Stakeholder rhetoric: ignoring the private sector

A mindset shift is needed to ensure greater engagement by authorities with the private sector in tackling some of Africa's most pressing public interest issues.

One standard criticism of corporate responsibility initiatives is that they only give superficial lip-service to their promise to engage a variety of other stakeholders.

However, this failure to match rhetoric with reality applies in a different and contrary direction: governments and their multilateral bodies dealing with major developmental, governance and security issues often speak of 'engaging all stakeholders' -- only to then ignore the private sector.

This post comes from Rome, where I'm part of a high-level EU meeting considering strategies to respond to organised crime and drug trafficking along the 'Cocaine Route' from Latin America to Europe -- via West Africa and the Sahel-Sahara.

A background paper for the event makes some mention of engaging a "diverse group of stakeholders", but only mentions the private sector at one point in relation to "advocacy strategies" to create a groundswell against organised crime and corruption.

I find it extraordinary that the invitation list for such an event includes no-one from chambers of commerce in key port cities, port and airport logistic firms, banks and others interested in preventing money-laundering, and so on. It is all diplomats and cops -- although some civil society groups are represented, businesspeople and their umbrella groups are not.

Of course, if you define 'multinational private sector' broadly enough, transnational organised crime is par excellence a multinational business activity. It is an illicit one, but large-scale illicit activity is difficult to sustain without passing, at some point, through the licit economy (if only to launder the proceeds of crime). Speaker after speaker here in Rome has highlighted drug traffickers' remarkable innovation and capacity to respond: yet one licit source of resources, capacity and interest (the private sector) is again overlooked as a relevant 'stakeholder' in promoting less corrupt, more crime-free growth and development in Africa.

Innovation in public policy extends to re-thinking who may count as partners or can in some way be co-opted.

This sort of innovation is generally lacking. My doctoral work examined how authorities engaged in post-conflict recovery have tended to ignore the scope for engaging the private sector's capacity to contribute to building peace. From Sudan to Solomon Islands, the problem I found was either authorities' undue ambivalence about engaging the private sector, or ignorance of the potential contributions of businesspeople to achieving public goals.

This sort of mindset leads to the anomaly that one can attend a major conference on international supply chains in drugs without any attendee from the private sector: banks, airlines, ports authorities, shipping firms (and all their insurers -- a node for regulatory influence).

All the 'holistic -- multi-stakeholder' rhetoric rings hollow in such a context.

Jo

See a related previous post, here.

A link to the background paper is here.

The politics of business: 'crazy for good'

Politics, as they say, is a tricky business.

For companies this makes the politics of doing business in tricky places ... particularly tricky.

This is so even (or perhaps, in complex settings, especially ...) where a firm is trying to promote public good-spiritedness and aspirational values, typically in pursuit of its strategy for market position or building reputation / mitigating reputational risk.

Last week in Zimbabwe, Coca Cola found that its new can of Coke opened something of a small can of worms -- highlighting how even firms which adopt a studied neutrality on domestic politics can unwittingly find themselves forced to say where they stand on tense, changing local political issues, and in hard cases to make or avoid value-ridden judgments about which side of history they [may be perceived to] stand on.

The Zimbabwe issue arose as an incidental part of Coca Cola's global marketing / social awareness campaign 'Crazy for Good'. One feature of this is an adaptation of the standard red Coke can, altered to show open hands -- waving, reaching out to each other.

The problem (if it is one) is that in Zimbabwe, red is the colour of the Movement for Democratic Change (MDC-T); an open-palmed hand has long been its distinctive party symbol.

By contrast, its rival (Robert Mugabe's ZANU-PF party) is typically associated with the clenched fist gesture so often used by its long-time leader.

The 'Crazy for Good' / 'Open Friendship' campaign and its new Coke can happened to coincide with the lead-up to probable 2013 elections given that the mandate for Zimbabwe's dysfunctional post-2008 ZANU-MDC power-sharing government expires at the end of next month. Some over-sensitive ZANU politicians accused Coca Cola of blatantly aligning its brand with the MDC -- just in time for electioneering. The brand I suppose is typically associated, through the company's efforts over decades, with fun, freedom and friendship.

Coca Cola of course can easily refute the suggestion, pointing out that its brand colour has been red for decades and that this is a global campaign. (In a post-Arab Spring world in places with restless politicised youth one wonders how threatening some of the world's more paranoid and less secure leaders might find any new version of Pepsi's long-running mantra with its emphasis on a 'New Generation... !').

Anyway, the incident neatly raises the dilemmas that brand-sensitive firms can face in juggling neutrality on political issues (on the one hand ...) with their desire to align their brand with aspirational sentiments or universal values (on the other hand ...).

This dilemma is a subset of the wider difficulties global firms have in navigating local political turbulence, and often the strategic decision of whether to abandon pretence at neutrality, subtly re-align oneself for alternative possible futures, or hope that one's firm is not found exposed at the intersection of politics and business.

