Making Globalization Work for Your Company

Today's CR as a business strategy includes integrated development, philanthropy abroad

By Sandra E. Taylor

Globalization – the growing integration of economies and societies around the world – has been one of the most hotly debated topics in international economics over the past few years. Rapid economic growth and poverty reduction in China, India and other countries that were poor just 20 years ago has been a positive aspect of globalization. In fact, studies have shown that those developing countries that increased their international trade and integration into the world economy over the two decades ending in the late 1990s achieved higher growth in incomes, longer life expectancy and better schooling. These countries, home to some 3 billion people, enjoyed an average 5 percent growth rate in income per capita in the 1990s compared to 2 percent in wealthy countries.

Many of these emerging countries—such as China, India, Hungary and Mexico—have adopted domestic policies and institutions that enable their people to take advantage of global markets, which have sharply increased the share of trade in their GDP. They are catching up with wealthy countries: their annual growth rates increased from 1 percent in the 1960s to 5 percent in the 1990s. People in these integrating countries saw their wages rise, while the number of people in poverty declined.

But not all countries have integrated successfully into the global economy. Some 2 billion people – particularly in sub-Saharan Africa, the Middle East and the former Soviet Union – are being left behind. These countries have been unable to knit into the world economy; their ratio of trade to GDP has either remained flat or even declined. On average, these economies have contracted, poverty has expanded and education levels have risen less rapidly than in the more globalized countries. Important reasons for this include weak governance and policies, declining development assistance, tariffs and other barriers that poor countries and poor people face accessing rich-country markets.

So while globalization often has been a very powerful force for poverty reduction, too many countries and their people have been left out. This has generated significant international opposition over concerns that globalization has increased inequality and environmental degradation, with international business—notably American multinational corporations—being blamed, and sometimes targeted by activist organizations and movements.

Some anxieties about globalization are well founded; but reversing globalization would come at an intolerably high price, destroying the prospects of prosperity for many millions of poor people. We cannot afford to retreat into a world of nationalism and protectionism. Instead we must find ways to make globalization work for poor people of the world.

The transition can be challenging. Companies once held accountable only for the direct, contractually specified or regulated consequences of their actions now find themselves responsible for alleviating hunger, disease and more: issues as disparate as environmental sustainability, the spread of HIV/AIDS and child labor in sub-Sahara Africa. Thus it is easy to see that our increasingly interconnected world demands strong corporate leadership to strengthen governance, harness economic potential, alleviate global poverty and improve human conditions.

The last 15-20 years have seen significant changes in the way business views issues of globalization and corporate social and environmental responsibility. Nevertheless, it is clear that while some companies have made major strides in addressing important globalization and development challenges, overall, these achievements simply do not stack up against the scale of change needed for real progress: Around the world 10 million children die of preventable diseases every year before age five; 77 million children don’t attend school; and more than 1 billion people lack clean water. In the poorest countries less than 10 percent of the 6 million people who need anti-retroviral medicines get them. So what should be the role of business? What is the responsibility of corporations to address poverty and underdevelopment, to help disadvantaged communities where they conduct their business, manufacture their products and employ workers?

Businesses are engines of growth and sustainable development with the potential to impact developing countries enormously. They can help improve people’s lives through innovation, investment and creation of decent jobs and development of affordable products and services—especially those that meet basic needs such as water, energy, nutrition, healthcare, housing and education—while leveraging their core business expertise and realizing commercial success. While there are a few established American corporate leaders in the field, social and environmental initiatives are often unconnected to core business activities. Many business leaders lack the knowledge and information to do more than simple grant making and traditional philanthropy. However, companies that want to continue to be in business must grasp increasingly competing societal realities and realign their strategies to include the needs and desires of populations in developing countries and under-served segments of all societies, including in their home markets, helping those populations become able customers.

The reality of today’s world is that companies need to invest in improving society and addressing global challenges beyond traditional philanthropy. Too often philanthropy is used as a form of public relations; “writing the check” to promote a company's image through high-profile sponsorships. To respond to competing pressure from investors, governments and activists, companies should approach their corporate giving strategically to improve the business climate and infrastructure in the places where they operate.

