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ROUND TABLE
Business and development
Ananya Mukherjee Reed
*, Darryl Reed
a
Political Science and International Development Studies, York University, Toronto, Ontario M3J1P3, Canada
b
Centre for Corporate Governance and Citizenship, IIMB, India
c
Business and Society, Department of Social Science, York University, Canada
Available online 7 August 2010
Abstract
Businesses now contribute to development through avenues other than the gener-ation of employment and economic growth, such as corporate social responsibility initiatives,corporate accountability movements and alternative business models, using several partner-ship formats to deliver. A panel with representatives from leading corporations, NGOs, anda public sector bank discussed the changing nature of corporate power, responsibility andownership, the greater congruence between the goals of business and society, and how their organisations were responding to the changes and opportunities.
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2010 Indian Institute of Management Bangalore. All rights reserved.
Academic perspective
With the transition over the past few decades from state-led development to market-led development models, theexpectations of business contributions to developmenthave changed significantly. While there is no clear consensus on what the development roles and responsibil-ities of business are (or what development entails), it isgenerally acknowledged that business has to play a moreprominent role and make significant contributions. Thepurpose of this proposed round table discussion, as indi-cated below, is to focus on how the key points of contentionin this discussion are visible at the firm level within the corebusiness strategies of firms. Before formulating this prop-osition, however, it is important to lay out the historicaland conceptual background to this debate.
Business and development in a globalised economy
With the acceleration of the processes of economic global-isation in the 1980s, the portrayal of the role of the state andbusiness in development began to change significantly.Increasingly states began to be viewed as the problem rather than the solution, a perception that was given somecredence by fiscal and development crises in the South. Inthis context business, conversely, came to be portrayed asthe key component of the solution to the problems createdby state failure. The primary role for business in contributingto development was understood, initially at least, as thegeneration of growth and employment through the pursuit ofprofits (with the implicit understanding of developmentbeing economic growth) (Bhagwati, 1982; Krueger, 1990).
* Corresponding author at: Political Science and InternationalDevelopment Studies, York University, Toronto, Ontario M3J1P3,Canada. Tel.:
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1 736 2100x30095.
E-mail addresses:
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2010 Indian Institute of Management Bangalore. Allrights reserved. Peer-review under responsibility of Indian Instituteof Management Bangalore.doi:10.1016/j.iimb.2010.05.002
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1 416 736 2100x77817.
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The processes of economic liberalisation, however,provokedstrongsocietalreactionsinnationsaroundtheglobe,both in the North and in the South. While these reactions firstgained international mainstream media recognition in 1999 atthe ‘battle in Seattle’, a diverse and broad range of protestmovementshadbeendevelopingforanumberofyears.Thesehave included local communities in the South whose liveli-hoods and health have been directly affected by corporateactivities (e.g., in resources extraction, agriculture, aquacul-ture, forestry, etc.), local and international advocacy NGOsandenvironmentalorganisations,corporatewatchdoggroups,shareholderactivistgroups,etc.WhatSeattlesignifiedwasthegrowing ability of these various groups to work together notonlytoconfrontcorporations,butalsotheirpotentialtoapplypolitical pressure for hard international regulation of corpo-rations (Bendell, 2004; Blowfield, 2005).
Four approaches to promoting businesscontributions to development
While business may promote development through itscontribution to economic growth and employment genera-tion,societalpressureshaveledtothepromotionofavarietyof other avenues in which business might contribute todevelopment. As discussed immediately below, theseinclude:1)corporatesocialresponsibility(CSR)initiatives;2)corporate accountability movements; 3) a reorientation ofpublic sector enterprises and their developmental roles,and; 4) alternatives to conventional business models. Theseresponses can involve businesses alone or, as discussedfurther below, involvement with different partners (e.g.,NGOs, community organisations, government, etc.).
