12-13 December 2005

From: "Business Unusual: Partnerships as Strategic Investments" Conference 

 

Berlin, 12-13 December 2005

 

Resource persons:

 

Kai Bethke, Industrial Development Officer, United Nations Industrial Development Organization (UNIDO)

Sanjay Gandhi, Global Project Manager, Growing Sustainable Business Initiative,United Nations Development Programme (UNDP)

Hans-Peter Schipulle, Deputy Director General, Ministry for Economic Cooperation and Development, Federal Republic of Germany

Reiner Lemke, Sustainability Manager, Deutsche Telekom AG

 

Moderator:

 

Melissa Powell, Project Manager, United Nations Global Compact Office

 

 

Key outcomes:

 

-          Partnerships require a lot of effort. It takes time for business, the United Nations, and development agencies to be able to speak to and understand one another.

-          Private investment is crucial for real growth. Public-private partnerships can serve as a tool in some cases to facilitate that investment; business can reduce its risk if it learns from and uses the networks and experience of organizations such as the United Nations and bilateral development agencies.

-          The business case for partnerships is becoming more important for all around, regardless if the case is measured by profit, or recognition of the company’s efforts by its placement on a sustainability index such as the Dow Jones Sustainability Index (DJSI), or less tangible benefits such as employee satisfaction.

-          Building trust in partnerships is difficult, so transparency and clear plans of action coupled with consequent follow-through are vital.

 

The emergence of global value chains has an increasingly significant impact on the economic development process in developing and emerging economies. During the past decade, transnational corporations have started to assume an ever more important role in the industrial development of these countries, primarily through the multitude of supplier and vendor relationships that they have built with small- and medium-sized enterprises. However, not all countries offer the necessary conducive climate for such investments, lacking (among other things) a qualified workforce, physical infrastructure, or a favorable regulatory environment. As a result, these countries are excluded from global value chains and therefore excluded from the global economy.

 

In recent years, multilateral and bilateral aid agencies have launched partnership programs to help bridge that gap to assist such communities in getting access to international markets and production networks. While having great potential, however, these programs also face a number of challenges. For example, companies sometimes do not have a strong business incentive to get involved in such programs since local procurement roles may prohibit them from tendering for the execution of projects in case they have previously tapped into public funds. In addition, many companies fear a loss of flexibility and autonomy when acting through partnerships. For multilateral and bilateral aid agencies, it is often a challenge to strike an appropriate balance between promoting investment and in furthering development objectives.

 

This workshop addressed both positive and negative experiences with partnerships, highlighting how partnerships can be made more effective. It started where the morning panel discussion left off: The panelists and audience further discussed the necessity of viewing multi-stakeholder partnerships as a strategic investment instead of as philanthropy. The workshop also focused on partnerships from a more sober perspective and whether they are accomplishing their goals.

 

Kai Bethke of the United Nations Industrial Development Organization stressed that his organization has been successful in working with business, but that mistakes have also been made on the road to successful partnership building. When the UNIDO Business Partnership Programme was initiated, working with the private sector in collaborative ventures was relatively new to UNIDO. Especially in the early phases, UNIDO staff did not speak the language of business and undervalued business expertise. Bethke also noted that they had also learned the hard way that business headquarters and CSR departments know about the Global Compact, but that the people on the ground have no idea how this should translate into their day-to-day business practice. He argued that this is an area in which companies need to change if they take their Global Compact responsibilities seriously. Bethke also added that UNIDO and business both need to focus more on concrete results in the field. How are their projects affecting the actual people they are intended to help? They have moved to address that, but more work needs to be done.

 

To spur real growth in developing countries the private sector needs to invest there. Often, however, companies overlook opportunities in these markets because the risk seems simply too high. Sanjay Gandhi described the role of UNDP’s Growing Sustainable Business Initiative as to fight exactly that problem. Gandhi’s organization does this by researching underserved markets, providing information from the local level to business, and by helping business engage governments to help ameliorate risk. Their approach is to "make market discipline work for development." Once they have helped create successful business models to invest in underserved markets they try to adapt them for similar cases.

 

Gandhi also stressed that a sober look at the state of multi-stakeholder partnerships is important. Flexible target oriented initiatives are still not mainstream thinking in the UN or in the business world, despite their growing popularity, and it remains difficult to get past the CSR department into the realm where real business decisions are taken. Furthermore, it is still difficult to work against short-term thinking.

 

Hans Peter Schipulle of the German Federal Ministry for Economic Cooperation and Development (BMZ) argued that aid can still play an important role in development (especially in infrastructure development), but he also maintained that there are limits to what pure aid can accomplish. Schipulle agreed with Gandhi’s assessment that for real growth one needs business investment in developing countries and also added that sometimes this can be furthered through public-private partnerships. He said that when thinking about the business case for such partnerships, one should also consider important indirect indicators such as employee satisfaction (referring to Luke Disney’s earlier remark during the panel discussion in the morning). He added that one of the most important roles that the BMZ can play is to use its networks and expertise to help companies get into places in which they would not normally have access. His ministry’s Public-Private Partnership Facility has worked hard at successfully playing that role.   

 

Reiner Lemke discussed his partnership work at the Deutsche Telekom sustainable development office. His company has learned from experience that having a regional CSR strategy is crucial for success. While wiring schools and key institutions in Slovakia the company spent time and money consulting with teachers, NGOs, and government officials to find out where their resource could most effectively be deployed. This effort helped pay off for the Slovakian project, but actually the problems of a digital divide affect the entire region. Afterwards, the company realized that it would have saved resources and been better implemented on a regional scale.

 

Lemke also discussed the business case for its CSR projects. He said that his institution approaches them with the understanding that in a best case scenario they will pay off in the long run and in a worst case scenario not at all. Close to 50 percent, however, of Deutsche Telekom’s stock value comes from its brand reputation, and in that sense their partnership projects do have a business case, especially since Deutsche Telekom benefits from its placement on the Dow Jones Sustainability Index (DJSI).

 

Other topics raised during the discussion included how to better build a business case and how one builds trust in other cultures or in countries divided by tribal or religious cleavages. Panelists agreed that in that situation transparency and clarity are key: make sure you clearly say what you will do and then make sure you do it.

 

One participant raised the question if it would not make more sense for the United Nations to push improving fundamentals such as rule of law and respect for property rights in developing countries. Gandhi replied that one should not underestimate these obstacles to growth, but that even this investment on the micro level can have macro results that facilitate other investment in that sector. If you help a water company work with an African government to provide water in a village, he argued, that model can either be scaled up by the company itself or help the next water company.

 

During the discussion participants and panelists also considered the implications of higher environmental and social standards on medium and small companies in the developing world—in a sense they act as a barrier on trade. So development agencies and others should try to build capacity when working in these areas to bring these businesses along.