Writ­ten by: Shantesh Hede, Doc­toral Can­di­date in Bio­engi­neer­ing, MIT Por­tu­gal Program.

The Mali hostage crises as pointed by Emira Woods from The Insti­tute for Pol­icy Stud­ies about the unde­sired geo-political out­comes of pre­vi­ous mil­i­tary inter­ven­tions, that has fur­ther resulted in a cer­tain per­cent­age of weapons to be dis­trib­uted unin­ten­tion­ally into polit­i­cally sen­si­tive areas; espe­cially regions where the local stake­hold­ers have been suf­fer­ing from both eco­nomic as well as polit­i­cal iso­la­tion. When we take a cru­cial step fur­ther from this point, Chirstain Par­enti also points out in his lat­est 2011 book titled “The Tropic of Chaos” about the result­ing geo-political dis­tur­bances attrib­uted to cli­mate change (such as exces­sive rain­fall, drought and weather fluc­tu­a­tions) that affects every aspect of a regions’ social fab­ric, whether agri­cul­ture or sus­te­nance of local economies.

How­ever, the solu­tion ven­tures way beyond any form of ‘blame game’ and ‘fin­ger point­ing’ towards glob­al­ized Indus­trial activ­ity. Explain­ing the source of the prob­lem in sim­ple words, the renowned Eco­nom­ics Nobel lau­re­ate Joseph Stiglitz high­lighted the flawed logic of Adam Smith’s ‘Invis­i­ble Hand’ par­a­digm in terms of social and envi­ron­men­tal exter­nal­i­ties ema­nat­ing from unfet­tered global trade which con­sumes non-renewable resources at a rapid rate and exac­er­bat­ing cli­mate change. In fact, he even stated in his trip to Asian Indus­tri­al­ists that the inno­va­tions in the West­ern world have focused more on sav­ing labor in con­trast deliv­er­ing a more sus­tain­able lifestyle and com­bat­ing cli­mate change. This in his opin­ion (based on exten­sive study) has brought about the eco­nomic down­turn, espe­cially in the United States.

Almost a decade ago, when Porter and Kramer rec­om­mended glob­ally present Cor­po­ra­tions to adopt the model of ‘cre­at­ing shared value’ with the envi­ron­ment and the stake­hold­ers for long term com­pet­i­tive advan­tage. The approach even though sup­ported by detailed stud­ies to con­tribute towards bet­ter income dis­tri­b­u­tion in the soci­ety which is known to fur­ther prop­a­gate eco­nomic growth; nev­er­the­less still man­aged to suf­fer from the syn­drome of the invest­ments being located in the ‘long term assets’ sec­tion of the bal­ance sheets and also within the brack­ets (as in neg­a­tive value) inside the cash flow state­ments. Both unde­sired by con­tem­po­rary CEOs in our present crises cen­tric eco­nom­ics. Notwith­stand­ing the risk of delayed return on invest­ments, one can­not com­pletely ignore the suc­cess sto­ries of Nestle’s cor­po­rate social ini­tia­tives in cer­tain rural parts of India; wherein a sta­ble sup­ply of milk and growth in local econ­omy was brought about by edu­cat­ing farm­ers, dairy pro­duc­ers and main­tain­ing the health of the cat­tle pop­u­la­tion. Sim­i­larly, low cost hous­ing projects by real estate devel­op­ers in coor­di­na­tion with non-profit orga­ni­za­tions and local banks alle­vi­ated the prob­lems of decent hous­ing for lower income fam­i­lies in cer­tain urban Indian cities.

The ongo­ing aware­ness for more than a decade has resulted in active stake­holder involve­ment to bring about the approach of ‘socially respon­si­ble invest­ing’, com­pul­sory report­ing of socially respon­si­ble activ­i­ties by Gov­ern­ments in the Nordic region and the Kinder Lyden­berg Domini (KLD) rat­ing sys­tem for com­pa­nies listed in the Stan­dard and Poors 500. Despite the fact that these mech­a­nisms have been suc­cess­ful and in the future even a cred­its trad­ing mech­a­nism could be adopted; these socially respon­si­ble endeav­ors are vol­un­tary in nature and at the moment there is indeed a lack of robust mech­a­nisms for reward­ing as well as incen­tiviz­ing socially pos­i­tive behav­ior by Gov­ern­ments across theglobe.

