Business

CSR in Developing Countries: Advocacy and Strategy

BusinessWeek has a cover story on CSR, Beyond the Green Corporation, suggesting the ethical, responsible corporation is no longer the stuff of fiction. It is very much here and while not mainstream, is certainly a visible minority.

The article may be a bit too optimistic in that prognosis. It rests on restating the same few examples, such as Shell in Nigeria and Walmart’s labor issues. Most of all, it gives too much weight to corporate sustainability reports which are seldom backed by enterprise wide tracking and accountability measures. However, the article brings to light two very important points.

First, there is an inexorable push to make CSR mainstream. The rhetoric is no longer about ‘ethics’ but about the bottomline. Advocacy groups and consultancies have learnt corporatespeak and are proving that CSR saves - or makes money. In the emerging advocacy and regulatory environment, companies that don’t lead the CSR agenda will be forced to digest an agenda not of their choosing.

Nevertheless, new sets of metrics, which Innovest and others designed to measure sustainability efforts, have helped convince CEOs and boards that they pay off. Few Wall Street analysts, for example, have tried to assess how much damage Wal-Mart’s reputation for poor labor and environmental practices did to the stock price. But New York’s Communications Consulting Worldwide (CCW), which studies issues such as reputation, puts it in stark dollars and cents. CCW calculates that if Wal-Mart had a reputation like that of rival Target Corp., its stock would be worth 8.4% more, adding $16 billion in market capitalization.

Second, and more important, the article draws a link between sustainability and expansion to developing world markets. The expansion path tread by companies in the west is not only unsustainable - it is impractical in the developing world. Better still, sustainability efforts in developing countries are not only preventive CSR - of the type exercised in the west - but proactive strategy.

GlaxoSmithKline discovered that, by investing to develop drugs for poor nations, it can work more effectively with those governments to make sure its patents are protected. Dow Chemical Co. is increasing R&D in products such as roof tiles that deliver solar power to buildings and water treatment technologies for regions short of clean water. “There is 100% overlap between our business drivers and social and environmental interests,” says Dow CEO Andrew N. Liveris.

Categorizing CSR: Advocacy Consumption in Home Markets

These two approaches highlight two divergent ways in which CSR can be categorized if seen as an advocacy strategy for consumption.

In the first instance CSR strategy is produced for consumption in home markets (i.e. the west) of an MNC, though the actual operations occur elsewhere. Corporate labor regulations in China, or Shell’s actions in Nigeria fall under this category, because they are meant to address perception issues in the US that impact a company’s share price.

Much of the CSR advocated thus far is stuck in this category. Even today, as SRI funds expand, mutual and pension funds emphasize sustainability issues, and consultancies quantify the cost of inaction, everything a corporate does is meant to justify actions that are inherently not tied to the bottom line, but are meant as advocacy and communication strategies. In this case, even where a bottomline argument is made, the business drivers match the social drivers only of the home market.

As a result, such CSR is always stuck with two dilemmas. The first is seldom discussed in western circles because it questions the ethics of imposing social practices of home markets on operations in societies far removed. The other, more practical and common problem is of justifying expenditure unrelated to business profits, leading to arguments on the business of business.

CSR: Strategy Consumption in Target Markets

The second CSR strategy is produced for consumption in target markets, where the operations actually occur. The preceding example of Dow’s investments in energy R&D fall under this category.

If CSR is to justify itself and be more than a passing fancy of imposing global ethics on local audiences, this is what it needs to be. Business drivers must match local social drivers, not ones far removed.

It is unlikely that the second form of CSR, which needs a long-term perspective, can happen in the quarterly-profit-report obsessed west. In poor countries, an exploitative corporation can do so much more harm in the absence of regulatory and watchdog pressures. It is, therefore, an ideal place to develop that new paradigm of CSR. Because while profit pressures exist they do so alongside pressures of society to survive. CSR is not simply an advocacy strategy here, but is necessary to ensure that one’s consumers can live to buy another day.

© 2007 The Discomfort Zone.