By Alice Owen
How can the smallest of cogs turn the biggest of wheels?
Last month we looked at how organisational strategy affects the environment, and the difference between being a good citizen, taking responsibility in a complex world, or being a good neighbour. This time we look at these issues again to understand the connections between collective and individual decisions and poverty around the world.
Poverty is found wherever you can identify two groups of people: the “haves” and the “have-nots”. When, as a decent person, you are moved to pledge a contribution on your credit card to help the current humanitarian crisis in Sudan, you are moved by the same impulse as when you drop loose change into the polystyrene cup that a glassy eyed man holds out in front of the station on your walk to work.
Is there a link between this increasingly visible poverty, and governance, the framework that businesses use to make and communicate decisions? And if there is, what can any individual do to shift the giant wheels which seem to be moving to widen the gaps between the “haves” and the “have-nots”?
Three examples serve to show the complex links between poverty and governance:
Successful, brand-aware corporations like Nestle and Cadbury Schweppes found chocolate tasted bitter when sweet toothed consumers in Europe and North America were shocked in 2002 by a documentary film showing how chocolate production in West Africa depended on child labour, an issue reported on in depth by USAID and the International Institute of Tropical Agriculture. Seventy per cent of the world's chocolate is harvested in countries such as the Ivory Coast, Cameroon and Nigeria. It was estimated that 200 000 children were working on the plantations in the Ivory Coast, of which 15,000 were slaves. The industry has moved to rebuild its reputation by forming a group called the International Cocoa Initiative to deal with the problem of child labour and labour rights violations in cocoa production, expecting to report significant progress in 2005.
Commodity foods grown in developing countries have an environmental context as well as a social one. Intensive coffee farming, vital to the economies of many Latin American countries, is driven by market payments which can be lower than the cost of production. By contrast, shade grown coffee is interspersed under a shielding canopy of trees mimicking coffee growing conditions in the plant’s native Ethiopia where it is a shade loving understory shrub. Shade grown coffee creates more biodiversity and bird habitat with less need for chemical inputs. “Technified coffees” are hybrid varieties grown to increase yield per acre, avoiding the need for shade trees but dependent on agro-chemicals. "Technified" production requires a clear cut of all or most trees, allowing the coffee plants to be placed closer together. This coffee is also chemical intensive, as it requires chemical fertilisers and pesticides to compensate for the loss of nutrients and biological diversity previously supplied by the canopy trees. Full-sun coffee increased productivity, but the new yields come at a cost: increased pesticide run off into water courses, and reduced migratory bird counts. In coffee production, business decisions focussing on only one part of a complex picture, the need to reduce the financial cost of production, has led to a range of other effects.
Lest we slip into thinking that the issues of business and poverty apply only in developing countries, it’s worth looking at the (big) business of healthcare in the USA. The large proportion of the US population excluded from health care because they can’t afford medical insurance is not news: in the US 75 million people are without insurance at some point every two years. But a new twist emerged recently in the role that big companies, who provide private health plans for their employees, play in the provision of health care facilities. Car companies pursuing enlightened environmental policies and being exemplar global citizens in some ways, including Ford, General Motors, and DaimlerChrysler, recently joined a legal challenge to block two Michigan health systems from building two new hospitals in the Detroit suburbs. These 3 companies, with a combined annual employee health bill of nearly $10 billion, worry that the new hospitals will lead to overcapacity in Detroit's suburbs. They argue that in the hospital business, overcapacity pushes medical costs up, because it encourages doctors to put more patients into empty hospital beds. In effect, these companies are finding that it’s not in their interest to be good neighbours in an area like Detroit where there are massive problems of social exclusion. To look after their own employees, the “haves”, they need to be sure they are not subsidising the “have-nots”.
These links between business activity and poverty may seem obvious, but they are not obvious in how businesses currently make decisions on investment, product development, marketing strategies and dividends. A new model of governance needs to revise who takes the business decisions, and how those decisions are reached: what information is collected, what assets are valued, what timescale is used, and whose voices are heard.
