Does CSR Affect Development?

Stephen BrammerCentre for Business Organisations and Society

Key questions

1. What is the capacity for multinationals to (positively) influence development through their CSR activities?

2. To what extent is this capacity actually delivering developmental benefits?

Multinationals have the capacity to act

1. 46 of the planet’s 100 largest economic entities were companies in 2007

2. In 1997, the top one hundred firms controlled 16 percent of the world’s productive assets

3. In 2006, the largest 100 MNCs employed about 15.5M people, had total sales of over $7TN, and total assets in excess of over $9TN

Positive impacts

• It’s misleading to see the social responsibilities of multinationals as distinct from their economic impacts

• In employment, for example, for every person directly employed it is thought that between 3 and 7 other jobs are created in related industries

Positive impacts

• In general, foreign multinationals pay 40% higher average wages than local firms, and the differential is higher in low-income countries of Asia and Latin America. (OECD, 2008)

• Even after controlling for differences in industry, capital intensity, worker skill etc MNCs pay between 11% and 19% better than local companies in the developing world

Positive impacts

• Not all impacts require location in LDCs

• Many MNCs occupy positions of considerable power in their industry value chains, through which they can (attempt to) influence the practices and strategies of related companies

• Responsible supply chain management, though challenging, is becoming more deeply embedded

Positive impacts

• “Philanthropic” giving is another important element of MNC activities in LDCs

• Business has the capacity to be innovative (& unaccountable) in its giving and to deliver benefits to society through this

• A substantial proportion of the giving of many MNCs goes to LDCs – 35% of IBM’s $152M giving went to LDCs in 2007

Conclusion

The discourse on MNCs and development is often:

• Overly bleak, ignoring many of the substantial and positive impacts that MNCs have in LDCs

• Unappreciative of the difficulties encountered when trying to implement responsible policies