‘’Rethinking business impacts on matters of general interest’’ : interview of JM Severino to the blog Ideas For DevelopmentSubmitted by Admin on Mon, 12/12/2016 - 14:14
While the French Development Agency was celebrating its 75th anniversary with a conference on “Commons and Development” early December, Jean-Michel Severino was interviewed on the topic by the blog Ideas for Development.
Reflection on common goods continues to be influenced by a binary vision of the world, shared between profit-making actors (companies, banks, investment funds), which only appear to be seeking to maximize their profits, and the others (States, local authorities, NGOs, foundations…), which only appear to be seeking the collective interest. However, a number of general interest causes are taken up by private initiatives, as explained by Jean-Michel Severino, former Vice-President of the World Bank for Asia, Chief Executive Officer of Agence Française de Développement (AFD) from 2001 to 2010, and current manager of Investisseurs & Partenaires.
To what extent does the concept of the commons compensate for certain limits of the public administration of goods?
The concept of the commons especially allows us to get out of the dichotomy between public and private goods, by which on one side there would be public actors – civil servants and politicians who would embody the general interest – and on the other, private operators exclusively dedicated to profit-generating activities. Yet, in reality, the two spheres are interrelated. All actors and all actions generate externalities, i.e. undesired positive or negative effects which have impacts on both the public and private spheres. A company, when it trains people, does not only allow them to access knowledge (which is more in the realm of the public sphere in France). It also indirectly transfers it to their descendants through social capital. In this case, we can talk of a positive externality. Conversely, a company may manufacture a very good product, but if it pollutes and destroys the health of its employees, it has a negative externality (in a field, health, which once again is a matter of public policies).
Many companies are aware of the nature of the externalities related to their missions, as they are of the way in which to conduct them. This is in particular, but obviously not only, the case of very large multinational companies. Their sensitivity to these issues has been scaled up over the past thirty years. When Danone Group sets up a major investment fund (The Livelihoods Fund) to address natural resources and biodiversity with other large enterprises, such as Unilever and Schneider, it does so for two main reasons: firstly, because these issues have an impact on its own food production chain; secondly, because it considers that international public action does not sufficiently take up these issues. Consequently, this group of companies is forced to act in order to compensate for a public shortcoming.
What contribution does the idea of externality make to reflection on the commons?
The concept of the common is itself rather generic. It concerns everything good or bad that we share. If we take a very concrete case: if you manufacture sweets in a developing country using imported sugar, you are going to create formal employment and provide your employees with a status which will give them access to a pay slip, therefore to credit for accommodation. This is a major positive externality. At the same time, your company is going to create problems of diabetes and contribute to worsening the country’s trade balance by importing sugar. These impacts are increasingly going to be measured using reliable calculation methods, based on methodologies that are known in economic policy.
The approach in terms of externalities can allow companies to have a less partial and short-term vision of their impacts, but a more holistic and especially more sustainable vision.
Consequently, this approach brings us to a more ethical understanding of the economy where the responsibility of each of us and of each company is called on, thereby evoking a world which is more open, more constructive, more participative, more generous and more effective. A world where development will be the result of optimizing the net externalities generated by each activity and whose engine may be found in both the best interest of each of us and in the motives of altruism of which everyone can be a depository.
CEOs of large companies, such as Safaricom in Kenya, say that they are not seeking profit, but want to change the lives of their clients. Must the private sector take on public service missions?
This has already been the case everywhere, including on our European markets. We cannot retrace the history of social protection in France without examining the involvement of industry leaders in housing and health insurance. Our public systems have marked a century of changes which have largely been initiated by employers, due to workers’ demands and the lack of public services, in order to address the absenteeism of workers. The health of employees remains a corporate issue in the short term, a crucial issue for operating accounts.
These actions fall within the scope of Corporate Social Responsibility (CSR), and we can always suspect a company of social washing, just as some do green washing. Nonetheless, many companies are reliant on natural resources and an increasing number of them are realizing that their long-term survival depends on them being effectively managed. Consequently, they seek to influence public policies, or engage in activities which have an impact on the management of these resources.
In your opinion, the private sector can thereby be an engine for “developing commons”. What does this mean for development actors?
It calls on us to seek new and innovative partnerships, with the aim of using companies (their networks, their expertise…) to achieve public policy objectives. For example, the L’Oréal Foundation, a cosmetic manufacturer, in partnership with UNESCO, has exploited one of its most important positive externalities – dialogue in beauty salons – in order to launch highly effective action to fight against AIDS, by supplying hairdressers with training kits to disseminate a good understanding of the endemic and talk about safe-sex behavior. This has strengthened L’Oréal’s image in the eyes of a whole host of actors and the fight against AIDS is making progress. We should not forget that a company, it is clients, suppliers and employees – meaning a lot of people for a large company, which can use this link, this network, to sell or promote solutions that serve the general interest.
All in all, without falling into naïve optimism and being careful to examine situations on a case-by-case basis, a private economic activity can very well turn a company or network of companies into a custodian of a common.