Corporation for change

Is the corporate sector a crucial player in the field of international development? That is the question we (Marrit and Rosalie) asked ourselves before the AMID corporate sector lecture of 25 March 2022. Given the growing attention for the role the corporate sector could and should play within international development, for example as mentioned by the 17 SDGs, one would almost automatically assume that, indeed, we need the corporate sector. There are a lot of potential benefits to the involvement of the corporate sector in international development we could think about. Not only do corporates have the (entrepreneurial) skills and experience to make initiatives and organisations economically viable, they also have the network and resources to get things done. Perhaps even more interesting, because of the size and geographical spread of corporates, the potential impact of corporates on international development is very large.

As we both work in/with private companies, we realized that our opinion might not be shared by our fellow AMID trainees, so we took it to the test. Based on a survey question we asked the trainees to answer before the lecture, it turned out the vast majority agreed that corporates are important. Of the 40 trainees (out of 51) that responded, 45% said they agreed, and 47% said they strongly agreed with the statement that “the corporate sector is a crucial player in the field of international development”.

Alright, so let’s have a closer look at this potentially crucial player. What happens on the ground? Corporate social responsibility (CSR) is a widespread trend in the corporate sector. The notion that corporates should have a positive impact on the world and its people is widespread and CSR projects, mostly developmental, are popping up everywhere. Great initiatives, but also heavily critiqued. Why? CSR can also be seen as a bandage on the wound created by the way international corporations do business. The integration and cooperation of local businesses within the multinationals’ value chains often does not happen, leading to crowding out of local business (Ekumankama et al., 2020). Furthermore, foreign multinationals tend to prefer either importing (the majority) of their products against lower prices, or to work with a selected group of large-scale suppliers, making it difficult for local companies to compete and leading to the exclusion of small suppliers (Ekumankama et al., 2020). Also, it is mentioned that multinationals repatriate profits to their home country, (deliberately) misreport their imports and exports to reduce their taxes (Global justice et al.,2017), and have short-term strategies, leading to limited to no real development (Ekumankama et al., 2020). It seems the corporate sector prefers CSR development projects than change the way they conduct business.

Of course, there is more to the story. Part of the reason corporates behave the way they do is in response to the circumstances in a country. For example, Ekumakama et al. (2020) mention that the infrastructure in Nigeria is underdeveloped and that the market is fragmented, leading to higher costs and lower efficiency. From a purely financial point of view, it therefore seems logical that multinationals look for alternatives besides incorporating the local business within their value chain.  Furthermore, informality and the associated contract uncertainty explain why corporates prefer to import their products, and the perceived high risk of doing business is the reason multinationals choose for short-term investment strategies and limit their local investments (Ekumankama et al., 2020).

That is not to say that corporates would necessarily make different choices if the circumstances were different. A common agreement during group discussions seemed to be that, because of their commercial nature, corporates are first and foremost financially driven. Hence, to make sure corporates fulfil their role within international development, they need some encouragement. During the lecture this was underlined by professor Chibuike Uche, who made it abundantly clear that he believes governments have a big role to play in encouraging and supporting corporates to achieve positive change. Through clear regulations and policies, governments can encourage the cooperation between organizations.

“The extent a firm can go in achieving sustainable vertical integration depends on the strength of the governance institutions, availability of supportive infrastructure, and the conduciveness of the policy and regulatory environment” (Ekumankama et al., 2020)

So after the lecture we returned to the question, is the corporate sector a crucial player in the field of international development?

The answer is that our feelings are a bit more mixed than before the lecture. The large majority still thinks the corporate sector has the potential to play a crucial role within international development. Its entrepreneurial and commercial nature can be used to create viable and successful businesses, using its resources and network to increase the potential impact. However, there are also some concerns being raised. One student cited that he/she/they “May have underestimated the influence of the government”, raising the question if that then means that governments are more important than corporates? Another student wrote “From the lecture, I have a different perception. The role of the corporate sector is depended on the existing policies in the developing economies! If the corporate sector is not guided, they tend to benefit at expense of development of these nations’’. Following this line of reasoning, one might wonder how much of the future of international development we must put in the hands of the corporate sector. If it is true that the majority of corporates will only operate in a way beneficial to international development when they are encouraged (or even told) to do so, how likely is it that the involving the corporate sector in issues regarding international development will actually yield positive results?

In conclusion, what the role of the corporate sector should entail exactly, and how prominent this role should be? The jury is still out. However, given the potential positive impact this sector can have, it seems that there definitely is á role to play for the corporate sector. In the end, we think that achieving a more fair, equal and sustainable world without the corporate sector will unnecessarily complicate this challenge. So, let’s try to involve the corporate sector, encourage change from within, resulting in better CSR projects, more ethical ways of doing business and a better world.  

Sources

• AMID lecture and group discussions – Corporate sector (25th March 2022).

• Global justice et al. (2017), Honest account: Profiting from Africa’s wealth

• Akinyoade, A., & Uche, C. (2018). Development built on crony capitalism? The case of Dangote Cement. Business History, 60(6), pp. 833–858.

• O. Ekumankama, A. Ezeoha, C. Uche (2020), The role of multinational corporations in local dairy value chain development: case of Friesland Campina WAMCO (FCW) in Nigeria, International Food and Agribusiness Management Review, pp.55-69.

• Student responses on the survey (google forms) on the 25th of March.