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The Partnership Model

The corporate sector is today facing an unprecedented challenge on two fronts. Driven by international competition to expand into new markets and develop untapped resources, it is increasingly finding itself moving into countries where violence and chronic instability are the norm. Simultaneously, it is operating in a commercial environment in which consumers are demanding more and more accountability in the way companies pursue their operations © By Jordana Friedman and Nick Killick*

Unfortunately, these two phenomena do not lie easily together. The free market may be the prevailing philosophy of our time but it is frequently coming into conflict with our collective sense of what is right and wrong, what is acceptable and what is not. The corporate sector is just beginning to wake up to this fundamental tension and is finding, to its surprise, that it is caught right in the middle.

How to reconcile these two apparently conflicting trends is a question many multinational companies (MNCs) are beginning to ask themselves with ever greater urgency. There is little doubt that instability is bad for business. Companies operating in unstable countries or regions may well see their assets seized or destroyed, their staff threatened or killed, their markets collapse and their profits slashed. Their mere presence can exacerbate tensions, fuelling the violence and providing a target for disaffected groups. In such circumstances, their actions and behaviour become a focus of international attention, prompting ever-closer scrutiny of their role in the conflict and potentially causing serious damage to their world-wide reputation.

The familiar examples of Royal Dutch/Shell in Nigeria, Freeport McMoran-Rio Tinto in Indonesia and BP in Colombia, amongst others, have served to highlight this complex interaction between business and conflict. In circumstances where access to wealth and resources is a driving force in a conflict, businesses of all kinds, but particularly MNCs, can become the targets of violence. This may either be because of specific actions on their part or simply because of their mere presence in an unstable country, or indeed both. The most obvious examples of the former come in situations where companies and communities clash over the exploitation of delicate but resource-rich environments. More often than not, the sources of the conflict lie firstly in the environmental damage visited upon lands owned and occupied by indigenous peoples, secondly in the failure of the companies, usually extractive and logging industries, to offer adequate compensation for the damage, and, thirdly, in the aggressive tactics pursued by the companies in response to the inevitable and legitimate protests which follow.

Conflict is bad for business. Photo Linda Graham

In other cases, the conflicts may have little to do with the companies at all, at least in the first instance. The very presence in a poor or volatile region of a player of such economic influence can exacerbate or create the potential for violent conflict, even if the conflict seems to have more to do with ethnicity or political protest than economics. In other words, although there may not obviously be a strong resource dimension to a conflict, there is always room for people to challenge the economic status quo as a way of furthering other ends.

In such situations, however, companies are far from being helpless. Just as they can exacerbate tensions and fuel conflict, so they can contribute to building peace and security. Unfortunately, business has traditionally resisted involvement in activities that do not reflect its core competencies. But as companies continue to expand their influence economically and socially as well as geographically, they will increasingly have cause to address issues such as human rights, social justice and sustainable development. This is not simply because it is necessary or 'right' but because it is in their interests to do so.

The challenges facing MNCs should certainly not be under-estimated. Conflicts are complex processes. It is not always obviously apparent when and from where they are likely to erupt. Each one is essentially unique even if some appear to share many of the same traits. It is for this reason that they need to be afforded special consideration. Basic standards of corporate social responsibility may be sufficient in developed countries but fall well short in situations where more is required than social philanthropy and simple good practice. This is an important distinction to stress because in less stable societies company strategies need to be focused rather than universal, holistic rather than piecemeal.

