djordjija petkoski, head of business, competitiveness & development; world bank institute

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Dr. Djordjija Petkoski [email protected]

Djordjija Petkoski,Head of Business, Competitiveness & Development; World Bank Institute

World Bank Institute & GAIN

Business Alliance

Corporate Social Responsibility

and Sustainable Competitiveness

Dr. Djordjija PetkoskiHead of the Business, Competitiveness & Development Program World Bank Institute, The World Bank Group

Alexandria, Egypt - October 29, 2008



Background and Context



Our world is …

… out of balance.



Today across the world:1.3 billion people live on less

than one dollar a day; • 3 billion live on under two

dollars a day; • 1.3 billion have no access to

clean water; • 3 billion have no access to

sanitation; • 2 billion have no access to

electricity.

Challenges or opportunities?

Challenge:

Source: The World Bank Group



Is This Our World?

• Amount needed to put every child into school by 2000 = US $950 billion. It did not happen.•This amount was less than 1% of what the world spent every year on weapons.



Is This Our World?

• 20% of the population in developed nations consumes 86% of the world’s goods.

• The poorest 20% of the world’s population consumes only 1.3%.



• Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).

• The top 200 corporations’ combined sales are 18 times the size of the combined income of 24% of the total world population.

• MNCs account for a quarter of global economic activity, they employ less than 1% of the world’s labor force, while one third of the world’s willing-to-work population is unemployed.



Developing countries outperform high-income countries

0

2

4

6

8

1980 1985 1990 1995 2000 2005 2010

Developing countries

High-income countries

Real GDP, percentage change Forecast

Source: Development Prospects, The World Bank Group



Developing countries outperform high-income countries

0

2

4

6

8

1980 1985 1990 1995 2000 2005 2010

Developing countries

Real GDP, percentage changeForecast

Excluding India and China

Source: Development Prospects, The World Bank Group



Emerging of MNCs indeveloping countries

Galanz

134 major companies in ten developing countries: Argentina, Brazil, Chile, China, India, Indonesia, Mexico, Poland, South Africa and Turkey



Announced value of Western-targeted acquisitions by emerging-market acquirers, (Wall Street Journal, Feb 2006)

05

1015202530354045

(In Billions of Dollars)

01 02 03 04 05

Year

US-Targeted

European-Targeted

“Buying Spree”



The Role of the Private Sector



$113 bn $7 bn $106 bn 75%

StockMarket Value

NetBook ValueGoodwill %

$380 bn $41 bn $339 bn 89%

$199 bn $21 bn $178 bn 90%

$499 bn $23 bn $476 bn 95%

$104 bn $8 bn $96 bn 92%

$202 bn $31 bn $171 bn 85%

$60 bn $8 bn $52 bn 87%

$46 bn $19 bn $27 bn 59%

$35 bn $8 bn $28 bn 78%

$149 bn $72 bn $77 bn 52%

Source: Interbrand/Citibank league table, 2001

Evidence of the Importance of Goodwill

Corporate Responsibility & Risk Management, SustainAbility, 2005



New Pressures

• Pressure on business to engage in broader sustainability issues.

• Increasing difficulty of tackling certain global problems unilaterally.

• Necessity of bringing in the comparative advantages of all stakeholders.

• Competitive benefits for the private sector to play a more proactive and collaborative role in development.

New Paradigms



The Role of the Private Sector

• Economic, environmental and social issues are becoming too complex and the resources and competencies needed to address them too dispersed for one sector to have all the solutions.

• There is a growing expectation that the private sector can and will play a role in helping to address these challenges.

• The critical issue for all stakeholders is to define appropriate and realistic boundaries.

• Common interests and values.



• Businesses must go beyond the "compliance game" and public relations.

• Businesses must define the boundaries of their social and environmental impact.

• Businesses must prioritize demands for CSR and philanthropic giving.

• Businesses must deal with "activist organizations" and making them part of the solution.

