SANCHAR EXPRESS | March 24, 2014
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 sector groups 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.