What should the private sector do better? While there are many examples of responsible companies that want to “do well by doing good,” sustainability and development goals are not always integrated into businesses’ core agenda. Total shareholder return (TSR) and corporate social responsibility (CSR) often seem completely divorced from each other.
The thinking, mostly implicit, is that maximizing TSR by polluting the environment is acceptable as long as some compensating contributions are made to CSR initiatives — the corporate equivalent of bathing in the Ganges to wash away one’s sins. We need a new standard that requires companies to report not just their financial metrics, but also their performance on social, developmental and environmental issues. For maximum impact, and in order to restore public trust in corporations, the standards must be global, clear and consistent.
The other reality of the post-MDG world is the multi-directionality of development flows. Traditionally, development flows were unidirectional, going from the wealthy North to the impoverished South. However, the world order has changed. Emerging markets and developing countries now account for 50 percent of global GDP and 75 percent of global growth, and demographics will further accentuate the shift in the center of economic gravity.
“Southern” countries such as Brazil, China and India, to name only a few, are enhancing their contributions to overseas development. Domestic resources and diaspora remittances are increasingly funding development. As countries become less reliant on traditional sources of financing, they are less likely to follow foreign dictates blindly.
Indeed, people in developing countries are increasingly demanding a stronger voice in determining what is good for them. The North’s old “we know what is good for you” approach, however well-informed or well-intentioned, will no longer work. A more inclusive approach that reflects local conditions and preferences is essential.
The P-4 approach reflects the new global realities and seeks to leverage the best qualities of the private, philanthropic and public sectors.
Viswanathan Shankar is group executive director and chief executive officer for Europe, the Middle East, Africa and the Americas at Standard Chartered Bank.
Copyright: Project Syndicate