How to Make Corporate Responsibility Work for Multinational Corporations
In my last post, I discussed how multinational corporations are often blamed for the negative impacts of globalization. The reality of today’s world is that companies need to invest in improving society and addressing global challenges beyond traditional philanthropy. Too often philanthropy is used as a form of public relations, ‘writing the check’ to promote a company’s image through high-profile sponsorships. To respond to competing pressure from investors, governments, and activists, companies should instead approach their corporate giving strategically to improve the business climate and infrastructure in the places where they operate. This concept is called ‘creating shared value,’ and I’ll discuss several examples.
Corporations must move toward integrated and strategically focused approaches that align their corporate citizenship, corporate responsibility and philanthropic activities more closely to business strategies and core corporate competencies and assets. They should use their natural strengths’creating products and markets’to stimulate development in emerging economies where future business growth opportunities are the greatest.
For example, Coca-Cola understands that fresh water availability and access is an acute need of many developing communities and is critical to the company’s long-term business success. They have:
- set goals to improve factory performance in water efficiency,
- launched community programs to help enable equitable access to clean drinking water in underserved communities where they operate,
- worked toward the protection of watersheds in water-stressed regions, and
- helped mobilize the international community around the issue of water shortages and clean water.
Coke is ‘Creating shared value’ by not simply improving water quality and access for its own sake. They are protecting a vital resource for their product and creating better relationships with potential customers and markets in developing countries by doing so.
Other notable examples of international development projects based on business objectives:
- Healthcare companies supporting improved access to essential medicines and improved local capacity to meet health needs
- IT companies improving access to technology
- Energy companies supporting affordable energy access
- Water companies partnering with others to improve water and sanitation
- Finance companies sourcing locally to increase access to credit and business skills
- Professional services firms sharing their management expertise with local NGO, government and business partners
- Food and agricultural companies improving access to nutritional foods and/or supporting local farmers’ livelihoods through improved crop quality and ensuring higher prices for commodities in the international marketplace.
Many corporations and NGOs have thus begun to work together to tackle specific development concerns. NGOs provide corporations with sophisticated knowledge and expertise about specific social, economic and environmental issues. They furnish indispensable access to and information about ‘the actual situation on the ground’ in local communities where corporations have established markets. Corporations provide NGOs with the influence, flexibility and financial resources to get things done. The smartest business strategists do not see these partnerships as necessary simply from a public relations standpoint. They see it as an opportunity to grow and protect the company’s market while simultaneously doing humanitarian or environmental good.
This new approach toward strategic engagement in communities will be good for the bottom line and will bring those millions who had not benefited from globalization into the fold and out of poverty. Companies that heed the call for alignment of their social and philanthropic missions with their core business strategies will succeed far into the future. Those that don’t won’t survive.