Approaches to Assessing the Impact of Business on Development

Transcription

1 Approaches to Assessing the Impact of Business on Development Unilever s Experience in Indonesia and South Africa Miguel Veiga-Pestana Vice-President Global External Affairs DFID/BAA/ODI Event Series London,12 May 2009

2 Introduction Context: Is FDI good for development? Impact of Business on Development: Indonesia & South Africa Approaches & Methodologies Results Conclusion: Impact on Unilever?

3 Context: Is FDI good for Development? Pros Generate wealth Investment - Economies of scale Transfers leading edge technology Improves standards, training & business practices Increases consumer welfare Cons Exploitative Increases poverty Transfers pollution to D&E Encourages corruption

4 Background: The Unilever/Oxfam Indonesia Report Why did Oxfam & Unilever do this project? To support the Millennium Development Goals and Johannesburg Summit Declaration To contribute to the search for sustainable solutions to poverty to understand the nuances of pro-poor strategies in the private sector, in order to engage more effectively with companies to increase understanding of the impact of the operations of a business like ours on the lives of poor people

5 Background: Why we did a Follow Up INSEAD South Africa Study Build on the Indonesia Novib/Oxfam study Widening to another continent Market we had a strong local operating company Contribute to body of academic body of research (INSEAD Professor Ethan Kapstein) Apply more academically rigorous methodology for economic footprint Adding Social and Environmental impacts as far as possible

6 Research Focus Areas: Indonesia 4 Main Areas of Analysis: Macro-economic level impacts Employment impacts The value chain from supply to distribution 1. Low-income consumers in the marketplace

7 Example: Supply chain Impact jobs Sourcing 105,000 Manufacturing 7,000 Distribution 188,000

8 Example: Value Chain Impacts Total value generated along the chain was estimated at US$633m: 1/3 UI - 2/3 in the chain The government receives (from UI alone) 26% of the total value generated The value created by poorer people working at either end of the value chain is much lower than the value captured by those who are in direct interaction with UI

9 Research Focus Areas: South Africa Input-output (I-O) Social Accounting Matrix (SAM) Economic rate of return (ERR) Quantitative & qualitative Assessment of Social and Environmental impacts

10 Research Methodology: South Africa Two reference groups gave feed-back on methodology and content (local and global) Included national and international academics, government advisors, business associations and NGOs. All comments are included in the report

11 Unilever South Africa value added 2005 Sales of 8.5bn Suppliers Labour cost Interest Depreciation Tax Profit

12 Contribution to tax revenue R4bn (0.9% of total SA tax revenue) Corporate Income Indirect

13 Impact on Jobs Total Jobs 99,062 Trade Business Services Manufacturing Agriculture Other services Other ULSA Multiplier %

14 Jobs by race 80,000 60,000 40,000 20,000 0 Black White Coloured Asian

15 Impact on Balance of Payments 500 Rm 5 year Average, Exports Imports Expatriated dividends Net

16 Corporate SociaI Investment (CSI) CSI spend = 3.2% of profit after tax (2006) Education Health/Nutrition/HIV/AIDS R 8m R 5m Empowerment & women R 0.55m Water R 0.9m Government capacity building R 1.9m Volunteer programme R 0.3m Charitable donations R 7.9m Total R 24.5m

17 INSEAD Report Recommendations Consider a study of the changing retail structure Work more closely with suppliers to make them more productive and competitive Continue to invest in S Africa s R&D capabilities Continue to work with the government to reduce environmental footprint, especially packaging waste Ensure sustainability, scalability and effectiveness of its CSI through a more focused approach Continue to promote education and employment opportunities especially for the least advantaged Maintain dialogue with government to ensure policies which promote private sector investment

18 Outcomes Unilever South Africa Exploring ways to reduce eco-impact (e.g., Packaging, Carbon footprint) More focus and consistency in CSI Discussed report s themes with SA Trade Unions Working more with suppliers and contribute to enterprise development Sharing our work with other companies and stakeholders in South Africa

19 Conclusions The Impact Corporate Brand Imprint Greater Focus and Insight Product Brands Imprints Driving Integration of socio-economic impacts Driving innovation to address bottom of the pyramid Encouraging supply chain to address local versus international sourcing focus on small holder agricultural production Raises questions regarding employment practices particularly use of third party temporary labour Encouraging more open fact based debate about role and value of multinational companies