Development work and the private sector - open for business?
“Shared values “ and healthy future customers
NEW YORK, 3 December 2013 (IRIN) - The relationship between businesses and non-profits has traditionally been an adversarial one, with no shortage of mistrust between the two, who pursue seemingly contradictory goals: profits on the one hand and solving the world’s problems on the other. But many players in the health sector now see a shift in the way businesses, non-profits and governments are working together.
In a climate of rapidly shrinking donor funds, governments and non-profits are increasingly tapping corporations for their skills and money. And businesses are, in turn, re-evaluating the long-term benefits of their philanthropic and corporate social responsibility efforts, finding ways to direct their core business practices towards social good.
“What we're seeing is much more dialogue among sectors and a move away from an attitude of mistrust to one of more openness towards collaboration,” says Pam Bolton, vice-president of the Global Business Coalition on Health
, a New-York based coalition of over 200 companies that seeks to address global health problems. The group bestows annual awards on companies engaged in successful partnerships with governments and non-profits in developing countries.
Bolton says she sees a shift taking place on both sides: NGOs are increasingly drawing on private sector assets in a more strategic way, tapping them not simply for cash hand-outs but for business skills and marketing savvy, for example. And she detects a sea change in how companies view their social investments; many are moving beyond having just a “social responsibility” arm that is removed from the workings of their actual business.
“Historically, companies have used their social investments and philanthropic efforts primarily to earn social license and win the support of the communities in which they are engaged… to look like good corporate citizens,” says Bolton. But increasingly, they are moving away from “a philanthropic, reputation-driven approach” to one that embraces their core business activities, she says.
Harvard Business School’s Michael Porter began articulating this new approach a couple of years ago with the concept of “shared value”. In 2011, he wrote in the Harvard Business Review
: “Solving social problems has been ceded to governments and to NGOs. Corporate responsibility programmes - a reaction to external pressure - have emerged largely to improve firms’ reputations and are treated as a necessary expense. Anything more is seen by many as an irresponsible use of shareholders’ money.”
He went on to argue that viewing economic efficiency and social progress as contradictory goals has prevented business - an “unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth”, in his view - from harnessing its potential to address the problems of society. “Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face,” he wrote.
Now, a growing number of companies, including General Electric, Unilever, Nestle, Johnson & Johnson, Becton Dickinson, Proctor & Gamble, and Novartis, have taken the “shared value” concept on board and are combining forces with NGOs, donors and, often, governments to improve health delivery. While they have not lost sight of their profit motive, they are taking the longer-term view that a healthier, more skilled and educated society will ultimately be of greater benefit than quick profits, says Leith Greenslade, private sector representative of the MDG Health Alliance
Unilever began pioneering the “shared value” approach five years ago with its support for the UN Children’s Fund’s (UNICEF) public hand-washing programme
. In marketing its Lifebuoy soap, Unilever offered sophisticated advertising for the hand-washing campaign. And Nestle - long vilified for undermining breastfeeding through aggressive promotion of its infant formula - is producing low-cost micronutrient-enriched
food products. Proctor & Gamble promotes clean water access for children, along with its water-purifying tablets
. Becton Dickinson has used new medical technology to create self-destructing syringes
. And Swiss-based Vestergaard-Frandsen
has developed insecticide-impregnated mosquito nets and portable water filters.
Additionally, the Mining Compact for Child Health
is a multi-partner initiative that sees the mining and extractive industries playing a greater role in child health in the communities in which they operate. For example, Teck Resources, in its partnership with UNICEF
, makes zinc and oral rehydration solutions available to combat diarrhoea in young children in India, where the illness is a leading cause of death among children under age five.
There is a realization, says Greenslade, that product sales are ultimately linked to the economic development of an entire community.
She cites India as an example of a country where the private sector is undergoing a major shift in the way it views public health goals. Thanks to a government subsidy of US$30 per person, poor women are now giving birth in private hospitals in Gujurat
. This has brought about a “striking reduction” in maternal mortality, Greenslade says.
But not everyone is as optimistic about private sector involvement in public healthcare delivery in that country. Anna Marriott, Oxfam’s health policy advisor, points to evidence
that women with complicated births have been turned away from private facilities. She says that, in some cases, women have been encouraged to have unnecessary hysterectomies
in private healthcare facilities to generate more profits. She also cites a scheme
in which the government gave free land to private hospitals with the proviso that they provide care to low-income patients; the government later complained that the private hospitals failed to stick to their side of the bargain.
The India example illustrates the complexities inherent in public-private partnerships. Marriott notes a “huge amount of talk” about the benefits of such private partnerships within the past five years but says the “win-win” rhetoric allows for no real analysis of the “potential - let alone real - risks of these kinds of partnerships.”
