Opening Session: Introductory Remarks

Transcription

1 Presentations by Greg Simpson to the Corporate Social Responsibility Conference, Sponsored by the Qatar Ministry of Business and Trade and the Qatar Chamber of Commerce and Industry, January 24, 2009, Doha, Qatar. Opening Session: Introductory Remarks Good morning. My name is Greg Simpson, and I am a Program Officer at the Center for International Private Enterprise, or CIPE, in Washington DC. On behalf of CIPE, I would like to thank the Qatar Ministry of Business and Trade, the Qatar Chamber of Commerce, the Qatar Businessmen Association, and the Qatar Institute of Directors for sponsoring this important conference on Corporate Social Responsibility. The Center for International Private Enterprise, or CIPE, is a non profit affiliate of the US Chamber of Commerce with the mission of strengthening democracy around the globe through private enterprise and market oriented reform. CIPE has supported more than 1,000 local initiatives in over 100 countries, involving the private sector in policy advocacy and institutional reform, improving governance, and building understanding of market based democratic systems. CIPE provides management assistance, practical experience, and financial support to local organizations to strengthen their capacity to implement democratic and economic reforms. At CIPE, we are concerned with business s ability and responsibility to participate and have a voice in the democratic process. Civic participation involves equal measures of rights and responsibilities, and as such, we see corporate social responsibility as an essential element of good corporate citizenship. In my remarks on this morning s panel I will elaborate on that theme, as well as highlighting some of the benefits of good corporate citizenship to business, particularly here in the MENA region. In the meantime, allow me to congratulate you on holding this important conference here in Doha, and to thank you again for hosting me and allowing me to offer CIPE s perspective. I wish you an enjoyable and productive day. Thank you.

2 Session I: Definition of CSR Corporate Citizenship: Good for Business Thank you and hello again. In discussing Corporate Social Responsibility, I wanted to take a few moments to share with you CIPE s approach to the topic, as well as to suggest some benefits for business of including CSR as an integral part of its operations. In closing I will also try to offer some thoughts on CSR here in the MENA region. As I mentioned in my introductory remarks this morning, CIPE is a non profit affiliate of the US Chamber of Commerce with the mission of strengthening democracy around the globe through private enterprise and market oriented reform. In addition to our US Chamber affiliation, CIPE is also one of the four core institutes of the National Endowment for Democracy. Central to all of CIPE s programs is the belief that economic and political freedoms are inextricably intertwined. CIPE s focus is on institutions: the institutions that must be in place for a free market to function, as well as the democratic institutions that allow the private sector to participate in the policymaking process. Seen from this perspective, CIPE takes a broader view than the traditional definition of Corporate Social Responsibility, preferring to focus on Corporate Citizenship. By definition, a corporation is a legal entity designed to allow a business enterprise to be treated as an individual under law. Corporations, like citizens, enjoy certain rights in a free market democracy: property rights, access to information, and the right to participate in policymaking. Again, as with citizens, with these rights come civic responsibilities the responsibility that all citizens of a community have to consider not only their own welfare, but that of the community of which they are a member. I like this broader focus on corporate citizenship because it puts CSR in the context of the social contract. It s more than just philanthropy, more than charity. As a business, you re not giving away something for nothing you are a citizen participating in institutions that guarantee your rights, and look after your welfare. It s a contract with a fair exchange of value. You might even consider it a business transaction. So what is good corporate citizenship? Corporate citizenship deals with a variety of issues and can be defined in a variety of ways. Above all, it is about building internal and external structures that reward good behavior and punish careless actions. It stems from the recognition that corporations don t operate in a vacuum they operate in environments upon which they depend and which they must therefore protect and help develop. Corporate citizenship deals with the business community s commitment to protect human rights, address global health issues such as HIV/AIDS, produce safe products and services, and help build better communities. Good corporate citizenship means looking beyond short term profits. It means taking into consideration the needs and concerns of various stakeholders, advancing ethical standards, and promoting a good business environment. It can be thought of as a good investment strategy an investment in sustainability.

