Business approaches and Traditional approaches needed, to reduce poverty

Yes, i totally agree with Paul Polak, Jacqueline Novogratz, CK Prahalad, Stuart Hart, Nancy Barry and the others who think a new, business, approach is needed to help combat poverty. It is, for sure. It helps create new products that the poor need and can afford, and can access. It helps create jobs. It empowers the poor and unleashes them do work hard to reduce their own poverty. It can be sustainable. It can be scalable. There are many many books and reports written about this approach, how it is changing the world, how it is changing the business world and how it is making aid and traditional appraoches to poverty reduction/eradication a waste of effort, time and money.

However, as much as I agree with them, I have to say that there are a number of things that determine poverty, and the business approach will nto solve all of them. It will not help put children in school, not will it get rid of corruption, or write laws that protect citizens, or protect citizens by enforcing those laws (though business could play creative roles in all of these, in some way).

Aid is still needed -more aid and better applied. Governance is a key issue, and one, unfortunately, where so little progress is being made. Ultimately irregardless of how one tries to reduce poverty, be it through aid, loans, business etc... a country needs a good government that sets the right framework for a country (i.e. laws that are implemented), does what is best for its citizens and so forth.

With issues like poverty and Climate Change, where incredibly fast progress needs to be made on a massive scale, there is a need to engage governments and improve the aid agenda (where actually some progress has been made, despite constant environmental degradation, increasingly unfair trade, increasing population growth, wars, greater incidence of diseases amongst others) AND for business to utilise business approaches to poverty reduction. Let's pay more attention to the business approach, but not forget the need for aid and 'traditional approaches to poverty reduction'.

Blanket statements criticising 'traditional approaches' as useless, are not useful. Instead one needs to see how they have helped and learn lessons to improve traditional approaches, and use their lessons in business approaches. Ultimately business will find it very hard (though possible) to thrive when there is no effective government creating an effective marketplace.

Why don't we care about Climate Change?

Dan Gilbert gives 4 reasons (PAIN):
1) Personal: Our brain cares more about tangible, social (i.e. people) threats that can be personified
2) Abrupt: Our brain cares a lot more about current threats than potential threats
3) Immoral: Our brain cares about unethical threats to us, and no-one has anyone in particular to blame Climate Change on, or any reason to see it as unethical.
4) Now: Our brain does not effectively notice slow changes, and therefore cares less

We are sleeping in a burning bed, and our senses are not aware of it!

Desperate...

We are getting desperate, having messed up the planet so badly, and continuing to do so, and without any real hope of any significant behaviour change until it is too late, we are having to rely on technology to save us from ourselves, technologies like geoengineering (which would change oru atmosphere artificially) or genetic engineering (to create organisms to generate energy from CO2).

Tragedy of the commons and climate change

Sustainable Development is really about the Tragedy of the Commons: the concept that when there is a common resource, each of us seeks to exploit it so much, that it becomes over exploited and thus depeleted so we all lose out.

This can be applied to almost anything and ultimately is an issue of how much competition is good, and how much collaboration is good. Nowadays there are numerous new ideas that are part-competition and part-collaboration, not the least the concept of open-source where something is created and then given away for free, or the concepts of wikis where contributors help create something for free, because they recognise that the value of what is created by all contributors will be beneficial to everyone.

As leaders we need to explore these problems and seek new solutions; we also need to examine waht solutions work and imitate them elsewhere. We need to be fast, we are depleting all known resources too fast. There are very few cases where we have collectively worked together to stop a particular resource being depleted, or even begun to rehabilitate it. Despite knowing that deforrestation is bad, deforrestation is getting worse, globally, not better. Despite knowing our sources of non-renewable energy are limited, we are using more, not less, of them. Despite knowing our population is growing too fast and each of us are consuming more than the planet has to offer, the global population continues to expand and individual consumption continues to expand.

In rare cases, we have managed to overcome issues, collectively, such as the hole in the Ozone layer, that is now no longer getting worse; but this was an easy issue to overcome, one that was really about technology and uncontroverisal political decisions. Even in cases of war, with real-time, immediate consequences of death, we are unable to solve collective action problems. The 'we' is both the losers, the outsiders and the winners.