She continued: “We have to be realistic that the private sector is there to make a profit. We will see them cherry-pick their patients or parts of the market that will bring the most profits, but these are not always where need is greatest.”
She says, for example, that the expansion of South African private healthcare companies like Netcare into other parts of Africa, part of an initiative backed by the World Bank, is eroding healthcare access for poor people and draining healthcare professionals from the public sector. Another problem, she said, is that poor countries usually lack the capacity to regulate the activities of the private sector.
Marriott says Oxfam is supportive of a “shared value” approach that sees businesses moving away from “tokenism” and mainstreaming their corporate responsibility into their core business, “as long as they are using just and fair practices and as long as there are no hidden motivations. We have to ensure that they mean what they say and that these practices contribute to greater public good.” Each initiative, she said, should be evaluated on a case-by-case basis.
“We have to be realistic that the private sector is there to make a profit. We will see them cherry-pick their patients or parts of the market that will bring the most profits, but these are not always where need is greatest”
Marriott says NGOs vary widely in their views of public-private partnerships, and that the “upbeat rhetoric” is drowning out voices calling for more a balanced debate about the risks.
Greenslade, however, believes there is a generational divide. People over 45 tend to see a division between non-profits and corporations, she asserts. “Any company they think is trying to sell them something is under suspicion,” she says, while the younger generation sees “the ulterior motive of profit is part of the solution”.
“The young social entrepreneurs coming out of university don’t see the same divisions between public and private sectors. They’re not ashamed to be making money, but they want to shift their efforts to products that will benefit poor people and take care of public health goals,” she says.
Greenslade also argues that non-profits recognize that when a company is involved, and its products are being sold, the programme is often more sustainable than when it depends entirely on donor funds.
“Eventually the funds dry up, and things often relapse,” she says. NGOs from Asia to Africa to South America are experiencing diminishing donor funds
in the wake of the 2008 global economic crisis. Many are operating with skeleton staff and, in some instances, face closure.
Mary Beth Powers, child survival campaign director at Save the Children
, notes that many non-profits now have a “bigger relationship” with corporations. She discerns a growing desire to work collaboratively because of the scarcity of resources. The impact of HIV/AIDS on company bottom lines was a turning point for business, in her view, and led corporates to start thinking more about their role in public health.
“We’re increasingly seeing much more of a partnership in developing ideas of what we can do together. There is a new willingness on the part of the UN system and many governments to see a collaborative role for business, whereas 10 years ago there was a lot more questioning about it,” she says.
US-based non-profits are probably moving more quickly in this direction than their counterparts in other countries, she notes, partly because of the legacy of the private healthcare system and the prevalence of pharmaceutical marketing in that country.
Many companies now offer skills development and leadership and management training for frontline healthcare workers who may one day sell or consume their products, but who now are giving basic care to families. Others, like Merck and GlaxoSmithKline, are also giving grants to train health workers. “These endeavours are not really promoting products of these companies, but they are critical to primary healthcare,” says Powers.
But some express concern about the potential “hidden motivations” and “merged agendas” of initiatives like these. “If their motivation is to one day sell their products or manipulate a bias towards their products in the training of professionals, we would be very concerned about that,” said Marriott.
Certainly, when the parties come together, they must grapple with very different cultures. Powers believes the involvement of the private sector can improve standards and stimulate governments to “up their game, too”. Governments usually work at a slower pace than companies, Bolton agrees. She says that partnerships between NGOs, governments and the private sector work better when there is an acknowledgement that these organizational differences exist. This leads to a “deeper level engagement” she says.
Bolton is optimistic that collaboration is becoming the new normal. Meanwhile, when it comes to philanthropic and corporate responsibility programmes versus shared values, companies are on different points of the spectrum, with some adopting a mix. Just as they diversify their portfolios, they are diversifying social investment too.
Some health and social issues, adds Bolton, do not lend themselves to a market-driven approach, but “there is a grey area that companies are prepared to step into, to take the risk. They expect that over the long-term this could translate into a pure business.”
But there is always the risk that these partnerships - often worth millions of dollars - can be tainted by corruption. For example, in November, the Global Fund to Fight AIDS, Tuberculosis and Malaria temporarily suspended mosquito-net suppliers Vestergaard-Frandsen and Sumitomo Chemical Singapore after their employees admitted to paying bribes to Cambodian health officials. Because the companies supplied 80 percent of the nets bought by the Fund, fears have been raised about a shortage for next year.
Mikkel Vestergaard-Frandsen, CEO of the company and a poster child for “shared value”, said he was “shocked” by the actions of the corrupt employees, who are no longer with the company.