle most susceptible to formal regulation and reputational harm and most likely to pursue a responsible investment agenda. In a previous post on 'The Public Company as Public Good' I questioned whether onerous listing and reporting requirements might drive commercial people to choose alternative business vehicles and ventures that are harder to scrutinise.

However, it can't be assumed that unlisted firms are less effective at or prone to responsible or impact investment choices (any more than it can be assumed that state-owned firms are more susceptible to regulation on such things).

At work we've done a study on the growing interest of non-traditional investors ('High Net Worth Individuals' and 'Family Offices') in African growth opportunities. Such (by definition unlisted) investors are usually highly mobile and opportunistic. With such investors there is often a far greater interest in explicitly pursuing, alongside decent returns, worthy social agendas. The highly private investor may be very interested in a legacy of public good through their investment choices, and have far greater direct control of their vehicle than the CEO of a listed company.

Of course, at the opposite end of worthy publicly-listed firms are the ultimate private enterprise -- organised crime. The point to ponder is whether enough research has been done (alongside all the business school research on what drives pursuit of sustainability within corporate governance practice, and the relationship between corporate responsibility and financial performance), on how the form of incorporation of a business shapes its capacity to pursue a responsible investment agenda.

Jo

* The notion of stock exchanges are regulators of public interest goals is fairly well covered in the literature. For a primer, see Hall and Biersteker (eds) The Emergence of Private Authority in Global Governance (Cambridge, 2002). My very first post talked of the regulatory pluralism and its potential.

My previous post hinted at the idea that, taken on their own, reporting requirements may serve to distort strategic planning and implementation on responsible business issues -- in the same way that, in my experience of working in an international development agency, consciousness of reporting cycles sometimes obscured attention to achieving objectives, even if it also disciplined us towards those objectives too.

Rio fallout (or The Post that Should Have Been)

It becomes a post on 'reader saturation' to itself be short.

In the previous post I had promised that this one would try to sort, for reader interest, through the waves of post-Rio+20 commentary, especially as it related to Africa; but the sheer bewildering volume of it put me off.

The flowering of many perspectives and initiatives on issues of the corporate role in sustainable development is a good thing. However, the Rio aftermath and the related informational and analytical saturation had me wondering whether some larger, singular, guiding message risks being obscured by the myriad of things policymakers and advocates need to follow just to keep a grasp on these evolving debates across all aspects of social and economic development.

I know few colleagues who read even a fraction of what they think they need to read. I know many who feel spread thin across the many dimensions of current trends of sustainable-responsible-corporate-development-stuff. I spoke recently to a senior sustainability executive at a global branded foodstuffs firm who said his staff spend so much time reporting and reacting to the many initiatives and campaigns that they seldom stopped to ask simple questions about what they could do more of and less of in terms of mitigating their social and environmental footprint and creating shared value.

At the African Mining Indaba in Cape Town in February, I heard a senior executive from a global mining firm list (exhaustively) and then bemoan the huge variety of sector-specific and general multistakeholder and other schemes and initiatives and campaigns on which his staff tried to satisfy reporting obligations and expectations. Does the mining firm faced with multiple schemes really become a better and more proactive corporate citizen, or is there a risk that its energies (and the talents of its individual staff members) get diverted and dispersed down multiple channels?

This short post offered no insights or comprehensive overview into Rio+20 events and outcomes and implications. Yet we all mainly know what the gist of it is. Let the work begin, let the words be thin?

Jo

Rio+20: Corporates and 'The Future we Want' (II)

My pessimistic tendencies are really to be understood as a mindset calculated to ensuring that optimism is sustainable over time.

There are no medals for pointing out the many ways in which the Rio+20 Conference on Sustainable Development -- which ended yesterday -- fell short of what many had hoped for in terms of bold and clear leadership from governments.

In next week's post I will try to screen the huge amount written and said about Rio for what may briefly be said relevant to this blog's subject: the role and regulation of the private sector in achieving public goals, especially in Africa.

Wading through this now, I'm taking the easy route by offering only a reflection on the words used for the summit's outcome  document 'The Future we Want'. Whatever its many paragraphs, I wonder if there is something significant in this not having been called 'The Future we Need'. You can imagine an activist arguing that the global development and environmental challenges 'we' all face are not matters merely of want, but of (dire) need.

Well this is just one (optimistic, perhaps counter-intuitive) thought, but could one argue that referring to 'needs' in such cases holds less potential than referring to 'wants'?

