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“If we’re going to succeed in the task of ending extreme poverty and suffering, we will only do so through partnerships with companies like yours,” said Raj Shah, USAID’s administrator, to a room of business executives at last month’s BSR conference in Manhattan.
The definitiveness of Shah’s statement reflects the new normal of international development. Formerly a sector dominated by donors, multi-laterals and NGOs, now corporations are at the table, bringing with them new ideas, new funding sources and new questions about the most effective way to lift the world’s poor out of poverty.
Many say it’s a transformative moment. Old assumptions and operating models are falling away, while the shape of what’s to come has not yet emerged. What is clear is that the private sector has injected new energy into the world of international development, even as a new focus on social good is changing the way business operates around the world.
At the launch of Devex Impact, the new online platform devoted entirely to the intersection of business and development, we bring you a look at how we got here – and where we’re headed.
How did we arrive at this moment? The big narrative is the stunning role of the private sector in lifting India, China and other countries out of poverty, even as stagnant growth rates in the “developed” world have pushed global corporations to look to emerging markets for growth.
“A confluence of forces” is responsible for bringing the private sector to the table of international development, suggested Tam Nguyen, manager for corporate responsibility at Chevron. “Aid budgets are decreasing,” he said. “Countries are graduating from the aid system. Businesses are becoming smarter about linking their core business to development.”
For Chevron, working with local communities in the Niger Delta and across the world is a way to improve operational efficiency and security, said Nguyen. Companies in other industries have their own drivers. Technology companies like IBM invest in development to access new markets, develop their internal leadership pipeline, and educate future customers to use their products and services, while agriculture-based companies like Cargill and Monsanto need access to land and reliable supply chains.
For a company like Citigroup, it is the “speed and complexity” of today’s global financial system that drives the company to engage in global development work, said Graham Macmillan, senior program officer for financial inclusion at the Citi Foundation.
During a panel at the Business Civic Leadership Center’s conference in October, Macmillan highlighted the magnitude of change by contrasting Citigroup’s 19th century mandate – to serve British-American trade in the North Atlantic – with its modern, global scale. “Today, we are in 100-plus countries, facilitating trade between, say, companies in India and Kenya.”
Working toward what Citigroup calls “financial inclusion” – bringing the unbanked into the modern financial system – is a strategic move, he said. “In that tension between short-term quarterly results and long-term growth, financial inclusion helps us think about the future,” said Macmillan.
Even as these external factors have driven companies to embrace a new development-focused mission around the world, another factor has emerged from within, under the umbrella of “employee engagement.”
As a Net Impact study conducted by Rutgers University found this year, current employees who are able to make a social or environmental impact are more than twice as likely to be satisfied with their jobs. And for future employees, the effect seems to be even stronger: Asked to rank which factors were essential for their happiness, students listed having “a job where I can make an impact” above children, wealth and prestige in terms of importance.
At IBM, international development-type work is now a core element of the company’s leadership development program, known as the Corporate Service Corps, which deploys up-and-coming leaders on short-term service assignments in emerging markets. “It’s a way of developing the next generation of 21st century leaders for the company by giving them a team experience in solving an important social problem,” said Stan Litow, IBM’s vice-president of corporate citizenship and corporate affairs.
When the 2,000 alumni of the program were surveyed recently, Litow said, nine-out-of-ten described it as the best leadership experience of their lives. “Keep in mind we’re talking about the best talent in the company,” he said. “Those are the people you are most worried about losing to competitors, and we have not lost one.”
Where we’re headed
With all this change afoot, it’s hard to see precisely what’s coming next. But a few contours are becoming visible.
Partnerships are still the name of the game – but look for more private-private partnerships based on the sharing of skills, resources, risks, and rewards.
Companies may be exploring new roles for themselves internationally, but they can’t afford to become full-blown development agencies, and they appear to understand that building alliances with the public sector can result in successes that they could not attain alone.
Citi Foundation’s Macmillan agreed with this viewpoint: “We are the global bankers of corporations and banks – we can’t be experts on rural Tanzania. We need partners, we need intermediaries, and we need a regulatory framework to make it work.”
The next challenge for the work of partnerships is to deliver more data on best practices and metrics. There’s also the challenge of how to accurately measure partnership impact. “Like all relationships, partnerships have challenges,” said Yasmina Zaidman of the Acumen Fund. “The more transparent we can be about those challenges, the smarter we will become.”
Zaidman argued that metrics emerge when partners can agree on a shared definition of success. She pointed to Acumen’s recently launched technical assistance initiative with Dow Chemical, aimed at scaling African social enterprises, as an example. “We have diverse goals, but our shared bottom line is the social impact and scale of the entrepreneurs we will support.”
Even as partnership structures mature, however, there is hunger to grow the scope of partnerships. As Stewart Alvarez, vice president for strategic planning at Amadeus North America and newly appointed chair of the International Business Corps said during the BCLC event, “We need to see more multi-company partnerships. We hear of so many great efforts, but if you pull them together, you can realize exponential benefits.”
In a Bloomberg BusinessWeekcolumn this year, Accenture Development Partnerships founder and executive director Gib Bulloch, made the case that such cross-industry partnerships can unlock hidden value in emerging markets.
“Couldn’t the small farms that supply SABMiller or PepsiCo benefit from a tailored micro-finance product from a major bank?,” he wrote. “Or couldn’t the technology from a mobile-phone operator be used to improve the distribution of medicines for Big Pharma in Africa?”
In an interview with Devex Impact this month, Bulloch pointed to the GAVI Alliance, which created a stable, attractive vaccine market for pharmaceutical companies, and the Global Alliance for Improved Nutrition, GAIN, which leverages resources from companies like Coca-Cola, Kraft Foods, and Unilever, as examples of successful multi-sector collaborations.
Partnerships still require a sometimes-difficult alignment among organizations with divergent objectives and governance systems. Bulloch acknowledges that even these complex alliances and partnerships among non-profits, governments and corporations are only a “transient step” on the road of cross-sector “convergence,” a term he helped coin nearly a decade ago.
What Bulloch sees on the horizon now is the rise of a “fourth sector.” “New, hybrid organizational forms will emerge that share attributes with the non-profit, government and corporate sectors,” he said. “These collaborate platforms may or may not be profit-making. We will have an agnostic marketplace for development outcomes.”
Part of this move to the “fourth sector” will begin with “social intrapreneurs,” champions for development who work within operational business units, said Bulloch and others.
“We are hiring bright people who are motivated to make a difference, and we are not putting them in the sustainability department,” said Bo Miller, director of corporate citizenship at Dow Chemical. “Rather, they work in the IT department, or the purchasing department, because they have those skills. And we know that because of how they think about social impact, they will have a long-term positive impact.”
This integration of key personnel reflects a desire on all sides of the table to root development not at the foundation or citizenship level, but deep within the business drivers of the company.
The global development community is already intent on pursuing more innovative development finance instruments, and increasing private sector engagement might be able to take this effort to the next level. As funding from corporations and other private-sector sources outpace official development assistance, many players expect to see the expansion of social capital markets, including social impact bonds and impact investing.
“If smart people in the financial industry could package toxic mortgages and sell them as valuable assets, then why can’t these same great minds find ways to finance the education of the 61m kids who are out of school, based on the 20-year economic value those educated kids will create?” asked Accenture Development Partnerships’ Bulloch.
For Chevron’s Nguyen, now is the time to “redefine the mission of aid and assistance so it is more inclusive of the private sector.”
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