WSJ.com - In Shift, Multinational Corporations Look To Address Developing World's Problems

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Date: Mon, 29 Jan 2001 07:39:39 -0500

From: Belkin

http://interactive.wsj.com/articles/SB98072233758994778.htm

" But companies that have long given money to nonprofit

organizations increasingly realize they can get more bang for

their buck. Increasingly, firms are forging long-term partnerships

with them and looking for ways to create mutual benefit.

Companies bring hard-nosed business savvy to social-welfare

projects. But they also get help from their new partners with

challenges like negotiating the minefield of public opinion.

An example of the new approach is Merck's $100 million (108.3

million euros), five-year AIDS-fighting effort in the Republic of

Botswana, where 29% of the adult population is infected with the

AIDS virus, HIV. The U.S. pharmaceutical firm was convinced that

AIDS drugs such as its own Crixivan do little good in Africa.

Health care is spotty and infectious diseases such as

tuberculosis and pneumonia, to which AIDS-weakened

individuals are particularly vulnerable, run rampant.

Merck's conclusion was that only a far-reaching makeover of the

health-care system has a chance of beating back the deadly

disease. The magnitude of such an undertaking made partners

essential. Merck linked with the Bill and Melinda Gates

Foundation, which pledged $50 million, and with the Harvard

AIDS Institute. It also attracted other companies, such as Unilever

PLC, which will contribute distribution know-how and help shape

AIDS-awareness campaigns. Merck officials met with

Botswana's president, Festus Mogae, last July to stress their

desire to shape the program jointly with the nation's health

agencies.

" If you have all the antiretroviral drugs in the world, you can't get

them to people if all the other systems aren't in place, " says Dr.

Banu Khan, Botswana's national AIDS coordinator.

The partners are still mapping their strategy. But already there are

plans for a nationwide HIV training program for doctors, nurses,

and counselors, as well as building modern diagnostic labs in

remote areas of the nation of 1.6 people. If the project succeeds,

it may serve as a model for similar efforts in other countries. "

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January 29, 2001 [WSJ.com]

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In Shift, Multinational Corporations Look

To Address Developing World's Problems

By DAVID WOODRUFF

Staff Reporter of THE WALL STREET JOURNAL

Last year, Royal Dutch/Shell Group invested $200,000 (216,509 euros) in a

project to make electricity from coconut shells in a remote village on the

Philippine island of Palawan.

World Economic ForumThe Anglo-Dutch energy giant also bankrolled a factory

to make soap, netting and other products from the locally abundant fruit.

Shell says its goal isn't to turn a profit. Rather, in partnership with the

Philippine Coconut Authority and U.S.-based Community Power Corp., the

company aims to raise locals' standard of living.

Weary of its role as a whipping boy of the antiglobalization crowd, the

company that spawned the Brent Spar fiasco and was charged with abetting

violence in Nigeria is trying to make social welfare part of managers'

everyday strategic thinking. Last summer Shell launched a foundation to

oversee projects that range from gleaning energy from pig slurry in China's

Hunan Province to helping Brazilian oyster fishermen increase the value of

their catch.

" In the future, the successful companies will be those who work hardest to

make sure that they are in tune with the needs and aspirations of society, "

Mark Moody-Stuart, Shell's chairman, said in a speech last July at the

World Congress of the International Society of Business, Economics and

Ethics in Sao o, Brazil. " Society does not end at the company gates or

the office car park. "

Such open soul-searching is good public relations. But it also illustrates

a surprising trend: Companies are rethinking their role in society. In a

world where governments, the traditional guardians of social welfare, face

tight budgets and wield less influence, powerful corporations increasingly

are filling the vacuum. Under intense scrutiny from consumers, they're

tackling some of humanity's prickliest conundrums, such as how to reduce

poverty, or how to stem Africa's devastating AIDS epidemic.

They come armed with more than their checkbooks. Forward-thinking

multinationals such as Shell, Merck & Co. and International Business

Machines Corp. are redefining what it means to be a good corporate citizen.

The professional management techniques many companies perfected over the

last decade to address environmental issues are being extended to social

welfare. In an approach some call " strategic philanthropy, " they

increasingly strike strategic alliances with nonprofit organizations.

" This old notion that there was a trade-off between creating social value

and generating shareholder value is being discarded, " says Austin,

head of the Harvard Business School's initiative on social enterprise.

" Business leaders are no longer looking at philanthropic donations as pure

charity, separate from their business activities. "

Make no mistake, corporations' main mission remains maximizing profits.

Moreover, how far companies should go toward promoting social good remains

a matter of intense debate.

But companies that have long given money to nonprofit organizations

increasingly realize they can get more bang for their buck. Increasingly,

firms are forging long-term partnerships with them and looking for ways to

create mutual benefit. Companies bring hard-nosed business savvy to

social-welfare projects. But they also get help from their new partners

with challenges like negotiating the minefield of public opinion.

An example of the new approach is Merck's $100 million (108.3 million

euros), five-year AIDS-fighting effort in the Republic of Botswana, where

29% of the adult population is infected with the AIDS virus, HIV. The U.S.

pharmaceutical firm was convinced that AIDS drugs such as its own Crixivan

do little good in Africa. Health care is spotty and infectious diseases

such as tuberculosis and pneumonia, to which AIDS-weakened individuals are

particularly vulnerable, run rampant.

