According to the Ethical Globalization Initiative (EGI), the private sector has a crucial role to play in eradicating world poverty and achieving the Millennium Development Goals. After all, the top 200 companies in the world represent a quarter of world GDP, and ‘with power comes responsibility’ (Observer, 12 December 2004).

In the view of Mary Robinson, founder and President of EGI, signing up to the Global Compact isn’t enough. Alliance talked to Mary Robinson and Heather Grady, Director, Policy and Partnerships at EGI, about how EGI persuades companies to take on this responsibility, and to work with grassroots social movements to ensure that change really does benefit those with less power.

What role do you see companies taking in solving the world’s worst problems, in particular in eradicating (or halving, if one’s looking at the MDGs) extreme poverty?

Generating increasing levels of decent jobs is the most important role that companies can play in combating poverty and promoting sustainable development. For companies investing in developing countries, there is a range of factors that increase the chances of long-term growth in employment opportunities. One is focusing on labour-intensive industries (rather than capital-intensive sectors or portfolio investment). Another is developing backward and forward linkages into the domestic economy, like providing market access for small-scale agricultural producers, and creating employment for retailers. This does more to reduce poverty than relying on imported raw materials or establishing factories in economic processing zones, for example. A third factor is the extent to which companies bring in new skills and technologies. And last but certainly not least, companies can play a critical role by meeting or exceeding internationally recognized labour and environmental standards. Of particular importance here is the right to collective bargaining, so that workers can maintain bargaining power vis-à-vis their employers even in turbulent economic times.

Companies that are successful also contribute tax revenue to governments, essential for the funding of vital institutions such as health systems and schools as well as for poverty alleviation efforts.

Companies have a particular responsibility to rise above the short-term interests of investors and shareholders and take account, too, of those who work on their premises and in their supply and distribution chains, and of the public at large in poor countries. We do find and applaud companies that are trying to influence policymakers to work towards a more ethical and inclusive globalization, rather than trying to shape trade and investment laws for their short-term interests.

Companies can also play a complementary role to government in promoting social services. In the pharmaceutical sector, for example, they can make a contribution by developing tiered drug pricing policies for poor countries, or setting aside a portion of R&D effort for neglected diseases that debilitate poor countries.

Is this solely a matter of ethics or is it also in companies’ own interest to shoulder this responsibility?

As others have pointed out, in a world of ‘haves’ and ’have nots’, where globalization means the ‘have nots’ are embittered and resentful, no one is winning. The more companies can do to spread the wealth that they generate, the better off everyone is. Increasing employment ultimately benefits companies as well, because the workforce is also the market that companies need in order to survive. In an increasingly globalized economy, we need an increasingly global social compact.

Why isn’t it enough for companies to sign up to the Global Compact?

The Global Compact is a very useful initiative. Voluntary standards can help raise the level of awareness and performance. But they only go so far in ensuring that the private sector acts responsibly. Just as the government and non-profit sectors require oversight, and adopt monitoring and reporting standards, companies also need to go further to actively comply with standards that are set independently.

How is the Ethical Globalization Initiative working to get companies more involved in fighting poverty and meeting the MDGs?

EGI is involved in several activities, described further on our website http://www.eginitiative.org. One example of a new initiative we are helping to shape is the Business Women’s Initiative Against HIV/AIDS. It seeks to engage women business leaders from around the world in addressing the impact of HIV/AIDS on women. We are working with the UNAIDS Global Coalition on Women and AIDS and with Mary Ann Leeper and her colleagues from the Female Health Company to create a group of women business leaders from around the world committed to addressing the key challenges that women in the developing world face in attempting to access health products and services. The group seeks to draw on the skills and resources of its individual members and their respective organizations to help unlock some of the roadblocks facing women’s health the world over. Integral to this discussion is attention to the state of the art of women’s prevention technologies. We would invite you all – women and men! – who are interested in this project to be in touch if you would like to learn more.

We also work with business leaders and others to challenge assumptions about the relationship between investment and development that overlook the perspectives of people living in poverty. On the ‘Bottom of the Pyramid’ debate, for example, it is important for the business sector to understand that selling to poor people does not necessarily serve the interests of poor people. While this may be an important market for companies to become more profitable, selling to people living in poverty will benefit them only if it does one of the following:

• gives them access to high-quality products that are good for health or well-being;
• improves their value for money spent, gives them more power as consumers, for example if having more choices of products available locally leads to more competition between brands, which in turn can lead to lower prices;
• increases economic opportunity in their communities, in particular creating jobs that provide working capital or new types of skills and opportunities; or
• spreads new technology or product ideas that catch on among local producers.

EGI is also invited to many events sponsored by business leaders to share our views on why human rights are so important as a ‘compass’ for the behaviour of companies, going beyond philanthropy to examine their core business practices. We have been involved with the work of the World Economic Forum’s Global Governance Initiative, which in 2005 is highlighting the private sector’s role in achieving the MDGs. Across the board, the team of experts who prepared their Annual Report 2005 found that business was not doing all it could to foster sustainable development.

We have also supported the work of the UN Millennium Project, which prepared a comprehensive plan for meeting the MDG targets by 2015. This provides a number of specific recommendations for how business can play a responsible role in these efforts.

What role does EGI see for grassroots social movements in fighting poverty and meeting the MDGs?

Grassroots social movements are essential because social and economic progress does not depend just on changing policies, but on changing policies in favour of those with less power – and that requires sustained efforts at the ‘movement’ level. Shifting the way one society or the world as a whole looks at economic justice, for example, requires effort over many, many years from local constituencies who have a say on who controls the reins of government at all levels. Organizations like EGI cannot work effectively without grassroots movements informing our work and ensuring that policy changes we may influence actually have an impact on people’s lives.

Should companies be supporting/partnering with these movements in order to fight poverty and meet the MDGs?

Yes, but this doesn’t happen enough. A central element of the Millennium Project report’s recommended strategy for developing national MDG-based poverty reduction strategies is the proposal to involve the private sector directly in the development of these programmes, alongside grassroots civil society groups, development partners (in particular, bilateral donors), and multilateral agencies.

Isn’t eradicating poverty the role of governments? What is the relationship between companies and governments in achieving these objectives?

In recent years we have looked at health and education as the building blocks of an educated and healthy workforce, but the reverse is true too: a workforce that receives decent wages and benefits is the cornerstone of social services, because this is the long-term tax base of the country. Without this, societies could remain aid-dependent for ever. If companies could see how crucial they are in promoting decent work, we could perhaps expand their sense of responsibility beyond their immediate stakeholders to society at large

.

Realizing Rights: The Ethical Globalization Initiative (EGI) was founded by Mary Robinson, former President of Ireland and former UN High Commissioner for Human Rights, in October 2002. In collaboration with the Aspen Institute, Columbia University and the International Council on Human Rights Policy, EGI is committed to convening key stakeholders – civil society, government and business – and forming new alliances to address global challenges in a more responsible way. Particular concerns for EGI are human rights, gender sensitivity and enhanced accountability.
For more information, contact Heather Grady at heather.grady@eginitiative.org or visit http://www.eginitiative.org