During a September 2014 visit to Paris I met with the chairman of OECD DAC, Erik Solheim. He shared his views on how governments and companies can work together to create a sustainable future.
What is OECD-DAC?
OECD DAC is often described as ”the venue and voice” of the world´s major donor countries. It is the international institution that decides the rules for what can be defined as development aid. If a country sets an aid target at, just say, 0,7% or 1%, we set the rules for what can be included within this percentage. Examples of what can be defined as aid include export support and a peace keeping military operation.
We try to focus our work on what is most effective in lifting people out of poverty, and we try to contribute to countries that are experiencing war and conflict. How can countries work to limit war and conflict? How can development aid budgets be used in such a way that they create peace? How can we use our budgets to improve the environment and at the same time raise people out of poverty? These are all important questions that we address.
Why are you concerned about business and economic and social development?
Private corporations play a crucial role in economic and social development. The scale of direct foreign investment is – and always will be – larger than the sum total of development aid. One way development aid can be used is to promote more responsible investment, as well as larger donations. If we are concerned about lifting people out of poverty, we have to work closely with private corporations. We simply cannot afford to ignore the important role business plays in economic and social development.
Development policy around the world was long-dominated by people who believed that poverty was caused by exploitation and by too much investment, whereas we now know that the complete opposite is the truth: The poorest countries need much more private investment and a larger private sector. Unfortunately there is no Google strategy for Burundi or a Microsoft strategy for Guinea Bissau. Very few see business opportunities in these countries, so the poorest countries suffer, despite desperately needing much more and better private investment in order to reduce poverty. There is simply no doubt about that. Just take a look at the enormous development successes in China, Korea, Singapore, and Turkey, where millions have been lifted out of poverty; that is connected to, among other things, major private investment.
How does OECD DAC work with private sector?
We work together with the World Economic Forum in Davos, as well as with a number of companies. Most importantly, though, we work with Ministries of Foreign Affairs, along with development institutions. We also work with NORAD and SIDA on how to get more and better investments.
As I see it, Sweden’s SIDA is an excellent example of best practice: They have held meetings with major global Swedish companies, such as IKEA, Ericsson, Volvo, and H&M, and discussed how SIDA can support them in investing in developing countries, such as in Africa. There is no need for help on investing in China – that is working out absolutely fine on its own – but in Africa there are very few investments and what investments there are continue to be focused on commodity trade and the exploitation of oil, gas, and minerals, etc. There is very little clothing production, which has been the driver for social and economic development in the Far East. OECD works with what is the right political focus for getting this system to work: How can a country create an investment frame of laws and policies that increase and attract further sustainable investments?
How do you think companies can become better at setting sustainable goals? Do you have any examples?
Unilever is the most prominent international example of a company that has set ambitious goals for sustainability. By 2020 the company aims to have their entire value chain pass an environmental sustainability test. This is a very ambitious goal for such a large company, and it opens Unilever up to criticism from media and civil society if it fails to succeed.
Another company that has set ambitious goals on sustainability is Willmar. Willmar is one of Asia’s largest producers of palm oil, owning 50% of the market. The company says it will halt any production that involves liquidation of the rain forest. This type of commitment has far more impact than a collection of small development aid projects.
OECD DAC produces large amounts of research and impact evaluations of development aid projects. How do you think that knowledge may be transfered to CSR projects?
Impact evaluations of CSR will show value creation, and will also point to issues that can be improved. Politicians must work together in cooperation with private corporations for a better work environment, improved human rights, and increased sustainability. It is important that politicians and media refrain from attacking private corporations, even if concerns arise through an impact evaluation. Instead, politicians and the media should embrace companies’ transparency, and continue efforts to work together on social and economic development.
If, through evaluations, small issues are discovered it means that private corporation will have to work towards improvement. It doesn´t mean that it is wrong for that company to invest in that country, which is unfortunately what happens at times. If we were to wait until all conditions prove to be perfect before anyone invests in emerging markets and developing countries then you can just forget about it.
Fortunately, if companies take the time to explain their intentions then people will understand. The company needs to be allowed to make mistakes but it also requires that the company contribute to telling the whole story about how important it is to distribute power.
You believe in distribution of power to ensure economic welfare and development. How can we ensure that distribution of power increases?
Most people today, with the exception of the poorest, have a mobile phone. That is almost the first thing people buy after having enough rice or corn porridge. This is distribution of power. I have been to places where people have nothing: They have one set of clothing, one t-shirt, one pair of trousers, and hardly enough food, but they still have a mobile phone. So that says something about how people prioritize. They prioritize buying a mobile phone before anything else, and this is of course because through their phones they get access to information, knowledge, and they can connect with relatives and other loved ones.
Mobile phones are also a source of power. In many Asian countries poor people have always had to queue for services, and that takes time. They can hardly get to the bank as the distances are great and public transportation is scarce. When they arrive at the bank they´re placed at the back of the queue. If they ever reach the counter, they often face a commission to the bank of 30% or so.
Today it is possible to enter a tobacco store and transfer money to a wife in another part of the country, and even transfer small amounts to others. This is essentially micro-financing – and that is distribution of power.
Distribution of power contributes to poor people not being as dependent on those with resources. They are no longer always at the back of the queue, but instead have a mobile phone to perform their desired tasks, such as accessing banking services.
You have been engaged in peacekeeping. How can business contribute to peace among people and countries?
There is no easy answer to that. In general, economic development leads to a more peaceful environment. There is less chance of civil war.
There is less war in wealthier countries, and while there are many reasons for that, at the most basic level it is less attractive to join armed militant groups if you belong to the middle class and have something to lose. If you don´t have anything to loose by joining these groups – and if you are very poor – there is only need for a very small amount to recruit people as soldiers. So for many reasons economic development leads to a more peaceful environment.
In general lifting people out of poverty will contribute to less war and conflict, but that of course not an absolute truth. There are wars and conflicts in more wealthy countries as well. It is very important to remember that the instruments used for doing good can also be used for the opposite. They can be used to spread the most unbelievable, grotesque, and negative propaganda.
Information used to be a scarce resource. With mobile technology and the digital transformation we are experiencing, mobile photos of abuse can be distributed to the world through social media and the Internet. The world has become more transparent and it is much harder for those in power to hide what´s going on. Additionally, people can now spread and use mobile health services, digital banking services, and education through the Internet and social media. These services are democratized in a totally unique and new way.
Take education as an example. Many Asian countries now offer better education than their western counterparts. Mobile phones are used for giving teachers information. In China and Vietnam young teachers without experience are given mobile phones so that they can connect with a network of experienced teachers, seek guidance, and learn from them.
To evaluate value creation in international business and, for example, telecommunications in emerging markets, you would have to start with the individual and what it means for the women in the rice fields. What changes have access to mobile phones had for them and their lives? That is the starting point – not high-level politics. Then you would of course have to talk to governments and business executives to get their perspectives.
Do you think that governments and private enterprises have to work together to reach goals on sustainability?
In many countries there remains a barrier between business and government. Very few people make a career change – going from business to politics or vice versa. On the other hand, there is a clear responsibility on both sides to work together. Unfortunately politicians are not very concerned about doing right, but are instead more interested in how things play out in the media, and what may add to a good or bad reputation.
Private corporations should be more daring and invite governments, clients, and people in general to see the positive effects of what they are doing. They should trust that in many cases what they are doing contributes to positive social and economic development.