THE BUSINESS OF PEACE The private sector as a partner in conflict prevention and resolution
By Jane Nelson
sponsored by: International Alert
Council on Economic Priorities
The Prince of Wales Business Leaders Forum
Note: Unrelated - the reason why corporate and other boards are now adding the private sector is to reflect ppp.
See the changing role of CEO as he becomes "quasi governmental leader" and the changing role of the corporation to not only provide jobs, keep the business cycle going, but also provide the social cohesian in the community and now become the quasi-military presence.
Militias will face not only governments but CORPORATIONS
Five Principles for Corporate Engagement in Conflict Prevention and Resolution
1. Strategic Commitment
Provide CEO and board level leadership on corporate responsibility issues. Establish policies, guidelines, and operating standards that make explicit mention of these issues including human rights, corruption, conflict and security arrangements. Develop internal management systems, compliance and incentive structures to embed policies into the company's daily activities.
2. Risk and Impact Analysis
Assess the conflict-related risks and impacts of the company's core business and social understanding of the nature of conflict; the role/relationships of other actors; and the characteristics and constraints faced by the company itself.
3. Dialogue and Consultation
Identify and engage with key stakeholder groups on a regular and consultative basis.
4. Partnership and Collective Action
Develop mutually beneficial and transparent partnerships with other companies, civil society organizations, government bodies to address sensitive political and public policy issues. This includes collective action for: negotiating peace, voluntary codes of corporate conduct, creating innovative public-private partnerships for financing health, education, civic institution building and infrastructure development.
5. Evaluation and Accountability
Identify key performance indicators for assessing the company's social, economic and environmental impacts.
EXECUTIVE SUMMARY
Currently:
-There are 72 countries where the security risk for the majority of locations in which foreign business operates is rated medium, high or extreme for 2000
-MNC are investing more than US$150 billion annually in 50 countries which fall below the intermediate point in Transparency International's corruption Perception Index
-Only 4% of the world's GNP is military related; 96% of the international business community provides civilian products and services.
Key messages from the Report:
1. The business imperative for action
Domestic and multinational companies have an increasingly important role to play in conflict prevention and resolution. In today's global economy they have a growing commercial rationale for playing this role in order to avoid the direct and indirect business costs of conflict
and to reap the business benefits of peace.
Almost all companies have an interest in helping to build peaceful and prosperous societies and a role to play by contribution to: equitable economic development; human development, especially education and health; environmental sustainability; good governance; social cohesion and respect for human rights.
Certain companies and industry sectorsdefense, natural resource and infrastructure industries have important responsibility to address their direct roles as potential causes of conflict. Banks, travel, tourism and those providing products/services to humanitarian agencies have a direct and growing role in conflict prevention/resolution.
2. Strategies for individual corporate action
The goal of companies should be to pursue strategies of pro-active, systematic value- creation, aimed at creating positive value for a s many stakeholder groups as possible, including shareholders. They can do this by:
a. Their social investment and philanthropy programmes
b. The Way they engage in public policy dialogue
c. Advocacy and institution building
Linked to the above, multinational companies need to develop systems and competancies for addressing conflict at different management levels. Staff at office have a key role to develop global frameworks for corporate value and management system. The traditional role of corporate communications and one-way public-relations must evolve into a more complex structure of multi-way stakeholder engagement, ranging from dialogue and consultation to accountable reporting processes.
3. The importance of partnership
The enabling framework for preventing/resolving violent must be in the hands of governmentsat the national/international level. Corporate engagement cannot be viewed as a substitute for good and pro-active government. Linked to this, new types of cross-sector partnerships between business, government and civil society will be absolutely critical in building peace and preventing or resolving conflict.
4. The need for leadership
the ultimate challenge of conflict prevention/resolution is about values-based leadership at every level of the company and at every level of society. The question of whether a company contributes to conflict or helps to prevent it depends on the value policies and operating guidelines of the company and the way its employees and business partners accept, interpret and implement these. Corporate, political and civic leaders are needed to help shape these values and guiding principles and to provide the incentives and frameworks in which their respective stakeholders must live and operate.
Chapter 1: The business case for Engagement
Includes: The changing context of business
The changing nature of conflict
Business costs of conflict
Business benefits of peace
1. The changing context of business
"During the past decade, development assistance has continued to decline, while private capital flows to the developing world have risen significantly [Joan: I now realize what this says "Government is not contributing what they use to while corporations have taken up the slack]. This has reduced the relative influence of donor states and international institutions while increasing the present of international corporations." Kofi Annan 1999 Annual Report
TERMS OF DESCRIPTION
Privatization: The privatization of state-owned enterprises has become a central feature of political and economic transformation in all countries. Privatization International estimates that global proceeds from privatization have increased from $36B in 1988 to over $141B in 1998, thus increasing the share of the private sector.
