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Business & Society: Partneringfor a Sustainable Future

Dr. Djordjija Petkoski, Head of the Business, Competitiveness & Development Team, World Bank Institute

Sao Paulo, June 2007

Ethanol Summit 2007

Work Relations and Social Progress

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Overview

1. The Bigger Picture2. The Role of Business in

Development 3. Collective Action4. The importance of

leadership

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Global Development Priorities vs.

Global Private Sector Priorities……

Is there a disconnect??

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Our world is …

… out of balance.

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Global Issues

Poverty and Developing Countries Today:

3 billion people (survive on) under $2/day

1.2 billion people (survive on) under $1/day

Global Gross Domestic Product (GDP)

Year 2000:30 trillion – 5 billion people – 20%

global GDPYear 2050:140 trillion – 8 billion people –

40% global GDP (assuming 3.5% growth)

2000 2025 2050

Developing Countries

5 billion

7 billion

8 billion

Developed Countries

1 billion

1 billion

1 billion

Population Growth

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Is this our World?

Today, across the world: • 1.3 billion people live on less than one dollar a day; • 3 billion live on less than two dollars a day; • 1.3 billion have no access to clean water; • 3 billion have no access to sanitation; • 2 billion have no access to electricity.

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Estimated BOP market by sector: $5 trillion

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Economic reality in LRC

According to Mc Kinsey Quarterly (2007), Latin America has the world’s greatest inequality, measured by income distribution.

The richest 10 percent of LRC earn 48% of total income, while the poorest earn 1.6%

Poverty afflicts nearly 40% of all people in LRC (~209 million)

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Is this our World?

20% of the population in developed nations consume 86% of the world’s goods. The poorest 20% of the world’s population consume 1.3%.

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Scientist can calculate to the nearest planet how much land and sea it would take to sustain the population of the world if everybody lived as comfortable as the Americans, British or French. The answer is …

Sustainability Actions

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… three planets!!!

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The Role of Business in Development

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Whose problems are these?Who is responsible?Is it just about money?What are the costs?When are we going to pay?How will we pay?How long will we allow this to continue?How long can we afford to live this way?

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Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).

The top 200 corporations’ combined sales are 18 times the size of the combined income of 24% of the total world population.

MNCs account for a quarter of global economic activity, they employ less than 1% of the world’s labor force, while one third of the world’s willing-to-work population is unemployed.

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What stakeholder expect from business leaders?

WEF, Voice of the People Survey 2005

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Which Global Risks Matter Most to Business?

WEF asked risk experts in New York and London (2005) .

Top Ten Risks1. Instability in Iraq2. Terrorism3. Emerging Financial Crisis4. Disruption in Oil Price5. Radical Islam6. Sudden Decline in China’s

Growth7. Pandemic – Infectious Disease8. Climate Change9. Nuclear Weapons Programs10. Unrestrained Migration

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Good Governance & Tackling CorruptionPoverty Alleviation & EducationSustained Economic GrowthPace & SecurityEnergyHIV/AIDSWaterHuman RightsInternational Trade RulesInternational Financial

Architecture

Business Leader’s Ranking of Top Development Challenges

WEF GCCI Survey 2005

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Rethinking the Role of Business

The Friedman Approach:

“The Social Responsibility of Business Is to Increase Its Profits.”

In other words, “the business

of business is business”.

“Business is in a unique position to play a leading role in helping to shape the global agenda, and can provide government and civil society with the tools and capabilities to better adapt.”

Jonathan Schmidt, Director, Global Agenda, World Economic Forum, WEF, Annual Meeting, Jan. 2006

There is no common understanding of the role of business in society.

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Collective action

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A Need for Multi-Stakeholder Partnerships

Given the complexities of global development challenges and climate change, it is unlikely that progress towards their achievement can be effectively achieved unilaterally.

Economic, environments, & social issues are becoming too complex & the resources and competencies needed for addressing them too dispersed for one sector to have all the solutions.

There is growing expectation that the corporate sector can & will play a role in helping to address these challenges.

The critical issue for business, & public sector leaders to define appropriate & realistic boundaries of this role.

Common interests and values.

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Multilateral Development Banks

The possible role of the World Bank Group in tackling climate change:

Setting new targets for reducing carbon emissionsHigher targets for investment in renewable energy, such as wind and solar powerInvestment in energy in the world’s poorest countriesHelping developing countries shift to a low carbon economyHelp for countries to adapt to the impacts of climate change, such as investment in alternative cropsHilary Benn, UK International Development Secretary

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Multi-Stakeholder Partnerships for SustainableCompetitiveness

• UNICA (the association of sugar industries in Brazil) & WBI formed a partnership with the purpose of strengthening the competitive position of sugar companies in São Paulo by addressing some fundamental CR issues, such as labor practices & impact on the environment. Objectives: to build capacity of local businesses & business associations & contribute to the better understanding of the vital role the private sector can play in development & the significance of productive public-private partnerships.The program was made available to MBA & MPA schools in Brazil so that future graduates will be behind the strategic reorientation of sugar companies.

• CEMEX, one of the world biggest cement companies (based in Mexico) & WBI formed a partnership to deliver jointly with the ITESM the web based course “CSR and Sustainable Competitiveness”. It has reached more than 1500 participants in 15 countries in Latin America.The Catedra CEMEX “Introduction to Corporate Citizenship”is a new program developed in collaboration with CEMEX and ITESM. The training targets 3,000 participants in Latin America and specifically SMEs in Mexico through COPARMEX.

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Investing in a stable and secure environment in which to do business contributes to a healthy and competent workforce, prosperous consumers, a more attractive investment climate, and increased competitiveness.Managing the direct costs and risks of doing business such as environmental degradation, climate change, disease and can reduce costs, improve risk and reputation management, improve resource efficiency and enhance productivity.Contributing to sustainable development and being responsible can lead to new business opportunities through innovation, value creation and competitiveness.

Incentives for the Private Sector

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New initiativesCitigroup will devote $50 billion in investments and financing to reduce global carbon emissions

Citi’s Markets & Banking group plans to invest over $31 billion in clean energy and alternative technology

U.S. Climate Action Partnership, with members such as: Alcan, Dow, General Motors, Johnson & Johnson, PepsiCo and Shell has a leadership on climate change

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The importance of leadership

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Do we have the right questions?Old questions still around in different surroundingsNew questions not yet formulated articulately Need to make them as specific as possible

How about the answers?Do NOT over-focus on definite or over generalized answersDynamic process of continuously addressing the questionBuild capacity for dealing with the questions through partnerships between government, business, civil society organizations, international financial institutions and development agencies

Instead of Conclusions

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“The assumptions, tools and frameworks that leaders have used to make

decisions over the past decade appear inadequate. It is imperative for leaders

of all walks of life to develop new capabilities if they expect to be

successful and to maintain relevance.”Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, WEF Annual

Meeting, Jan. 2006

The role of leadership

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New challenge for current and future business and public sector leaders: how to capitalize on business opportunities while ensuring sustainability through addressing global development challenges.

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The future depends on what we do in the present.

Mahatma Gandhi

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Thank You !

Dr. Djordjija Petkoski,dpetkoski@worldbank.org

Program LeaderBusiness, Competitiveness & DevelopmentWorld Bank Institute

www.devandbiz.org