The search still goes on for ways for each of us to understand the long-term negative impacts of our current actions on our own future. Not just on our children's future -but our own future. Can new forms of media and communication lead to new forms of collaboration, or will they lead to new forms of competition? What mix of collaboration and competition is requried to solve our problems -when is competition better and when is collaboration better, what happens when some want to compete and some want to collaborate?

This is the problem we have with climate change -where some see they lose they refuse to collaborate, but others see that without collaboration everyone will lose. The solution is to ignore the past, forget the past and move on. This is not easy, but is the only solution. We cannot complain about others being richer or better-off. We need to all work together to ensure a better future for us all, without worrying about the past, because if we continue to complain, criticize and seek retribution or compensation, we will not move forward. This is the problem -not just that we cannot see long-term, but that we cannot forget the past. That, the problem with human nature, is the real tragedy.

Can Green be a sign of status?

There comes a point when people move beyond buying out of neccessity and convenience to start buying for greater luxury and status. In China and parts of Asia it's fair to say that the environmental footprint of the poor is fairly low, but the middle classes is higher. Although many that buy cars argue it is a necessary purchase, the reality is that many cars are as much a status symbol than a neccessity. It is reasonable to expect comfort to be an important decision factor but is it unreasonable for status to be such an important factor?

For the upper middle classes, apart from the car, the choice of accommodation also affects one's environmental footprint. Again, though location and comfort are important factors, it is a matter of status: how one's spouse, parents, peers or business partners view your choices matters.

In travelling between Beijing and Shanghai, though the trains' sleeper carriages do contain their fair share of business travellers, most business travellers fly. It can be important to spend the night with one's family, but apart from that, taking the train has many benefits: the stations are on the subway so travelling to/from the station is not just cheap but there is no need to worry about traffic jams. The journey itself is comfortable and efficient -with a few hours to work or read before sleeping. In fact many business travellers i speak to have just never considered the train and are not against taking it, but are just used to flying and are not motivated enough to change.

There is absolutely no status to be gained by being 'green' in China. No-one is proud of taking the train, no-one is proud of buying a smaller (though still comfortable) car and no-one is proud to buy a green apartment. In fact though companies are proud of their environmentally friendly offices, none of them encourage staff to not fly. There are many schemes that work elsewhere to encourage cycling (i.e. suitable cycle storage and showers at work) or public transport (i.e. free public transport cards and financial incentives to use them). It is not cool to cycle to work.

What is needed is a shift in how status is gained, which is not just about being seen in a positive light for being green (like many who buy hybrid cars in the West) but more about being seen ina negative light for not being green. We might start to see this change if public opinion shows distaste at those using plastic bags, instead of a re-usable one. A few are buying fashionable re-usable bags now to seem cool, apparently. but this is not mainstream.

If it becomes mainstream, could it spread? Could 'green' be the real status gainer in China, or will it just affect the youth? If a sense of shame starts to develop that would be great, and maybe have a wider affect than the positive status of being 'green'.

In reality though this needs to lead to something bigger...to the demand for greener cars, greener apartments, environmentally friendly clothing and so on. How can we make 'green' a status symbol beyond the fringes of society, so that demand affects supply leading to retailers, developers, salesmen etc developing greener products, because of the demand for them. How can we create this demand for green life? How can we start to make it embarassing not to use a reusable bag, to fly, to consume too much (waste food or buy too many clothes)?

Although this is yet to even affect the 'cool crowd' in the West it might not be unreasonable to target the 'status' crowd in China (as well as the 'cool' crowd; though the 'status' crowd are those with a bigger impact). It is not just the plastic bag example that could offer a glimmer of hope. The other example is of course the earthquake where amongst the 'status crowd' you were looked down upon if you did not donate a certain amount or attend certain fundraisers. If it was possible to create such an atmosphere because of the earthquake -and that, like china's current environmental crisis, also had no direct impact on the 'status' crowd, is it possible?

The situations are not the same, but there is some hope.

Who is pressurising Chinese companies in Africa?

