How can companies prove their value in emerging markets?

In my last post I mentioned some shenanigans going on in the India CSR policy arena.

Whether all of these actually end up being forced on companies remains to be seen.

Either way, there is one fundamental, and complex lesson for large companies here:

No matter how much better company practices are becoming, no matter how good your sustainability reporting or even stakeholder relations are, you can never underestimate the lack of knowledge and understanding in some sections of government of the right role of business.

I've spent a lot of time in emerging economies, MINT nations, BRICs, whatever we call them, in recent years (lean markets is another interesting possible term) and some of that time with Government ministers and officials. Spending time with these folks, a few things have become very clear to me. Notably:

1) Senior Government officials are about as time-poor as people get. This means many of them have missed out on learning about the complexities of the fast evolving business and society debate in recent years.

2) As a result many rely on political populism, on reactionary views based on recent events and on their past education, which may have taught older socialist views or 'zero sum game' 1980s capitalism models as the way forward. (Both of which are now accepted to be simplistic).

3) Much of the information they see is filtered, and they make quick decisions all the time. They often have to. Social media or traditional media (in democratic states) often forces the pace given the social unrest it often causes.

4) Many of the good simple ideas around business policy that the progressive smart officials or politicians out there come up with, (and there are many of these) get watered down and lost in bureaucracy.

5) Many do not yet understand the emerging links between sustainability and foreign direct investment. It's clear to me that increasingly companies link a solid business environment with good frameworks that can stand a change of government or major event. Whilst large companies are increasingly linking business investment (the FDI all governments want) decisions with frameworks that include (or exclude) sustainability / CSR related policy, Governments are often not doing the same, for the reasons above.

What does all this mean? Quite simply, it says to me that companies must do a much much better job of demonstrating their value in the volatile emerging markets where they operate. Not enough businesses yet understand this, and how to do it. (
GSK’s travails in China show serious corporate risk in action)

There's no proven way, but I'll end this post with a few links to examples which I think may help provide some idea of the way forward below.

These impact reports mentioned below, of course, are only part of the equation. Many of the leading companies now understand they must play a positive role in development that works for them and the countries they operate in.

Many understand that proving your value on a regular basis is now part of the cost of doing business and can lead to business opportunities, particularly through innovation.

The next stage is working out not only how to communicate your current value, but to play a positive role in the frameworks that will improve conditions, not just for individual companies or even sectors, but for countries as a whole. That's probably the hardest conundrum facing CEOs today. Most instinctively shy away from conversations about contributing to national competitiveness, and for good reason in a traditional sense.

But left to themselves Governments and their officials, with every more demanding populations and ever present NGOs talking into their ears, may come up with plans such as in India recently.

Those kinds of ideas are potentially much worse for business than the risks run by careful engagement in the public policy debate. This is where collaboration and partnerships can make a big difference, if companies can resource their negotiations and involvements and consistently promote them correctly. Most currently, do not. This is why good initiatives become written off as temporary PR.

There are ways beyond impact reporting to get involved in shaping the debate, ways beyond just engaging industry associations or a handful of NGOs to help argue the case for well thought through business policy frameworks.

Producing the kinds of impact reports put out by the likes of SAB Miller, Heineken, Standard Chartered, Unilever and the like are an improvement on current practices. But let’s be honest, the state of the art is fairly woeful, because companies are slow to make the strategic link high enough up the food chain, that sustainability is something they need to much more overtly link with their long term planning and investment decisions. The key word above is “overtly”. Business must work out more effective ways to constantly communicate with Governments in emerging markets on this topic. Doing so consistently can help better decisions to be made for the long term.

I am working with some companies, and one Government, soon I hope two, to try out some methods and see what can work better than the above. I will report back in due course on my blog, I hope with good news.

Here's those examples of impact reports I mentioned, some of which you may have seen before:
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