A strate­gic blend actu­al­ized through appro­pri­ate involve­ment of pub­lic insti­tu­tions and fur­ther prop­a­gated by pri­vate enter­prise by virtue of a mar­ket econ­omy approach holds the prospects of a com­plete par­a­digm shift. This par­a­digm shift would entail the inter­nal­iza­tion of envi­ron­men­tal con­sid­er­a­tions and stake­holder par­tic­i­pa­tion as a core facet of the eco­nomic growth objec­tives of the Corporation(s). This is what can be con­sid­ered as upgrad­ing Social Com­mit­ment to Cor­po­rate Social Respon­si­bil­ity 2.0 (a.k.a Cor­po­rate Social Strat­egy), where a Cor­po­ra­tion per­ceives itself as strate­gi­cally con­nected to the envi­ron­ment and its stake­hold­ers for its con­ti­nu­ity and aims to align the well-being of the afore­men­tioned facets with its own self inter­ests. Thus, mit­i­gat­ing the inad­e­qua­cies of Adam Smith’s ‘invis­i­ble hand’ dilemma and avoid­ing any crit­i­cisms of cor­po­rate social com­mit­ment as ‘win­dow dress­ing’, ‘eye wash­ing’ or in a social activists stand­point a ‘check book phil­an­thropy’ approach for com­pen­sat­ing a company’s cor­po­rate sins.

In a com­plete 1800 con­trast to the Mali crises, the suc­cess of the West Africa Gas Pipeline Project is attrib­uted to the com­mu­ni­ca­tion and mit­i­ga­tion of risks (both socio-economic and polit­i­cal, espe­cially con­cern­ing bor­ders) to the local stake­hold­ers by local author­i­ties in coor­di­na­tion with the per­ti­nent mem­bers of the World Bank Group. Under­stand­ing the need of a mutu­ally ben­e­fi­cial cen­tered devel­op­ment, China since the past few years has sub­stan­tially increased its credit lend­ing to Africa for infra­struc­ture devel­op­ment, growth of Africa’s man­u­fac­tur­ing sec­tor, small-medium enter­prises and agri­cul­tural growth. As from a Chi­nese per­spec­tive, Africa is con­sid­ered not only as a sup­plier of pre­cious raw mate­ri­als (petro­leum for our plas­tics and metals/minerals for our lap­tops) but even a promis­ing export mar­ket for China’s eco­nomic future.

How­ever, as every facet of glob­al­ized trade is sus­cep­ti­ble to cumu­la­tive risks aris­ing from cli­mate change to geopo­lit­i­cal and socio-economic insta­bil­i­ties; Cor­po­ra­tions must imple­ment a robust Enter­prise Risk Man­age­ment Sys­tem with a robust Infor­ma­tion Tech­nol­ogy Infra­struc­ture for not eval­u­at­ing poten­tial risks but even timely respond­ing to mit­i­gate any unde­sired out­comes (Source: Price­wa­ter­house­C­oop­ers and Eura­sia Group). Although 100 % suc­cess can never be guar­an­teed, but the ben­e­fits always out­weigh the neg­a­tive consequences.

 Begin­ning with the step­ping stones of advanced inno­va­tion as a result of Kurzweil’s law of accel­er­at­ing returns which not only enables expo­nen­tial tech­no­log­i­cal advance­ments but also bet­ter access to use­ful knowl­edge. Prod­ucts and Ser­vices can be designed with the oppor­tu­nity of recy­cling the mate­ri­als and re-use of cer­tain parts designed for a longer life span. For instance, extrac­tion of metals/semiconductor min­er­als from elec­tronic waste and recy­cling of plas­tics (MBA Poly­mers). An advanced step fur­ther would be Car­bon Cap­ture and Uti­liza­tion, in which car­bon emis­sion are re-transformed into renew­able fuels and plas­tics of eco­nomic value.

These approaches not only make Cor­po­ra­tions less depen­dent on un-sustainable min­ing activ­ity for sourc­ing pre­cious mate­ri­als from ores or crude oil. But the whole endeavor of con­duct­ing inno­va­tion and imple­ment­ing the solu­tions results in tech­nol­ogy advance­ments, growth in employ­ment, impro­vis­ing the skills of the skilled/unskilled labor and even tech­nol­ogy trans­fer to host nations where a Cor­po­ra­tion is address­ing its desired mar­ket. As a mat­ter of fact more active stake­holder par­tic­i­pa­tion can occur in activ­i­ties such as Eco­log­i­cal Restora­tion where the knowl­edge of the local farm­ers can be employed effec­tively to not only increase the ‘sink capac­ity’ of the ecosys­tem in order to sus­tain indus­trial activ­i­ties and health of the stake­hold­ers (includ­ing the company’s employ­ees) but even boost­ing local agri­cul­ture. The same can be observed in the infor­mal elec­tron­ics waste recy­cling sec­tor in devel­op­ing nations which can recover 80–90% of the value from locally gen­er­ated elec­tronic waste (Source: United Nations University).