The problem is that business decisions are being made with incomplete information, because the model of governance doesn’t allow a business to map the complex systems of which their products and services are part. The model that underpins these business decisions is wrong – businesses see themselves as part of a linear supply chain rather than part of a complex, messy system full of overlapping links. Current best practice in governance fails to acknowledge that all economic transactions are, ultimately, people making decisions that affect other people, even if that impact is be indirect such as environmental pollution, health, or land ownership.
While businesses grapple with these fundamental challenges, there is a role for each individual to play in making personal decisions that reflect the complexity of the world. We all need to get beyond the fragmented view of the world and consider ourselves connected in a myriad of ways to other people and to the rest of the world. To start with, I’d suggest three dimensions along each of us can influence the corporate world:
- As connected consumers
- As connected workers
- As connected citizens
Acting as a connected consumer is the basis of the fair trade movement so far. But there is room for innovation in what comes within the scope of fair trade, and fair trade can offer new opportunities as well as a mechanism for raising standards in existing industries. Even your choice of energy supply has an effect far beyond your energy bill or the climate change effects of the CO2 produced in your own region. The UK based think tank the New Economic Foundation recently compiled a report which argued that there is an important connection between third-world poverty and the amount of money that developed countries spend on fossil fuels. All of non-electrified Sub-Saharan Africa could be provided with energy from small-scale solar facilities for less than 70 per cent of what the wealthy OECD countries spend on fossil fuels year, and NEF claims that one year’s worth of World-Bank spending on fossil fuel projects, if redirected to small-scale solar installations in Sub-Saharan Africa, could provide ten million people on the continent with electricity. Your choice to buy renewable energy makes a difference. The growth of small-scale renewable energy generation could enable developing countries to determine their own energy policies, rather than becoming dependent on the system that the developed world has established. The capital requirements of renewables can also be lower than those of conventional and centralized investments. Because renewable energy generation lends itself well to small, independently operated, local facilities, such as community generation in the UK, small scale wind turbines in Mongolia or solar powered cell phones in Bangladesh, different entrepreneurs, not just the big players, can operate and benefit from renewable energy.
Even if you are not running your own business, you can influence corporate governance by being a connected worker. Employers are increasingly aware that their existing workforce is a vital asset and the workforce’s opinions count. You can use the employee opinion survey that lands on your desk periodically to tell your employer about the values and behaviours that matter to you. In June 2004, the Chief Executive of Alcan told the World Business Council for Sustainable Development that consistent feedback from Alcan’s employees was one of the main drivers for Alcan to look at changing their energy sourcing policy and seeking ways to reduce their use of virgin bauxite ores for aluminium production. Aluminium is a readily recycled material, if it can be collected after use, and aluminium smelting is one of the largest energy users in the world, so acting on the feedback of individual concerns will make a big difference to the company’s critical environmental impacts.
Connected citizens garner their courage and look beyond the information that’s presented readily to them, using the resources of the World Wide Web, as well as working with their neighbours and communities at home, to work out what decisions to make about buying, living, educating and voting.
Acting in a connected way like this does more than give you the warm glow of altruism. Altruism is something that few people feel they can afford anyway. Thinking in a connected way actually enables you to make better decisions – better in the sense that the solution you reach optimises financial, social, security, cultural and environmental outcomes (all outcomes which we just happen to cost in different ways).
For a company, connected thinking allows you to spot the risks that your company is exposed to from social and environmental effects you simply don’t see with a linear view. More positively, connected thinking also enables you to innovate in branding, giving you that sought after niche; in supplier relations so that you can marshal more resources in support of your business aims; and in marketing. Who would have thought that the Cambodia’s garment industry would be able to differentiate itself from the sweatshop labour economies in south east Asia by trumpeting its reputation for enhanced corporate responsibility, decent wages, respect for human rights and smaller, devolved production allowing people to stay in their communities rather than migrate long distances in search of work? The Ethical Corporation newsletter reports that this is exactly what it happening. The livelihoods of Cambodian garment industry workers are tiny cogs which are changing the pace at which the giant wheels of national and international economies turn.
You may feel uncomfortable and saddened by the poverty you see that seems to grow day by day. But individuals are not completely powerless in the face of the widening divide between the “haves" and the “have nots”. Individual responsibility is the starting point for corporate social responsibility. Individual responsibility means rejecting the “fragmented” view of the world and seeing a “connected” world instead.
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© Article 13 2004
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