Business - Sharing Value? The Business Case for International Development

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The Business Case for International Development

September 2011- Tara Schmidt- Mark Tuckwood

Presented at Business - Sharing Value? 20th September 2011, EdinburghA NIDOS event www.nidos.org.uk


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Business

Short-termism

“PROFIT PROFIT PROFIT”

“All in for the money”

Greed

Personal gain

Lack morals

Charity

Inefficient

Do-gooders

“Don’t live in the real world”

“Hand-outs for lazy people”

Is the money going where it should be?

The business–charity paradigm and perceptions…


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Empowerment of people

Capacity building

Longer-term view

Economic, environment, and social

Business Charity

… versus the broader perspective


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Short-termism

“PROFIT PROFIT PROFIT”

“All in it for the money”

Greed

Personal gain

Lack morals

Inefficient

Do-gooders

“Don’t live in the real world”

“Hand-outs for lazy people”

Is the money going where it should

be?

Products and services

Skills development

Operational efficiencies

Wealth creation

Longevity

Stakeholder value

Governance

Societal value

Economic development

Motivation & empowerment

Innovation

Infrastructure development

Capacity building

SUSTAINABILITY

Awareness building

Supply of basic goods and

services

Supporting communities

Campaigns

Training

Opportunities for self-help

Business Charity

Challenging the business–charity paradigm… to create societal value


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We are now beginning to see convergence in the global market

Finding a common ground…

… to build strong effective partnerships that can achieve more through working together

Bu

sin

ess

Bu

sin

ess C

harity

Ch

arityGovernmentGovernment

The PeopleThe People

Regulatory framework, incentives, policies

Su

stai

na

ble

in

com

e,

op

erat

ion

al e

ffic

ien

cie

s

Co

mm

un

ity and

ind

ividu

al n

eeds

Consumer demand, constituents, supporters

Consumer demand, constituents, supporters

Societal ValueSocietal Value


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The Business Case for International Development The Business Case for International Development

1 Why should a medium sized Scottish business build local capacity abroad?

2 What are the potential benefits to business and to the communities in which they operate?

3 How could business partner with charities and governments to create value?


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Why should a medium sized Scottish business build local capacity abroad?

Has a responsibility to all of its company stakeholders

• To persevere as a robust and profitable business

• To sustainably grow business into the future

Helps to ensure sustainable business growth

• Focus on a longer-term business outlook, adding strategic and tangible value while mitigating risks

• Goldman Sachs Sustainability Index was founded on research that the companies who are leaders in environmental, social and governance policies are also the leaders in stock performance, delivering long-term sustainable competitive advantages

• Despite the global recession, 70% of the 756 US companies surveyed by GlobeScan in 2009 said Corporate Citizenship should be a business priority and 60% said it makes a tangible contribution to their bottom line**

• For the small companies surveyed, it was particularly key in managing reputation and business brand**

“It is simply the right thing to do.”

* Source: Goldman Sachs Sustainability Index http://www2.goldmansachs.com/ideas/environment-and-energy/goldman-sachs/gs-sustain/index.html**Source: Hitachi Foundation “The 2009 State of Corporate Citizenship in the US” survey, www.hitachifoundation.org


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The business opportunity is significant for building local capacity abroad…

A real opportunity across business sectors to add to the triple bottom line* – people, planet and profit**

• Consumer goods – Unilever in West Africa

• Pharmaceuticals – GSK across Africa

• Microfinance – Citigroup in India

• Technology – GSM in over 14 countries (Africa/ISC)

• Energy – energy access to aid development, especially in rural communities - more challenging

“Spin-off” business units were needed to make this work – better placed for more entrepreneurial businesses?

