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May 2017 Economy and Policy

Published on: 2017-05-15 13:05:17     534 times read    0  Comments
The Second Pillar : CSR in the Development Dialogue

The view that development is a job for governments, and that aid does it best, is just as out-moded and counterproductive as the view that human development needs can all be met by the private sector.

--BY VAIJAYANTI KHARE

The careful reader would have noticed that the last few articles read like two strands intertwining much like the double helix band outlining the nature, the role, the work and the outcome of foreign aid and private sector as the tools to socio-economic sustainable development.  The inadequacy of the government may well have been the trigger for the former, as the demands of the society and compliance frameworks may have stirred the latter. Be that as it may, it is clear that the tracks are now converging and overlapping, as the foreign aid looks to build production and manufacturing capacity to augment its returns and the private sector strengthens its social engagement. The articles speak of the government as the First Pillar, the private sector as the Second Pillar, and are silent on labeling the foreign aid as any pillar, in the context of Nepal.  

Instead, it questions the relevance and the debilitating effects of this foreign presence on the development landscape. The infrastructure development initiatives and aid for the same are by far the lesser of the evils (or not at all evil in terms of usefulness), but it is the multilateral / bilateral donor activities in the areas of health, education, agriculture, livestock and such key areas which are the questionable dynamics.  The careful reader and the players in this field must have identified themselves with some of the content of the articles that have spelled out the dichotomy of ‘understanding’ both these sectors as seen in the eyes of the government, the public at large and of course, the workforce so employed.  

The dynamics of agencies like DFID, DANIDA, USAID, GTZ are based on the ‘gap’ left by an absence of a socially responsible business sector and inadequate government measures to meet developmental goals, millennium or otherwise. And yet, currently, the donor agencies are increasing their ‘economic activity’ and the private sector is broadening its ‘social responsibility’.  How and why are the initiatives of the donor sector more glorified than those of the business sector? What differentiates them, and / or what makes one the ‘fairer’ – pun intended – of the two. 

Why is the engagement of the foreign aid players in the social context of health, education and the like more praiseworthy than that of the private sector in the same fields? Conversely, why is the engagement of the foreign aid players in the production, manufacturing, processing activities more praiseworthy than the private sectors’? How is manufacturing sanitary napkins or medical accessories by GTZ or USAID (through its implementing partners, of course) a greater deed even when the objective is to make a surplus and augment their funds? Even, warehousing is an activity that is increasingly being adopted by the foreign aid players, in the guise of stocking their own products- so is supply chain management by them ‘cleaner’ than if taken on by the private sector? USAID is even involved in factory building! Profit-motive alone cannot be the differentiator especially as the donor agencies have started making inroads into activities that bring in monetary gains.  Technical superiority and organisational skill, often claimed as the domain of the donor agencies, (was never) and is not any more superior. The private sector has by far the better tools, competencies and bandwidth to take on development. ‘Intent and Content’ are features that can be brought into play by the private sector, just as much and as well as that portrayed by the aid players. 

Can a robust, mature and broad-based CSR be the business sector’s answer to the chimera of foreign aid and the shifting funding landscape in the development conundrum?

The role of business in development is today’s hot topic. The United Nations has formally acknowledged the importance of the private sector in meeting the Millennium Development Goals, and public/private partnerships abound, many under the rubric of Corporate Social Responsibility (CSR). Often catalysed by CSR initiatives, multi-stakeholder partnerships have gained ground, but collaborations between civil society and the private sector have much greater potential. Business must become engaged in the development challenge, bringing with it the full weight of its core competencies.

For many international NGOs and multilateral donors, equitable, sustainable development remains their primary objective. Although concrete numbers are surprisingly difficult to ascertain, NGOs deliver a great deal of humanitarian relief, estimated at some USD six billion annually. At the same time, organisations have become more and more convinced that crises are often man-made, suggesting that long-term impact requires policy change. As a result, civil society is increasingly inserted into policy dialogues with donors, businesses, and governments. In the context of Nepal, the near absence of effective civil society groups has given way to the proliferation of ‘implementing partners’ either in the form of government-cum-private not-for-profits (the CRS Nepal being a case in point) or non-profit NGOs. 

Calls to increase the level of official development assistance are not likely to resolve the long-term development challenge. Certainly aid does much good work when well spent, work that the private sector is often unwilling, unable, or unsuited to tackle. But regardless of the amount, aid cannot remedy underdevelopment. Economic growth is not sufficient for development, to be sure, but it is absolutely necessary. Even if donors deliver on recent commitments to increase aid budgets, such official aid flows will continue to be dwarfed by the annual increases in the demand to meet the out of proportion costs-of-operation in terms of fat salaries and fatter benefits all around. 

Multinationals and small and medium business houses here face similar seismic changes. We may have come far from Milton Friedman’s famous adage that “the social responsibility of business is to increase its profits,” but the case for social engagement too often remains cast as business going beyond its core mandate. This is shortsighted.