Liberalization: At the same time countries have opened their markets to foreign investment, resulting in a dramatic increase in cross-border flows of private capital, people, technology and products. In 1999 private capital flows totaled $250 B.
Emerging Markets Linked to the above, it is a result of political transformation. There is a growing private investmentforeign/domesticin many developing/transition economies.
Few companies with global aspirations can ignore such markets but the risks of operating in conflict prone or conflict ridden regions of the world is greater. IN PARTICULAR, THESE ECONOMIES ARE OPENING UP THEIR INFRA- STRUCTURE, ENERGY, MINING, MANUFACTURING, BANKING, AND AGRIBUSINESS INDUSTRIES TO PRIVATE INVESTORS WHICH HAS ECONOMIC IMPLICATIONS. POTENTIAL FOR CONFLICT, BASED ON ACCESS TO THESE STRATEGIC RESOURCES IS POSSIBLE.
Technological
Change The advent of new technologies has increased the reach and scope of the private sector. This has not only created new market opportunities and competitive pressures for business but also new social challenges and expectations by underpinning the blossoming of civil society. Certain technologies have increased the potential for conflict.
Increased societal
expectations While privatization and liberalism have transferred ASSETS, democratic and technological advancements have transferred other sources of POWERempowermentto civil society and citizens. This has many forms: community initiatives to campaigning on a world wide scale, supported by unprecedented communications capacity via internet.
Global Businesses not only face rising societal expectations but dramatic/relentless
Competitiveness competition. Failure to deliver value to customers will result in market erosion, take-overs, etc.
Changing THERE IS FUNDAMENTAL CHANGE TAKING PLACE IN OUR
'Governance' UNDERSTANDING AND PRACTICE OF GOVERNANCE. GOVERNANCE
STRUCTURES USED TO BE PRINCIPALLY ABOUT WHAT GOVERNMENT DO. TODAY, THE CONCEPT IS INCREASINGLY ABOUT BALANCING THE ROLES, RESPONSIBILITIES, ACCOUNTABILITIES AND CAPABILITIES OF DIFFERENT LEVELS OF GOVERNMENT AND DIFFERENT ACTORS OR SECTORS IN SOCIETY
2. The Changing Nature of Conflict
War between More than 90% of armed conflicts take place WITHIN rather than BETWEEN
States to states. Between 1989 and 1996, 101 conflicts occurred of which 95 were
internal internal.
conflict
Geo-Politics Reasons for conflict have changed from geo-strategic and ideology to conflicts
and Ideology based on access to resources, issues of identity and "state" failures.
to Resources,
identity, and
state 'failure'
Military casualties Women/children
to civilian victims
Superpowers to Most major conflicts in the past decades have occurred in poorer countries
poorer states in
transition
State-sponsored IN RECENT YEARS THE WORLD HAS WITNESSED A DRAMATIC INCREASE
war to privatization IN THE PRIVATIZATION OF SECURITY AND VIOLENCE. EXAMPLES:
of violence and UNAUTHORIZED MILITIAS AND LOCAL WARLORDS TO THE ACTIVITIES
security OF NARCO-GUERRILLAS, MERCENARIES, PRIVATE SECURITY AND
MILITARY COMPANIES.
Weapons of With the decrease in weapons of mass destruction has come the dramatic
Mass Destruct- increase in the legal and illegal trade of small arms. 90% of all deaths come
ion from small arms.
State-based The changing nature of conflict has had major implications for approaches to
diplomacy to preventive diplomacy and peacemaking. In a multi-polar world, it takes more
"multi-track" than leaders for more multi-disciplinary approaches. This requires a growing role for non-state organizations and private individuals, including business, in the process of negotiating and making peace. As a result, there has been an increase in what is termed "two track" or "citizen" diplomacy where unofficial and informal negotiations occur between members of adversial groups and /or nations: churches, professional organizations, media, private citizens,
Military security In recent decades there has been a shift in our concept of security. There is a growing acceptance in the international community that security is also about human security and freedom from oppression, violence, poverty, hunger and disease. State security systems remain important mechanisms for ensuring human security from both internal and external threats. Human rights groups have been increasingly invoked to justify external interventions in internal conflict as happened in Kosovo and East Timor in 1999.
