The
contributions the private sector can make to a country’s
economic and social development are increasingly being recognised. These new
roles have steadily progressed from being a product and/or a service provider,
to a development partner and now as a potential engine for socio-economic
development and environmental protection.
A
growing number of mostly multinational companies are embracing sustainability
policies and practices as integral components of their businesses models.
Companies still aim to achieve the normal continuous profitability and growths
goals but many are also looking to concurrently create social and environmental
benefits in the communities within which they operate.
Out
of necessity, but also as an acknowledgement of the values and benefits of
working with local, regional and international non-governmental organisations,
many private sector groups have now developed partnerships with
different actors at different scales. Partnerships with academic institutions
are also increasing both in developed and developing countries.
There
is a growing body of evidence-based research that assesses and documents the
impacts of companies in the social, economic and ecological environments within
which they operate. Unfortunately, many members of development communities and
media groups are largely disregarding most of these analyses. They are
primarily concerned that publishing such positive facts may make them appear as
the public relations agent of the companies concerned.
That
is, it seems that being aware of the contributions of a growing number of
multinationals to development is one issue, but acknowledging and appreciating
them is a completely different one. The question that needs to be asked is why
many sectors of society and media are reluctant or afraid to accept
this fact.
Contrary
to what is often assumed by many, not everything companies are doing is
necessarily self-centred, profit-oriented or negative. The Harvard Business
School, the Sustainable Markets Intelligence Center in Costa Rica, Regional
Center for Studies on Coffee and Industries (CRECE) in Colombia, Third World
Centre for Water Management in Mexico, for example, have studied the new
business models of some major private sector groups on
sustainable development issues and the results they have achieved. There is now
considerable evidence to show that there are many companies contributing to
social progress through poverty alleviation and increasing the standards of
living of millions of people, as well as making profits.
The
inclusion of more sustainability-oriented business activities may very well be
out of necessity due to increasing public and media scrutiny. Yet, companies
are also responding to the demands from Boards and shareholders, who are
signalling to the market the necessity and desirability to adhere to stricter
social and environmental requirements.
Let’s
take the case of Nestlé, the largest global multinational food and beverages
company that operates in 194 countries. The plans, programmes, investment and
resources the company has put on the implementation of sustainability aspects
(accessible and affordable nutrition, water management, resource conservation,
and support to rural development and poverty alleviation) have translated in
tangible results in the above areas for at least six decades in some parts of
the world, especially India. This business model was established well before
the movements for Corporate Social Responsibility, or Creating Shared Value
(business strategies that directly address social problems) became fashionable
globally.
In
India, Nestlé has worked for six decades in Moga, Punjab, where it has
established successfully a dairy industry where no milk culture
existed before. The recipe has been to foster long-term relational
interactions, and not only transactional ones, with numerous small to large
scale farmers and other business partners.
Under
very challenging conditions, the company’s work in Moga has progressively led
to a more prosperous community, triggering positive spillovers in the region
through its strict emphasis on hygiene, cleanliness, quality control and
monitoring. This has directly and indirectly led local farmers, labourers,
entrepreneurs and ancillary firms to climb up the economic and the quality
ladders. Multiplier effects have played key and catalytic roles to steadily
improve the social, economic, environmental and entrepreneurial conditions of
the area. This is a fact recognised by the local population.
Nestlé’s
work has significantly contributed to the milk economy of Punjab, which in 2012
represented 10.5% of India’s dairy production with only some 3% of the
country’s dairy animals. This success proved the initial hypothesis of the
factory’s first unknown planners of the 1960s: for Nestlé to survive and thrive
in Moga, it must first look after the social and economic welfare of its
farmers first, as without continuously increasing milk supplies from the
farmers Nestlé simply would not have a viable business model.
The
challenges and difficulties faced, lessons learnt and achievements in the
region have received very little media attention in spite of serious attempts
to disseminate them. ‘Too good to be true’, ‘most likely a PR piece’ or ‘we
already wrote about the same company a year ago’ have been the main reactions
of the mainstream international and business media. It may be that old prejudices on
the private sector in general still prevail. It may also be that
society, and many media groups, are still not ready to even consider, let alone
acknowledge, the fundamental role an increasing number of private sectorgroups
are playing in the field of economic and social development. It is high time
for the national and international communities to move from blanket
pronouncements praising or denouncing the private sector activities
to the rigorous study of individual cases in order to share experiences,
challenges and lessons learnt.
Dr Cecilia Tortajada is President of the Third World
Centre for Water Management, Mexico. She is co-author of the book Creating
Shared Value: Impacts of Nestlé at Moga, India (Springer, Berlin,
September 2013), with a Foreword by Michael Porter and Mark Kramer of Harvard
Business School.
