Djordjija Petkoski, Head, Business, Competitiveness & Development World Bank Institute

1. The Role of Business in Development through Multi-stakeholder Partnerships Djordjija Petkoski, Head, Business, Competitiveness & Development World Bank Institute April, 2007

2. Outline • Background: The Big Picture and Global Challenges • The Role of Business in Development • A New Paradigm: Multi-Stakeholder Partnerships • Developing Capacity • Capturing the Reality: Best Practices • The Importance of Leadership

3. Background: The Big Picture and Global Challenges

4. Our world is … … out of balance.

5. Poverty and Developing Countries Today: 3 billion people (survive on) under $2/day 1.2 billion people (survive on) under $1/day Global Gross Domestic Product (GDP) Year 2000: 30 trillion – 5 billion people – 20% global GDP Year 2050: 140 trillion – 8 billion people – 40% global GDP (assuming 3.5% growth) Population Growth

6. Is This Our World? • Every day more than 16,000 children die from hunger-related causes – one child every five seconds. • Amount needed to provide basic health and nutrition to everyone in the world = US $13 billion. • Amount spent on perfumes in Europe and the US = US $12 billion.

7. Is This Our World? • Amount needed to put every child into school by 2000 = US $950 billion • It did not happen. • This amount is less than 1% of what the world spent every year on weapons.

8. Is This Our World? • Every day 8,500 people die and 13,000 others are newly infected with HIV. • By 2010, more than 25 million children will be orphaned by AIDS worldwide. • In some parts of Africa, one-third of all pregnant woman have HIV/AIDS. • In Swaziland, for example, nearly 40% of pregnant women are HIV positive.

9. Is This Our World? • 20% of the population in developed nations consumes 86% of the world’s goods. • The poorest 20% of the world’s population consumes 1.3%.

10. Is This Our World? Scientists can calculate, to the nearest planet, how much land and sea it would take to sustain the population of the world if everybody had the same quality of life as those living in the United States, the United Kingdom or France. The answer is …

11. … Three Planets!!!

12. Is This Our World? • The World Bank estimates that a mild pandemic of Avian Flu would cause at least US$800 billion in global economic damages. • World economies would need approximately 3 years to recover from such a shock.

13. The Role of Business in Development

14. The Role of Business in Development • Whose problems are these? • Who is responsible? • Is it just a money issue? • What are the costs? • When are we going to pay? • How will we pay? • How long will we allow this to continue? • How long can we afford to live this way?

15. Financial Flows to Developing Countries $ billions Total net capital flows Net private flows Net official flows Source: Global Development Finance Report, 2005

16. Rising Influence & Power of the Private Sector Source: Ranking based on corp. revenue data from Fortune Magazine, October 1, 2005; and GDP data from World Bank World Development Indicators (WDI) Report 2005.

17. Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs). • The top 200 corporations’ combined sales are 18 times the size of the combined income of 24% of the total world population. • MNCs account for a quarter of global economic activity.

18. Corporate Philanthropy Evidence of the Importance of Goodwill* Corporate Responsibility & Risk Management, SustainAbility, 2005 Stock Market Value NetBook Value Goodwill % $113 bn $7 bn $106 bn 75% $380 bn $41 bn $339 bn 89% $199 bn $21 bn $178 bn 90% $499 bn $23 bn $476 bn 95% $8 bn $96 bn 92% $104 bn $202 bn $31 bn $171 bn 85% $60 bn $8 bn $52 bn 87% $46 bn $19 bn $27 bn 59% $35 bn $8 bn $28 bn 78% $77 bn 52% $149 bn $72 bn Source: Interbrand/Citibank league table, 2001

19. Expectations of Business What Do Stakeholders Expect from Business Leaders? * WEF, Voice of the People Survey 2005

20. Rethinking the Role of Business There is no common understanding of the role of business in society.

21. What Do Business Leaders Think? • Business Leaders’ Ranking of • Top Development Challenges • Good Governance & Tackling • Corruption • Poverty Alleviation & Education • Sustained Economic Growth • Pace & Security • Energy • HIV/AIDS • Water • Human Rights • International Trade Rules • International Financial Architecture • * WEF GCCI Survey 2005

23. Corruption as a Key Constraint to the Private Sector, by Region

24. Challenges to Businesses • Businesses must go beyond:     - the generalized debate and simplified messages.     - the "compliance game" and PR.     - defuse unfocused and un-integrated CSR programs. • Businesses must define the boundaries of their social and environmental impact. • Businesses must connect CSR to corporate strategy. • Businesses must prioritize demands for CSR and philanthropic giving. • Businesses must deal with "activist organizations" and making them part of the solution.

25. Reactive to Proactive Strategies • Businesses must move from reactive behavior to strategic measures. • Businesses must create new strategic opportunities, including stakeholders engagement. • Improvements in competitive context - a healthy society as prerequisite to economic success.

26. A New Paradigm: Multi-Stakeholder Partnerships

27. A New Paradigm "A multi-dimensional approach...is required to address [development] problems...the private sector is the most important engine of development, but it's also clear that the private sector can't do it on its own. There are critical things that have to be done by the public sector and that's the principal area where the World Bank interacts... governments and donors need to include the business community in policymaking decisions and use [their] expertise and experience in making the right policy choices for a good business environment". World Bank President Paul Wolfowitz, Remarks at the Corporate Council on Africa June 23, 2005.

28. The Need for Multi-Stakeholder Partnerships • Economic, environmental, and social issues are becoming too complex and the resources and competencies needed to address them too dispersed for one sector to have all the solutions. • There is a growing expectation that the private sector can and will play a role in helping to address these challenges. • The critical issue for all stakeholders is to define appropriate and realistic boundaries. • Common interests and values.