What comes into my mind when reading some of the endless articles of Chinese companies irresponsible practices in Africa, like this from Bloomberg news, is not the reasons why it is happening (of course there is pressure to keep costs low and pressure to access resources), not if Chinese companies are any worse than Western companies (either past or present) or other 'developing countries' companies (presumably not that much difference, but more Chinese companies out there and China is in the spotlight more) -but i wonder what the people running these companies are thinking.

I am a strong believer that people are inherently good, though also selfish. This thus means many people will put themselves over others, but if it is a matter of 'a bit more wealth' vs 'death for a child', i am mystified how people can, as human beings, make such a choice. The answer might be that such a choice never happens -that poor decisions create accidents, rather than people purposely acting irresponsibly knowing the impact it will have. Besides, if it is not forced labour, if it was so bad, wouldn't the workers find work elsewhere?

Is not this just the same as has happened (and still does happen, though not so explicitly any more) in China for decades? If China has improved (somewhat), will Africa improve too? Why did China improve and what lessons might this hold for Africa? Does Africa need a strong state to establish and enforce laws (though China's strong state only selectively enforced its own laws)?

Does Africa need more pressure from the West (presumably this makes no difference, as there has been pressure for a long time with no impact) or does Africa (note, the use of the term Africa in this post is inappropriate, but we will use it for simplicity) need other forms of pressure -from customers (Western end-customers might care; direct Chinese middle-men or end-Chinese customers probably do not care), from media (Chinese media will rarely criticize Chinese companies), from Chinese NGOs (are there any that do this kind of thing, apart from INGOs in China?) or from other groups..... I have to say, it does not look good.

The pressures that helped China clean up its act somewhat (some will say that it is still getting worse in China!) do not exist in Africa, so I am wondering how can we encourage some kind of pressure...from Chinese NGOs on Chinese companies, from Chinese media on Chinese companies, from Chinese government on Chinese companies or from any other source of pressure -ideally inside China and ideally with some actual leverage on Chinese companies in Africa. Any ideas?

On a slightly different note, many of the companies that get into the news about Africa are either state-owned, privately owned or micro entrepreneurs. What is the role of the Chinese government in monitoring these activities? Is there a role at all? For some activities, where there is funding from the Chinese state (through the export-import bank) there is a clear role and clear line of responsibility, and the Exim bank, as it is known, is claiming to take its responsibility seriously (though not as seriously as other International banking institutions that have signed up to the Equator Principles and similar collaborative agreements).

For the others operating in China, the government is unlikely to see a need to interfere at all. There is no such 'Alien Tort Act' for Chinese companies operating overseas, as there is for American companies; which can be prosecuted in the USA for irresponsible activities outside the USA. Any lawyers out there know of any Chinese legislation that could be use, say by an INGO, inside China to sue the companies mentioned in the Bloomberg report?

The limits of strategic community programs

In Asia businesses are starting to focus their community programs, make them 'strategic', leverage their limited resources as much as possible, instigate lasting and large-scale change, increase their community investments as the region's importance to their business grows and explore ways of distinguishing their programs from the rest as well as a number of other trends. This article aims to identify the limits of such trends in order to guide businesses as they develop their programs.

Best practise for an NGO: Identify the problem, identify the best solution, get the resources required to implement solution, use resources when needed (i.e. may vary depending on implementation progress).

Best practise for a business: Identify a problem related to the business (i.e. in the business's local community, related to business's line of work etc), identify what the benefit is to the business to adressing the problem, identify what resources the business has that can be used to address the problem (and that bring the desired benefits), provide said resources. Attach strings to ensure resources are used as benefits the business (i.e. location of implementation), as convenient for the business (i.e. volunteers) and to ensure appropriate use of resources.

Though the above statements are very brief, they describe the dilemna that exists whereby the way an NGO and the way a business addresses problems are very different, and can even be come incompatible in some cases.

Businesses should benefit from their community programs and they should seek to utilise their specific resources as best they can, but this may only be part of the solution. It is rare a business has all the resources to meet the NGO's needs -or the willingness to provide all of those resources.

The result is an imperfect provision of resources to the NGO, restricting an NGO's ability to tackle the problem as it would wish -but this is accepted as a sacrifice in order to get neccesary resources. In some cases NGOs can seek multiple resource providers and combine them, but in many cases this does not work due to business's requirements for 'exclusivity', location specificity, different financial and impact reporting requirements and so on.

