Should Business Be At the Heart of Development?

By Nigel Twose

Across the globe, particularly in developing countries, private sector investment is having a significant impact on the social and economic development of local communities. It is, therefore, not surprising that the demands for greater corporate social responsibility have grown dramatically in recent years.

Pressures from investors, competitors, other stakeholders and new international guidelines are affecting many corporations. In response, strategic decisions at the corporate level are moving beyond concerns about access to assets, new technologies and capacity, to include social, environmental and ethical considerations.

Not everyone is in agreement that companies should have this strong social and ethical dimension. Critics argue that corporate social responsibility deflects business from its primary role of profit generation and that governments are increasingly using regulation to force companies to pursue what used to be their own social ends.

It is not altogether surprising then that some commentators are beginning to question whether the time has not been reached when governments, corporations and civil society organisations should step back and re-think corporate citizenship altogether and their means of operating in the developing world.

One answer to this need for a ‘re-think’ is the emergence of Business Partners for Development (BPD).

Business Partners for Development
Business Partners for Development (BPD) was a project- based initiative, created in 1998, to study, support and promote strategic examples of partnerships involving business, civil society and government working together for the development of communities around the world.
BPD just published its findings and recommendations in a final report, released on April 18th 2002 at the Royal Society of Arts in London,UK.

Over a three year period, BPD divided its activities into four Clusters; two along industry lines; the Natural Resource Cluster (for the extractive industries) and the Water and Sanitation Cluster, and two based on themes; the Global Partnership for Youth Development and the Global Road Safety Partnership.

BPD worked on 30 focus projects, involving more than 120 different organisations in 20 countries to share practical experience in building partnerships and learn how to achieve the greatest impact on businesses and communities. BPD, as a whole, came to an end in December 2001 and launched its report “Putting Partnering to Work” in London on 18^th April.

The report provides an analytical compilation of the lessons learned across BPD’s focus project partnerships; a checklist of the preconditions of partnership; guidance on when partnering is not the best approach to take; and a set of tools on how to develop successful tri-sector partnerships, including guidance notes, frameworks, draft Memorandum of Understanding and training modules.

Tri-Sector Partnering
Tri-sector partnering is a new approach that harnesses the comparative advantages of partners drawn from all three sectors of society and strengthens their impact through formalised interaction and collaboration.

All partners act upon their core competencies – their complementary resources, knowledge and skills – to jointly address the complexities surrounding social development. Core competencies might include the financing, project management and engineering skills of the private sector company; the strategic co-ordination or ability to source funding of public services of the local or central government; or the ability to mobilise local community participation of the NGOs and community action groups.

The various tri-sector partnering projects around the world have shown real, tangible development benefits including increased access to resources, such as health, education, water and sanitation; poverty mitigation; and the development of human capital and community empowerment.

Las Christinas Gold Mining Project, Venezuela Health Care Partnership

In Venezuela, Placer Dome, the Canadian mining company, suspended plans to develop a mine in Bolivar State after the price of gold dropped. The company entered into a partnership to build a health facility to serve future mine workers ahd the surrounding area.

This project was successful and cost effective because all sectors were responsible for a particular part of the development stage. The company organised construction, provided financing and building materials; the Ministry of Health sponsored training for local residents; a regional NGO supplied the medical equipment; and communities supplied voluntary labour and food. Even though Placer Dome withdrew, it left a legacy of improved health in the community and an energised local community looking to pursue more partnership projects in the future.

In the early stages there was much hesitation on the part of certain individuals within the three sectors about working together. Input by a BPD facilitator (to introduce people to consensus building, and to broker a common vision, decision making rules and so forth) proved crucial to the parties’ efforts to work together, despite their past relationships and prejudices. This was one of the key success factors of the partnership building stage.

What’s in it for the Private Sector?
From the corporate perspective, tri-sector partnering is a step forward in sharing the risks and complexities of investment in socially sensitive environments, enabling companies to leverage additional resources to manage social issues, and building a more durable ‘social’ license to operate. It is a management tool to deliver business and development outcomes by optimising the effectiveness of different partner’s resources and core competencies.

Tri-sector partnering ensures that the local government and community remain involved and accountable for their share of the project; broadens the scope of community investment programmes and speeds up the delivery of benefits; and enables the company to focus on those aspects of community development it is best placed to deliver.

Key Guidelines for Tri-Sector Partnerships
The report provides a set of indicators to help each party undertake an internal assessment of the risk, costs and benefits of entering into a partnership. As a general rule, the closer the participants’ activities and benefits align with their key business strategy,
the more likely the partnership’s overall chance of success. For example a company deploying its core competencies tends to involve less investment in new capital costs, relying instead on fluctuations in existing variable costs.

Significant time needs to be allocated to building mutual respect and consensus, and to agree on specific commitments, roles and responsibilities guided by the mediation of a partner or third party. Partnering is most successful when partners negotiate and agree on their governance structure through a Memorandum of Understanding and work plans.

While formal governance structures should be developed, including partnership agreements, experience demonstrates that these must be sufficiently flexible to adapt to changes in context (such as change in government and economic cycles), learning processes, staffing and degree of success.

A partnership is a dynamic entity. BPD’s experience shows that even over a short time frame, roles, responsibilities, and even partnering organisations can all change in a partnership. These changes may reflect those in the external environment, community, funding streams, performance levels and individual relationships. Structures and processes must be established to accommodate and respond to change.

The report concludes by providing specific operational and policy recommendations for partnership development for different audiences: businesses and investors, developing country governments, NGOs, and multilateral and bilateral development agencies. The key recommendations for the private sector include understanding of one’s core competencies, commitment to transparency and the need to build internal capacity and seek long-term benefits.

Not without risk, nor without benefit
When seeking to engage in partnership it is important to weigh the risks against the benefits. Companies that play a key role in establishing partnerships that eventually fail, are at risk of being most strongly associated with this failure, yet if the partnership is well implemented a company can benefit through reduced social liabilities, more efficient use of resources allocated to social programmes, reduced risks to investments and improved regional competitiveness and reputation.

Guaranteeing the continuity of the partnerships over time, finding incentives that encourage partners to share control, and knowing how to use the core competencies of companies more intelligently to reduce poverty, are recurring challenges. Yet through trial and error, BPD has learned lessons that demonstrate the ‘art of the possible’: re-thinking the way corporations discharge their new social responsibilities, and one that involves ‘all’ parts of society, not just business.

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For a copy of the report please go to the Business Partners for Development website: www.bpdweb.org