Intervention to At the same time the international community is starting to undertake military
Interventions to prevent gross violations of human rights within sovereign states, there is a growing recognition of the need to shift towards a more preventative
Peace-building approach to security which places economic and social development as integral aspects of the international security agenda. This contrasts with traditional approaches that have characterized international aid and peacekeeping activities in the past, which tended to separate peacekeeping and conflict resolution from poverty reduction and sustainable development.
3. Business Costs of Conflict
Conflict is almost always an impediment rather than a spur to private sector investment and economic growth. Few industries benefit from violent conflict. Employees are threatened, markets are slashed, infrastructure is damaged and in many cases company assets are seized or destroyed. Business costs are:
3.1 Indirect societal costs of conflict - "internal" costs to the country, region and external costs to the international community which have and indirect impact on business
The international costs to a country are human, social, economic, environmental and political CAPITAL. The external costs include those borne by the UN system in delaying with humanitarian crises, refugees, peacekeeping operations, etc.
Security costs Personnel costs
Material Losses Litigation Costs
Opportunity Costs Reputation costs
Capital Costs
4. Business Benefits of Peace
There is an economic benefit in resolving violent conflicts and preventing them from happening.
Better investment opportunities - over the long-term peace provides the underlying basis to building healthy market economies which in turn provides the private sector with customers, qualified employees, local suppliers and investors.
Reduced operational costs
Reallocation of national state expenditures - State expenditures could be reallocated from military-
related purposes to social and productive purposes. The 1997 Carnegie Commission on Preventing Deadly conflict estimated that developing countries pay $9,094 per solider and only $165 on education and health expenditures.
Reallocation of international funding - Official development assistance could be reallocated from peacekeeping/humanitarian relief elsewhere. OECD countries currently spend over $10B every year in emergency humanitarian assistance.
II. PRINCIPLES FOR CORPORATE ENGAGEMENT
In conflict prone or ridden situations companies face two challenges:
taking full responsibility for how they manage their own activities on the micro-level
engaging with other in addressing some structural challenges at the macro-level
These structural challenges relate to issues of governance, equality, poverty, justice,
identity and ideology. AS PRIVATE ENTERPRISE BECOMES MORE CENTRAL PLAYERS
IN ECONOMIES AROUND THE WORLD, THEY WILL BE UNDER INCREASING PRESSURE FROM CERTAIN STAKEHOLDERS TO ACKNOWLEDGE THESE ISSUES.
THEY NEED TO ADDRESS THEM ON 3 LEVELS:
COMPLIANCE
RISK MINIMIZATION
VALUE CREATION
THE CORPORATIONS HAVE 5 INTER-DEPENDENT PRINCIPLES FOR ACTION THAT CAN ACHIEVE THIS AIM OF SOCIETAL VALUE-ADDED:
1. Strategic Commitment
To date few companies have made explicit public commitments on their role in conflict prevention and resolution. A growing number are ESTABLISHING POLICY STATEMENTS, PRINCIPLES AND OPERATING GUIDELINES ON SPECIFIC ISSUES THAT ARE LINKED TO CONFLICT PREVENTION SUCH AS HUMAN RIGHTS, ANTI- CORRUPTION, DIVERSITY, DEALING WITH INDIGENOUS PEOPLE.
In some companies these are incorporated into a statement on "General Business Principles" or "what we Stand For" or "How we operate". Companies like Shell, BP Amoco, Rio Tinto, BT, premier Oil, Nokia, Novo Nordisk, Norsk Hydro and Statoil have all incorporated explicit statements on human rights into their business principles or policy statements.
2. Risk and Impact Analysis
Rigorous and ongoing analysis is central to a company's understanding of the context in which it is operating and the options it may have for engaging in conflict prevention or resolution in a manner that safeguards its business interests while contributing to wider societal interests:
Risk Analysis - Three groups of factors that drive political risk:
(1) political instability, poor public policy, and weak institutional frameworksregulatory systems, ineffective legal systems and the inability of governments to provide vital services such as infrastructure.
(2) Impact assessment - The World Bank Group and others have done extensive work in the areas of environmental impact assessments on specific projects. They are looking to integrate social and environmental impact assessment into a single framework.
3. Dialogue and Consultation
A company must invest in regular dialogue and consultation with key stakeholders so that they understand what is trying to achieve and the practical and strategic constraints that it faces. P.32 - fill in with multi-stakeholder dialogue