On Tuesday, April 10, I attended a Sustainability Practice panel hosted by Deloitte, called “The Post-Multinational Corporation: Can New Business Models Deliver Business Growth Alongside Social, Environmental and Development Progress?”
The panel was based on a number of articles arguing that the new corporation isn’t multinational, but rather a “globally integrated enterprise,” capable of providing economic benefits like a higher standard of living, improved working conditions and more jobs to emerging markets and low income groups, while responsible for negative impacts on domestic competitors, public policy and local livelihoods.
Panelists included:
Michele Kahane, author of Untapped: Creating Value in Underserved Markets; Director, Special Projects, Center for Corporate Citizenship, Boston College
Heather Grady, Director, Policy and Partnerships, Realizing Rights: The Ethical Globalization Initiative
Sasha Dichter, Director of Business Development, Acumen Fund
Kathryn D Pavlovsky, Senior Manager, Global Environment & Sustainability Group, Deloitte
The Panel was moderated by Michelle Dow, Director, The Corporate Citizenship Company Inc. Program
Michele Kahane explored how multinational companies and their business models are changing, and why. She discussed two phases of corporate engagement around poverty:
1. The compliant phase in the 80’s and 90’s driven by pressure from NGO’s and other civil society organizations.
2. The competitive advantage phase in the late 90’s where corporations tried to align societal issues and core business goals. In this phase, social and environmental issues were considered not only material to business success, but also capable of creating opportunities for this success.
She cited the example of Cemex, the 2nd largest cement manufacturer in the world and largest manufacturer of ready-mix concrete, who sent their staff to low-income communities in Mexico for a year to learn how residents build homes. The Cemex team noticed that cost and speed of building were two essential factors for homeowners, and developed the “Patrimonio Hoy” (“savings/property today”) model based on this savings mechanism. It now takes one year to build a home, whereas it used to take five, and Cemex achieved sufficient profitability with the project to expand to other countries.
Although Kahane doesn’t claim that multinational corporations can alleviate poverty, she believes that there are ways to leverage business towards that end. She stresses the importance of thinking beyond corporate philanthropy and focusing on new business models that address poverty through partnerships.
Heather Grady discussed the less positive impacts of the new business models on developing markets and the necessary factors (legislation, engagement, corporate commitments or collaborations) to ensure that multinational corporations have an ethical and equitable impact on developing economies and the people living in them.
In discussing the pharmaceutical industry, she noted how the US Pharmaceutical Lobby contacts the US Trade Rep far more than the Food & Drug Administration (FDA). The stronger business grows, the more it can influence public policy, but instead of lobbying for human rights, well-being and development, the lobbies want provisions constraining access to medicine. Grady stressed taking a critical look at what constitutes a level playing field between international and domestic companies to ensure that wealth is distributed justly.
Sasha Dichter focused on the ways in which new business models are bringing opportunities to low income people and communities. He explained the mission of Acumen Fund, which is to invest in small/medium businesses that provide necessities like health, food and water to poor people in developing countries, where the poor spend disproportionate amounts of their income on necessary goods and services.
Specifically, Dichter spoke about a company called A to Z in Tanzania that produces anti-malaria insecticide bednets. Acumen brought in a Japanese company to assist with the technological aspects of the product, creating a partnership between the two businesses. In the process, Acumen learned that local marketing campaigns (mostly word-of mouth) didn’t focus on the health benefit of a malaria-preventative net, but rather on how good the nets looked, how the nets would enable children to sleep through the night, and how the nets would impress neighbors – marketing strategies similar to those that would be targeted at people of means. The example illustrates the importance of granting poor consumers the same respect as wealthy consumers, as their intentions and inclinations are the same. Dichter noted that the speed at which poor people’s lives will be positively affected is slow, but that the power of markets lies in the way in which it requires business to consider poor people as consumers, employees and producers, rather than as victims.
Kathryn Pavlovsky addressed social and environmental development challenges within corporations, and asserted that there is now recognition of the term “sustainability” at the board of directors’ level. She said that what started as speculation about how social initiatives influence shareholder value became an acknowledgment of the need to preserve assets and resources. Her questions remain, how do we operationalize the corporate interest in sustainability? And how do we translate regulations on the local level to the federal level?
All of the panelists stressed the value of long-term vision over short-term returns. Sasha Dichter summed up the program best by saying, “We don’t come with a solution, we come with the power of markets to help us find a solution.”