Business is embedded in society; it cannot thrive without social order and social acceptance. For a long time, the “society” that mattered was largely domestic and concerned with domestic issues: today it is increasingly global. Global social values do influence at-home social values and are the measure of impact of such social engagement. 
Multinationals have been major beneficiaries of globalisation and have made the case that free trade and economic growth are good for all, including the poor. But business has largely failed to recognise that growth is but one component of human development, and that it can in fact exacerbate poverty, inequality, and conflict. Consumers, voters, contractors, employees, and shareholders, in both developed and developing economies, have rising expectations of business in the modern world – even as our judgments of corporate performance are in freefall. This is stretching business well beyond its usual areas of expertise.

The CSR basket of some of the big and medium business houses is commendable but could be (mis) judged as small, narrow and/or irregular in operation and outcomes. The Chaudhary Group engages in good work across the spectrum of health, education, women empowerment, capacity building and baby food / nutrition supplements.  The Nimbus Holdings works in areas of agro-based farmers’ development, seed and soil-nutrients, cold storage, crop pattern development, and livestock management. Dabur Nepal engages in capacity building and individual /self-help group initiatives in honey-making, fruit pulp processing and herb horticulture. Unilever Nepal is into adult education, women empowerment and youth employability initiatives. 

The list can be long and covers almost all areas of social development, which is not very different from what the donor agencies engage in, albeit with the major difference being ‘source of funds’. It is more commendable that business houses use their own funds whereas the donor agencies use donated funds. ‘No skin off their backs’ or ‘hands in someone else’s wallet’ as it were. The other major difference is the benefit given by the government itself. All aid is not mere philanthropy or handouts without strings – there is more to that G-to-G relation building as well as a long beneficiary chain. 

Perhaps, all the CSR put together is still not as robust or deep impacting as it could be. But what is the incentive for business to make it so– on the same lines as the incentive given the aid sector by our government.  One could begin with bringing the govt/policy makers and private sector on the same table for social issues that the government wishes to address. To take a case in point: has there been sufficient dialogue about addressing the need for the production of medical accessories (IV sets, bandage, first-aid kits) or distribution of condoms and IUCDs whether for safe sex or population control or the making of sanitary napkins or the making and distribution of baby/children nutritional supplements? If there was an ‘invitation’ to the private sector to help the government agencies in these matters, perhaps, there could have been a ‘collective CSR’ by those businesses engaged in pharma, healthcare delivery, food processing and the like to deliver the same. 

Instead we have, unashamedly, the GIZ tie-up for manufacturing sanitary napkins, we have USAID through its implementing partners, CRS Nepal, not just touting ‘Suahaar’ as their humanitarian label but also taking the lead in ‘social marketing’ and distribution of condoms! Does Nepal really need to call on foreign funds (and personnel) for such initiatives rather than collaborating with their own private sector through CSR as an integral tool in the development dialogue? On the brighter side, names like Dhukuti, Mahaguthi and more recently Sabah, as well as some initiatives like handmade paper making, organic (pine needles) briquette making, toys and puppet making and organic farming are success stories of foreign funding and technical assistance given to small/medium business units to bring in skills development, quality production and social empowerment. The need for collaboration becomes more and more glaring as the foreign funding landscape now moves into economic activities, (in the guise of capacity building and what-not!) and the private sector deepens its social engagement. 

It is clear that fundamental changes in the operating landscapes of both business and foreign aid open new space for strategic engagement. We need to move “beyond CSR”– to a dialogue that engages core competencies and fundamental interests on both sides. A first step might be the encouragement of a more nuanced understanding of each other’s respective core competencies and motivations, with the goal of pushing corporates, donor agencies and NGOs to eventually see themselves as equal, but different, partners in the development challenge. Currently, there is insufficient opportunity to engage in this sort of exchange. The view that development is a job for governments, and that aid does it best, is just as out-moded and counterproductive as the view that human development needs can all be met by the private sector or that business can remain aloof from its social environment.

Policymakers could promote the idea of a development toolkit – one in which aid, private capital flows, debt relief, economic growth and other tools – are all accorded the same standing. Both sides would benefit from the creation of a space to explore mutual problems, develop a collaborative agenda for action, share knowledge and learning, and scope out long-term practical avenues for moving forward together. It is plausible to suggest that this would surely result in better outcomes for all players, beneficiaries and transform the existing perceptions and relations between the two sectors into a healthy mutual respect and open collaboration. 

CSR is the private sector’s response to the call for socioeconomic development and is no doubt a more dignified way to address ‘our own issues’. A CSR-cum-foreign aid dynamic will set both on a more robust, sustainable path. CSR is an integral feature of the development dialogue and we must welcome it as such.   

(The concluding articles, on this double helix band, will bring you the success stories of both foreign aid dynamics and the Second Pillar in the June and July issues, respectively)

Vaijayanti Khare is known for her dynamic engagements in the corporate, academic, social and development fields in Kathmandu over the past decade. Her writings are a reflection of her hands-on work, insights, studies, success and challenges.


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