China and India will shape the future of CSR

The decisions made by the world's up-and-coming economies will shape the future of ethical business, according to a leading academic.

Addressing a conference on CSR issues at London’s renowned Chatham House on Monday, Jane Nelson, senior fellow and director for Harvard University’s corporate responsibility initiative and former advisor to UN secretary general Kofi Annan, outlined the key trends she believes will determine the future development of CSR.

“It’s fair to say that we are currently experiencing some of the most fundamental shifts, geopolitically and environmentally, the world has ever experienced and some of these are entirely unprecedented,” she said.

“Climate change is something we have never had to deal with as a global community before, for example, nor have we seen technological change at such a dramatic speed before.

“Each of these changes represents some fundamental new risks and challenges to the resilience of enterprises.”

She said that to her mind there were six major trends that would impact on the corporate world and determine who could sink or swim in 21st century business.

The first of these were growing environmental pressure. The business world was now waking up to the importance of climate change, she said, and a global water shortage was already starting to make itself felt.

“500 of the world’s biggest rivers are depleted or polluted and two thirds of the world’s population is already living in a water-constrained environment or will be in the next 20 years,” said Ms Nelson.

“The impact this will have on industry is enormous.”

On the geopolitical scale the emerging economies, particularly India and China, would prove to be the makers or breakers of corporate social responsibility, she argued, saying that within the next 15 years consumers in the two countries would have a spending power similar to that of Western Europe.

“The business opportunities associated with this growth are huge, but environmental and social challenges will increase as well,” she said.

“If India and China don’t get it right then it doesn’t really matter what what we do in the rest of the world.”

While Western companies, particularly in Africa, were starting to consider their impact, China’s hunger for natural resources did not currently come with the same concerns for human rights, welfare and the environment.

Corruption in many parts of the developing world where the wealthy elite lined their pockets and the poor remained in poverty was also an increasingly high-profile issue for Western business, she said.

Population demographics could also shape the future outlook of business, she told delegates.

The widely-reported aging population of the West and Japan, as well as parts of India and China, would present new business opportunities along with the looming pensions crisis, while the ‘youth bulge’ of the Middle East and Africa posed its own social problems with growing numbers of well educated, unemployed and disaffected young people.

Changes within the cultural makeup of developed nations, where traditional minorities were increasing in size and likely to become majorities, such as black Americans and those of Hispanic descent in the USA, would also force companies to look at who was leading them from the board room and how they were selected, said Ms Nelson.

Global health would also be a major factor in the future of CSR policies, she argued, with multinational business looking at its responsibility for the welfare of those working in developing countries.

“The diseases of poverty are a major challenge – just 10% of R&D goes into 90% of the world’s diseases, including the big killers like HIV, diarrhea, tuberculosis and malaria,” she said.

“Companies operating in developing economies have got to decide how far down the supply chain they will address these challenges.”

The diseases of affluence – diabetes, heart disease and stress – would also need to be considered, as would the ease of infection being carried around the world due to the scale of global travel, such as with the current avian flu scare.

The role of technology would also increasingly enter the CSR arena, said Ms Nelson, as new developments, particularly in nano and bio-technology, had the potential to meet so many global challenges but also brought with them their own set of environmental and even social risks.

Ms Nelson’s final trend was that of governance, and changes in the way governments and business interacted.

“A lot of these challenges are extremely difficult to govern,” she said.

“How the UN and similar bodies can work with the private sector is becoming an increasingly important issue.

“For the first time in its history the UN has appointed a special representative on a business related issue – in this case business and human rights – and companies are getting more involved.

“I don’t think you can separate corporate responsibility and public policy and governance.

“Often crises happen because of weak governance or bad governance and companies are called on more and more to address their share of these challenges.”

More and more companies were starting to accept their responsibilities, she said, and particularly in the last year those based in the USA were starting to realise CSR was not simply about philanthropy, but made good business sense too.

“There is a growing acceptance that this is about protecting the value of your company on the one hand,” she said.

“And seeking out new opportunities on the other.”

by Sam Bond

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