'Partnering' business for development

In the new fashion for cross-sector cooperation, are we tending to distort the term 'partnership', applying it to things that are either just dialogue, or normal cooperation with regulatory requirements?

And alongside all the promise that lies in the convergence of public and private sector focus on shared development constraints, are there not some concerns?

Convergence and blurring are related ideas, but one has a positive sense and the other a pejorative one.

So policymakers have 'discovered' the private sector as an 'actor' with impacts and interests relevant to development. Duh. But we now risk too rapid a transition in which proper parameters and principles have not yet been worked through.

Scaling-up the private sector's developmental impact was a key theme of last week's inaugural high-level meeting on global partnerships for effective cooperation for development ('GPEDC'), held in Mexico.

This blog is very 'pro' looking for ways to unleash-yet-harness the energies (etc.) of business in support of sustainable development aspirations and imperatives. Yet one overwhelming theme at and message from the GPEDC agenda / outcomes was not really about partnering for development (in the sense of systematically looking for areas and issues where business strategy / self-interest and government policy / duty overlap).

Instead, a major focus was about shifting from external financing of development (donors) to 'domestic resource mobilisation'. That is, taxation of business activity and constraining licit and illicit capital outflows, retaining more value within regions such as sub-Saharan Africa. (See para [4], [20-[24] of the outcomes document). This is a very sound idea (see a previous post on taxing for development in Africa). Especially for heavily indebted donors, and some developing country governments which might become more democratic if they become more reliant on and responsive to local taxpayers.

But a focus on taxation is not 'partnering' with business for development, nor is it public-private development cooperation.

It is a basic function of the state to tax and spend, and a basic obligation of a firm to pay, and to complain or leave if it does not wish to. When regulatees share the regulators' vision and cooperate, this improves compliance and eases regulatory burdens. But tax compliance is not cooperation, it is an obligation. Cooperation comes where business and government enter dialogue about what the taxation envelope might consist of. Even then, this is not a relationship of equals, for a number of reasons on both sides.

It is a basic ideal of development policy to eventually wean a country off external funds to enable it to finance its own development. To do so, one wants to think less about particular partnerships with business here and there (helpful as these can be), and more about creating an environment where business can flourish, so that appropriate social shares can be taken and distributed, building a better and more sustainable, inclusive society in which (in turn) business can flourish more. Virtuous cycles, and so on.

Sure, there is scope for greater cooperation, expertise-sharing, dialogue, etc between the public and private sectors. But these are not necessarily 'partnerships'.

Cooperating to find ways to help developing countries to tax more fairly, consistently and to spend the proceeds on developmental purposes is something to be explored. In previous posts I've repeatedly noted the initially counter-intuitive idea that a major investor might help its host government improve its tax and regulatory capacity. This way business can know what its fiscal exposure is, but also know that its taxes will in fact lead to better infrastructure, a healthier and better educated population (workforce / customers), and so on. Cooperation like that is to be welcomed, and specific partnerships may help deliver it.

But 'partnering for development' should not now mean everything that vaguely relates to business. Some of those things are just 'development'. Hence the 'duh' above: why is it such a revelation to donors that business can make general and specific contributions to development goals, and may in fact be interested in more peaceful, prosperous societies?

The social responsibility of any one corporation is not open-ended. One needs only pause for a minute to know why this is a good thing: business is not accountable in ways that policymakers (in theory) are. Hence the previous post, making the point that business and government may 'partner' but are not true 'partners': governments must lead, serve, respond, take responsibility.

Excitement about 'partnering' should not obscure the state's duties, and the state's capacity shortfalls without which it cannot partner effectively.

Blurring these lines is not in the interests of business, or in the public interest.

Where government functions as it should in Africa (or anywhere), there would perhaps be nothing shocking and anti-progressive about reiterating (with caveats) Milton Friedman's adage that the social responsibility of business is to grow, employ, obey laws, pay tax ... the social responsibility of governments is to finance development by planning, supporting, taxing, spending. There is convergence, there are shared interests and vulnerabilities, but there are separate spheres, and there is value in that. Friedman had some objectionable ideas, but it is too often overlooked that he cherished freedom. Do we want the public and private spheres to blur?

