International Business: mapping impacts & influence on development

Transcription

1 Kennedy Schl f Gvernment CSR Initiative Internatinal Business: mapping impacts & influence n develpment Mandy Crmack Advisr, Internatinal CSR Practice

2 Kennedy Schl f Gvernment CSR Initiative Internatinal business: mapping impacts & influence n develpment based n a case study f Unilever Indnesia a jint research prject cnducted by Oxfam GB, Nvib, Unilever and Unilever Indnesia

3 The Impact f Business n Sciety Framewrk fr analysis

4 Backgrund t the Case Study Why the research prject? Shared interest in increasing cntributin f internatinal business t pverty reductin UN Glbal Cmpact/MDGs What is this reprt abut? a learning prject; nt an audit f Unilever r UI. The gal: t understand hw wealth generated by a multinatinal cmpany s lcal perating cmpany can have psitive r negative impacts n peple living in pverty T d this, we lked at UI s entire value chain frm smallscale prducer t lw-incme cnsumer t understand the pints f entry and leverage t reduce pverty.

5 Indnesia in Cntext Ppulatin 213 millin (2002) An ecnmy in develpment ecnmic crisis Unemplyment 9.7% (2004) Half the ppulatin live n US$2 r less a day (2002)

6 Unilever Indnesia (UI) in Cntext Unilever Indnesia funded in % f Indnesians chse a Unilever prduct every week Hme and persnal care prducts: 84% f ttal sales Fd prducts 16% f ttal sales Emplys arund 5,000 emplyees (direct/cntract) Lcal prductin units, and lcal supply and distributin chains Listed n the Jakarta stck exchange: 9.2 millin shares lcally held (15% f ttal)

7 The UI Business

8 UI - A Grwing Business UI s sales revenue ( ) US$millin

9 UI s macr-ecnmic level impacts UI s emplyment impacts The value chain frm supply t distributin Lw-incme cnsumers in the marketplace

10 UI s macr-ecnmic level impacts UI s emplyment impacts The value chain frm supply t distributin Lw-incme cnsumers in the marketplace

11 UI s distributin f prfits

12 Freign exchange, trade & human resurce flws

13 UI s macr-ecnmic level impacts UI s emplyment impacts The value chain frm supply t distributin Lw-incme cnsumers in the marketplace

14 Emplyment UI emplys 5000 peple: 60% direct emplyees; 40% cntract wrkers The clser wrkers are linked t UI the mre they benefit directly Pay, benefits & cnditins fr UI s direct emplyees are abve required by law/in the tp quartile f Indnesian cmpanies Cntracting ut emplyment may reduce a cmpany s ability t mnitr cntract wrkers r suppliers emplyees situatin UI labur-supply cmpanies t bserve legal requirements t transfer temprary emplyees t permanent cntracts & t address cncern f a female cntract wrker ver lss f emplyment if ill r pregnant

15 UI s macr-ecnmic level impacts UI s emplyment impacts The value chain frm supply t distributin Lw-incme cnsumers in the marketplace

16 Supply chain Direct suppliers UI had 334 suppliers, spending apprx Rp 3,591 billin (US$ 419m) 80% f suppliers are dmestic, 20% are internatinal Tp 10 suppliers by value are all Indnesian and accunt fr 34% f purchases Dmestic suppliers prvided 84% f gds and services All UI suppliers required t bserve Unilever s Cde f Business Principles UI maintains basic standards thrugh negtiatins, nging dialgue, and a rlling three-year audit prgramme UI supplier cmpanies exceed legal regulatins gverning wages and benefits in Indnesia but pay and emplyment cnditins fr suppliers emplyees and cntract wrkers were lwer than thse fr UI s direct wrkfrce

17 Distributin chain Cmplex distributin chain: tw principal channels: General Trade (80% f sales) via 385 distributrs and 1,267 SDKs wh supply 550,000 small retailers warungs Mdern Trade (20% f sales) + an estimated 1.8 millin small stres and vendrs purchase UI brands independently The clser t UI that distributrs and retailers are in the chain, the mre likely they are t gain skills, knwledge, better prices & cnditins, experience higher emplyment standards and incmes, and be able t build up business capital

18 Estimated emplyment linked t UI value chain (2003) Mre than 300,000 peple (FTEs) make their livelihds in UI s value chain Mre than half this emplyment is fund in the distributin and retail chain Cntributin f this emplyment t ecnmic develpment and pverty reductin ften verlked

19 Estimated distributin f value generated alng UI s value chain (2003) Ttal value generated alng the chain was estimated at US$633m: 1/3 UI - 2/3 in the chain The gvernment receives (frm UI alne) 26% f the ttal value generated The value created by prer peple wrking at either end f the value chain is much lwer than the value captured by thse wh are in direct interactin with UI

20 UI s macr-ecnmic level impacts UI s emplyment impacts The value chain frm supply t distributin Lw-incme cnsumers in the marketplace

21 Impacts & Infuence Lw-incme cnsumers in the marketplace 90% f pr Indnesians use at least ne UI prduct each year Average lw-incme family spends 5.7% f its average mnthly utgings n UI prducts UI markets many f its prducts in small sachets. Althugh unit cst is higher, sachets are mre affrdable fr cnsumers with limited cash-in-hand Cncerns abut plluting effects f sachet packaging waste

22 Lw-incme cnsumers: key insights Marketing t peple living in pverty can serve their interests if: It gives them access t high-quality prducts that are gd fr health r well-being It imprves the value f their limited dispsable incme prduct chice and cmpetitin lead t lwer prices, r cnsumers are prvided with better infrmatin abut prducts It increases ecnmic pprtunities by creating jbs in the distributin netwrk r supply chain: in particular, jbs that prvide wrking capital r new types f skill and pprtunity It spreads new technlgy r prduct ideas that lcal prducers can adapt and use.

23 Building trust thrugh crrbratin f respnsible business practice Emplyees & business partners ambassadrs thse wh knw the cmpany best Cmmunity* thse wh knw the cmpany directly Sciety thse wh knw the cmpany by reputatin * Cmmunity may refer t physical lcatin and/r scial grups with clse assciatin t the cmpany (eg the industry, investrs, business partners, academic institutins, NGOs, etc)

24 Kennedy Schl f Gvernment CSR Initiative Internatinal Business: mapping impacts & influence n develpment Mandy Crmack Advisr, Internatinal CSR Practice