The Observer: Don't go giving them money: Businesss is the key to beating global poverty, but we're talking so much more than handouts, writes Simon Caulkin: “…Tony Blair's Commission for Africa proposes yet another attack on the development conundrum, the Shell Foundation, an independent charity funded by the Shell group, is taking a rather different line…” (ShellNews.net) 13 March 05

Sunday March 13, 2005

Is it the job of business to 'make poverty history', in Bono's words? Most people would answer 'no'. Some, harbouring deep suspicion of business motives in the developing world, wouldn't want it to try. Others would arrive at the same conclusion, but on the basis of equally deep suspicion of companies being involved in anything except making as much money as they can.

But as people don their red noses and Tony Blair's Commission for Africa proposes yet another attack on the development conundrum, the Shell Foundation, an independent charity funded by the Shell group, is taking a rather different line. In a paper entitled 'Enterprise solutions to poverty' (www.shellfoundation.org), it argues not only that business involvement in development efforts is legitimate, but that without that involvement, development will fail.

The stakes are getting higher on all sides. Although there have been short-term humanitarian successes, the results of past efforts to break the cycle of poverty have overall been disappointing. After half a century and $1 trillion in development aid, more than 2 billion people still live on less than $2 a day. Indeed, some of the poorest economies are going backwards.

At the same time, in a very different way, business is up against it, too, facing a crisis of legitimacy of its own. Are companies a force for good, or do the environmental and social damage they produce demand that their powers be curtailed? There is at the very least a case to answer; and against well-prepared NGOs and stakeholders their current risk-minimising approaches to corporate social responsibility (CSR) are an inadequate counterweight.

Finally, for humanity as a whole the consequences of a world growing ever more polarised between rich and poor become more hideous by the day. Neither rich nor poor can continue to tolerate today's inequities. This round of development can't be allowed to fail.

Yet while 2005's political commitments and upsurge of humanitarian sol idarity show that something is stirring, they are not enough. The question remains: how do we do it? How can precious resources be used not for grand one-off projects or short-term relief, but to kick-start a process of dynamic, sustainable development that removes people from poverty permanently?

For the Shell Foundation, the missing link is business. 'In theory, practice and common sense terms... most routes out of poverty start with enterprise,' it says. A market economy, based on both large and small enterprise, is central to job creation, growth and sustainable development.

Yet the route of pro-poor enterprise is relatively untrodden. Why? One reason, as CK Prahalad demonstrated in his groundbreaking The Fortune at the Bottom of the Pyramid (FT Prentice Hall), is that big business doesn't see the opportunity.

Equally important, believes the Shell Foundation, is that the wrong 'offer' is meeting the wrong request - it's simply the wrong conversation. Because large, top-down interventions have signally failed to create the conditions for enterprise to flourish, donors have increasingly turned to privatisation (with mediocre results) or public-private partnerships with large firms.

But the ensuing engagement, claims the Shell Foundation, frustratingly misses the point. Civil society assumes that what big companies can best bring to the development table is money. Wearing their hat labelled 'corporate social responsibility', companies acquiesce with varying degrees of urgency but never as a top priority.

All the while, both sides are ignoring the one critical ingredient that only business can furnish, which is - business: in other words, the ability to help the poor not to consume scarce aid resources but exploit them to meet the needs of the market. This, as Peter Drucker well described it 20 years ago, was the real social responsibility of business: the alchemy of transforming social need into 'economic opportunity and eco nomic benefit, into productive capacity, into human competence, into well paid jobs and wealth'.

There are some tough corollaries to this proposition, though, for business and the traditional development community. Since both financial viability and the ability to go to scale are essential to multiply the effect of the original intervention, donors need to think in terms of investing, not giving. There needs to be unfamiliar discipline imposed on both sides.

'Make it hurt', advises the Shell Foundation report: those given grants should be held accountable for their promises, and donor- managers should be judged on the growth of pro-poor enterprises and whether benefits flowed to poor peo ple as a result. Debt relief and other macro-interventions should be linked to the same imperatives.

Likewise, for companies, poverty partnerships should be like business partnerships, argues the report. They need to matter, not just in terms of alleviating poverty, but in generating returns to business in a currency that it values and at a scale appropriate to the risk involved.

An example is the funds for small business put together by the foundation in South Africa and Uganda. For local banks, the funds were worthwhile because thriving small business has an appetite for bank loans, while the Shell Foundation demonstrated to other institutions that investing in small enterprise was good business.

Is this an attempt to bring one more area of life into the market and subject to the profit motive? Well, yes. But note two things. First, the impetus to enlist business principles comes from the development world, not companies. The aim is to make business the servant of the poor, not its master.

Second, it requires big business, perhaps paradoxically, to be more businesslike in a true sense, too. Many development projects fail because at bottom they are focused on satisfying donor agendas rather than those of the people on the ground. Where have we heard that before?

The challenge for companies is to stop playing at CSR (their own agenda) and focus their efforts on meeting the wants of their most demanding customers - the world's poor. Now that really would be a revolution.

http://observer.guardian.co.uk/business/story/0,,1436183,00.html