Merck's conclusion was that only a far-reaching makeover of the health-care

system has a chance of beating back the deadly disease. The magnitude of

such an undertaking made partners essential. Merck linked with the Bill and

Melinda Gates Foundation, which pledged $50 million, and with the Harvard

AIDS Institute. It also attracted other companies, such as Unilever PLC,

which will contribute distribution know-how and help shape AIDS-awareness

campaigns. Merck officials met with Botswana's president, Festus Mogae,

last July to stress their desire to shape the program jointly with the

nation's health agencies.

" If you have all the antiretroviral drugs in the world, you can't get them

to people if all the other systems aren't in place, " says Dr. Banu Khan,

Botswana's national AIDS coordinator.

The partners are still mapping their strategy. But already there are plans

for a nationwide HIV training program for doctors, nurses, and counselors,

as well as building modern diagnostic labs in remote areas of the nation of

1.6 people. If the project succeeds, it may serve as a model for similar

efforts in other countries.

Today's socially conscious companies are as motivated by good business

sense as they are by altruism. For one thing, consumers are increasingly

keen scrutinizers of corporate behavior. In a 1999 survey of 25,000 people

in 23 countries, two-thirds of respondents said they want companies to go

beyond their traditional role of making money, paying taxes and employing

people to contribute to broader social issues. In the same poll, sponsored

by the Prince of Wales Business Leadership Forum and the Conference Board,

20% of consumers said they either rewarded or punished companies in the

prior year for their performance in the social arena.

A just-completed follow-up survey found that 41% of U.S. respondents said

they discussed the ethical or social behavior of companies " many times "

last year, up from 24% in 1999. Moreover, 28% of Americans who owned stock

said a company's demonstrated social responsibility had influenced their

investment decisions.

The cost of botching social questions can be painfully high. It's a lesson

that many companies learn the hard way.

Take Shell. In the early 1990s, activists in Nigeria complained that the

company's oil production was damaging the environment. Nigeria's military

regime brutally put down protests, which were organized mainly by members

of the Ogani ethnic group. Celebrated writer Ken Saro-Wiwa and eight others

were arrested in 1994, found guilty of murder by a military tribunal and

executed.

Human rights activists said the executions of what became known as the

" Ogani Nine " were unjust. They charged Shell with aiding and abetting

government repression. They organized a world-wide consumer boycott of the

company. Then last year the Center for Constitutional Rights in New York

filed a lawsuit there on behalf of the writer's brother, Owens Wiwa, and

two other Nigerian emigres charging Shell with complicity in the deaths of

Nigerian activists.

The company denies the charges. However, Shell's attempts to get the case

thrown out have been unsuccessful.

The growing pressure on companies to do right is having an impact all the

way up to the board room. Of the corporations surveyed by the Boston

College Center for Corporate Community Relations in 1999, 35% said their

boards included a committee or subcommittee devoted to issues of corporate

citizenship. That compared with just 18% in a similar poll two years earlier.

Moreover, companies increasingly are looking for guidance on how to be good

citizens. The Boston College Center, which organizes programs to provide

such practical advice, has seen its membership jump 75% in the last five

years, to 350 companies. Members include UBS Warburg, Ford Motor Co. and

Telefon AB L.M. sson.

The expectation that business should pitch in is likely to grow. A global

trend toward streamlined government means public resources are shrinking.

In Europe, for instance, the welfare state is being pared back as the euro

fosters greater competition and governments are forced to cut taxes. In the

developing world, public coffers and government officials are overwhelmed

by the magnitude of major problems such as the AIDS epidemic.

At the same time, corporate profits have soared. In the U.S. over the past

decade earnings have quadrupled, according to Barney. In

Europe they tripled over the same period.

Proponents of strategic philanthropy say the approach needn't cost

companies more than existing charitable giving. But the payoff can

increase. IBM has focused its efforts on primary and secondary education

and on closing the digital divide. As part of a program to provide hardware

and software to needy schools, the company sometimes tests new products.

The benefits can be more sweeping, as well. For instance, companies with a

reputation as good citizens have an easier time attracting and retaining

talented people. That can be a key competitive advantage in a world where

good managers and technicians are in short supply.

Multinational companies that undertake social projects in the developing

world are making a long-term investment in their brand image there.

Consumer-products companies in particular are likely to benefit as growth

accelerates in those regions.

Tackling high-profile social problems can present special challenges. One

common hurdle is overcoming mistrust of big corporations. Governments,

nonprofit organizations and consumers often assume that companies have

hidden motives. To gain legitimacy, firms look to partner with

nongovernment agencies that are above reproach.

That's not always easy, especially when their past relationship has been an

adversarial one. That was the case when forest products company

Georgia-Pacific Corp. linked up with The Nature Conservancy in the

mid-1990s to jointly manage environmentally sensitive woodlands in the

eastern U.S. The former enemies came together by forging common goals, says

Harvard's Mr. Austin, who has studied their partnership.

Doing good deeds in the developing world can be particularly tough. Gauging

the political climate is often difficult for outsiders, as Shell discovered

in Nigeria. There are few local nongovernment organizations for companies

to work with. And Western executives who parachute into foreign lands with

a know-it-all attitude can quickly make enemies rather than friends.

That's partly what happened to U.S. drug maker Bristol-Myers Squibb Co.

after it launched its own program to fight AIDS in Africa in 1999.

Officials in some African nations felt Bristol-Myers was throwing its

weight around and ignoring local concerns about how the program was run.

Now, instead of being hailed for its social activism, the company has

become a lightning rod for public criticism.

" Big international companies usually have a preset notion of what needs to

be done, " says Marlink, head of the Harvard AIDS Institute. " But

all of us are guests in these areas. The solutions to these problems have

to be led by the people most affected by them. "

Write to Woodruff at david.woodruff@...

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