CSR and Partnerships

partnership agreement

partnership agreement (Photo credit: o5com)

One of the more resent developments within the field of CSR has been the emergence of strategic partnerships. Ever since the start of business there have been different forms of partnerships from small business franchises to large-scale outsourcing. In the last decade there have been an emergence of other forms of partnerships such as business and governmental institutions and in the last few years between Business and NGOs. While the first form of partnership is relative unproblematic as it is assumed that both parties have similar end goals in their efforts to maximize return on investment it is another case for the two last forms of partnership.

Business and Governmental partnerships have been seen in areas were both parties could see synergies. This could be in cases were companies wanted to explore markets in developing countries but needed support in-order to get a foothold in the market. In both Sweden and Denmark business partnerships are promoted by governmental development agencies like SIDA Business-4-Devlopment and DANIDA Business-2-Business programs (SIDA, 2012, DANIDA, 2012).

Volunteerism vs. Entrepreneurship

There aren’t enough good things to be said about young people doing voluntary work in areas of the world where educational and competency resources are scares. Volunteers help build schools in Costa Rica, they teach children and young people how to read and write in India and they help build NGO’s in South Africa. Further more they are motivated, able and make it possible for good projects to be realised because they do not require a big overhead.

For many volunteers it is a experience of a lifetime and expands not only their personal understanding of how the world works but also gives a opportunity to contribute in a very real way. In short volunteers makes a real difference for people for very real people.

However, when it comes to the development of a flourishing private sector, economic growth and sustainable development there is no substitute for the entrepreneur. To some extend the entrepreneur is competing against the volunteer at least this can be the case in some sectors. For instance when it comes to education there can be competition in the areas of higher education and specialised courses that could prevent higher quality firms involved in education creating a sustainable business platform. Or when takes up cleaning and reconstruction it could mean the “creative destruction” that Schumpeter talks about never happens simply because of the hit-and-run nature of volunteering.

I write this not to put down volunteering it is just stating a fact that if you compete against zero wages and zero profit you will almost certainly loose as a up and coming small business. So while we hail the volunteer we might consider that by doing good now one might be doing harm in the long-term separating people and society from creating and shaping their own future.

It is the nature of the entrepreneur to take a chance and to some extend take in a significant risk in order to gain first-mover advantage and maybe conquer a whole market. This risk is that the entrepreneur will loose everything that is invested in the project, but that is at the very hearth. In that way she or he is at the very front of what society needs in order to grow. Believing in something, taking a risk in order to accomplish the goal and harvesting the fruits of the hard work. And by doing that he or she is creating jobs, paying tax, creating new markets and innovating society.

As part of the analysis that any would be business creator will do is to evaluate if there is a market the product that might be introduced. The analysis will state if the market is either open for more competition or if it is saturated, if it possible to create a business model that can be scaled up or if it is a small business will continue to be small. A true game changer in that analysis would be if volunteering is part of business model used. For most, if not all entrepreneurs it would mean that he or she would find other places or other products to launch simply because you cant compete against zero wage and zero profit.


We need the NGOs as much as the entrepreneurs in the world

A kid repairs a tyre in The Gambia

Image via Wikipedia

Schumpeter said that ‘the function of the entrepreneurs is to reform or revolutionise the patterns of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing a old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry’. I will argue that the NGO have much the same function in society.

In this case I define the NGO as a relative small organisations, which is bound together with a purpose of societal change either domestically and/or internationally.

Like the entrepreneur is the function of the NGO to create new knowledge and question old habits in society. Both of them know their area of expertise much better then most and deal with the challenges of their micro-cosmos every day.

The NGO is often poorly organised and under managed but they cope with this challenge through a clearly defined mission and a sense of common purpose. And just like the entrepreneur there are plenty of challenges, which needs to be addressed administratively but gets handled through sheer footwork.

While many people in business look upon the NGOs as a pest that just makes life hard they should welcome the actor as a friend but a critical one. In business you will find plenty of people who will tell you what you want to hear but the NGO will almost certainly tell you what you should improve and were you have done wrong. I would not say to the NGO that they should partner up with business because then they loose their legitimacy and ability to be critical. But they should like the entrepreneur be welcomed at an arms length.

Business has for year scanned the market for new competitors and ideas. We all know plenty of stories about you innovative people having the business should for millions if not billions of dollars. But they would only have been able to create their brilliant designs if they were outside the corporate sphere on the inside they would only have been crushed under the weight of corporate naysayers. They thought and believed in their ideas and were willing to take a risk in pursuing their dream come true.

The NGO functions in much the same way, they are only effective if they are in opposition. If they get surrounded or encapsulated by too much structure they will only be less effective they do not exist for the sake of excising (as could be said for many other organisations) but they do so for because they want change. In business innovation it is the idea of creating something that other wants and the fulfilment of appreciation by others and for the NGO it is about making this place we live in a little bit better in the small niche were they are active.

In many countries there is a possibility for new entrepreneurs to get help in the starting phases of their project. This help is made available in order for the entrepreneur to be able to handle all the red-tape and hopefully make it possible for them to start a successful business. When they clear the first stages of creating a business plan and maybe even producing a prototype of the product they will if they are lucky be able to attract a angel or venture capitalist who will provide the funding needed in order to make the final transition from small scale to large scale production.

If we are to cope with the challenges of globalisations we need to produce organisations that will challenge the governance of the organisations on the global market. We have seen and continue to see that corporations are left with self-governance or governmentality and no stat or interstate enforcement of international proclaimed ethical or governance standards.

