Corporate Social Responsibility and Multinational Corporations

23 Jun 2012

By Christophe Bahuet, Country Director
5th Multinational Corporations Leaders' Roundtable, Beijing
23 June 2012

Good morning!

On behalf of UNDP, I am honoured to join you this morning and to share some remarks on UNDP’s vision for the private sector in sustainable development. I wish to thank the China International Council for the Promotion of Multinational Corporations for this opportunity.

Against the backdrop of an ongoing financial crisis, China’s economic performance has been remarkable. During this period, the private sector has been a centre of creativity and innovation that has provided much of our rapidly increasing world population with goods and services. At the same time, the trading of these goods and services has contributed to sustained domestic growth and poverty reduction for more than a quarter of a century.

Globally, such sustainability relies on the availability of three inputs – capital, workforce and natural resources. In much the same way as the sustainable development that UNDP advocates, combines economic, social and environmental as its three pillars, successful business comes from being able to strike a balance between these three resources.

Yet, in today’s world this may be easier said than done. At almost every turn, businesses are being faced with an increasingly complex list of demands and risks that extend beyond traditional bottom-line operating costs. Advancements in media coverage and communications technologies have made stakeholders far more sophisticated and outspoken, especially when it comes to companies’ impact on poor communities and the environment.

UNDP is increasingly aware of this situation and understands the need for a change in approach if businesses are to be part of a sustainable global economy. This is the spirit of the Global Compact initiative that the UN launched a few years ago. In China, the government has taken encouraging steps towards this goal, most notably in its promotion of Corporate Social Responsibility (CSR) as a means for improving the reputation and competitiveness of Chinese companies. Businesses are also recognising the value of CSR as they seek to build consumer confidence and establish new markets.

Still, in many cases worldwide, businesses continue to operate far beneath their potential by ignoring the valuable market potential associated with CSR. This has led to a lack of sustainability and a dramatic increase in the so-called mortality rate of businesses. In a report published by Bloomberg Businessweek, it has been said that the average life expectancy of a multinational corporation – Fortune 500 or its equivalent – is between 40 and 50 years. This figure is based on most surveys of corporate ‘births’ and ‘deaths’. A full one-third of the companies listed in the 1970 Fortune 500, for instance, had vanished by 1983 – having either been acquired, merged, or broken up. The average life expectancy of all firms, regardless of size, measured in Japan and much of Europe, is only 12.5 years. The report further points out that one of the reasons why corporations fail is because the prevailing thinking and language of management is too narrowly based on economics, leading managers to focus almost entirely on the economic activity of producing goods and services, and crucially forgetting that their organisations' true nature is that of a community of humans.

Ladies and Gentlemen,

Let me say a few words on a topic of high interest to UNDP, namely the relationship that China is developing with other developing countries, including investments and business activities. In the last decade, China’s overseas business interests have gained pace, with Chinese enterprises being encouraged by the ‘Going Out’ policy, to invest overseas. From 2005 to 2010 outward investment surpassed US$316 billion. By 2010, bilateral trade with Africa amounted to US$120 billion, while in the past two years China has been credited with providing more loans to poor countries than the World Bank. This has led to some improvements in local communities, though these achievements have been more of a bi-product of business than a conscious effort to promote sustainability.  

UNDP recognises that for many companies in China as well as in other countries, that CSR is a concept that is often perceived with caution. In a study published by Forbes Magazine, some of the biggest reasons companies cited for not engaging in CSR included doubt in its effectiveness, lack of global standards and a lack of resources. In recognition of this, UNDP is set to launch a new programme aimed at assisting Chinese enterprises to identify and incorporate CSR opportunities within existing management training. Through the framework of South-South Cooperation, the UNDP programme will also encourage companies to look at CSR as integral part of their long-term business models. A case study database will be developed to share experiences of Chinese companies abroad.

In the years ahead, as developing countries expand their standards of living, corporations will have an increasingly important role to play for both business operations and sustainable development. In this regard, I would like to extend a warm invitation to join UNDP initiative in promoting CSR and look forward to opportunities to work with you in the future.

Thank You!