Now this situation might only occur for so-called 'strategic' community programs, and not every program need be strategic as every program will vary by business type, location, sector, size etc.

Additionally it musy be recognised that though business can be the solution to many social and environmental problems (as well as economic ones), they cannot solve all of them. Though strategic community engagement is a good thing, as are other programs engaging with the environment and other issues, it must be recognised that there are other limits as to what business should or is willing to support.

There are other resource providers out there -each with different roles to play, resources that can be provided and interests including governmental funding, aid funding, individual charitable donations, foundation funding and so on. Some issues business will not touch, either becuase the link to the business is too weak, the issue is too sensitive or business does not have the required resources.

One benfit of a corporate foundation, especially for US companies, is that the foundation can have a wider remit and address issues the business might not want to. In fact the more strategic businesses become with their community programs, the more there seems to be the need, in Asia especially, to keep some money and other resources aside for non-strategic purposes.

Increasingly businesses are recognising the importance of actually engaging the community through employees as volunteers and this is a welcome move to adding value to communities and educating employees, providing them extra skills and so on. Unfortunately the side effect of this is that, in Asia, most businesses are therefore more willing to support programs in major cities close to where their customers, employees and target markets are. Indeed, in this case, a strategic community program can be crafted, and this should be encouraged.

The problem with this is that most of the social and environmental problems, in China, and other parts of Asia (though not all), are not in the major cities but in rural areas, away from the major cities. In these circumstances resources are not going where they are most needed and instead are going where is most suitable for businesses. Again, this is just good CSR, but is not good for development and this is the conflict.

In fact, in 1 example, businesses are falling over themselves to support migrant children because, as an issue, it is a hot issue, it is no longer politically sensitive, it is an urban issue and it is a ‘children’ and an ‘education’ issue. This is not a criticism for businesses who are supporting this issue and it is still worthy (though, increasingly less so as the government policy changes and government allocates more resources towards it, such as in Shanghai). It is especially a large issue in the smaller cities, though these are often places businesses are only just starting to touch with their community programs.

At the end of the day a little money can make a big difference and any difference a business can make is good for society and good for the business -inspiring employees, generating good PR and generating goodwill. So as businesses grapple with this issue of focussing their community programs but at the same time wanting to do what is best for development, they need to:

• Recognise the limits of what they can do
• Recognise the NGO perspective and needs
• Be flexible and explore different options and partners
• Recognise how important small grants (or volunteers, in-kind product etc) can be, especially in stimulating smaller NGOs' development (even if these small grants are not ‘strategic’)
• Explore partnerships with other businesses with complementary resources and aligned interests (i.e. pool resources)
• Explore supporting joint initiatives (e.g. Chambers of commerce, World Bank etc) in order to reduce transaction costs in developing suitable programs and to contribute to programs that otherwise are too big to do alone
• Continue to support employee driven local initiatives, even if not strategically aligned with the business
• Develop a coherent plan within different business units and within corporate foundations, so that where foundations are more separate from businesses, there is less overlap and foundations can focus on those areas business units might not be interested in
• Explore ways to support programs and projects that might not be such an obvious strategic fit, but can still be a good fit with a bit of thought making the partnership mutually beneficial.

.....For example, this could involve supporting programs in rural areas and sending volunteers there (and covering these costs and time off) for a number of days. Such volunteering activities can be used as team building activities as well as providing real eye opening experiences to employees and fully immersing them in communities for a longer time.
.....For example, looking at longer term secondments that can bring tangible benefits to the secondee, as well as the NGO.

This article is not a criticism of strategic community programs; it is an attempt to help explain the limits of such programs and to explore options for overcoming some of these limits. It is, though, intended to sow some ideas for readers to contemplate how businesses can be a part of the solution for those issues that many businesses are not yet part of –but that definitely still need solutions to come from somewhere. There are other resource providers for many of these solutions, but as we all recognise, there are some resources foundations, government etc just cannot provide that businesses can: be it brand awareness, staff expertise, technological expertise or a multitude of other useful resources businesses can apply to make the World a better place –for those in habiting it, and for the businesses that depend on it.