Why Businesses Should Engage More in Local Governance

October 9, 2012
  • Tue David Bak

    Former Manager, Partnership Development, BSR

Tue David Bak, Manager, Partnership Development, BSR

I was recently asked to speak at the Convergences 2015 Conference in Paris on the topic of Local Governance in Developing Countries.

Local governance is somewhat of an abstract concept, and usually a topic reserved for academics and civil servants. BSR’s work with member companies in a number of developing countries, however, indicates that companies need to engage much deeper in governance locally in order to be successful in their corporate responsibility and business activities.    

Despite the best of intentions, even simple corporate responsibility initiatives in developing countries, like sponsoring a local school or upgrading the local medical clinic, often run into trouble because companies shy away from engaging effectively with local public institutions. For example, in East Africa, a recent school building project financed by a BSR member has seen years in delay because local authorities’ governance practices are ill aligned with the foreign company’s engagement and management practices. By not fully understanding the dynamics of local governments and their political economy limitations, companies are failing to harness the potential of their community investments and getting a suboptimal return on corporate responsibility activities. 

All the while, as highlighted by my co-presenter at the conference Antoine Raogo Sawadogo, former Minister for Decentralization from Burkina Faso, governments are unaccustomed to engaging in dialogue with companies and lack the skills to conduct constructive multi-party discussions on local issues. Yet many governments recognize the great transformative power of businesses, want to engage more with business, and need support from the outside to improve their governance. 

Given the growing investment and engagement of international companies doing business in developing countries, there is an increased need for dialogue on how the involvement of private sector partners and other stakeholders might look–and how it can help strengthen local governance. 

BSR’s experience, which was highlighted at Convergences 2015, shows that increased levels of investment and scope of foreign company operations in developing countries have the power to support improved local governance. Foreign companies can advance both their own interest and those of local communities by deepening their engagement in the local context.

With an increasingly vibrant NGO scene and ICT based public scrutiny of governance practices in most developing countries, positive changes are already happening. Foreign companies can build on this existing momentum to help support improved local governance and to strengthen their own corporate responsibility practice in the process.   

My dialogue with Mr. Raogo Sawadogo highlighted three factors that need to come in to place to improve the framework for corporate responsibility and local governance:

  • Companies need to seriously engage with governments on local development, while recognizing that governance looks very different in public institutions than in corporate settings.
  • Companies need to have people on their payroll who understand the dynamics of public governance and are tasked to engage with public institutions.
  • The private and public sector need to create collaborative solutions that engage whole sectors (and not only individual companies) in government solutions.

Moving forward, BSR will continue to work in partnership with member companies and international development partners to build a greater understanding of good practices in this area and to provide a platform for companies and governments to advance socio-economic development through improved governance.

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