Corporate social responsibility initiatives anddevelopment
In reaction to social opposition and in efforts to forestall anymoves to develop binding international regulation, from thelate 1980s and early 1990s corporations and industry bodiesstarted to promote corporate social responsibility pro-grammesmoresystematically.Overtimetheseinitiativestooka variety of forms (e.g., codes of conduct, best practiceguidelines,communitydevelopmentprogrammes,etc.),havecometooperateatavarietyofdifferentlevels(e.g.,thefirmlevel, industry wide initiatives, cross-sector initiatives) andhave engaged a variety of different actors (e.g., localcommunities, NGOs, multilateral bodies, national and inter-national development agencies, etc.) (Mukherjee Reed andReed, 2009; Partners in Change, 2004, 2000; Zammit, 2003).While not all such CSR initiatives explicitly speak of thedevelopment responsibilities of firms, many increasingly do.The most visible of all such initiatives, the United NationsGlobal Compact (UNGC), is a case in point. When it wasinitially launched the UNGC did not have a strong explicitemphasis on development responsibilities. Subsequently,though, it was extended so as to link participation in theCompact to the achievement of the UN Millennium Devel-opment Goals (UNGC, 2007).Table 1lists some of the major
international CSR and corporate accountability initiatives.
Corporate accountability movements and development
CSR initiatives by corporate actors have not been benignlywelcomed by all. Critics have included development NGOs,social movements, corporate watchdogs, labour organisa-tions,academicsandpublicpolicyinstitutes.Theircomplaintscanbebrieflysummarised.First,particularCSRinitiativesarenot accountable to their purported beneficiaries, who typi-callyhaveaminimalroleindevelopmentandimplementationof such programmes. Second, these initiatives often focus onnon-core business activities (e.g., community developmentprogrammes). Third, even when core business activities areaddressed,theinitiativestypicallydonothavehardstandards(often relying on best practices, managerial processes, etc.),tend to rely upon self-reporting and have no strong sanctionsor enforcement mechanism. Third, and more condemning, isthechargebycriticsthatCSRinitiativesarenotevenintendedto be effective. Rather, at the level of individual firms andindustries they function as a mechanism for image washingand green-washing, while at the level of business as a wholethey serve to legitimise a model of business self-regulation(Bendell, 2005; Korten, 2001; Soederberg, 2007; Zadek andRadovich, 2006). Under such a business self-regulatoryregime, critics contend, it is inevitable that social divisionsand associated adverse development effects will increase,especially among already marginalised groups. While suchresults are not well captured by aggregate macro-economicindicators of economic development, they are clearly visiblein human development indicators (e.g., levels of incomepolarisation, illiteracy, infant mortality, etc.) (MukherjeeReed, 2008; UNDP, 2003).Inresponsetothesedeficiencies,corporateaccountabilitymovements seek to impose greater social accountability over corporations. A key aspect of this strategy is that, in contrastto CSR initiatives which often focus on CSR communitydevelopment programmes, corporate accountability move-ments focus on core business activities (especially as theserelate to environmental and labour standards). In addressingcorebusinesspractices,corporateaccountabilitymovementsdo not want to leave it to corporations to decide on appro-priatesocialresponsibilitystandardsandwhethertheyshouldact in accord with such standards. Rather, in the face ofgovernment inability or lack of motivation to set and enforceproper standards, corporate accountability movements seekto increase societal determination of what appropriate stan-dards are and to increase the pressure on corporations to liveup to such standards. As such, corporate accountabilitymovementsareprimarilyconcernedwithrule-settingandtherelated activities of monitoring, reporting and enforcement.In moving away from entirely voluntary measures, corporateaccountabilitymovementsseektoestablishaframeworkthatensures answerability, enforceability and universality (Haighand Jones, 2006; Newell, 2002; Utting, 2005).In theirefforts to impose great control over corporations,corporate accountability movements may use a variety ofmeasures, including hard law, soft law, boycotts, protests,shareholder activism, and certification programmes. Ofthese by far the most prominent would be certification pro-grammes.CorporateAccountabilityProgrammes(CAPs)havetended to focus on two primary concerns, namely labour rights and the environment. Most of the labour rights CAPs(oftenreferredtoas‘nosweat’or‘ethicaltrade’initiatives)havetendedtobeconcentratedintheapparel,footwearandsporting goods sectors. For their part, the environmentalinitiatives have largely been concentrated in the resourcessectors (e.g., Forest Stewardship Council, the Marine112 A. Mukherjee Reed, D. Reed
StewardshipCouncil,theRainforestAlliance,etc.)(Bendell,2004; Bernstein & Cashore, 2004; O’Rourke, 2006).A second major area of corporate accountability activi-ties
d
some would argue the most important
d
could bereferred to as transparency and governance initiatives.Examples would include Transparency International andPublish What You Pay. These organisations may havea variety of different goals which can directly and/or indirectly lead to greater development impact by corpo-rations. These goals include helping to eliminate corruptpractices by governments (e.g., eliciting bribes fromcorporations), increasing corporate transparency (e.g.,reporting requirements), reducing undue corporate influ-ence through lobbying, eliminating corporate tax evasionand avoidance, etc. (Bendell, 2004; Moran, 2006).