This blog says that the private sector inhabits a public world, and with it various responsibilities. But that does not mean business can or should do it all, or that government can absolve itself of its duties by producing a soup of partners.

In academia, 'multi-disciplinary' scholarship is useful for cross-cutting problems, but by definition relies on people who first have a strong grounding in their individual discipline, and only secondarily have an openness to other forms of knowledge. So it is with development: each sector needs to succeed in its own sphere, while looking out for judicious combinations and efficiencies. Societies need to resolve where those spheres lie, what is private and what is public.

These are big questions of ideology and social-political preference. The current 'business and development' debate can obscure that this is so. Does business want more social responsibility? Do we want business to have more social influence?

These things need discussion, not what I call the NDL: the New Disapproving Look. One gets it these days if one suggests that not everything that matters can be solved by some or other public-private dialogue and, of course, a partnership. 'Only connect!' and all will be well? I do not think so.

On a practical level, firms and departments may not be very good at partnering, or sure about it. The NDL and the new high-level rhetoric on engaging companies and investors in development can obscure the extent of ambivalence that still exists, within both bureaucracies and corporate structures, about expanding explicit links.

As with all high-level meetings: they matter, they steer, but they are generally aspirational, not declarative. Greater cooperation is a goal and a process, but it is hardly happening all around us. Policymakers need to show both the public and potential business 'partners' why partnering is more efficient and effective. Intuitively it seems so, and these linkages hold enormous promise for dealing with development bottlenecks and business frustrations. But more proof is needed, that partnering works. 

And in Africa and beyond we must keep an eye out that 'partnering' is not a cover under which the state (realising how few expectations it can deliver on) tries to abdicate its role or responsibility, or a cover under which business (fearing the effects of unmet expectations) tries to partner so as to say 'we tried to partner'.

Jo

Regulating business for peace

Failure by business to implement socially responsible practices also represents a failure of public policy.

Where business falls short, blame is swift but such failures are ultimately regulatory failures, the failure of public policy to reach in to business and open it to the influence of public values, as Parker argued in her excellent Open Corporation (2002).

The pace of business engagement on social and infrastructural development bottlenecks in Africa is welcome. Given business impatience with public sector planning and delivery, and firms' long-term risk exposures and opportunity costs if development imperatives are not met, this enhanced engagement is also somewhat inevitable. Often business is ahead of policymaking in assessing and seeking development gains that align with business interests.

Yet the state still matters in Africa, perhaps more than ever, and excitement about the role of business in development can obscure this.

It is short-sighted to believe that business sustainability efforts can be sustained without relying, ultimately, on the powers of the regulatory state.

A previous post made this case, pointing to recent research by Rory Sullivan and others (here). A related post noted that implicit in the (much-hyped) concept of public-private partnership is a capable state, one not only fit for partnering but able ultimately to steer the development agenda from a basis of duty.

We talk of business 'responsibility' for human rights and other issues, but for governments these are questions of 'duty', a concept of a somewhat higher order.

In this sense, PPPs are not truly equal partnerships. The state must lead, and must bear the ultimate responsibility. Business should not want it any other way, however impatient it might be.

The fact that many of these practices are not subject to mandatory regulation can obscure this fact. Despite all the rhetoric on partnerships and public-private convergence on development issues, governments and business have both legitimacy-features and obligations of a fundamentally different level and kind. Again, despite welcoming the new pragmatism and engagement on public-private cooperation for development, business leaders would not, in the long term, want it any other way, and nor would a democratic society.

I write this because this week I speak on a panel on the social and governmental factors of long-term investment in Africa. The audience wishes to focus on what business can or should do more or less of to find local or national development synergies. All good and well, and the topic of next week's high-level meeting on global partnerships for effective development cooperation (see recent posts). Yet such conversations sometimes tend to gloss over the state, which is inconsistent with the idea of 'long term' thinking. A previous post made this point.

So business-led initiatives on a range of issues from peace to sustainable development are to be welcomed. Many of their issues lie beyond what is likely, possible or desirable for public regulation, or are necessary because regulatory impact is weak. But the state's role cannot be side-stepped.