*Source: John Elkington in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business**Source: Sustainability Challenges and Solutions at the Bottom of the Pyramid, The Shell Foundation, Tara Schmidt & Christine Keating, 2008***Source: Survey results from interviews conducted by the authors with managers in 22 multinational business units

Profitable50%

Not for profit5%Unknown

10%

Not met targets discontinued

10%

Not met targets continued

10%

Commercially sustainable

15%

Financial performance***

Motivational drivers***

-

10

203040

506070

8090

Strategic Financial Philanthropic

Res

po

nse

s (%

)

Ch

alle

ng

e v

ers

us

Re

wa

rd


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Opportunities in Energy Sector

The provision of sustainable power in developing communities is THE empowering enabler

Over 1.6 bn people have no access to even

rudimentary power source*

Lack of access to reliable energy supply affects the lives of around 2 bn people*

“The source of material civilisation is developed power. If one has this developed power at hand, then a use for it will easily be found… The way to liberty, the way to equality of opportunity, the way from empty phrases to actualities, lies through power.”

Henry Ford (1926)

Power is one of the three fundamental inputs that determine the productivity of labour, the other two being materials and information.

(*Huber and Mills, 2005)

What are the possibilities?


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… especially for more entrepreneurial businesses

New economic development

paradigms

•Create new development pathways•Leapfrog legacy technology•Develop new commercial arrangements

•E.g. Mobile phones in Africa•E.g. Green energy R&D in China

Market development

•“First mover advantage” – create a commercial space where there is limited or no competition•Ability to establish and shape the market•Brand building

Defining success differently

•Holistic performance metrics•“Triple bottom line” philosophy i.e. social and environmental as well as economic targets


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Interests of the right business can be aligned with the charity sector and government to deliver true sustainable development

Scotland has an “energy economy”, built on the foundations of the oil & gas sector, but is now a centre for innovation in renewables

Technology innovation should go hand-in-hand with commercial innovation in exploring means of creating value

Who are the real business innovators in this sector?

• Large incumbent energy companies – have a large vested interest in the status-quo, but a view to the long term (e.g. Shell Solar)

• IT sector – a “young”, dynamic sector with a reputation for innovation - seeking a new market (e.g. Google Green)

• University spin-offs – commercialising R&D

• SMEs – owner managed business driven by passionate individuals - need to be innovative in order to survive

• Who could you most easily align yourself with?


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What are the potential benefits to business… and to the communities in which they operate?

Communities Communities 1)Jobs and new skills2)Capacity building of the country

Builds a joint platform for addressing the needs of the community and the broader stakeholders

BusinessBusinessCompany reputation and business development

builds company ‘license to operate’ in developing countries / new market entry

develops new innovative ideas for business

Employee excellence and skills development

attracts new recruits who may have otherwise over looked the company

retains and cultivates a more diversified company team

Company cohesion locally and globally

builds a strong, effective team environment, particularly as a company may expand abroad

encourages stakeholders from potentially very different backgrounds to work more closely together

Robust management of risks (and costs)

considers social, environmental and economic issues for a more thorough assessment of risk

builds more robust ability to successfully manage local operations


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How could business partner with charities and gov’ts to create value?

Business challenges*

• Understanding local consumers’ needs

• Engaging with communities for supply chain development and product/service delivery

• Redesigning their business model

Working with charities and government*

• Delivering built-for-purpose products/services

• Strengthening value chain through partnership(s)

• Focusing on core capabilities for all organisations (business, charity, government)

Business modelBalancing innovation

with mainstream business

Products/servicesLeveraging core

capabilities

Value chainStrengthening

through partnership

Industry

Market

Challenges to the Business Model**

0

10

20

30

40

50

60

Stake

holder

s

Funding

Relat

ionsh

ips

Coordin

atio

n

Corruptio

n

Safet

y

Distri

bution

Res

po

nse

s (%

)

*Source: Sustainability Challenges and Solutions at the Bottom of the Pyramid, The Shell Foundation, Tara Schmidt & Christine Keating, 2008**Source: Survey results from interviews conducted by the authors with managers in 22 multinational business units


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What’s the link?

“When you change the way you see things, the things you see change”“When you change the way you see things, the things you see change”Mahatma Ghandi


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Name: Tara Schmidt

Position: Corporate Development Analyst

T: 0131 2434526

E: [email protected]

Name: Mark Tuckwood

Position: Senior Associate

T: 0131 2434205

E: [email protected]

Contacts

Presented at Business - Sharing Value? 20th September 2011, EdinburghA NIDOS event www.nidos.org.uk


www.woodmac.com


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Business - Sharing Value? The Business Case for International Development

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