Challenges to Businesses



What Do Executives Think?

84% of executives agree that making broader contributions to the public good should

accompany generating high returns to investors.

- McKinsey Global Survey – Assessing the Impact of Societal Issues, 2007.



What Do Executives Think?

• Most important ways in which large corporations currently contribute to the public good:

Creating jobs 65%

Making discoveries, innovations, scientific and technological breakthroughs

43%

Producing products, services that people need

41%

Supporting their local economy (e.g. tax revenue)

35%

Training, educating employees 23%

Providing dividends, gains for stockholders

23%

Supporting, preserving the environment

16%

Engaging in philanthropy (e.g. donating money, services or products)

15%

Contributing to local communities

13%

Contributing to employee benefits such as pensions

12%

McKinsey Global Survey – Assessing the Impact of Societal Issues, 2007.



Reactive Proactive

• Businesses must move from reactive behavior to strategic measures.

• Businesses must create new strategic opportunities, including multi-stakeholder engagement.

• Businesses must make improvements in the competitive context - a healthy society is a prerequisite to economic success.



• CSR is the commitment of business to managing & improving the economic, environmental & social implications of its activities at the firm, local, regional & global levels.

• CSR can be used as a framework through which business engages in multi-stakeholder partnerships for sustainable development.




Corporate Philanthropy vs. CSR• CSR does NOT have to be a philanthropic activity.• Philanthropy can be complementary to CSR.

• Philanthropy is external to a business.• CSR is both internal and external to a business.

• CSR should be a part of a business’s core strategy– This way, there can be a fundamental, long-term

impact on poverty alleviation and social development by increasing national competitiveness.



enhanced competitiveness

and investment.

Poverty Reduction

Collateral Social benefits

Stabilization of fragile,developing and emerging

market countries

Better business Environment




And the Base of the Pyramid



Base of the Pyramid Approach

Despite global companies’ ability to create wealth worldwide, the benefits of this

rarely directly reach the 4 billion poorest people of the world – the so-called “Base

of the Pyramid (BOP).”



Population Distribution (by Age) and Population Growth



Estimated BOP market by sector: $5 trillion



BOP Approaches and CSR

• BOP approaches can be a critical component of a company’s CSR strategy and core business.

– New business models• The more traditional “consumer-oriented” BOP

approaches• Empowering the poor to not only enter the market

as consumers, but to be integral parts of the supply chain as producers.

– Creation of new markets AND the transformation of existing markets.



Platform for Business Growth

– Increased access to financial services and to communications, notably mobile telephones is the greatest success story.

– Access to information, e.g. up to date market prices, and to credit is now enabling the poor to compete more effectively, and engage as entrepreneurs in the global economy.



Integrating CSR and BOP

• Both CSR and BOP strategies should be fully aligned with broader corporate strategy and long-term market positioning.

• Effective CSR and BOP strategies can help deliver sustainable business growth.



Emerging Business Case for BOP Approaches

• Top-line Growth– Most large businesses have saturated their markets entering

untapped markets opens up an enormous new consumer, supplier, and partner base and unlimited opportunities for innovation and investment.

• Cost Savings– Bringing in the BOP creates supply chain efficiencies– Outsourcing labor markets to the BOP– BOP markets are built on different business models

• Innovation– Extending beyond innovation in new products to innovation in

new business models.



Some Main CSR-related Issues in the Arab World



Areas Where Businesses Can Play a Significant Role

– Business Engagement with Youth• Youth unemployment is a growing problem in the region.• There is a large gap between the skills that people have and

job requirements.• Investing in young people will pay off as a more skilled labor

force is created.• Engagement of youth can also have a multiplier effect –

increased entrepreneurship, wealth creation, increased innovation, higher education levels, reduced fertility rates.

Our program is very committed to engaging youth and future leaders.

– Videoconference on CSR in the Arab World.



Areas, cont.