Public sector enterprises and development
In many countries such as India, state-owned enterprisesplay a significant role in the economy. Historically, theseenterprises have not only had a direct developmentmandate ascribed to them by government through their core business, but also have had other requirementsimposed upon them to promote development. This isparticularly the case in India, where state-owned enter-prises typically have specific policies and criteria laid downwith respect to such issues as employment of marginalisedgroups, contributions to local development, etc. In addi-tion, such state enterprises may also engage in the CSR andcorporate accountability programmes that are targeted for traditional for-profit firms (e.g., ISO certification, etc.).Their substantial growth in recent years indicates thenecessity to reassess their role in development (for example, five out of the seven Indian companies listed inthe Fortune 500 are public sector firms).
Alternative businesses and development
In addition to traditional for-profit businesses and publicsector enterprises, there is another class of business whichoften has the promotion of development as a core compo-nent of its mission. These alternative businesses
d
oftenreferred to as social economy enterprises
d
are distin-guished by the fact that their primary purpose is not thepursuit of profits but the achievement of some socialpurpose. Such social economy enterprises would include co-operatives, social entrepreneurs and social enterprises.Many such businesses have been founded with the specificpurpose of promoting development (e.g., through sup-porting small producers and producer organisations in theSouth through trade links, providing finance, etc.). Theseare however to be distinguished from charitable organisa-tions which also claim to have a social purpose (MukherjeeReed and Reed, 2009).
Table 1
Major international CSR and corporate accountability initiatives.Name Initiator Sector Goals GovernanceGlobal Compact United Nations Multi-sectoral MillenniumDevelopment GoalsUnited NationsGlobal ReportingInitiativeCeres, United NationsEnvironmentProgramme (UNEP)Multi-sectoral Transparency Multi-stakeholder GlobalGAP EuroGAP (industry) Multi-sectoral EnvironmentalsustainabilityPrivate sector SA 8000 Social AccountabilityInternationalApparel, Agriculture Labour standards NGOWRAP Industry Apparel industry Labour standards IndustryFair Labour AssociationGovernment, NGOs,Industry, UnionsApparel Labour standards Multi-stakeholder Workers RightConsortiumNGOs, Unions Apparel Labour standards NGOsForest StewardshipCouncilNGOs Forestry EnvironmentalsustainabilityMulti-stakeholder Marine StewardshipCouncilIndustry Fishing, Aquaculture EnvironmentalsustainabilityMulti-stakeholder Rainforest Alliance NGOs Various agricultural EnvironmentalsustainabilityMulti-stakeholder Fair LabellingOrganisationNGOs, Small producers Various agricultural Small producer support NGOs, small producersUtz Kapeh Industry Coffee, tea EnvironmentalsustainabilityMulti-stakeholder InternationalFoundationfor OrganicAgricultureNGOs Various agricultural EnvironmentalsustainabilityNGOsExtractive IndustriesTransparencyInitiativeGovernments,NGOs, IndustryExtractive industries Transparency,GovernanceMulti-stakeholder
Business and development 113
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