29. Incentives for the Private Sector • Investing in a stable and secure environment in which to do business contributes to a healthy and competent workforce, prosperous consumers, a more attractive investment climate, and increased competitiveness. • Managing the direct costs and risks of doing business such as environmental degradation, climate change, disease, and ethnic conflict can reduce costs, improve risk and reputation management, improve resource efficiency and enhance productivity. • Contributing to sustainable development and being responsible can lead to new business opportunities through innovation, value creation and competitiveness.

30. Stakeholder Roles & Competencies

31. Roles of Stakeholders

32. The Role of Individuals • Today, there is a considerable increase in individual philanthropy. • Bill Gates : Not only is he among the richest men in the world, but he is also one of the world’s top philanthropists. • Warren Buffett: This famous American investor is the second richest man in the world. He is giving away much of his $44 billion for philanthropic causes. • Bill Clinton and The Clinton Global Initiative: Clinton has built his initiative capitalizing on his political clout and connections, fostering leadership and resources to fightHIV/AIDS

33. Role of the World Bank • The World Bank has the potential to provide the right environment for successful private-public partnerships by providing a politically-neutral territory for a meaningful dialogue.

34. Role of the World Bank • The World Bank engages on four levels: • Political level: initiating a political dialogue about the importance of private sector involvement. • Strategic level: helping to create necessary frameworks (legal & regulatory) to ease private sector participation. • Implementation level: providing a connection between the planning, budgeting and implementation process. • Operational level: assisting with technical support

35. The World Bank Institute • The capacity building arm of the World Bank that helps countries share and apply global and local knowledge to meet development challenges. • WBI's capacity development programs are designed not only to build skills among groups of individuals involved in performing tasks, but also to strengthen the organizations in which they work, and the sociopolitical environment in which they operate. • It creates learning opportunities for countries, Bank staff, clients, and people committed to poverty reduction and sustainable development.

36. World Bank Examples of Multi-Stakeholder Partnership • Examples of WBI’s multi-stakeholder partnership programs are: • UNICA, the association of sugar industries in Brazil, partners with WBI • WBI has been collaborating with the German Chamber of Commerce • GAIN Business Alliance on malnutrition and vitamin and mineral deficiencies • Business partnerships to fight HIV/AIDS in Ethiopia These programs strengthen the competitive position of the private sector and capacity to address CSR issues.

37. Multi- Stakeholder Partnerships Expertise in private sector development and corporate social responsibility Expertise in malnutrition and vitamin and mineral deficiencies GAIN Business Alliance

38. Multi- Stakeholder Partnerships Ethiopian Business Coalition Against HIV/AIDS (EBC) World Bank Institute’s (WBI) ACTafrica IFC Against AIDS Donors (i.e. GTZ, DFID) BUSINESS COALITION AGAINST HIV/ AIDS

39. Challenges • Monitoring the impact and effectiveness of multi-stakeholder partnerships. • Scaling-up successful multi-stakeholder partnership initiatives. • Determining and assessing the governance impact of multi-stakeholder partnerships. • Addressing the importance and urgency of facilitating and fostering the success of multi-stakeholder partnerships to effectively deal with complex global development challenges.

40. Developing Capacity

41. Demand for Capacity Development • Strengthening the capacity of stakeholders to work together. • Rethinking roles and responsibility of each stakeholder. • Building committed leadership across sectors. • Finding a common language. • Creating a safe space and breaking taboos. • Fulfilling the need for more research. • Developing workable strategies and scaleable solutions.

42. Capacity Development Issues • Not all stakeholders have the capacity to form and/or sustain partnerships. • Issue of access. • legal, political, geographical barriers • Issue of resources • Personnel, capital, knowledge resources • Issue of perceptions • Mistrust, lack of common language, unequal legitimacy or relevancy

43. Capturing the Reality: Best Practices

44. Examples of Best Practices • To capture the reality some examples of best practice experiences globally are: • BASF Chemical’s “Eco-efficiency centers” in Latin America • Natura’s “Ekos Challenge” in Brazil • The CEMEX housing program in Mexico “Patrimonio Hoy” • Barlays Bank social program globally • Citibank’s program for Mexican immigrants in the US • SHG “Bank linkage” program in india • Bank Rakyat’s microfinance program in Indonesia • K-Rep Bank’s microfinance program in Kenya • Banco Real/ ABN AMBRO CSR program in Brazil • Acer Inc.’s CSR program in China • Nirma’s program in India “Making soap powder affordable for the poor”

45. Capturing Reality in Japan • Limited access to best practices of Japan companies as well as companies form other OECD and EDC countries. • Better understanding of the Japanese experience and involving Japanese companies can: • re-shape the global CSR agenda through improving the framework on how companies can best contribute to development • Identify new best practices with practical solutions and scalability potential

46. The Importance of Leadership

47. Instead of Conclusions… • Do we have the right questions? • Old questions still around in different surroundings • New questions not yet formulated articulately • Need to make them as specific as possible • How about the answers? • Do NOT over-focus on definite or over generalized answers • Dynamic process of continuously addressing the question • Build capacity for dealing with the questions through partnerships between government, business, civil society organizations, international financial institutions and development agencies

48. The Role of Leadership “The assumptions, tools and frameworks that leaders have used to make decisions over the past decade appear inadequate. It is imperative for leaders of all walks of life to develop new capabilities if they expect to be successful and to maintain relevance.” Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, WEF Annual Meeting, Jan. 2006

49. New challenge for current and future business and public sector leaders: how to capitalize on business opportunities while ensuring sustainability through addressing global development challenges?

50. The future depends on what we do in the present. –Mahatma Gandhi