Coca Cola's recent full-page newspaper advert in nearby Swaziland raised some controversy -- it wished happy official birthday to the king of Africa's last absolute monarchy, which has strongly suppressed alternative political expression (even if the royal family as an institution retains considerable popular loyalty especially in rural areas).

Then there's a firm like South Africa's Nando's which took a different tack: one advert openly mocked Mugabe, resulting in threats to its staff in neighbouring Zimbabwe -- it withdrew the adverts, perhaps having calculated that Youtube hits would continue soaring and that the kudos in the SA market was worth whatever happened in the much smaller Zimbabwe one.

Close political ties can be handy, but also be a handicap ... That is, these issues are obviously especially acute in places like Angola where the local business elite (whose cooperation may, as there, be needed for any viable corporate strategy) is for all material purposes indistinguishable from the political elite. Relations, explicit or otherwise, that make things easy or which are unavoidable in the short term might carry with them long-term liabilities (whatever their implications on foreign corrupt practices laws and the like). Operating hand-in-glove with political elites carries both near-term reassurance and longer-term risks...; yet remaining even-handed can be difficult where one's brand or operation is singled out by either the incumbent or the opposition (or activists).

Greater demand for electoral democracy in sub-Saharan Africa means that firms which in the old days needed only to appease the incumbent may need to consider, for example, the risk that a change of administration might make them vulnerable where they are perceived to have 'taken sides'. Firms that have already sunk a lot of capital into a country or which hope to be there for a long time to come will need to strategise around the prospects of change and of the implications (there and abroad) of enforced lack-of-change.

Sometimes the risks are in plain sight; sometimes they are foreseeable even if unlikely; sometimes they take firms by surprise. In some cases, mere presence in a controversial country represents a value-based decision by reference to democratic or human rights norms -- or is seen that way.

In many cases, the firm's licence-to-operate and brand will emerge intact, perhaps only with a rap on the knuckles; most will be able to make a good fist of staying well away from political controversy. Firms that are newly entering have one set of dilemmas, but those with existing investments tied up in a country to some extent have one hand tied behind their backs in terms of backing down in the face of politicised counter-campaigns. The main consideration for brands with global exposure is an awareness of the importance of consistency across markets on value-based issues: the left hand needs to know what the right hand is doing.

Policy choices impacting the business environment can be highly political -- raising the question for business of when and how to explicitly join national conversations about such issues. In considering the role for socio-political leadership by business, this blog has referred for example to the dilemma individual firms face in South Africa in putting their heads 'above the parapet' rather than remaining silent. Speaking under the umbrella of a business chamber mitigates that risk. Note that this last week apparently saw a Guatemala business group criticising the genocide conviction of a former head of state: now that takes 'private' business engagement on public interest issues to a whole different level!

Jo

See the South Africa version of the Coca Cola 'Crazy for Good' campaign -- here.

See one (note -- mainly anti-ZANU) news story of the Zimbabwe-Coke story -- here.

See my earlier post on the Swaziland-Coke story -- here.

See the Nando's advert about Mugabe -- here.

See discussion in an earlier post of Coca Cola's entry into Myanmar -- here.

See discussion in an earlier post of (limited) reputational risk from mere country presence -- here.

Corporations, contracts, clarity: from Congo to Cape Town

Last week was full of interesting events for a blog reflecting -- as this one does -- on regulation and responsibility, risk and reward in Africa.

Here are just two thoughts -- one is on possible side-effects of greater contract and revenue transparency measures affecting major listed companies; the other is on the wider question of the private sector's role in Africa's development.

'Public company as public good'

Friday's cover story and lead editorial in the influential Financial Times covered the (not that new) allegations, in the just-released 'Africa Progress Panel' report, of how the Congo-Kinshasa (DRC) government sold major state mining assets at significant undervaluation; the effect has been unrealised public revenue from the national natural endowments of a country whose alarming poverty and under-development levels belie its significant below-the-ground resource wealth. This is a country whose mineral wealth makes strangely ironic the phrase 'dirt poor'.

The controlling interests in one major listed firm involved in this DRC drama are considering de-listing it from the London bourse; both the US and EU are easing in regulations requiring mining firms domiciled there to report publicly on what they pay to host governments.

Campaigns for greater revenue and contract transparency are hard, on many levels and in principle, to disagree with. (The Panel's report decries the public revenues that go unrealised in Africa each year through various evasive transactional measures by firms; its not an over-statement to say that those interested in glamorous impact on advancing financing of Africa's development should eschew conventional debates and take on the less headline-y, bean-counter complex but nevertheless vital topic of taxation: how it is levied, how its proceeds are used).

Yet for all the merits of the transparency trend, there are some other dimensions. Almost exactly a year ago I blogged on whether one unintended consequence of (otherwise laudable) greater stock exchange regulation of responsible investing might be to accelerate the trend of increased preference for more private and more opaque corporate forms -- and so end up decreasing rather than increasing aggregate transparency on major deals: see here.

(See also these posts on corporate form and responsible investing: here; and the wider context for transparency regulations -- strategic competition for minerals in Africa: here ... in this context there is also a question of whether regulatory proliferation will necessarily achieve its pro-social objectives: see here; last week's Economist noted how much consulting and legal advisory work new regulations on such issues have generated from firms unable to digest what counts as compliance.)