– SMEs and Family-Owned Enterprises (FOEs)• SMEs and FOEs are very prominent in the region and their

success, development and expansion is critical to the region’s economic competitiveness, growth, and wealth creation.

• Finding ways to reach this demographic in regards to CSR is important.

– Supply chains and Clusters.

- Public-Private Partnerships• Engaging with the government is critical for creating

incentives, enforcement, setting national priorities, and comparative advantage.



Areas, cont.

• Transparency and accountability



Corruption as a Key Constraint to the Private Sector, by Region



Learning and Experience-

Sharing



WBI’s CSR Program

• Online course on interactive e-learning platform

• Face-to-face workshops– For localized training and relevance to the client’s

socio-political, cultural and sectoral context.

• Case studies– For relevant experience-sharing and learning.– To document progress and success stories.



Objectives:

To provide participants with an introduction to the fundamental rationale, design and implementation of CSR programs.

The course can be used to establish or strengthen CSR policies and practices by focusing on sustainable competitiveness and good governance.

Focuses on:

• Key elements of the policy and business environment that support CSR and how these elements function as an integrated system

• Providing a strong justification on why CSR should be incorporated in corporate business strategy and country development strategy

• Facilitating access to relevant research and data and dissemination of best practices.

CSR Program



CSR Online Course

Over 30,000 participants in over 90 countries around the world. The course is now available also in Arabic.

Course Modules:1. CSR Main Concepts2. Decision-Making Frameworks3. CSR Diamond4. Building Sustainable Competitiveness through CSR5. CSR and the Poor6. An Introduction to Coalition: Building Action Plans

Target Audience:

Primarily business, but also very useful for government, NGOs, academia,

and university students.



CSR Program

The WBI CSR program in Egypt will be offered jointly with InWent Capacity Building International, Germany



Executive Development Program



ApproachThe World Bank Institute’s Executive Development Programs utilize a holistic approach to the learning experience.

PreparationIn order to tailor the program to your needs and to encourage learning before the beginning of the Training component, participants are challenged to clearly define what they hope to learn during the program, and commit to how they plan to leverage on that learning after the program. Participants will be given key materials and resources to prepare for the training.

Defining the Learning ExperiencePreparation

Learning by experiencing

Training

Applying what you have learnedConsolidation



TrainingTraining is divided into thematic modules consisting of a combination of the following session types:

• Panel discussions• Case study• Simulation exercises• Interactive multimedia sessions• Face-to-face component



Partners

• World Bank Group

• InWEnt Capacity Building International, Germany

• Transparency International

• The Wharton School of Business, University of Pennsylvania

• Harvard University

• The Global Alliance for Improved Nutrition

• The Center for International Private Enterprise



Upcoming EDPs

At World Bank Headquarters, Washington, D.C

1. Inclusive Agri-Business February 16-20, 2009

2. Business-led Anti-Corruption Strategies April 6-10, 2009

3. Opening Markets with the Poor June 8-12, 2009 (Regional Program)

4. Africa Dates to be determined



CSR and BOP case studiesCSR and BOP case studies



Business models that engage the poorIncreasing the productivity and real income of the poor. Enhancing job creation opportunities supported by products and services that boost productivity. “traditional consumers” vs “productive consumers” concept.

Building a BOP business cultureLearn about the values, aspirations and contribution of the poor

Internal changesBusiness growth + profitability Complementarities between philanthropy, CSR, and service to the poor

Market capacity buildingTo what extent do “organized or well-developed markets” capture the costs and benefits of the poor? What access do the poor have to these markets? Why do the poor pay more for the same or similar goods and services than the rich? How can level playing fields that provide equal opportunities for the poor be created?

The role of MNCsPerformance benchmarks

Work within the existing market environment.

Integrating the poor into the global production system

Facilitating market transactions for increased productivity as part of their supply chain.