3 Good corporate citizenship must be a habit, not sporadic acts of philanthropy. It must be embedded in a company s culture, as corporations should constantly strive for excellence beyond financial indicators. Responding to the concerns of customers, employees, and communities must be a part of any firm s decision making process. It can ultimately make a difference between commercial success and failure. I described corporate citizenship in the context of the social contract. As with any contract, the question arises: what s in it for me? I mentioned already the rights that go along with citizenship the institutional protections in place that allow a business to operate and thrive in a community. Beyond those rights, let me suggest some other benefits to business of good corporate citizenship practices: Enhanced reputation and brand image: Corporate reputation is perceived as one of the leading measures of corporate success, according to the World Economic Forum Voice of the Leaders Survey conducted in late Almost 60 percent of the 1,500 executives surveyed estimate that good reputation can contribute as much as 40 percent to market capitalization of companies. A good reputation also contributes to companies ability to sustain profits and performance over time, as was revealed in a study of performance of Fortune 1000 companies during the 1980s and 1990s. Improved access to capital: The importance of a good reputation for sustained corporate performance leads to improved position in the credit markets. Essentially, socially responsible companies can attract more capital and borrow at lower total cost. Investors and financial analysts are increasingly interested in the social aspects of corporate operations and are willing to invest in responsible companies. Also, responsible businesses have a key role in promoting corporate governance mechanisms, such as transparency, independent audit, and board oversight, which in turn help make investments more secure. Economists have also highlighted the link between responsible companies and the interest rates on loans. In short, reputation is of a value to lenders. Higher quality, more committed employees: Socially responsible business practices can effectively enhance a company s ability to attract and retain higher quality workers. Firms with strong corporate citizenship programs typically notice improved employee morale. Also, greater transparency and openness about the business process can change the dynamic of labor relations and union negotiations from antagonistic to a more cooperative relationship. Reduced business risk and costs: Participation in corporate citizenship programs and environmental efforts yields more favorable fines and rulings for companies that have run into problems with the law. A firm s exposure to fines in legal proceedings can be greatly reduced if it can demonstrate that it was making a concerted effort to avoid the problems it has been found guilty of. The public is more accepting of failures when it can be shown that a company was not irresponsible and did not attempt to cover up but rather did everything to prevent it from happening. Responsible business practices can also prevent many disasters from occurring in the first place. Improved financial performance: Corporate citizenship makes sense from a financial standpoint. There are a number of studies that expose the link between responsible business practices and improved financial performance. As businesspeople, you understand the financial impact of the benefits I ve

4 mentioned thus far. Data analysis studies as well as various surveys of corporate executives show that companies with good corporate citizenship programs are more likely to perform well financially. I mentioned access to capital and improved financial performance at the corporate level as a benefit of socially responsible practices. In developing countries and emerging markets, the need to attract foreign direct investment provides an incentive for the private sector to look beyond only socially responsible business practices and take a lead role in strengthening democratic and free market institutions, as well. As recently as three decades ago, capital flow to developing countries was dominated by foreign assistance; today, the private sector is by far the largest supplier of foreign capital. Poor protection of property rights, corrupt political systems, and a lack of fair contract enforcement can deter business from entering markets, as such economic and legal uncertainties can make even the highest rate of return too risky. And contrary to the conventional wisdom, low labor costs are not enough to induce business to overlook such weaknesses. An International Labor Organization study of FDI among 127 countries, for example, suggests that the majority of investment goes to countries with higher civil liberties, even if labor costs are higher. It is therefore in the best interest of the business community to help countries build efficient markets and open political systems, and it is in the best interest of countries to welcome such initiatives. The countries of the MENA region have recognized this, and have engaged in perhaps the most organized, regionally oriented effort to approach CSR, at the policy level. The MENA concept of CSR is still largely philanthropically oriented, however, and still largely external to business. To realize the benefits I have described, businesses in the MENA region will need to institutionalize these practices and shift their understanding from a CSR approach to a broader approach of corporate citizenship. I say businesses governments, too, will need to shift their understanding as well, and offer corporate citizens a permanent seat at the policymaking table. I should note that many governments in the region are increasingly recognizing the need to include business and business associations in their policymaking deliberations. In keeping with this broader definition of CSR, I would like to stress the importance for the MENA region of efforts to fight corruption as central tenets of corporate citizenship. No effort to reduce corruption on the demand side public officials and civil servants can succeed without a commitment on the part of business to reduce corruption on the supply side: the willingness and ability of management or employees to engage in corrupt practices. This requires a higher standard of business ethics and moral leadership on the part of business that is in keeping with a more traditional, philanthropic definition of CSR. As important, however, is corporate governance: having the systems and practices in place within a business to enhance transparency and accountability and limit the ability of individuals, be they employees, management, or owners, to engage in corrupt practices.

5 With our focus on developing and strengthening the institutions that make up a free market democracy, anti corruption and corporate governance are the areas of corporate citizenship in which CIPE is most actively engaged, including here in the MENA region. I d like to close today with an oft quoted World Bank statistic: that at the current rate of population growth, the MENA region will need to create 80 million new jobs by million if one includes those currently unemployed. Rising to this challenge will require nothing less than a new social contract in the MENA region. That contract will have to include the concept of business as corporate citizen a citizen with not only the responsibility to engage in socially responsible business practices; not only the responsibility to pay taxes to support schools, social programs, and public sector jobs; but also the right to compete fairly in a free market so as to ensure maximum growth potential; and the right to have a say in policymaking, not only regarding the governance of business itself but in such areas as education policy, so that youth are taught the skills they need to thrive in the private sector. Operating as fullfledged corporate citizens, the private sector has the potential to lead economic growth and job creation in the MENA region and turn a daunting demographic challenge into an unprecedented opportunity for growth and prosperity. Thank you for your attention. I d like to point out also that my comments today draw heavily from CIPE publications on corporate social responsibility and corporate citizenship; I have made these available in English and Arabic to the conference organizers, who have been kind enough to print copies for you to take with you. Thank you again. Sources: Sullivan, John D., PhD, and Aleksander Shkolnikov. The Business Case for Corporate Citizenship. Center for International Private Enterprise (CIPE) Economic Reform Issue Paper No. 0410, December 27, World Bank Institute, the Center for International Private Enterprise (CIPE), the Egyptian Institute of Directors, and the Arab Labor Organization. Corporate Social Responsibility & Corporate Citizenship in the Arab World. Draft Background Paper. November, 2008.