Consider the various 'business for peace' initiatives. The UN Global Compact launched its one recently, and this week (for example) an international conference takes place in Belgium on 'Business for Peace'. Business-led schemes are, as said, both welcome and somewhat inevitable (if not always satisfying or universally subscribed too). Yet the proliferation of guidelines now available to business on conflict-sensitive practices should not be seen as a substitute for a regulatory or pre-regulatory strategy on the part of policymaking. Public policy can (and often should) promote self-regulation by business on such issues, but this is conditional or supervised, the regulation of self-regulation.

Recently, Anette Hoffmann made the point that whether business is able to adopt and implement conflict-sensitive business practices will depend on much more than the business alone. There is low risk that business 'captures' this regulatory space, retarding more effective public regulation; there is perhaps a greater risk that policymakers see these issues as running themselves, without the need to 'reach in' and stimulate, support, or require these behaviours of private sector actors.

For this reason, my forthcoming book is called 'Regulating Business for Peace' (CUP). The private sector shares with policymaking many of the latter's interests in peace and prosperity. But the process must be influenced, steered, shaped (ie, 'regulated'), even if sometimes only lightly, by the public sector. Africa's development is too hard, too important, and too strongly underpinned by profound duty to be considered a true partnership.

All who are partners are not equal: some partners hold a higher duty than others, and the private sector will be the first to agree that the public sector must lead.

Jo

For a previous post distinguishing 'duty' and 'responsibility' see here.

Where responsibility meets risk management

The trend towards bringing non-financial issues 'to the table' in boardrooms, alongside 'core' business strategy, has received much attention in recent years.

This week UK-listed Tullow Oil (a leader in recent successful exploration for new hydrocarbons assets in Africa) announces its intention to disclose project-by-project payments made to partner governments. This is in anticipation of EU disclosure rules, but includes voluntary disclosures that go beyond pending regulatory requirements.

Whatever the firm's strategy, the news underlines the tension sometimes identified between 'first-mover' advantage (when a firm moves ahead of the apparent regulatory trend, reaping the reputational, adaptation and other benefits) and the risks of assuming pre-regulatory obligations not required of one's competitors in a sector where no level playing-field exists.

This post extends the last one's discussion of 'core business' issues, where the operative word in the para above is 'strategy': unless championed by a proactive board, those working on sustainability / enviro, social and governance / responsibility issues have typically found it necessary to devise internal strategies to make their issues considered as part of wider firm strategy.

While vocabulary matters for basic cognitive shifts (such as seeing 'risk' as 'unlocking value'), this endeavour of getting sustainability (etc) issues 'to the table' goes beyond imaginative manipulations of vocabulary, or ensuring these issues are integrated into annual reporting. There is a pressure to express 'non-financial' risk issues in terms of core business value creation, beyond loss mitigation.

For example, those inside firms with global supply chains tend to advance the idea of using 'sustainability' as a lens for 'innovation'. The latter gets the attention of 'core'-minded boards more directly. It is an effort to frame sustainability as core business strategy at least in relation to supply chain systems. The new vocabulary of 'circular economies' is partly a reflection of this (and partly a reflection of common business sense, at least in the long term).

Although not everything that counts can be counted, this pressure to demonstrate value and return on investment is understandable, inevitable, and if anything promises to bring new discipline and rigour to the field of responsible business practices.

There is much talk of business and development practices in Africa 'leapfrogging' stages and bottlenecks, and turning adversity and novelty into innovation, advantage, value. There is much work to be done assessing how the continent's rise might also be a crucible for altered views of what comprises the 'core' of business strategy.

Jo

There are analogies to be drawn for in-house sustainability / ESG practitioners from a recent Accenture report on efforts in the banking and finance sector to get 'dull' risk compliance issues a 'seat at the table' ("hard to earn, hard to retain").

Plenty of guidance exists on how to go about doing this, at least in theory (there's a more heavy-going literature but here's one accessible and recent primer, there's the Harvard project on getting these issues into boardrooms, and here's another from BSR). The challenge in converting ideas into practice (or from the periphery to the core) is not necessarily different from other fields, as noted in this FT piece on the hunger for sustainability subjects in business education.

See also this recent post on this blog on corporate communications.

'Core business' and sustainable development

Next month will mark an important juncture in global debate on engaging the private sector in achieving development goals.

