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how a little togetherness may help firms fight poverty

May 2005

EP talks to the head of the Shell Foundation about its plans to act as a catalyst for ‘pro-poor’ initiatives on the part of large companies in developing countries

Like others in the corporate world, Shell Foundation director Kurt Hoffman is excited by talk of the potential for business to alleviate the plight of the world’s poor. But for this to happen, he believes that companies will have to work together more closely, and to forge much stronger links with governments and non-governmental bodies alike.

As an initial contribution, the foundation he heads is to bring together a group of companies from different sectors to work jointly at a local level in poor countries. The intention is for the companies to back entrepreneurs with commercial and technical expertise to the point where they will be able to stand on their own two feet. Small and medium-sized companies, with capital requirements of between $1000 (£530) and $500,000, will be supported through microfinance provided by local and international banks.

Will Day, special adviser to the UN Development Programme, told EP: ‘This new contribution may not be a magic bullet, but the messenger, as much as the message, gives it weight.’ The foundation was set up with £250m ($475m) provided by Shell in 2000. It distributed £15m in 2003.

Hoffman is considering how best to ‘bring together a group of actors from the private sector who all have an interest in a specific location in a poor country where things are not working – say a region of Ghana or maybe even a town. That gives the companies something on a manageable scale and allows them to focus on problems they can tackle in a business-like way from different angles, using local knowledge and entrepreneurial skills already present.’ He cites washing powder, cooking stoves and access to telephones as possible low-cost products and services that could be offered.

Pro-poor business initiatives are still in their infancy, but it is already clear that even large companies can achieve little working alone. ‘Because each business tends to operate in a silo it runs into problems. If you put enough companies onto the same basic problems in different areas of the market, there is more of a chance of making things happen.’

This approach, detailed in the Shell Foundation’s new report Enterprise solutions to poverty, will shortly be synthesized in a paper to the business community. Its base assumption is that business has to be in the driving seat. Hoffman agrees that companies ‘will need help from governments and NGOs; it has to be a partnership’, but says that ultimately only business people create lasting jobs and new markets. This view has some support from civil society. Emma Hunt, head of sustainable finance at Forum for the Future, says: ‘Too much work is done by charities forming separate enterprises which they cannot then sustain.

A number of initiatives have been introduced in the past ten years, but they were donor-reliant.’

Money from foundations linked to companies will have to be ‘very directed’, either as micro-finance or for equipment and training, Hoffman says. To have significant impact, projects must above all be financially viable in the long term and replicable on a larger scale elsewhere. The foundation’s mission is to stimulate local enterprise ‘both directly and as a source of advice and skills transfer’, with donors such as the foundation ‘acting less like charities and more like investors’.

Pressure on companies to do more to alleviate poverty is growing. The Commission for Africa has called for business to do much more. Poverty eradication is one of the priorities of the UK government in its presidency of the Group of Eight countries this year. Hoffman, for his part, prefers to stress the business benefits. ‘If you can help alleviate poverty in this way, it improves the context within which you work as a company. You have a more economically active hinterland with better trained people and improved infrastructure. That can only be good for companies. On that basis I’m confident we can get people to talk about this.’

Day is cautiously sceptical: ‘Plenty of observers remain genuinely concerned that increased corporate engagement in development simply means the world is being made safe for big companies to exploit. The real test will be whether investment decisions are taken in corporate boardrooms rather than in foundations.’

He acknowledges that business needs to be more involved, particularly in partnerships, because the ‘traditional donor-driven development model has not served the needs of poor people well’, but warns: ‘The same could be said of the market, with its demand for short-term financial return. There is something very powerful about market mechanisms, but also something uncontrolled.’

Hoffman is aware that while the concept may be sound, there is no guarantee it will work in practice: ‘The logic of the approach we are proposing is simple. But the challenges in implementing it are not.’


Further Information
http://www.shellfoundation.org
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