They must move toward integrated and strategically focused approaches that align their corporate citizenship, corporate responsibility and philanthropic activities more closely to business strategies and core corporate competencies and assets. Companies should leverage other resources as well, devoting not only money but their capabilities and relationships to solving development problems, such as in-kind donation of employee expertise for training and also cause marketing—engaging customers in both awareness of and funding for some of these development needs. But, importantly, companies should use their natural strengths—creating products and markets—to stimulate development in emerging economies where future business growth opportunities are the greatest. They can and should provide access to economic opportunity through jobs, property ownership, access to credit, and access to new technologies and training.

The eight Millennium Development Goals (MDGs), agreed on by world leaders at the United Nations Millennium Summit in September 2000, provide a good framework for what needs to be done in international development. The goals reflect an ambitious agenda for reducing poverty and improving lives. For each, one or more targets have been set, most for achievement by 2015, using 1990 as a benchmark. In fact several leading corporations are actively participating in programs that will impact achievement of the MDGs, although this is not necessarily their stated mission. Some examples:

Coca-Cola understands that fresh water availability and access is an acute need of many developing communities and is critical to the company’s long-term business success. They have:

• set goals to improve factory performance in water efficiency,
• launched community programs to help enable equitable access to clean drinking water in underserved communities where they operate,
• worked toward the protection of watersheds in water-stressed regions and
• helped mobilize the international community around the issue of water shortages and clean water.

General Electric, whose 10 Principles of Responsible Corporate Leadership include “Making a Business Out of Solving the World’s Toughest Problems,” has integrated this priority into the company’s corporate operating philosophy.

Pioneer, a DuPont company in the agricultural sector, operates from the premise that agricultural livelihoods remain a fundamental element of economic development, thus creating opportunities for the company and for its customers. Through public-private partnerships in Africa and Asia, Pioneer provides farmers with technical knowledge and equipment to improve output, quality and market access for products grown with Pioneer seeds, increasing farmer incomes and improving livelihoods.

Other notable examples of international development projects based on business objectives:

• Healthcare companies supporting improved access to essential medicines and improved local capacity to meet health needs
• IT companies improving access to technology
• Energy companies supporting affordable energy access
• Water companies partnering with others to improve water and sanitation
• Finance companies sourcing locally to increase access to credit and business skills
• Professional services firms sharing their management expertise with local NGO, government and business partners
• Food and agricultural companies improving access to nutritional foods and/or supporting local farmers’ livelihoods through improved crop quality and ensuring higher prices for commodities in the international marketplace.

These effective solutions involve thinking beyond corporate walls, realizing that the biggest development challenges require cross-industry collaboration and partnerships with government entities and NGOs.

Corporate executives and NGO leaders have learned that international development is far too complex and demanding a responsibility for the private sector—or any other single group—to handle on its own. For this reason, many corporations and NGOs have begun to work together to tackle specific development concerns.

Each partnering group or organization contributes a unique perspective on the problem and plays an essential role in finding and implementing a solution. NGOs provide corporations with sophisticated knowledge and expertise about specific social, economic and environmental issues. They furnish indispensable access to and information about “the actual situation on the ground” in local communities where corporations have established markets. Corporations, on the other hand, provide NGOs with the influence, flexibility and financial resources to get things done.

Successful partnerships are possible as long as all parties are committed to a common objective, recognize the needs and interests of other partners, and are open to the possibility of discovering new ways to understand and address development issues. NGOs must accept the potential of “market-based solutions” to social and environmental problems, work to understand the organizational and financial constraints under which corporations work, and avoid adopting an anti-business agenda.

International development will and should play an increasingly important role in corporate strategy in the future. As globalization continues, the private sector will continue to expand into emerging markets around the world.  Consequently, companies will assume greater responsibility for the well-being of those to whom they market their products and services, those whom they employ and those in communities where their plants and facilities are based. This new approach toward strategic engagement in communities will be good for the bottom line and will bring those millions who had not benefited from globalization into the fold and out of poverty.

Clearly, the world’s environmental and societal problems are nearing breaking points and solving these problems is becoming critical to economic growth, political stability and corporate survival. Thus, responsible conduct must increasingly become the guiding principle in overall business strategies. For private enterprise, international development is increasingly regarded as the “quid pro quo” for globalization and market expansion. Companies that heed the call for alignment of their social and philanthropic missions with their core business strategies will succeed far into the future. Those that don’t won’t survive.

Sandra E. Taylor is President and CEO of Sustainable Business International.