The inaugural high-level meeting on global partnerships for effective development (here) can be seen as part of the long (already well in train) build-up to the 'post-2015' era, where global public policymaking seeks consensus on overarching developmental priorities.

The post-2015 process matters and, like the 2000 Millennium Development Goals, the goals and targets agreed will provide a big steer for thinking and action across ensuing years. Yet this macro-framework is hardly the entire universe of development, and at many other levels, on many issues, policymakers are exploring what roles business can play in meeting development imperatives and aspirations. It is not all one-way outreach from the public to the private sector: some parts of big business are also seeking to influence policymaking, including because of their recognition that developmental problems or possibilities have a direct (especially longer-term) relationship with business ones. The previous post made this point.

There is much that a blog on the intersection of business, society and government could cover (not least around who one means by, or who gets to speak for, 'business' or the private sector). This post reflects on one issue where two big trends meet. Those are the trend on the 'engaging business in meeting global and national development goals' and the one on 'promoting responsible and sustainable business practices'.

Big business will often argue that its best contribution to wider development goals is to flourish at doing its 'core' business. It is short-sighted to dismiss this argument as simply a disingenuous rhetorical device for avoiding wider social responsibilities. In the fundamental activities of procuring, employing, tax-paying, etc, lie far more transformative development potential than the sometimes therapeutic activities of conventional corporate social responsibility / investment activities.

Aside from fair and appropriately used taxes, the best development contributions of big business will almost certainly come from leveraging their core activities. For instance, mining house Anglo-American's procurement budget is 100 times its social investment budget: finding ways to localise some of its supply needs in operating countries holds far more promise of economically empowering local people than exhorting it to devote more funds to social investment programmes.

The global debate next month is important, but more significant will be country-specific mechanisms of conversation and collaboration that find productive linkages between business strategies and national/local development plans, without necessarily privileging some firms or sectors over others. This is one feature of TPI's roadmap this month on engaging business in development.

To leverage the development gains of 'core business' activities to their full, those core activities must meet their full potential in business terms: to harness (developmental) power one must also release or unleash it.

Thus one challenge for contemporary policymaking in Africa, the region covered in this blog, is to implement policies that enable and incentivise private business activity to flourish, while also fostering inclusiveness and distributive equity, and promoting responsible environmental, social and governance (ESG) practices. Unleashing the developmental power of business in many ways simply involves exploring scope for public-private win-wins. Yet at some level it will also raise a host of policy design dilemmas and force governments to confront tricky questions about the overall role of the state in the economy, quite apart from strategies for conditioning unleashed business in appropriate ways that ensure 'people' and 'planet' are accorded value alongside 'profit'.

Those who work in-house on ESG issues are very familiar with trying to bring issues into the 'core' boardroom from the perceived priority periphery. Yet as obvious and familiar as it sounds, what efforts to engage business on development goals have in common with efforts to promote responsible business practices is that their success is likely to depend on how closely they can be aligned with 'core' business processes and thinking.

The challenge for those concerned about longer-term sustainability and equity issues (whether working within or outside major firms) is also to redefine in credible, persuasive terms what issues count as 'core' issues. In mechanical or system terms, gears are what link to the engine: the task of leveraging and redefining 'the core' in ways that maximise developmental gain and minimise social and environmental harms is a profound exercise in gearing.

Jo

See this post from a year ago on the post-2015 process, and subsequent ones on this blog.

Responsible lobbying and responsive government

Will it irritate some readers to assert that serious business leaders are just as interested in inclusive, sustainable growth as responsible public officials?

I find the statement unsurprising. Even if there is still more rhetoric and hyperbole than anything else about public-private action on meeting development goals, in my view no-one has demonstrated why the policy risks of engaging the private sector in resolving development challenges outweigh the potential gains from appropriate collaboration.

And here I think the real question is not collaboration, or having conversations about collaboration. Again, those seem obvious. The real question is what constitutes 'appropriate' forms of both.

Later this post observes an example from my own research that bucks the prevailing view that policymakers talk (or listen) too much to corporate views. It shows that the problem in at least one development sphere is the opposite: they do not seek the views of business, an important stakeholder in peace and prosperity.

I will start again. This longer-than-normal post makes two points. First is the one just made: major social and developmental gains are surely possible where business and government find common ground and can agree (or share) respective roles. Second, realising these gains requires deliberative engagement, but the means by which business and government seek to influence each other matters.

