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Tuesday, December 02, 2008

Net Impact: The Private Sector's Role in Building Stable Business-Friendly Environments

By Francisco Noguera

FrancescaGuest blogger Francesca van der Feltz is a graduating MS student with a focus in Asian Regional Business Environment at Thunderbird School of Global Management. She is the Net Impact president and Service Corps non-profit consulting leader on campus.

She earned a BA in journalism from Arizona State with focuses on political science, economics and law, and published front-page articles with the Arizona Republic's data team. She studied Dutch in the Netherlands and is learning Mandarin Chinese. She now focuses on sustainable trade and business practices in Asia.
By Francesca van der Feltz

Searching for amazing win-win solutions is a lofty goal, and my search at the Net Impact conference began with a session that explored the stake businesses have in supporting economic development and stable societies in the locations in which they operate. The panelists came from notable diplomatic and development organizations, and they each had a unique angle to discuss based on the programs they work in.

Business as a peacebuilder

The first panelist to present was Melissa Powell, head of strategy and partnerships for the United Nations Global Compact (UNGC), where she leads the work on business and peace and UN-business partnerships. Powell articulated the UN's view of the private sector's role in conflict prevention and peace building, saying the private sector is a stakeholder in society and should therefore work actively to create a sustainable and fair global economy. Powell pointed out that business by nature has an interest in stable environments that allow for strategic decision-making.

The UNGC helps businesses integrate 10 core principles into their internal structure and supports external partnerships that allow them to engage socially. Of the three levels of engagement-starting at basic compliance, then ?do no harm' and finally active peacebuilding-Powell focused on the last. The UN seeks to promote the role of the private sector in zones of conflict to mitigate the negative impacts of their operations and enhance the capacity of companies to contribute positively to development and peace. Any specifics as to how were to follow in the Q&A session.

Private sector connecting with struggling capitalists

The second speaker was Stephen Kaplitt, director of the U.S. State Department's Economic Empowerment in Strategic Regions (EESR) initiative. This relatively new program focuses on facilitating opportunities (rather than directly allocating funding) for local entrepreneurs and businesses in challenging regions, recognizing that job-creation and economic growth are strong medicines against conflict and extremism. Kaplitt identified the root of terrorism not as poverty, but as extremists' exploitation of the impoverished. The EESR is the advocate for these small business hopefuls, connecting local capitalists (who would be overlooked by other aid programs) with the investing community.

They actively seek local entrepreneurs with unmet needs, network them with MBA students to develop their business plans and finally pass these plans on to potential investors. Kaplitt summarized that capitalism endures even in the most challenging regions but needs help from the outside to thrive. As a diplomatic agency, they are looking to leverage the U.S. economy to invest in strategic regions-ideally bringing peace and stability through the local population.

Peace promotes business

Steve Killelea, the third speaker, has an impressive background as a serial business and philanthropic entrepreneur, having founded organizations such as Integrated Research Ltd, The Charitable Foundation and the Global Peace Index (GPI). Through his work in the Institute of Economics and Peace, Killelea identified the integrated relationships between business, peace and economics. During the discussion, he highlighted measurements that show why the private sector has an interest in creating and maintaining peaceful environments. He started with the broad concern that all global citizens have in peace: our looming global problems require global cooperation, making trust a prerequisite for survival in the 21st century. This led to an overview of the profound business-peace relationship.

The GPI measures specific indicators of the factors of peace within a country (such as the level of trust between citizens, relationships with neighboring countries, corruption, the functional level of the government, education, and per capita income). Killelea then explained that there was strong correlation between the GPI and the Human Development Index-as well as the size and wealth of markets, showing that with increased peace comes an increase in markets and consumer spending. Bottom line: peaceful environments equal better business environments. For most.

Private sector can develop peaceful environments

The final presenter was Patrick Bryski of BearingPoint's emerging markets segment. As the vice president and managing director of the segment and sector leader of the consulting firm's financial and private sector development business unit, Bryski was a worthy example of developmentally oriented business, but he certainly did not represent a typical company and what it can do to further peace. With USAID as a major client, he was able to explain how his segment does post-conflict economic reconstruction and development through fiscal and financial sector reform, legal reform and private sector development. The segment's work creates environments in which the private sector can lead economic growth through open and well-regulated markets-but Bryski did not hit on any specific way businesses in general could promote peace, other than simply existing and thereby moving the economy forward.

Questions and (mostly) answers

When asked during the Q&A that followed for an example of a company that enhanced the peace process, Powell described Nestl?'s hiring of former combatants in Colombia, giving them a constructive living that updated their skill sets. Otherwise, the discussion was sadly void of real examples of businesses developing peace.

There were, however, generalities about how businesses can help or hinder stability. Powell explained that the UN, for example, is trying to engage the private sector to harness resources and skills to develop economies and business environments, instead of just using charity models. Bryski called it the "self-fulfilling environment" in which businesses develop the environment they invest in. Specific actions were also recommended, such as engaging locals in every level of management to develop local capacity, bringing sound business ethics and values to the local private sector, creating HR policies aimed at conflict prevention and leveraging companies' influence over governments toward development and peace goals, to name a few.

There were also cautionary comments. Kaplitt pointed out that businesses cannot be looked to for nation building, and Powell explained that while companies sometimes provide public-sector services in order to operate, they also need to focus on building the capacity of the governments to take responsibility. Kaplitt said business cannot be stimulated in a real conflict zone-some form of peace needs to be established before business can be built up to then help prevent conflict and do peacekeeping.

Michael Shank, communications director at George Mason University's Institute for Conflict Analysis and Resolution, did an excellent job moderating and kept discussion flowing even during PowerPoint presentation changes. He also recognized the notable lack of non-developmental private sector presence on the panel. His closing remark said it all.

"Next year, we'll get Dow and Wal-Mart and others involved." Indeed.

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