Wednesday, 5 February 2014

Is the UK lagging behind cutting edge business thinking on development?

By John Humphrey

A week ago, Justine Greening, the UK Secretary of State for International Development, made a speech about business and development at the London Stock Exchange.

Three quarters of it was about the importance of economic growth in developing countries. ‘Growth’ was mentioned 18 times in the speech, and ‘economic development’ 16 times, and this is to be welcomed.

The big achievements in poverty reduction in the last 20 years have come from accelerating economic growth in many developing countries.

But how is business to contribute to this?

The majority of the Secretary of State’s references to this focused on removing barriers to business development (bureaucracy, infrastructure) increasing financial flows and market reforms, with some references to the benefits for British businesses of growth and market development in poor countries.

But is the Secretary of State lagging behind cutting edge business thinking on development?

Leading businesses are focusing on the quality of economic growth as well as the quantity. The global businesses contributing to the post-2015 development agenda are increasingly defining their role in terms of a broad approach to corporate sustainability that considers natural resources constraints, environmental degradation and sustainable economic growth.

One such example is Unilever, whose Sustainable Living Plan links the long-term sustainability of its business to broad social and development issues such as responding to climate change, water shortages, food prices and obesity. The Sustainable Living plan also recognises that many of these challenges are outside of the capacity of individual companies to address, which leads to an emphasis on engaging with governments on the big global issues of deforestation, water scarcity and undernutrition. In other words these businesses have a broader understanding of the type of economic development that will improve the livelihoods of the poor than that presented in Justine Greening’s speech to the London Stock Exchange.

Justine Greening’s speech made just one reference to sustainability, referring to the role of aid in driving “the kind of sustainable, inclusive growth that creates more and better jobs and raises incomes.”

But, how is such sustainable and inclusive growth to be achieved?

Some businesses are saying that they need to change the way they operate in order to ensure the long-term viability of their own businesses and to contribute more effectively to economic development. The submission to the UN High-level Panel by the United Nations Global Compact and the World Business Council on Sustainable Development (PDF) set out a clear argument about the conditions under which businesses are likely to support sustainable development.

This can be boiled down to two factors:
  1. Businesses are increasingly taking a long-term approach defining their interests, which includes the sustainability of their activities.
  2. Businesses are, or should be, driven by moral values as well – “business has a moral imperative not only to ‘do no harm’ but to act in the enlightened interest of future generations and for the good of society”.
Both of these drivers are important determinants of business action, but it is demonstrably clear that many businesses are not driven by such concerns. The very fact that leading businesses devote time to developing mechanisms to control business behaviour (codes of conduct, private and multi-stakeholder standards to address issues such as deforestation, etc.) indicates that there is still a lot to be desired with respect to business behaviour.

Some business behaviour is good, some is bad. Getting the most out of business for development goals means maximising the good and minimising the bad. This, in turn, requires development actors to:
  • Be more specific about how businesses can contribute to sustainable and inclusive growth.
  • Discriminate between the positive and negative impacts of business and develop strategies to maximise the former and minimise the latter. In both areas, collaborations with businesses will be an important element of policy.
  • Prioritise between the many different ways in which positive collaborations with businesses can be developed so that scarce development resources can be employed where they have most effect.
These concerns will be at the heart of the work of the new Business and Development Centre at IDS, which will be launched in March 2014.

John Humphrey is Professorial Fellow with the Globalisation research team, at the Institute of Development Studies. A version of this blog, entitled UK is not thinking smart about growth in developing countries, was originally published on The Conversation.

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