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Business and Society
BusinessThe collection of private, commercially oriented organizations
SocietyA broad group of people and other organizations, interest groups, a community, a nation.
Defining Business Objectives
There are five+ one major types of business objectives:
• Survival, • Profit Maximization, • Growth, • Managerial Objectives, • Sales Revenue Maximization,
&
Image and Social responsibility.
Growing Influence of Companies
Country/CompanyGDP/Revenues ($ bil) Global 500 Rank
1. United States $13,202 N/A2. Japan 4,340 N/A3. Germany 2,907 N/A4. China 2,668 N/A.
22. Exxon Mobil 486 123. Poland 339 N/A24. Austria 322 N/A25. Wal-Mart 315 226. Norway 310 N/A27. Saudi Arabia 310 N/A28. Royal Dutch Shell 307 329, Denmark 275 N/A30. BP 268 4
Present Business Environment
Increasing Demand from the Government
+
Increasing sophistication of general public
+
Increased Advocacy groups and watch Dogs
+
Regulatory regimes and Media TRPs
=
Costly and Challenging operating Environment
Why Interface between Business and Society on Social Issues Contd….
• India ranked at 119 in Global HDI index• More than 500 million poor• 62% literacy Rate• 250 million do not have access to basic health services• 450 million to not have access to Sanitation
In contrast• India has one of the highest mobile penetration• Some of the low cost business solutions have worked
This proves that business has the ability to be more effective in market led solutions in some situations
• Both are living organisms and have symbiotic relationship– As seller of goods – As buyer of goods and services– As employer and employee– As individuals and pressure groups– As Govt and regulator
• Issues that matter– Prices– Safety– Well Being/ Trust – Income– Opportunities– Transparency
Contd………Why Interface between Business and Society on Social Issues
Societal Aspirations and Expectations
• Demonstrate a commitment to society through action.
• Insulate society from any negative impacts of company operations, products and services.
• Share benefits of company activities with key stakeholders.
• Increase revenues of company through innovative approach.
• Wealth creation and equitable distribution
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Understanding Business Impacts
What groups will be
affected?
What groups will be
affected?
How will they be affected?How will they be affected?
What is the timing of initial and
later effects?
What is the timing of initial and
later effects?
What is magnitude of the effect?
What is magnitude of the effect?
What is the duration of the impact?
What is the duration of the impact?
To what extent will the impact be
diffused in the community?
To what extent will the impact be
diffused in the community?
Evolution of Stakeholder Expectations
Economic Environment SustainabilitySocial
Govt
Media Groups Activists Peers
Community NGOs
Complexity of Stakeholder Expectations
Trust Me Tell Me Involve MeShow Me
Govt
Media Groups
NGOs
Peers
Community
Activists
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Stakeholder Interface with Direct and Immediate Business Impact
• Legal license to operate:– Land title– Permits– Environmental approvals
• Social license to operate:– Access to land: perceived legitimacy of title– Community permission: ‘If you don’t listen when we
have a small problem, we’ll make a big one”– Social acceptance: ability to remain, expand, and
operate uninterrupted
• Koodankulam- Atomic power plant • Nigeria – Niger Delta• Peru – Minera Yanacocha• Gulf of Mexico- BP Oil spill• Singrur- Tata Nano
Examples of Unmatched Expectations and Its Consequences
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Failed Engagement Costs
• Security • Project modification• Risk management• Material damage• Lost productivity• Capital• Personnel• Reputation• Redress
Mapping Stakeholder Expectations- Illustration
Stakeholder Significance to Business/ Risk Linkage/ Opinion Influencing
Expectation
National level Politicians High - Fluctuates Large physically visible project
Regional Politicians High- Fluctuates -do-
Policy makers/ Compliance Depts.
Medium - Sustained Adherence to best standards
Local Govt. stakeholders High- Sustained. Influenced by above 3
Supplement local development effort
Advocacy groups High- Fluctuating Local development. Disclosures/ transparency, participation in development process
Local stakeholders/ influencers
Medium- Sustained Creating platform for their visibility through opportunities of local development
Community (in project affected areas)
High- Sustained Participation in progress
Public Low Seen to be doing good
Perceptions, Facts and Challenges
Issue Essar Community Challenges
Employment Cant employ locals. They don’t have required skills
Employment is my right.
Not everyone can be employed. Safety at site
Contracts Technical jobs cant be given
We are given only low value contracts. Company has no serious intent to develop us
Developing contractors and entrepreneurs requires much more than just training
Development Infrastructure “If I have water- am I developed”
Infrastructure is visible immediately and development is not
CSR To keep the community engaged
Superficial. No vision on “change” or “solution”
Requires significant investment and long term plan
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Cost of Conflict
Some survey’s suggest: • >30% of cases involve a fatality/injuries, damage to
property and/or suspension or abandonment• 50% involve physical blockade• Environmental/community health & safety issues are
the most common proximate cause of conflict• Most common underlying issues are economic and
social – distribution of benefits, communication, consultation processes – that affect the quality of the relationship
Engagement Models with inclusions
Economic Development, Health,Education, Infrastructure Development
Local Cooperatives Best R&R policies Local Employment Policy
Best HR PoliciesTraining & developmentEmployee volunteer programmeInternal moves
Business Issues (Core Sector) and CSR
Business Issue Where CSR can help
Community expectations Help manage expectations through continuous engagement. CSR will enable engagement on developmental issues hence open a neutral engagement front
Contracts Help in developing small time contractors from community to offset pressure from big daddies
Employment Provide skills for enabling employment elsewhere
Political influence Create forums where community leaders can stand besides Essar
Translating Perceptions, Facts and Challenges into Business Solutions- Core Sector
Issue Business Community Challenges Potential Solution
Employment Cant employ locals. They don’t have required skills
Employment is my right.
Not everyone can be employed. Safety at site
Prepare people with skills before the start of the project. Provide multi skills to align with changing needs during project cycle
Contracts Technical jobs cant be given
We are given only low value contracts. Company has no serious intent to develop us
Developing contractors and entrepreneurs requires much more than just training
Have a long term vendor development policy that enables vendors to evolve at an early stage
Development Infrastructure “If I have water- am I developed”
Infrastructure is visible immediately and development is not
Minimize gap between “your” and “their” infrastructure. Leverage their resources and participation
CSR To keep the community engaged
Superficial. No vision on “change” or “solution”
Requires significant investment and long term plan
Participatory planning
Case Studies Where Business Models have Impacted Society
• Financial Sector-
– Awareness on Financial Tools has helped increase savings
– Micro finance has triggered rural economy and consumption
– Mahindra rural home finance
• FMCG
– Project Shakti and E- Choupal are globally acknowledged examples
• Kisan Kendra/ Agri Information and Services
– Tata, Mahindra, Rallis
• NSDC
– Created training modules with private sector particpation and sponsorship
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