The private sector and Africa's development

Last week saw the 'African Davos' -- the World Economic Forum (WEF Africa) in Cape Town.

On one hand, it is striking how businessperson-policymaker summits have embraced vocabularies that for over a decade have been standard issue within the field of pro-poor development; thus one WEF panel looked at how the private, public and civic sectors could work together on "strategies to mitigate vulnerability and enhance resilience of African societies".

This sort of conversation may partly reflect austerity in donor countries but is no doubt to be welcomed -- see a recent post on the private sector's role in the post-2015 successors to the MDGs: here.

On the other hand, I am still struck by how new and surprising many people seem to think it is that the private sector might have some role, responsibility or interest in meeting development aspirations and needs (beyond being good employers and diligent tax-payers -- although there's a strong argument that after that the onus is on government to deliver public goods).

Thus a good friend who participated in the WEF and whose background is traditional development rather than business, was pleasantly surprised to learn how companies all over Africa are doing some pretty dynamic and interesting things towards its development -- doing well while doing some good. Perhaps one day this will no longer be surprising: the private sector, as this blog chimes, inhabits a public world.

'Business and Society Monitor'

Finally, if interested in these issues here is a link to our firm's new, free, quarterly email service monitoring macro-trends in corporate responsibility and sustainability, in the context of the changing role of business in society: sign up (and spread around) -- here.

Jo

Corporate responsibility -- government duty

In terms of corporate responsibility and regulatory debates there is no recent African analogy to last month's shocking Dhaka building collapse that killed over 600 mainly garment workers and injured thousands.

Like much reform generally, momentum on governance reform (by both the private and public sectors) on social impact issues often requires (sadly) a landmark, shock-inducing event.

(Empirically, such events do not necessarily lead to change, although they may add a pulse, perhaps no more nor less, to the general thrust of pressure for change; see this BBC online debate post-Dhaka: here).

There are few African analogies. The 1995 execution of activist Ken Saro-Wiwa (by a Nigerian military dictatorship) is one such event which prompted reassessment of business-government relations and the parameters of corporate influence on host country policy. By contrast, today many of Africa's better-known corporate impact issues are slow-burning ones without particular spike events -- from gas-flaring to toxic waste-dumping to conflict minerals.

That selective list itself illustrates how random or arbitrary it will often be whether a particular sector or issue or firm comes into the corporate responsibility spotlight -- a point made in a recent post on reputational risk, here. (This is not to say firms cannot plan for foreseeable contingencies). Other issues of profound significance, such as climate change, are in some ways too diffuse and unwieldy to fit easily into targeted campaigns by either firms or governments or activists. An expert's briefing published by our firm this last week noted how academic debate takes some issues as squarely within the field of 'corporate responsibility' while others which involve significant social impact by business, and which conceivably could become framed in that way, do not.

One question prevalent in the media and industry since the Dhaka event has been whether this is indeed a 'corporate responsibility in global supply chains' issue, or rather a question of weak government supervision of local statutory standards; enforcing local laws is not a corporate responsibility.

The answer may lie somewhere in between, since through their purchasing conduct foreign corporations and financiers have some capacity to 'regulate' local regulators (especially in weaker governance zones) to ensure these officials enforce their own rules; they also have some potential influence over the local commercial actors who mediate activity in their global supply chains. There are wider forces and considerations at issue relating to local control, global competitiveness and the allocation of responsibility and conscience-calling.

The Dhaka misery and debates on global supply chain integrity are too big for one post, in an Africa-focused blog. (Since I cover South Africa a lot, it is natural to think of the decimation of jobs in that country's garment sector as the ANC tries to promote its 'decent work' agenda in the context of Chinese and other manufacturing competition -- an unenviable task, at which they are at best drifting.)

I have been thinking this week of analogies with the 'aid to Africa' debate, where it is right for aid effectiveness / transformation activists to spare a lot of their energies typically directed at donors, to the behaviour of recipient governments. In the same way, while global brands can wield some regulatory influence over government complying with their own local standards, the responsibility in so many respects lies at home with governments. There is another analogy with aid, one familiar to corporate social investment debates: the more one asks of firms, the more some governments become removed from responsibility and unresponsive to local constituencies.

The challenge as ever -- across regions -- is to move from blame-game to game-changing steps in regulating, within what is realistic in a globalised market, the conditions under which people work.  That includes moving from an either/or approach to responsibility to appropriate apportionment and cooperative approaches to creating shared value and distributing shared risk.

Dhaka's victims fell at the intersection of small, particular regulatory norms (capable of altering local circumstances) with the more universal, amorphous norm which the ANC's emphasis on 'decency' captures. Big firms in Africa can do their brands and workforce a favour by thinking (individually or in sector coalitions) of how, beyond tax-paying, to improve the regulatory competence and integrity of government agencies -- even if the latter should always bear by far the primary responsibility for creating conditions for a more decent life.

Jo