Our second set of propositions relates to the role of large businesses, especially multinational corporations, in tackling poverty. Our core position is that through harnessing its value-creating assets, big business is especially well-equipped to add enormous value to pro-poor enterprise initiatives – and elsewhere in the war against poverty.
As noted above, some of this is happening but not enough and our propositions below focus on how to make more of it happen.
1. A case of mutual myopia: the wrong ‘ask’ and the wrong ‘offer’
An important and very simple reason why not enough of the ‘right’ type of business engagement with poverty takes place is that civil society is usually primarily interested in the financial contribution business can make – and business is used to and perfectly happy with doing just that.65 The issue of seeking or offering access to a company’s value-creating assets as the key contribution to tackling a poverty issue via a public-private partnership (PPP) simply doesn’t arise.
No doubt this situation could be improved through education and exhortation directed at both sides. But we think something more fundamental has to occur in order to break through the self-reinforcing, mutual myopia that leads to the suboptimal involvement of business in the fight against poverty.
2. Making poverty partnerships more like business partnerships And this ‘something’ is to do with recasting the ‘riskreturn profile’ of the poverty projects and publicprivate partnerships that business is asked to join.
Let us explain. Businesses participate in commercial partnerships with each other because they offer each partner specific value they cannot secure by acting alone. Both sides bring to the table an exclusive set of assets essential to accomplishing the task at hand. And both sides have a strong vested interest in a successful outcome.
The contrast with the typical poverty project or PPP in which business is asked to participate is illuminating. First business is often not consulted in their design and as we’ve noted money is usually the main input asked of business. PPP objectives, though worthy, are frequently so generally specified that the outcomes, even if achieved, will have little real social or business relevance.
Moreover, the lead civil society partners are not really ‘at risk’ in any meaningful sense as they rely on aid or public money to fund their involvement. Most importantly, while knowledgeable, articulate and full of ideas, these partners usually don’t have influence or are not empowered to deliver change where it’s needed in order to help achieve the PPP’s objectives.
This is not a criticism of the competence or commitment of civil society partners or of their right to play a role or of the value of their contribution to PPPs. It’s simply acknowledging that on their own, non-empowered civil society partners can’t bring enough of value to the table to catalyse a high value-added response from business.
So not surprisingly, big business turns down most invitations to join PPPs because they have the wrong sort of risk–return profile. And when business does join up, the inputs that are sincerely offered, while appropriate to the circumstances are rarely the core value-creating assets where we believe real social value-added lies.
Clearly there are some very successful PPPs out there where the business partners are delivering real social value via deploying their core competencies. And there is already a sizeable ‘literature’ full of useful recommendations about the principles of effective public-private partnership. But we want to draw attention to two fundamental weaknesses that undermine the ability of many pro-poor public-private partnerships to contribute to their full potential.
a. Ensure the right parties are at the PPP table or don’t bother issuing the invitations Big business is often appropriately criticised for not involving key stakeholders in discussions about actions by the business that directly affect them.
But very often, the civil society members of a PPP do not have the power or influence to effect the changes necessary to solve the problem the PPP was set up to tackle. Our proposition is that only parties who add real value and are empowered and able to deliver change where it is needed should sit at the public-private partnership table.
b. Set goals that make a difference to poor people but ensure that the partners also secure ‘returns’ they value Any pro-poor project or PPP of value must have achievable goals that deliver measurable (and wanted) benefits to poor people. But our main point here is not about the poverty outcomes of PPPs but about the benefits that devolve to the partners as a result of participating in the initiative.
It seems to us that to get big business to invest value-creating assets in PPPs, these need to generate ‘returns’ to all partners in ‘currencies’ they value and at a scale commensurate to the risk they are taking.
This is precisely the logic deployed in the design of our SME funds in South Africa and Uganda.
The local banks felt that the SMEs helped initially would eventually become customers for larger commercial loans – while Shell Foundation got involved to demonstrate to other banks that investing in SMEs was good business.
The process at work in this example is linear and in the banks’ case clearly linked to future profits.
Other risk-return relationships are possible. For example, big businesses operating in the same country could pool their input needs and thus create a market for local SMEs in return for government efforts to introduce ‘level playing field’
policies with regard to adherence to standards or the removal of differential pricing structures.
The challenge is in crafting a PPP that will deliver to each of the partners a set of returns of sufficient value that it makes it worthwhile for them to exclusively commit whatever is necessary on their part to achieve the overarching social outcomes of the partnership.
3. It’s all about getting the risk and return balance right There are many other dimensions that could be explored arising from the proposition that PPPs should be structured like business partnerships.
But they are all essentially thrown up by the fact that the parties involved would have to deal with the implications of a very new set of risk-return relationships. Again the challenges in doing this are significant but we think the potential benefits are of such scale that this topic too is worthy of more extensive debate.
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