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Harnessing core business for development: time to shift from the why to the how

The ‘responsible business’ agenda has changed.  For some years the agenda advocated moving beyond philanthropic Corporate Social Respsonsibility (CSR) to leverage core business competencies for development gain.  In other words, do business commercially but in a way that also optimises the contribution to development, combining financial and social value. The idea is no longer new, and no longer just an idea. Businesses are adopting the approach and it was the centerpiece of the UK Government’s 2008 Call to Action on the Millennium Development Goals (MDGs).  

Advocacy on the ‘why’ now needs to give way to learning about the ‘how?’ and the ‘so what?’    What works, what doesn’t, in what sector and circumstance, with what result?  A 2009 meeting series, opening today, aims to develop and explore this new agenda. Here are some issues to start:

  1. Managing internal change.  Evidence abounds on two critical success factors for the adoption of responsible business models. First, a senior champion. Second, the reform of key performance indicators.  But beyond that, we know less about how companies have managed internal change – dealing with staff resistance and the complex task of changing procedures – than of how they changed engagement with suppliers, consumers, communities or government partners.  Without compromising company confidences, more discussion will help others learn.
  2. Exchanging practical experience across sectors.  Many initiatives have been rolled out within a sector:  tourism operators work together on Travelife and the Tour Operator Initiative;  soy, palm oil and cocoa companies collaborate to set standards by commodity group;  oil gas and mining initiatives are specific to the extractive sector.

But implementation issues cut across sectors.  Take an example of a practical challenge.  Businesses face a trade-off between reducing risks for poor producers by issuing secure long-term contracts versus restricting their commercial options when supply rises or demand falls.  Both the Body Shop’s Community Trade programme and SAB Miller’s Enterprise Development programme, despite their contrasting brands, have useful experience.   Other common issues – how to manage expectations or how to adapt to the crisis – cut across sectors. 

The potential to apply core business competencies varies enormously by sector: Microsoft and Vodafone have technological capabilities of high value to the poor while TNT and DHL have logistical assets of high value to relief efforts, and cocoa and forestry companies have supply chains that reach into poor rural areas. Nevertheless, new business models are beginning to roll out from one sector to another, such as a new transparency initiative in health, drawing on the Extractive Industries Transparency Initiative Further potential needs to be explored.

  1. Assessing development impacts.  From a development perspective, the rationale for harnessing core business is to deliver impacts that combine scale and sustainability.   Aid-funded interventions can be more targeted, working directly with the poor or governments, but their reach is limited and they are dependent on funding.   In contrast, corporate supply chains or distribution chains in mining or beverage sectors can reach thousands of workers.  Mobile phones, mobile banking and other technology that meets the needs of poor consumers can continue rolling out to meet the needs of thousands – and then millions – of the poor.

But beyond such figures illustrating reach, we have little more data to report on development impact and no consensus on assessment methods.  How do new business models affect poverty levels? How do benefits compare with costs of change, or with impacts of other approaches?  How much does this really all matter? To move beyond the assertion that harnessing core business is good for development, we need to understand the impact.  The development community needs this. Business does too, though the business case for assessment has not yet been well articulated.  Assessments can help business either improve or prove:  improve their own operations to leverage even great development value; or to prove to their case to governments, communities, financiers that their investment delivers high social value as well as financial return.  Now that the language is becoming widespread, the market leaders will need actual results to keep their pole position.

  1. Assessing the business case.  Companies cannot afford to adapt operations just because it is the ‘right thing to do’.  To argue the case with the Board and shareholders, they need to justify the investment and calculate the return.  The anecdotal cases are plentiful, demonstrated across tourism, banking, brewing, mining and more.  As outlined in a new Opinion from ODI, the range of business benefits goes from local social license to operate to competitive differentiation.  But the case needs to be qualified and quantified if it is to inform decision making. 

Finally there is another set of issues, as yet undefined.  Some distinctions are becoming less clear:  the divide between public and private responsibility in catalysing development; the role of government in setting the investment climate and the role of business in supporting good governance;   the use of core competencies as in-kind philanthropy or as harnessing core business; ‘good’ business that combines high social as well as financial value and hard-nosed business. Deliverables no doubt matter more than definitional discussions. But as business and governments adapt roles to the downturn, build the business case for the core competency approach and engage together on investment climate reform, the bubble of discussion about the blur will no doubt continue.