On the corporates side -- and while not all sustainable development issues can be explained in terms of commercial incentives -- describing an issue in terms of what consumers and potential consumers want (desire) often gets attention going in a way that reiteration of staple needs perhaps does not. One only has to reflect on how investors have 'discovered' the African urban consumer to appreciate this.

For governments -- especially those that tend to neglect their citizens needs -- framing something in terms of wants (demands) might also trigger a different nerve, and perhaps greater responsiveness. This is especially so as governments continue to absorb what 2011's Arab uprisings mean for cases where populations want their needs met far more quickly and inclusively than governments might have thought.

Ahead of next week's review of the Rio+2o fallout, I also include a link to 'The Future we Want' report our firm produced for the UN Global Compact ahead of the Corporate Sustainability Forum that preceded Rio: here.

Jo

Rio+20: Corporates and 'The Future We Want'

It is day two of the Corporate Sustainability Forum, ahead of next week's Rio+20 UN Conference on Sustainable Development.

The conference clearly will not have the seminal effect of the 1992 event; in particular, governments are currently pre-occupied with near-term economic growth -- and far less so with how green or gregarious it happens to be. There is a strong sense that the corporate forum, rather than the inter-governmental process, is where momentum and innovation on sustainability in development is to be found.

My last post noted that the current era of governmental austerity would accelerate change in the relative roles of the public and private sectors in providing public goods and advancing social development. In the formal Rio+20 policy outcome, governments will place far heavier emphasis on the role of the private sector not just in respecting sustainability concerns but in delivering the technologies, financing and drive required to build 'The Future We Want'. Certainly, the level and profile of business representation and involvement in such summits is far greater these days; the talk is all of public-private partnerships -- partly reflecting fiscal realities on the public sector's part.

For at least the largest global firms, the risks of insufficient action in building peaceful, prosperous, less-polluted societies (and the opportunities provided by demand for greener, friendlier products and services) provide such an incentive that they are unlikely to wait around for policymakers to lead the way. We can expect -- and should largely embrace -- greater corporate attention to issues on the Rio+20 agenda, even if collective action constraints remain.

However, throughout all the current excitement about what the private sector can bring to scaling-up urgent developmental needs, we risk forgetting that it is governments who bear the main responsibility to protect and promote social goals; despite sometimes being exposed to consumer pressure, companies are not accountable in the same ways. For their part, major corporates' commitments are to be welcomed, but there is a longer-term risk that explicit adoption by the private sector of the social development agenda potentially exposes business to socio-political forces and expectations that it is generally ill-equipped to manage. If you sell and preach the good society, to some extent you also then own it. The private sector may consider itself damned if it does or doesn't assume a greater role in meeting issues on the Rio+20 agenda.

Amid all the pessimism among activists about the Rio conference, I do think one must be careful in criticising governments for having a short-term focus on avoiding recession (that is, criticising the effect this has on sustainability priorities). This is because serious economic meltdown is hardly a pro-social outcome, nor necessarily a pro-environmental one. Moreover, at least since 2011's (very different) 'Arab Spring' and 'Occupy Wall Street' phenomena, governments are generally more aware that the quality of growth matters as much to social and political stability as the quantity of growth. The risk of widespread or sustained loss of social cohesion or political stability certainly gets governments' attention. Along with strategic energy security imperatives and other incentives, this may help to keep sustainability issues and promoting the green, good economy relatively high on the policy agenda of a surprising variety of states, despite the current focus on growth of any kind.

Jo

- I touched on these themes in an earlier post questioning the assumption that it is governments that necessarily lead on addressing societal issues calling for responsible regulation: here

- Our firm has been working with the UN Global Compact in the lead-up to the corporate sustainability forum. For our CEO's co-authored op-ed piece in yesterday's International Herald Tribune, see here.

Business, Human Rights and Private Space Missions

It is June -- and so a year since the UN Human Rights Council endorsed, on 16 June 2011, the Guiding Principles on implementing its 2008 'protect, respect and remedy' framework on business and human rights.

This month also sees the 'corporate sustainability forum' taking place around the Rio+20 conference on sustainable development. Our firm has been helping provide input: in coming blogposts I'll reflect on forum issues -- how to scale-up responsible business practices and develop appropriate public-private-NGO partnerships and collaboration on development issues.

The GPs and Framework were not intended to foreclose further elaboration of the nature, source and scope of international standards of business conduct affecting human rights. Nevertheless, since the GPs' adoption attention has shifted from the content of the framework of norms to practical issues around their implementation. Some major firms with the resources to do so (and which hadn't already) can be found 'retrofitting' their internal sustainability and other policies and procedures to account for the GPs. Meanwhile it is now less remarkable to see governments explicitly including 'business and human rights' on the agenda of bilateral discussions and communiques (the recent UK-Colombia joint government statement is an example). Now five years ago that would have been most unusual.