Recommandations Partnership • Consult frequently with local academic and political experts on community needs and expectations, political and economic challenges, etc.; • Consult with all relevant parties in an area where business operations will take place (local communities, local and regional authorities, governments, etc.); • Negotiate terms to satisfaction of all relevant parties before initiating projects; • Design community development and environmental protection projects with multilateral and bilateral development agencies such as The World Bank and the United Nations Development Programme or humanitarian organisations which have core competencies in this area; • Identify and support local, national and regional development and conflict resolution initiatives by other parties such as NGOs, churches and local communities. Core Practice • Incorporate a statement illuminating the intent to minimise conflict in a corporate code of conduct; • Publicly commit to respected human rights standards such as Amnesty International's Human Rights Guidelines for Companies, the UN Declaration on Human Rights and The International Covenants on Civil and Political Rights and on Economic and Social Rights; • Support either internal or external research to identify general, region-specific and industry-specific conflict risks and conflict impacts; • On the basis of such research, identify policies and practices that would minimise both the threat of conflict to the company (risk) and the possibility of conflict occurring as a result of company action (impacts); • Work with other companies in a region or industry to establish like-minded policies upholding environmental and human rights standards; • Develop and implement mechanisms for internal and external verification and monitoring of company policies dealing with conflict mitigation (including codes of conduct, corporate statements, audits, impact assessments, etc.); • Pursue inclusive employment practices that provide enhanced opportunities for indigenous or local populations; • Set targets for percentage of workforce that is indigenous/local, percentage of senior management that is indigenous/local; • Support trade union or alternative collective bargaining processes for workers; • Support education and training of indigenous and/or local employees; • Screen all members of security forces for prior human rights abuses or criminal activities; • Participate in human rights training and non-violence for security forces, police and armed forces. Social Investment and Philanthropy • In consultation with local organisations and others, contribute to: traditional development initiatives such as infrastructure development (building roads, establishing telecommunications systems, building wells, irrigation systems and water sanitation facilities; constructing hospitals, schools and homes; supporting agricultural activities) community empowerment (funding doctors and teachers; providing technical training and educational materials, etc.). and post-conflict activities (retraining of former combatants, gun buy-back programmes, land mine clearance, land mine victim assistance and destruction of weapons; • Support elections, democracy organisations, independent newspapers and other activities promoting a transition to democracy (providing ballot boxes, funding voter education programmes); • Provide facilities, transport, office equipment, accommodation and other necessary resources to parties involved in negotiations; • Offer business skills to support the peace process (public relations, facilitation/ mediation, language and technical expertise); • Contribute resources to post-conflict reconstruction through development and investment partnerships with bilateral and multi-lateral development agencies, humanitarian organisations and other companies. Policy Dialogue • Lobby or advise outside governments whose policies (such as sanctions) may be contributing to conflict in the region; • Influence the actions and policies of instrumental third parties such as the World Bank, the UN etc; • Facilitate peace talks by acting as mediators or negotiators; • Publicise and promote the 'peace dividend'; • Lobby for social justice legislation and campaign for human rights.

It is important also to make the distinction between situations where companies are the problem and where they become part of the problem. Both demand a combined and comprehensive approach but perhaps the former is in many ways more pernicious and yet easier to avoid. When a company becomes entangled in an existing conflict, it must look more widely for support and incorporate its strategies into those pursued by other bodies, including regional and international organisations. This is particularly true in countries where there may be no legitimate government and companies are essentially operating within a power vacuum.

The recommendations discussed here (see Box) address both these possibilities. They are designed to help minimise a company's negative impact on a society and maximise its positive contribution. They are divided into four categories: partnership, core business practice, social investment and policy dialogue. They are offered as practical tools which can assist companies to think more strategically about their operations and provide them with the necessary mechanisms to prevent or better manage conflict situations.

Conclusion

Gradually, the business community's traditionally narrow outlook is beginning to widen, spurred on by the recognition that under-development, instability and outright conflict are damaging not only to the affected societies but also to its own profitability.

We have researched the difficult interaction between business and conflict and highlighted many of the costs incurred by companies operating in unstable countries. But we have also found examples of businesses that are starting to explore new ways of coping with the complex problems underlying conflict. It is unfortunate, if understandable, that those in the vanguard of this new approach have had to be prompted by their own bad experiences. Nevertheless, how they choose to approach similar situations in the future will carry a significance beyond their own operations. The pressure on companies to act is growing and is coming not only from disadvantaged communities but from a coalition of individuals, organisations and institutions, state and non-state.

Selected Bibliography

No Hiding Place - Business and the politics of pressure. Control Risks Group. London, 1997.

Multi-track Diplomacy - A systems approach to peace, Louise Diamond and John McDonald. West Hartford, 1996.

Companies in a World of Conflict, John Mitchell. London, 1998.

Human Rights Guidelines for Companies. Amnesty International UK Business Group. London, 1998.

Multinational Enterprise and Human Rights, A Report of the Dutch Sections of Amnesty International and Pax Christi International, 1998.

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