Guest post from Mark Goldring, Oxfam GB’s Chief Executive
Last week I introduced an Oxfam event at which Paul Polman of Unilever and a number of proponents of social enterprises came together to explore what kind of new business models we need to help beat poverty for good.
My starting point was that business has played a massive part in reducing extreme poverty, certainly more than that of charities and aid donors combined, and is fundamental to finishing the job. Many business leaders and employees have shown a strong personal commitment to reducing poverty, as have investors. Larry Fink, the CEO of Blackrock, recently stated in an open letter to CEOs, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” And when the world’s largest investor says it, even the sceptics begin to listen.
Many business leaders are genuinely interested in ensuring the benefits of wealth creation are shared more fairly. However, even the most committed CEOs and companies face barriers and disincentives due to the prevalence of models of business and finance that put a disproportionate emphasis on maximising shareholder value. Oxfam’s recent report, Reward Work Not Wealth, describes how the substantial economic growth over recent years has disproportionality accrued to those who already have it; around 80% of new wealth has gone to the richest 1% of the world’s population. Those in lower paid and informal employment have seen little gain in income and none in wealth. Unless we reverse this, we won’t hit our SDG target of ending extreme poverty and will leave the poorest behind as parts of society get richer.
Oxfam’s research and experience points to the potential and need for businesses that are structured so that farmers and waged workers have a greater say in decisions, and get a more equitable share of the value created. A recent Oxfam report, Fair Value showcases examples from food supply chains of multi-national companies, as well as cooperatives and social enterprises, which address such issues as contracting arrangements and fair pricing. Looking at business arrangements through the lens of how they impact differently on women and men can help overcome gender-specific barriers to women’s economic empowerment and enable them to benefit more from markets.
Our report, and the input at the seminar from Sophi Tranchell, CEO of Divine Chocolate and Lisa Dacanay, President of the Institute for Social Entrepreneurship in Asia, as well as Paul Polman, show us such approaches are scaleable, replicable, can be extended to cover areas of the chain of production where more value is added, and that they can be linked into the supply chains of the biggest businesses.
The challenge now is for companies and their investors to more generally apply this thinking about how to respond to the needs of a wider group of stakeholders than shareholders, and for governments to consider how best to support and encourage this.
I see a range of ways, of which new business models are perhaps the least developed by big business, that will maximise the impact of business on poverty and injustice.
In brief these would include:
- Recognise the difference between a legal minimum wage and a living wage. Work together with other likeminded businesses and governments towards this. The government in Ecuador garment industry in Cambodia and tea growers in Malawi have shown such progress is possible.
- Look at wage differentials and extremes of pay and reward more generally. Use executive incentives to reward social and environmental performance. Challenge (often gendered) social norms that value and reward individual’s contribution to a firm’s success in a vastly different and unfair way.
- Look beyond direct employees, right along the supply chain. The further along you go, the more exploitation you will find. Build partnerships with suppliers and don’t only rely on audit.
- Explore gender dimensions in all elements of employment. Recognise that women less often benefit from job security, training, promotion and other opportunities and more often suffer exploitation. Act accordingly.
- Commit to tax transparency, pay tax where profits are earned. Work collaboratively with governments in law and practice. Without this, poor countries will never raise the tax they need to be less aid dependent and pay for much needed public services that disproportionally benefit the poor.
- Actively engage with the communities affected by your operations. Recognise your impact on their lives, not just their jobs.
- Explore new forms of corporate governance, such as stakeholder representation at board level, and engage with long-term investors on social and environmental issues to build support for investments in people and business rather than short-term cash returns. Use procurement approaches to favour suppliers who are structured to benefit wider stakeholders and parts of the community who may otherwise not benefit.
Most jobs and wealth will be created by small and medium sized national and local enterprises, but multinationals have a powerful role in setting standards, collaborating with government, innovating and leading a race to the top. Good business is fundamental to beating poverty, the better the business the faster we will crack it. And Oxfam is committed to play its part by engaging with business to explore and test ideas, challenge, cajole and collaborate to help make this happen.