Multinational companies bestride the globe, their power and reach increased as never before in this post-communist era of economic and cultural globalisation. Meanwhile the power of the nation state has suffered a relative decline. Private business now operates in virtually every country – North Korea and Cuba being among the few exceptions. Alongside, a new small and dynamic voluntary sector is emerging. Most countries now have this pluralistic ‘civil society’ model with public, private for-profit and non-profit sectors.
This pre-eminent role for business is confirmed by data on investment flows, released by the World Bank at the end of March. The value of private finance into developing countries (defined as those with per capita incomes of less than 69,600) rose from 654 billion in 1991 to 6247 billion by 1996. Even more dramatically, as a proportion of the total flow of funds, private finance has risen from less than half (46%) to become the main source (88%) over that period. Official development finance from public sector sources was cut by a third.
Responsibility matters
With power comes responsibility: the potential and necessity for global corporate involvement in society has never been greater, especially in post-communist and developing countries without the tradition of individual giving and social activism. A global approach to corporate responsibility is essential for three reasons:
first, to maintain pluralism – such societies create the best and most sustainable conditions in which to do business, so companies need to play a part in strengthening the voluntary and public sector organisations that are vital to their institutional framework and culture;
second, to respond to external demands – as multinationals command an ever increasing influence and power, so governments, non-profits and other stakeholders expect that responsible engagement must increase in parallel; and
thirdly, to benefit the business – companies can work with partners in society to reduce costs, increase revenues and enhance profits.
Companies and countries
Private business has been the main beneficiary of the great economic restructuring undertaken during the so-called Thatcher/Reagan years. Open global markets and powerful international communications systems allow companies to grow to the size of nation states. Table One shows the pre-eminence of the great companies of the USA, Europe and Asia, much larger in cash terms than many of the world’s smaller countries.
These great global companies are largely headquartered in the industrialised nations, with approximately 30% of the Fortune 500 coming from each of these regions and only 10% from the developing world. In home countries, high standards of corporate responsibility and social engagement are expected. As they spread their investments around the world in newly established, economically and socially open societies, global companies need to take with them the ethics and values of social engagement which they take for granted at home. They have a leadership role in standard setting around the world.
Twin challenge
The twin challenge for community affairs managers is to map their company’s position on the global scale in two ways:
firstly, relating involvement activity to the company’s distribution of revenues, profits, employees and assets – a picture of the global spread is essential to plan accurately community contributions and to focus responsibility;
secondly, calculating backward linkages to suppliers of raw materials and components, as well as forward linkages to distribution and sales – it is along the product development chain that many of the new social issues such as child labour and human rights are being identified.
Dependent populations of companies are not just the direct employees. Table Two shows how the true size of dependent populations increases once forward and backward linkages are analysed in terms of direct employees families and suppliers too.
The importance of this is illustrated by the changes in the way companies like Marks & Spencer now operate. Having had an excellent track record of purchasing supplies in the UK, increasingly sourcing is moving off-shore, up to about 25%, in communities like Morocco with major social problems. How far does the company’s dependent population extend? What is the role of community affairs departments here?
Another example is SmithKline Beecham’s recent major immunisation initiative, making a commitment to share its products with those who cannot access them through normal channels until the disease is eliminated, even if it takes 20 or more years.
Checklist
Having plotted their companies on the global scale, community affairs managers will want to understand the implications of globalisation. To help them, here is a five point checklist of issues to address:
1. Does your company’s giving and social responsibility programme match the global spread of its direct business profile, assessed in terms of cash, time and in-kind resources invested?
2. Where is your company’s business growing? Is community affairs located there on the leading edge of your business, perhaps as part of a market entry programme?
3. Away from corporate headquarters, are you monitoring the different social issues in overseas markets and keeping track of how they are changing and affecting your business?
4. Where is your company buying from and where is it selling to? What social and environmental issues does this trade give rise to?
5. What community issues need to be addressed as part of a product development chain analysis?
Few British businesses are wholly domestic, so most community affairs managers will need to assess these implications for their corporate responsibility programme, its focus, profile and global distribution.
David Logan has written and lectured extensively on global corporate citizenship and is a founding director of The Corporate Citizenship Company, publisher of Community Affairs Briefing.
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