There are a host of issues worth blogging on here, but the nub of this week's post is buried in the paragraph above: resources. The June 2011 endorsement was historic, but only time will tell if the GPs were fated by being born into an age of Western governmental austerity and flat growth -- and related caution by corporations with their cash reserves. The sort of government support one might have imagined being given to national and UN-level follow-up to the GPs' endorsement is unlikely to materialise; while major firms may still mainstream the GPs into their operations and strategy, global economic gloom is probably undermining internal and external constituencies for such change, especially outside the world's biggest and highest-profile branded corporations.

Those who study and work in this field often talk of the 'business case' for taking responsible business conduct seriously and adding 'people' and 'planet' to the bottom-line of 'profit'. The 'case for the business case' is likely to be tested in what lies ahead in the wider economic picture.

An optimistic view is that some business leaders will press ahead -- perhaps even more so in the circumstances -- with innovative social investment, corporate responsibility and shared civil-corporate value initiatives. I'll subscribe to that view, if only for the sake of it; austerity will do all manner of things to existing perceptions of what is an appropriate or usual role for the private sector. (Indeed, if one needed persuading of this, last month's first privately-funded space station replenishment mission is food for thought). This blog hopes to chart these changes. Whether to insulate themselves better from social risks or grievances, or to seize new opportunities, some businesses at least in most OECD countries may find themselves persuaded to innovate or lead on social impact issues in ways that we might not expect. Not all such change is cause for alarm.

A less optimistic view is that prevailing mindsets still see many sustainability issues -- both human rights and the Rio+20 enviro-focussed agenda -- as added extras or luxuries. Thus in practical terms those inside policymaking circles in government and around the business boardroom who seek to take forward the GPs (and the whole wider transformation they represent) could well find that process a lot harder now than it might have been had the GPs been born in the higher-growth period of the mid-2000s. Despite the imperatives and incentives for sustainability innovations of the sort to be discussed in Rio this month, the climate of economic uncertainty may undermine what we need to do to change our impact on the climate ...

Jo

References
The UN's 2011 endorsement is here (it also sets out the mandate for the UN working group 'going forward'). The Guiding Principles are here, and the 2008 Framework is here. The Rio+20 corporate sustainability forum page is here.

Bribery and corruption: OECD work in Africa

Bribery and corruption are very significant issues at the nexus of the private sector’s role and the achievement of public policy goals in sub-Saharan Africa.

In this slightly longer post, Melissa Khemani, an anti-corruption analyst and legal expert at the OECD in Paris, kindly agreed to respond to questions about some current institutional measures on the issue:

JF - Partnership between members of the OECD and the African Development Bank (AfDB) last year led to a new initiative, the Anti-Bribery and Business Integrity Course of Action for Africa. What are some challenges you think it has or will encounter in terms of uptake and implementation by governments in Africa?

MK – In 2011, the members of the Joint AfDB/OECD Initiative agreed to the Course of Action, which sets out a number of measures countries can undertake to help curb the bribery of public officials in business transactions from both the demand and supply side. This was a major accomplishment and reaffirmed the momentum that is building in this region to tackle this form of corruption.

Of course, the biggest challenge now is to turn the rhetoric into reality, and to implement and enforce these policies effectively. Bribery in business transactions is a complex crime, which is difficult to prevent, detect, investigate and prosecute. It requires a coordinated approach from a cross-section of government agencies and non-governmental stakeholders to fight effectively. It also requires a great deal of technical legal and investigative expertise. Cultivating the political will -- which in turn translates into the resources and priority dedicated to fighting this form of corruption -- is the biggest challenge in any country. The objective behind the Joint Initiative is not only to share the 15 years of the OECD’s expertise and experience in fighting bribery in business transactions through the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention) but to also raise awareness of the economic and social costs of this form of corruption in order to help garner the political will to fight it.

JF – What about on the part of business -- is it partly an issue of awareness-raising, or is there much more to it than that?

MK – Awareness-raising is crucial, not only of the sanctions companies and individuals may face for engaging in bribery, but also for making the ‘business case’ against corruption, especially at this important juncture which is seeing Africa increasingly attract significant foreign investment, and African companies increasingly investing abroad. It is easy to see the short term gain of paying a bribe to obtain a contract. But in the long term, this increases the costs of doing business, and these costs can only be recouped through the delivery of sub-standard products or through higher prices. This is unsustainable for companies in increasingly competitive, globalized markets.

