Responsibility and Reputation: How ethical partnerships with big businesses and governments can pave roads and create jobs

September 24, 2019

By Tim Runge, Partner

It is interesting that the notion of a corporation having an interest in Socio-Economic Development issues is seen as new, and by some observers, evil.  At Babcock & Wilcox in 1987 my first assignment upon joining the company was to structure a large barter with Romania on behalf of a consortium of CANDU suppliers. At first glance this appeared to be a way to just create the foreign exchange needed to pay the suppliers; in reality it had more to do with economic development. The Romanians – still under central rule - could manufacture goods, but weren’t very good at selling on the global market. Babcock & Wilcox and the Consortium of CANDU Suppliers, as well as selling nuclear power systems, was also in the Economic Development business; we could not do one, without the other.

Strapped for cash already before the financial crisis, many governments and businesses felt compelled to issue deep budgetary cuts across the board in a search for extra revenue. Now four years later, faced with disappointingly slow job growth, high numbers of unemployment, and enormous budget deficits, both governments and businesses are in a position to work together for mutual benefit, a process seen clearly in the decision to re-align the Canadian International Development Agency.

In an era where corporations are viewed as soulless it would surprise most people to know that it is not only in the best interests of the public when big businesses invest in local communities but also for the business itself. Corporations can create a positive reputation for themselves though focussed socio-economic development by engaging the communities they work with, often with projects that local governments and organisations are unable to accomplish whether due to lack of capital or infrastructure

Businesses can create a socio-economic advantage for their brand by associating themselves with positive development that gives the company an edge against rivals who have neglected to invest in socio-economic programs.  Socio-Economic Advancement is a powerful business development tool, and what’s wrong with aligning corporate interests with the broader needs of society?

A 2010 Reputation Institute report puts it: “Additional outcomes identified in other research include stronger sales, growth and market share performance... Almost every important segment of business performance can be influenced by a good reputation.”

Under this framework a business that enters a community is not simply there in a smash-and-grab capacity, but as an actual member with co-aligned interests. For example, if a corporation wants access to minerals in a northern Canadian community, they would take into account how the lifestyles of those living nearby would be affected, and respond to concerns of community members accordingly by not only addressing current concerns, but pre-empting future problems through targeted investments.

Partnerships between public and private sectors are the answer to many of the questions faced by cities and towns across the globe hit hardest by job losses and government cutbacks. By encouraging businesses to engage in socio-economic development, communities and governments can tap into a vast-reserve of capital and knowledge for the benefit of the public. Corporations can gain access to resources needed while not only assisting the communities they’re working in, but also enhancing their own reputations both domestically and abroad, a prospect that can lead to winning lucrative contracts in emerging economies where the difference between success and failure rests on a single question: How will this help our community?

Founder of the Banyan Tree resort chain, Ho Kwon Ping, puts it well: “There need not be a dichotomy between being a good capitalist businessman and a person who wants to improve the world.”