Shape institutional environments and build partnerships

The role of local companiesLegitimacy in the eyes of the poor Job creationProvide goods and services Support MNCs

Measuring impactEconomic, cultural, social and environmental impactNot only output and profitability but equity and balance between corporate, legal and social obligationsWhat is important for the poor in terms of quality of life, empowerment and security?Transparency and accountabilityPositive and negative cross-sectoral effectsImprovements in market institutions

Success formulaSustainabilityCollective actionScalability

Variables to build a successful BOP model



Takamol Integrated Reproductive Health Services Project



• Takamol is a five year project to promote an integrated model for strengthening maternal/child heath, family planning and reproductive health in Egypt.

• Through the USAID funding, Takamol is the result of a social responsibility partnership between the private and public sector in Egypt.

• The objective is to encourage the private sector involvement in Takamol’s integrated model and thereby encourage the effort of the Ministry of Health and Population (MOHP), to achieve sustainable reduced fertility and improved health outcomes of mothers and newborns.

• It targets 200 villages and more than 25 hospitals in the neediest areas of 11 Upper and Lower Egypt governorates.



Focus on

• Mobilizing religious leaders as advocates for reproductive health

• Empowering woman to improve their reproductive health

• Bringing a positive behavior change

• Reactivating clinic management boards

• Reactivating clinic service improvement funds

• Maximising ideas and resources to create sustainable community assets

• Closing the gap between poverty and poor health



Some Achievements:• Barclays Bank Egypt: Renovated a clinic in a

poor urban area of Cairo

• P&G Egypt: Delivering generic hygiene messages to women in hard to reach areas.

• PriceWaterhouseCoopers: Donated funds to purchase income-generating equipment for women’s cloubs in clinics renovated under the Takamol project.

• Mentor Graphics: Provided funding to furnish women’s clubs in 3 renovated clinics.

• RWE Dea: The German petroleum company covered the renovation costs of 2 classrooms under a joint initiative between Takamol and Egypt’s National Council for Childhood and Motherhood.

• Multipharma and Future Pharma: These local Egyptian companies provided free of charge doms and medicines.



Challenges:

• Lack of shared vision between the private and public sector

• No real sustainability mechanisms to maintain the momentum for collaboration

To meet these challenge, the Egyptian Finance Executive Foundation (EFEF) played an intermediary role between the Ministry of Health and Poulation (MOHP) and the private sector.



Good

and Services

Nutrition

Healthcare

Clean water

Public health

Housing

Financial services

Education

Skills

Hunger/Food

Water

Security,

Shelter

Hygiene

Public Health

Jobs

Empowerment

Source: HBS Alumni Club Malaysia. Professor V. Kasturi Rangan

$20,000/annum

$2,000/annum

$725/annum

$365/annum

B

O

P

The BOP market :

Takamol



Scale

Scaled up global and Egyptian best practices to ensure

that high quality integrated services are

available at the community level

Collective Action

MOHPUSAID

Private SectorNGO (EFEF)

Sustainability

$1.4 MM has been leveraged by

businesses and individuals

Success Formula



Measuring impact:

BusinessesMore than $1.4 million has been leveraged by companies and business organizations and individuals through partnerships with Takamol to support health initiatives in Egypt.

Behavioral Change: Increased number of multi stakeholder partnerships in rural areas.

Clinics are adopting a business mentality to look at other ways to meet community needs and generate income for the health facilities.

Clinics



What questions are important to you1. How would measure the impact of the project? Private sector engagement? 2. Improved maternal and children’s health? 3. Better access to health services? All of the them?4. Do you agree that the skills and knowledge of clinic and hospital staff been

upgraded?5. How would you scale up this project?6. Any other recommendation?



Thank You !

Djordjija Petkoski,[email protected]

Program LeaderBusiness, Competitiveness & DevelopmentWorld Bank Institute

www.developmentandbusiness.org

djordjija petkoski, head of business, competitiveness & development; world bank institute

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