Global business is not representative of all that is virtuous, yet I do not propose to dwell on the first issue. At some level it appears somewhat self-evident. Take the issues that routinely top the list when leading firms make macro-analyses and scenarios about long-term risk or opportunity. I am fairly confident they are also the same issues that do (or should) trouble responsible, future-minded policymakers: inequality and exclusion, insecurity and joblessness, resource scarcity and climatic uncertainty ...

On the assumption, then, that there is lots for business and government to talk about in maximising the developmental impact of core business strategies, and in formulating public policy that harnesses private sector strengths (and fosters responsible business practices), let's turn to the second issue: what is involved in talking?

Corporate lobbying and public-private forums and pathways to explore development synergies are not necessarily the same thing, although both do involve parties trying to steer things in some way.

It is true that not all corporate chiefs are leaders -- just as not all officials pursue the public interest. It is also true that only officials represent the populace, and we must remain aware that 'partnership' between public and private sectors does not imply equal levels of legitimate authority: private economic activity is a highly important sphere of human freedom, but it is after all a public world, the public's world.

But both groups matter for development, unless we believe that governments alone hold all the tools for ending poverty and all the keys to unlocking opportunity and potential. The evidence suggests otherwise. Both groups matter, so it matters that they talk about the things that matter to both.

For business and government to understand and respect each other, and uncover what are the areas and scope for these development / growth 'synergies' [sorry], they clearly need to talk, to 'find' each other. This takes time, and trust. Implicit in that is proximity, regular contact, dialogue. How is this closeness developed or sustained, without damaging the public's trust in the process? How do big business and government discuss common ground without either one distorting or misappropriating the ground itself? How do we convince officials not automatically to distrust corporate motives, or convince corporates that sitting with policymakers can enhance their long-term strategies, not just delay or constrain them? 

Thus this post returns to the topic that the last one ended on: how do we build appropriate forums or channels of communication and influence so that we have the benefits of legitimate and vital private sector perspectives on public policy relating to development, but without subverting broader public interests by basing policy (or its implementation) on the preferences and interests of a narrow class of players?

A recent Economist article (*) on the pervasive effect of corporate lobbying noted how US regulatory authorities devising the Dodd-Frank Act met far more often with banks than with community or consumer groups. Yet my forthcoming book on engaging business in post-conflict peacebuilding reveals an entirely opposite problem: policymakers do not talk with businesspeople about shared interests in peace and prosperity, and about what business can do to contribute (appropriately...) to these goals.

Thus from Haiti to Liberia to the Sudans, I found that peacebuilding authorities meet far more often with civil society groups (many one-person outfits) than with businesspeople. Indeed typically they ignore the private sector altogether, either never considering them 'stakeholders' in the first place, or actively avoiding encounters for fear of being 'tainted'.

I could go on (the book does...). The point is that the lack of a strategy to engage the private sector on issues of mutual interest manifests as a lack of policy frameworks (safe places, platforms, parameters) for these important conversations to take place.

So whereas most of the concern is that business is too influential, on some important development issues it is not being sounded-out nearly enough.

A few other thoughts, briefly:
* Debate on responsible lobbying neglects smaller businesses, which struggle to engage with policymaking in the region I follow, struggle to make their voice heard to governments. Yet they often hold far greater promise of job-creation and local empowerment than most major foreign investment projects. There is much scope for big foreign firms to sit with government and local chambers of commerce on building backward linkages into local economies.

* In many settings, business and officialdom are the same individuals, families. Development policy must arrive at suitable frameworks for principled engagement if it is to influence policies for inclusive growth in such settings as Angola.

* In many places the risk is not that business will 'capture' the state and its regulators by having closer dialogue, it is that the state either neglects business or is predatory and extortionate.

Note that April 2014 is the first high-level meeting of the OECD-DAC global (business-government) partnership for effective development cooperation: see here. See also TPI's roadmap document ahead of this forum, here.

Jo

See the Global Compact's guidelines on responsible corporate engagement in policy debates on the development issue of climate change.

* The Economist 22 Feb 2014, p. 14, discussed in the previous post.

See here for some previous posts on the private sector's role in development.