Much of the current debate on corporate social responsibility is focused on legislative proposals, such as mandatory social reporting and the tightening of laws governing emissions. But in most cases it has failed to achieve the step-change in thinking from both companies and individuals.
In practice compliance with legislation does not tend to encourage the innovation needed to have a real impact. There is no doubt that companies are more responsive when they are engaged in a fashion that is based on business; this is true of CSR activities and regeneration alike.
Part of the problem is the use of language. An area described as “disadvantaged” or “deprived” will not attract commercial investment, though it may generate funding and CSR support. Throwing money or new buildings at an area will not lead to regeneration unless it tackles the real issues that have caused the decline in the first place. At best, small improvements will be made to the quality of life for some residents, at worst, the area is gentrified and the problems moved elsewhere.
If, however, regeneration is treated as part of a commercially based investment strategy, then it can be successful and profitable. Real regeneration is about socio-economic development and not just CSR. Until both the private sector and government alike understand this, it will remain a chimera.
When the excluded or disadvantaged cease to be viewed as a problem to be solved, but as consumers and a potential market, then new opportunities exist for both communities and companies. Global CSR has made inroads to this approach, as exemplified by C.K. Prahalad in Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing 2004): “…the typical pictures of poverty mask the fact that the very poor represent resilient entrepreneurs and value-conscious consumers. What is needed is a better approach to help the poor, an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable.”
Yet in the developed world, this approach has not made the same impact. Both investment in deprived areas and CSR seek to increase the positive impact companies have on society while achieving commercial success. So, why are these two elements frequently divorced from each other?
Inward investment
Business in the Community’s Under-served Markets project seeks to combine these elements of regeneration and CSR into a distinct two-stage process:
Using a market-based approach to attract inward investment to deprived areas
Providing a regeneration strategy to ensure that the investment can bring socio-economic benefits to those in need
The project was established in partnership with the (then) Office of the Deputy Prime Minister, with the aim of promoting investment in deprived areas and to investigate its potential to act as a catalyst for wider regeneration. In many localities, substantial inward investment is the key to the transformational impact necessary and for this the government must look to the private sector.
While drawing on philosophies such as Fortune at the Bottom of the Pyramid, the premise of the project lies in the US experience of communities like Harlem where, starting in the 1990s, communities found a way to engage companies and investors to undertake investments for commercial reasons that directly benefit the economic health of these communities. Technology, financial service, retail, consumer goods, and insurance companies, along with pension and venture capital funds, are just some of the industries that are increasingly mainstreaming this approach in the US.
UK retailers, particularly the supermarkets, have been the first to grasp the opportunities offered by investment in deprived areas. Commercial motivation is a great driver of innovation, particularly in a period of ever-greater competition. Yet the current negative debate that surrounds brand supermarkets has also affected the ability to engage in active discussions to link inward investment to neighbourhood renewal and enterprise growth. While the debate raises some interesting questions about competition and the relationship between large and small retail businesses that can’t be ignored, it should also address the true impact (both good and bad) on local communities and the importance of going into areas in need. There is evidence from Harlem and the UK that demonstrates how such investments can actively provide benefits to local employment and training for the disadvantaged, support for SMEs and new enterprises and support local issues.
The experience of the Under-served Markets project, drawing on other examples of commercially led regeneration, has generated a number of lessons for those involved:
Engage the private sector in a fashion based on business
Rather than focusing on indices of deprivation, highlighting low incomes and expenditure, a broader approach can reveal a significant market; socio-economic indicators permit companies to view the wealth of a catchment area in a more complete fashion. Use research to focus instead on where concentrations of affluence exist within a generally deprived area, or the aggregate numbers of individuals (rather than misleading averages) that constitutes significant spending power. Assist investors in recognising the different needs and demands of consumers in these areas: the difference is not in their brand consciousness, but the necessity for value. Shifting demographics mean a changing consumer base: the growing power of the ‘silver pound’ and multi-cultural societies where ethnic minorities are increasingly the majority can represent new market opportunities.
Develop specific strategies to connect inward investment to local benefit
Rather than restrictive legislation, focus on developing specific strategies so that investment can act as the anchor which creates the conditions for successful business and economic development as well as attracting additional investment. Be clear on how to provide for the creation of employment and training opportunities for the long-term unemployed; how to support local business development through increased customer presence and construction, service and purchasing contracts; how to contribute to a multiplier effect for the attraction and stimulation of increased economic activity; and how it will support neighbourhood partnership efforts to address local social issues, such as education, youth or health. Investors would be advised to articulate more clearly how they can support government in its efforts “to encourage investment to regenerate deprived areas, creating additional employment opportunities and an improved physical environment.”
To quote Prahalad again: “The poor cannot participate in the benefits of globalization without an active engagement and without access to products and services that represent global quality standards. Active engagement of private enterprises at the bottom of the pyramid is a critical element in creating inclusive capitalism.”
Bill Boler is director of the BITC’s Underserved Markets programme. Previously he was vice president for community investment at BSR. Jenny Dunford was formerly a research associate with the programme and now works for 3D Architects.
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