I have seen plenty of NGOs that have pursued the money that business can provide but through the process looses their soul and purpose as an independent observer. To me this is the very hearth blood of being a NGO is to be able to claim that they are free of close ties to private or even governmental organisations and the only reason why they can claim to be independent. If they can’t do this in a convincing manor they will have no right to criticise under the shield of the NGO banner. In my mind they would rather be names as lobbying companies who tries to influence key decision makers to see things their way, basically putting them in the same booth as tobacco, farmers, oil and weapons cartels.

My suggestion would be that we support the NGOs in their efforts to be even better just like we do for the entrepreneur. And just like the up-and-coming small business the NGO needs support in order to acquire the skills needed in order to become even better at what they do. They need to be educated and to some degree finances or at least be able to identify streams of funding which will insure their independence.

We need the NGOs critical voice in order challenge our perceptions of reality and our already established norms. Were would we have been on food safety, human rights, child labour, dangerous drugs and environmental issues if it had not been for the resilience and independence of the NGO.

ISO14000 for SME

In order for small and medium size enterprises to make it among all the big companies out there they are often required to present documentation for their CSR efforts.

A new tool is provided from ISO called ISO 14001 Environmental Management Systems – An easy-to-use checklist for small business – Are you ready? And it provides some of the basic checklists that most companies will ask for in a supplier.

ISO claims that some 223000 companies are now using their environmental standard and it is bound to have an effect on subcontractors around the world. It has for a long time been nearly impossible for SMEs to provide documentation for the environmental management work but with this new tool they at least have a fighting chance to get into the game.

I for one welcome the initiative. For years SME have had to invent their own systems for coping with customer pressure now they will have a affordable system that can be handled with the minimum of resources required. I have in the past been quite critical of some of the stuff that ISO does but sometime they do get it right and this is one of those times. See more here.

The social responsibility movement is killing of the SMV

Small and medium size companies or SMVs have been forgotten in our increased efforts to pressure companies to become more responsible. A few days ago I discussed with a local carpenter I know about how social responsibility is changing the way we are doing business and not least how business relates to society. He was not unreceptive to the ideas and recognized that business do potentially have a great impact on both social and economic factors. However, he did have some questions that I found difficult to answer directly through the mainstream CSR thinking.

  1. As a small business he was unable to meet the new criteria that the state and municipalities put forward in order to get contacts. In “our” strive to force business to become more responsible we are at the same time killing of the small and medium size companies ability to bid for the most lucrative contracts. In Denmark there is about 305’000 companies (yes, it’s true. Out of a population of 5,5 million) of these are 1100 or 0,36% required by law to have a CSR policy. All though this is a very small percentage of the total number of businesses are the requirements for SMVs to document their ethical behavior in a wide range of areas on the increase. For example, if you want to be shortlisted to bid on government contract through the state purchasing central (SKI) you will have to document your performance in a wide of areas. In the final evaluation 10-20% weight or points will be given to the environmental impact that the business can document to have. Most small business do not have a elaborate environmental management system that will tell them what their impact is so for most small companies this area will be left blank or inadequate filled out. This has the effect that they will not be given points for the questions, or as SKI puts it:“If the questions are not answered or inadequately answered, and the requested documentation is not produced, the contracting authorities are entitled – and may be obliged – to disregard the tender in question.”
  2. If you want to bid on big contracts anywhere, you need to have excellent computer skills. The time where big companies took up the phonebook and called the local electrician is over. Now local craftsmen will have to make bids, be short listed and document behavior on a wide range of areas before they let you in the door. For many small businesses this is just too much work so most contracts will go to medium or big size contractors. One of the reasons why they became craftsmen in the first place was because they did not want to sit in an office and fill out endless forms, but now they are forced to if they want to have any business at all.
  3. The majority of SMV actually has a great social impact in their local community. In the old days if one of the youngsters came into trouble you took him to the mechanic or blacksmith around the corner and asked if they could help out with the youngsters “surplus” energy. This is still the case today but it’s not recognized as CSR actually it is not given any merit at all. When one look at the amount of training places there is in big companies compared to SMVs it is mind bobbling. Most big companies just don’t take trouble youth at all they rather have them out of the local technical school so that their costs for education can be deducted on their tax bill.
  4. Most ethnic minorities have problems getting into the mainstream jobs so for many first and second generation immigrants the only option is to create their own business. These businesses support and create the foundation for future citizens that will bring new ideas and innovation to the societies that they are part of. The impact of immigration cannot be underestimated just look at the US, Australia and New Zeeland that are build upon immigrants wanting and striving to achieve a better future for themselves and their families.      
  5. Small business presents a opportunity for women that would otherwise be out of the job market to get a foothold. Many new businesses are within e-business is started by women as it they can be managed from the home and in most cases does not require a lot of warehouse space (at least in the initial phase). If women choose to take full advantage of the opportunity for parental leave there is a relative high likelihood that they will lose their connection with their old place of work and in some cases they want to change their working patterns. Small business gives women a opportunity to be their own boss, planning and managing their own time. These are opportunities that big business does not offer, even with the best of work/life balance plans out there. 
  6. Investment in small business has shown to have a significant local impact. Micro investments like the once done by Grameen bank have shown that investing/lending in “bottom of the pyramid” business ventures can have a very good return. Actually it has shown to be better than lending money to mainstream businesses because of the diversification of risk and that investments are done with survival in mind and not fluffy business ideas and fancy spreadsheets. Today one can as a private investor put money in microloans through websites like MyC4 and Kiva

With this in mind do big companies still have a obligation towards society? Of cause they do but in our euphoria to create a better world we should not forget that there are others out there that really do a difference and whose impact is many times bigger in total than all the biggest multinationals combined. It is like the question of what weights the most all the elephants of the world or all the ants? And the answer is, as you might know, the ants. They might be small but their sheer numbers combined make them weigh so much that they outperform all the elephants combined.