Ethan Kapstein - Paul Dubrule Professor of Sustainable Development, INSEAD
Santiago Gowland - Head of Corporate Responsibility, Unilever
Hugo Pienaar - Economist, Bureau of Economic Research (BER)
Shona Grant - Director, Development Focus Area, World Business Council on Sustainable Development (WBCSD)
Lea Borkenhagen - Head of Sustainable Livelihoods Strategy and Development, Oxfam GB
Simon Maxwell CBE - Director, ODI
1. Simon Maxwell, Director, ODI, opened the event by introducing 2 key questions:
(i) What are the ways business can participate in development?
(ii) What constitutes an adequate standard?
2. Santiago Gowland, Head of Corporate Responsibility at Unilever, responded to Simon’s questions and introduced Unilever’s CR initiatives:
(i) Unilever has been using value chain analysis (VCA) to help brand areas of innovation.
(ii) They partnered with Oxfam to conduct a VCA in Indonesia.
(iii) More recently, they used input-output analysis to understand their impact in South Africa.
3. Ethan Kapstein, Paul Dubrule Professor of Sustainable Development at INSEAD, presented the key findings of a Unilever impact study in South Africa.
(i) Ethan opened his presentation by stating that – until Unilever’s South Africa study 1 year ago - no companies have been serious about understanding their impact in developing countries. He referenced a study by Haussman (Harvard University) that found no impact on growth from US$300 billion FDI in Latin America.
(ii) He suggests that business leaders are unaware of the renewed debate over foreign direct investment (FDI).
(iii) Unilever’s main impacts in South Africa include:
- Over half of Unilever profits go to suppliers;
- A significant amount is paid to the South African government through taxes;
- Supports 100,000 jobs, mainly in trade;
- Provides training, which it considers a public good
(iv) Ethan recommends that businesses:
- Generate comparative data
- Support research on the effects of modernisation and the costs and benefits of business.
4. Hugo Pienaar, an economist at the Bureau of Economic Research (BER), presented the key findings of a SAB economic impact study in South Africa.
(i) The SAB study also used input-out analysis and measured direct, indirect and induced impacts.
(ii) Key findings found that SAB:
- Employs 8972 individuals;
- Supports an additional 378,000 jobs, mainly relating to production and sales of SAB goods;
- Pays – on average – higher than the average South African wage;
- Employs a significant number of previously disadvantaged individuals – 75% of their staff;
- Pays R23 billion in taxes;
- Estimates a total value added of R51 billion (3.3%) to the South African GDP; and
- Contributes R58.9 million to responsible business initiatives such as campaigns.
5. Shona Grant, Managing Director, Development at the WBCSD, introduced the Measuring Impact Framework.
(i) The tool has 3 components:
- Business Case
- Excel-based User Guide
(ii) A large group of leading businesses developed the framework, including Philips, Anglo-American, Vodafone and Unilever.
(iii) The framework is to help companies measure and assess societal contributions. It is very operational.
(iv) The WBCSD offered a number of reasons why businesses should measure their contributions, including: new business opportunities, employee satisfaction, risk management and community interaction.
(v) Some key features are that it was built by business for business, is flexibility, externally reviewed and beyond traditional reporting.
(vi) The four-step methodology is as follows:
- Set boundaries
- Measure direct and indirect impacts
- Assess contribution to development
- Prioritise management response
(vii) Shona announced that the impact tool will be available for download in May.
New users are welcomed.
6. Lea Borkenhagen, Head of Sustainable Livelihoods Strategy and Development at Oxfam, GB, shared Oxfam’s experience at measuring impact.
(i) Oxfam is interested in the quality of impact, the distribution of impact and how to effectively measure impact.
(ii) From a business perspective, an objective is to secure sustainable supply chains. From a development perspective, Oxfam asks how can companies engage in sustainable relationships with communities and consumers?
(iii) It is important to measure: positive and negative impact; development and poverty; economic, inequality, gender, environment, market power and ‘why,’ not just ‘what.’
(iv) Lea highlighted some specific issues to consider in Africa:
- Women play a key role in the economy;
- What kind of investments are multinational companies making?;
- What is the impact of Chinese and Indian investements?;
- What are the structural or macro impacts?; and
- What are the changes in inequality?
- Lea indicated that the key components to Oxfam’s Poverty Footprint of Business are similar to those previously reviewed by Unilever.
7. Simon Maxwell thanked the presenters and invited comments, thoughts and questions. The main areas of discussion included:
(i) Input-output analysis versus VCA: ODI’s tourism programme has preferred VCA as it captures the downstream inputs and points of impact. Others have preferred to use input-output as a basis for understanding impact. Input-output tables use easy-to-access (government) data. However, this does not allow for frequent updates. FDI is not always the starting point for measuring impact. Alternatively, one participant suggested that the critical issue is to engage in dialogue, not just to measure hard facts.
(ii) Capturing dynamic impact: Dynamic impacts can be very large, but there is no clear way of measuring them. The private sector traditionally prefers to use employment figures.
(iii) Encouraging businesses to measure impact: companies need to be made aware of the business reasons for responsible business and they should be incentivised to monitor their impact.
(iv) Gender and inequalities: businesses should find ways to be more inclusive, either centrally or peripherally.
The panel’s closing remarks were as follows:
8. Lea Borkenhagen: Analysis should go deeper than numbers; such as types of jobs and skills developed. Quality cannot be lost.
9. Shona Grant: We should look at the creation of jobs and at how the poor can be integrated into value chains.
10. Hugo Pienaar: The first question to emerge when there is a new FDI is ‘how many jobs will be created?’ Hugo gave the example of aluminium smelters that create significant employment, but are also major carbon emitters.
11. Ethan Kapstein: Ethan drew our attention to incentives. What incentives drive companies? Do these incentives match development objectives?
12. Simon Maxwell: Simon reminded the audience of the 4 objectives presented by Douglas Alexander: climate change, fragile states, international systems and growth. Growth will be highly controversial. Therefore, it is important to be clear of business impact.
The private sector is the driver of growth. Businesses creates jobs and wealth, bring investment capital, pay taxes and train workers. But businesses often face criticism for their activities in the developing world. Measuring the economic, social and environmental impact of a company’s activities is a crucial first step in strengthening the contribution that they can make to growth and development and identifying any negative impacts. This workshop will explore recent experiences in measuring business impact.