Sustainable Development

Long-term poverty reduction in developing countries cannot happen without sustained economic growth, which requires a strong business sector. While it is the responsibility of governments to lay the foundation for long-term economic growth, business actors – through investment, partnerships, trade, and other engagement – create the employment, the markets and the value-added goods and services that allow developing countries to benefit from economic globalization. Although there is growing debate on what the boundaries of business should be in tackling these challenges, there is no doubt that the private sector plays an important role.

There are many reasons why it is crucial to scale-up collective solutions for sustained development and poverty reduction. Namely, disparities in development, particularly poverty and its resulting discontents (violence, disease, environmental damage), pose a serious threat to world peace and global markets. Development efforts can have strategic significance for companies. In many countries, a company’s deep commitment in areas such as infrastructure development, local capacity-building, education, health, job creation, disaster relief and more can serve as far more than philanthropy. These efforts can address aspects of the societal context which are lacking or insufficient – voids which can greatly impact a company’s ability to operate, compete and thrive.

But the private sector does not engage in partnerships only to manage risks associated with negative externalities, increasingly it is also seeing opportunities. Through engaging local and global actors in partnerships, companies can acquire a better understanding of the nature of their operations, improve their license to operate as well as access to resources and markets, and increase operational efficiencies.

By taking a principle-based approach to business and engaging in projects that also have a positive developmental impact, companies can help to accelerate progress toward a more sustainable and inclusive global economy. Companies have a stake in contributing to development and partnership projects can be viewed as a practical manifestation of a strong corporate commitment to the Global Compact and its objectives.

How can companies contribute to development?

1. Through a company’s core business activities

Good performance on environmental, social and governance issues in day-to-day business operations contributes directly to the creation of stable and inclusive markets. Responsible corporate citizenship has become the management philosophy of an ever-increasing class of leadership enterprises – large and small in an effort to drive long-term success. 

• Creating business linkages: Small- and medium-sized enterprises (SMEs) represent the majority of employment in many countries around the world and building local capacity in this regard is a priority. Attracting foreign capital is a complementary priority. Collaborative efforts between foreign and local business can, if properly designed and implemented, achieve greater impact than action by individual entities.  
• Ethical sourcing and supply-chain management: One of the defining trends of the globalization process has been the “outsourcing” of production by businesses around the world, offering new economic opportunities for many marginalized people. The full benefits are maximized if responsible and ethical practices are introduced. Good supply chain management stresses enhancing the capacities and skills of business partners in ways that incorporate social and environmental principles, while ethical sourcing and trading encourages sustainable business practices while offering greater opportunities for local communities.
• Specialized product development: Evidence is mounting that profits can be earned by creating specialized products that serve the needs of people in the developing world. Companies can revolutionize their approach to doing business by closely examining societal needs and customizing products and services to meet those needs, while encouraging the emergence on an entrepreneurial class. In the process, companies can serve themselves while contributing to development.
• Public-private partnerships: Partnerships, if appropriately designed and implemented, can bring the efficiency of business to public service delivery while often avoiding contentious social issues around full privatization schemes. Both sides can stand to benefit, with governments earning revenues by, for example, leasing assets without incurring operational costs, while business shares the risks with the public sector while generating market returns.

2. Through social investment and philanthropy

Mobilizing resources such as capital, products, skills and volunteers, private-sector organizations can deliver a wide range of essential services, including educational training, micro-credit schemes, environmental management, as well as critical goods such as anti-malaria bed nets and condoms.  Frequently, such efforts are undertaken in partnership with others, including civil society organizations and UN agencies.  And as the experience related to the tsunami in South Asia demonstrated, the private sector can represent a profound force in contributing to humanitarian crises and related reconstruction and development efforts.  

3.  Through public policy dialogue and advocacy activities 

Business can, individually or collectively, influence the enabling environment and support systemic change through advocacy and thought leadership. Engaging in dialogue with the public sector and other societal stakeholders in critical areas such as poverty, corruption, climate change, health care, and education can influence debate and decision-making.  Such efforts can assist governments in creating the proper climate for business activity, thereby stimulation long-range economic growth.

Each of these areas of offers opportunities for business to contribute to development, such as the Millennium Development Goals (MDGs), (http://www.un.org/millenniumgoals/) while at the same time benefiting the company’s long-term interests.  The most significant contribution of the private sector to the MDGs is to invest and to be successful and to do so in a socially and environmentally responsible manner – thereby creating enormous social benefits including employment and income generation.  The challenge for governments, business, NGOs and other societal actors is to find ways to scale-up collaborative efforts in order to achieve wider impact.

(Last Update 16 November 2007)