Engaging in bribery also creates business uncertainty, as such behaviour does not necessarily guarantee business to a company; there can always be another company willing to offer a higher bribe to tilt the business in its favour. As a result, bribery may swiftly lead to, in economic terms, a ‘race to the bottom’, where the least desirable and inefficient company may obtain business not on the basis of merit but on the basis of ‘deep pockets’ -- a situation that cannot be sustained over the medium and long term.

Robust awareness-raising also helps set and reinforce the tone of a company’s anti-corruption ethos. All of the companies I have met with which place a very high priority on anti-corruption ethics and compliance have said that one of the most important ways to prevent bribery is to set the ‘tone from the top’ that bribery and corruption is not their way of doing business, it is not in the interests of the company, and employees will be reprimanded for engaging in such conduct. Of course, such awareness-raising must be backed-up by a meaningful anti-bribery compliance infrastructure including, among other things, regular trainings, clear rules on gifts and hospitality, due diligence rules on agents and joint venture partners, and internal whistleblower reporting mechanisms. It is much more than just simply sending out a yearly memo.

JF – There is a lot of talk about the need for a ‘level playing field’ on business integrity regulation. How do you see the role of the OECD in promoting harmonization of standards across OECD members on anti-bribery and corruption in the context of all one hears about the need to compete?

MK – One of the main objectives that underpinned the drafting and signing of the OECD Anti-Bribery Convention in 1997 was to try to ensure a level playing field in international business through international treaty commitments. The idea is that companies should obtain business on the basis of merit and fair competition rather than on having paid bribes. With the OECD Anti-Bribery Convention, 39 of the world’s largest exporting and foreign direct investing countries have enacted and enforce foreign bribery laws.

The rigorous peer review monitoring mechanism attached to the Convention, undertaken by the OECD Working Group on Bribery, plays an important role in ensuring such standards are being equally enforced across member countries. Furthermore, in 2009, the Working Group on Bribery adopted the Good Practice Guidance on Internal Controls, Ethics and Compliance to assist companies prevent and detect foreign bribery. This is the first ever guidance provided to the private sector at the inter-governmental level, and has thus played a very important role in harmonizing minimum standards on anti-bribery business integrity.

JF – The suggestion of those seeing a ‘Beijing consensus’ phenomenon is that increasingly it is / may be state-owned firms we see investing in Africa and its resources. How does this raise problems or possibilities for regulating bribery and corruption?

MK – The OECD Anti-Bribery Convention requires member countries to include state-owned companies within the jurisdictional reach of their foreign bribery laws. As such, these companies should be just as aware of bribery risks and implications as private companies, especially when operating in high risk geographic zones or sectors. I am aware that there are concerns that countries will not enforce such laws against state-owned companies as rigorously. However, the Convention addresses this in part through Article 5, which prohibits considerations of national economic interest to influence enforcement actions, and there have been examples of enforcement actions taken against state-owned companies in member countries of the Convention.

JF – I see talk of a ‘monitoring mechanism’ for the Course of Action. What will happen with that? Indeed, more broadly where do you see the emphasis likely going in terms of the future work of the initiative?

MK – The Initiative has just taken off, and the next step is for the member countries to decide how they wish to implement the Anti-Bribery and Business Integrity Course of Action for Africa. This could take the form of a monitoring system loosely based on the OECD’s peer review mechanism where countries review one another’s efforts to implement the Course of Action and make recommendations. It could also take the form of having certain thematic issues addressed in the Course of Action investigated in more depth, and identify best practices. This is really for the member countries to decide, and it is envisioned to be discussed at their next meeting.

In terms of future work -- again, this is for the member countries to set -- but I would surmise that emphasis will likely be placed on horizontal challenges the countries are confronting; this could include issues concerning anti-bribery enforcement, promotion of anti-bribery corporate ethics and codes of conduct, anti-corruption in national resources extraction, transparency in public procurement, or preventing corruption in development aid-funded contracts, to highlight a few…

[I record my thanks to Melissa, whose responses are reproduced unedited but which do not necessarily represent those of the OECD secretariat, the Working Group, or the joint OECD-AfDB initiative].

This blog will continue to feature occasional interviews. I hope you are enjoying the weekly or fortnightly posts (we’re all saturated in information these days) and feel free to forward the blog to those you think may be interested in it; also, feel free to use the ‘comments’ facility.

Jo