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Sustainable Development ~ The Business Case

Author: Valerie Geen ~ Director of Climate and Energy - National Business Initiative (NBI)

( Article Type: Sustainable Development )

A balanced approach in South Africa
The challenges outlined above represent a collage of pressures, threats, opportunities and imperatives for individual and collective corporate action. The following four issues are highlighted to demonstrate how the private sector in South Africa could approach these critical development challenges in a balanced and sustained manner - by improving the development context in the interest of enhanced competitiveness. In short, how business can do good by doing well.

Climate change and the global environment
The 1992 adoption of the United Nations Framework Convention on Climate Change (UNFCCC) has laid the foundations for the reduction of greenhouse gas emissions. This process resulted in the Kyoto Protocol, which commits developed countries to tangible reduction targets. The business sector is clearly interested in enabling frameworks, long-term predictability and functional market-based mechanisms.

As one of the top 20 GHG polluters and responsible for almost half of the total emissions for Africa, South Africa needs to keep abreast of the outcomes from this global process. Although there is still uncertainty regarding the science and other dimensions of climate change, it is important for the business community to come to terms with the possible environmental impact of climate change as well as the implications for sustainable growth and development. The private sector needs to understand the opportunities and threats contained in a carbonconstrained world, the changing rules of the global trade regime, the implications for trade barriers and emerging markets, the growing interest for alternatives to fossil fuels and the potential for clean coal solutions.

Projections on the effects of climate change do not paint a pretty picture for Africa. The continent faces high levels of poverty and can least afford to respond to the effects on climate, agriculture and human livelihoods. Reports indicate that efforts to reduce poverty in Africa will ultimately fail without action on climate change. While the exact impacts are debatable, it is known that 70% of Africa's population depends on rain-fed agriculture for their livelihood. The smallest change in climate could have significant environmental and social impacts in a continent where resources are already scarce and under pressure.

South Africa finds itself in a unique and challenging position. While the country is dependent on relatively cheap energy, it is also faced with significant developmental challenges balanced with highly developed environmental policies. Energy plays a crucial role in meeting these development challenges. The private sector must also take note of the possible commercial implications of the emerging global trends in the way the world values carbonbased energy.

Human capital development
The quality of basic schooling remains a critical challenge to achieving sustainable economic growth and social development in South Africa. As corporations spend more than R1 billion annually on voluntary corporate social investment initiatives, there is clear evidence of business adding resources to schooling in the country. It is less clear that companies are actually adding value. Given the magnitude of the task, it is clear that government cannot do it alone. The public and private sectors need to partner to ensure that children have an acceptable quality of education. Functional schools are vital for both government and business and the country in supporting sustainable development and to underpin economic growth.

It is well known that South Africa is ranked very highly in the world in terms of its per capita spend on education. Yet the country consistently scores poorly on the various global competitiveness indexes, particularly regarding human capital development. This is a major concern in the context of an acute skills shortage and vacancies in the growth areas of economy. Given the need for the country to compete in a tough global economy, skills development is an imperative as competing in a global environment needs skilled labour at an affordable cost. There is clearly a role for the private sector in engaging government on the required policy environment and the effectiveness of the various educational institutions. It will thus not be enough for the private sector to merely pay their taxes, sit back and leave it to government. The business sector will have to engage proactively in building a climate that is conducive for attracting, developing and retaining the key skills required.

Across the globe, the private sector is redefining its relationship with the higher education sector in order to enhance the quality of graduates employed and to fast track technology development for competitive purposes. Key challenges for the higher-education sector in its relationship with business include the need to produce graduates with an ability to learn, solve problems and think laterally; and to provide a high level of technologically advanced research, on which core business activities can be based. This will require a new mindset from the private sector to think strategically about its relationship with the higher education sector and to enter into productive partnerships.

Sustainable business models
There is increasing evidence that business can make a difference in the lives of the poor through innovative and competitive business practices. With over half of potential global consumers largely untouched by major corporations, the business case for creating sustainable livelihoods is clear and compelling. How can companies break into a market of over four billion potential customers in developing countries in ways that benefit both the poor and business? As business cannot succeed in a society that fails, there is a need to bring the poor into the market, thereby alleviating poverty, increasing prosperity and developing new business opportunities and potential customers.

A major challenge remains to explore innovative ways of utilising market mechanisms to help address poverty and exclusion. The sustainable livelihoods concept appears to contradict the typical business school concepts of focus, core business and market segmentation. Yet, it is clear that business leaders need to think out of the box if they are to find meaningful ways of doing business with the poor. In this context, sustainable development requires improved education and human capacity, sound public policy, increased private investment and the nurturing of small enterprises. For example, although nearly half of South Africa's adult population is not part of the formal banking system, these individuals participate in complex informal 'second economy' mechanisms through which to remit and spend their monies. The key question is how these markets can best be structured to work for the poor and costs and barriers to entry reduced.

There is a need for business to structure their operations on a competitive footing by developing new markets and creating new customers. One specific approach is to connect marketing and brands with charity and good causes for mutual benefit. This is not altruism nor philanthropy, but rather a clear commercial relationship between a business and a 'cause' that connects business basics, vision and values to doing good. This requires clear affinity and synergy between the chosen charity and the core business.

Beyond projects: systems change and policy impact
There are hundreds of examples of successful CSI projects and innovative private sector responses to environmental pressures. But singular greenhouse gas projects will not solve climate change. Innovative company/school partnerships produce tangible local results, but will not fix the school system. Providing resources and engaging in substantial programmes are influential instruments for the private sector to display its devotion, build relationships with the public sector and to establish credibility for engaging the public policy domain. It is essential to appreciate that programmes should not characterise the eventual purpose but rather be seen to serve as an instrument for systemic impact.

Although it is accepted that the final responsibility for public policy formulation rests with public policy makers, this is a most crucial realm for attaining systems impact. The contestation of public policy is clearly required in an emerging democracy, although the scope and nature of the role of the private sector in influencing social policy is less certain. It is by and large acknowledged that the business community has a lawful right and responsibility to influence legislation in areas where there is direct company or industry interest such as trade, tax or competition policy. Therefore, while the role, limits and opportunities for the private sector to influence broader social policy are not clearly defined, these issues require further reflection and collective action.

South Africa will face significant questions during the next decade in terms of speeding up economic growth while simultaneously making certain that a wider portion of the society experience increased economic gains. The business sector will have to display courageous leadership and genuine strategic corporate citizenship if the country is to deal effectively with the challenges of transformation, global competitiveness, youth employment and social exclusion. A productive partnership with government is essential if business is to maximise its economic potential and broaden its social impact. It is clear that scaling up corporate social responsibility initiatives will require policy impact and systems change - which will only be possible in a climate of public private partnership and mutual trust. Similarly, there is a need to build bridges with the broader society to ensure that the constructive role of business in society is appreciated.

The question is whether the business community has a vision for a future society that is compelling to the broader public and seems fair and just to the public sector and political leadership. It is essential for such a vision to enhance both sustainable development and competitive business action, while maintaining a balance between economic value add, environmental impact and social progress