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Large companies should impress upon government officials the importance of long-term thinking, particularly in emerging markets, says Toby Webb
No matter how much better company practices are becoming, no matter how good your sustainability reporting or even stakeholder relations are, you can never overestimate the lack of knowledge and understanding in some sections of government about the right role of business.
I’ve spent a lot of time in emerging economies in recent years, and some of that time with government ministers and officials. A few things have become very clear.
- Senior government officials are about as time-poor as people get. This means many of them have missed out on learning about the complexities of the fast-evolving business-and-society debate in recent years.
- As a result many rely on political populism, on reactionary views based on recent events and on their past education, which may have taught older socialist views or “zero sum game” 1980s capitalism models (both of which are now accepted to be simplistic.)
- Much of the information they see is filtered, and they make quick decisions all the time. They often have to. Social media or traditional media (in democratic states) often forces the pace.
- Many of the good, simple ideas around business policy that the progressive smart officials or politicians out there come up with (and there are many of these) get watered down and lost in bureaucracy.
- Many do not yet understand the emerging links between sustainability and foreign direct investment. While large companies are increasingly linking decisions on business investment (the FDI all governments want) with frameworks that include (or exclude) sustainability or CSR-related policy, governments often don’t do the same.
What does all this mean? Quite simply, companies must do a much better job of demonstrating their value in the volatile emerging markets where they operate. Not enough businesses yet understand this, and how to do it (pharmaceutical giant GSK’s travails in China show serious corporate risk in action.)
There’s no proven answer, but there are examples that may help show the way forward.
Many leading companies now understand they must play a positive role in development that works for them and the countries they operate in. Many understand that proving your value on a regular basis is now part of the cost of doing business and can lead to business opportunities, particularly through innovation.
The next stage is working out not only how to communicate your current value, but also how to play a positive role in the frameworks that will improve conditions, not just for individual companies or even sectors, but for countries as a whole. That’s probably the hardest challenge facing chief executives today. Most instinctively shy away from conversations about contributing to national competitiveness, and for good reason, in a traditional sense.
But left to themselves, governments and their officials, with ever more demanding populations and ever present NGOs talking into their ears, may come up with questionable plans, such as the new Indian law mandating 2% of large companies’ profits are spent on corporate social responsibility.
Those kinds of ideas are potentially much worse for business than the risks run by careful engagement in the public policy debate. This is where collaboration and partnerships can make a big difference, if companies can resource their negotiations and involvements and consistently promote them correctly. Most currently do not. This is why good initiatives become written off as temporary PR.
There are ways beyond impact reporting to get involved in shaping the debate, ways beyond just engaging industry associations or a handful of NGOs to help argue the case for well thought through business policy frameworks.
Producing the kinds of impact reports put out by the likes of SABMiller, Heineken, Standard Chartered and Unilever is an improvement on current practices. But let’s be honest, the state of the art is fairly woeful, because companies are slow to make the strategic connection high enough up the food chain that sustainability is something they need to overtly link with their long-term planning and investment decisions.
The key word is “overtly”. Business must work out more effective ways to constantly communicate with governments in emerging markets on this topic. Doing so consistently can help better decisions to be made for the long term.
I am working with some companies, and one government, soon I hope two, to try new methods and see what can work better than what has gone before. I will report back in due course on my blog, I hope with good news.
Toby Webb is founder of Ethical Corporation and Stakeholder Intelligence. He blogs at http://tobiaswebb.blogspot.co.uk.business strategy demonstrating value government Heineken opinion SABMiller sustainable innovation