In India, family-owned enterprises like the TATA group occupy a place in citizen's hearts and minds that is not easily shifted. They are viewed as the "go to" institutions to build schools and other social institutions, and fulfilling these social needs guarantees these companies' license to operate.
In Brazil, corporate sustainability is strongly influenced by international institutions focused on climate change and governance of the Amazon rainforest. Beyond the Amazon, domestic attention is focused on social issues, including the country's pending "talent blackout," and what it will take to create a competitive Brazilian workforce.
And in China, which continues to be the "world's factory," CSR traditionally has centered on compliance with corporate codes of conduct imposed by multinational brands. However, sustainable investment--particularly in clean-tech--is an emerging part of CSR in China.
For the past 20 years, corporate sustainability largely has been defined by people and institutions in the West, but with the current global shift in economic balance, countries like Brazil, India, and China are redefining the landscape of sustainability. These emerging markets are facing the most fundamental economic, environmental, and social questions of our generation, making them laboratories for sustainability solutions that will shape our world for a long time to come. As these countries are increasingly recognized on the world stage through events like the World Economic Forum in Tianjin and Rio+20 happening this week in Brazil, more companies are beginning to understand the difference in sustainability issues, how they are prioritized, and how they are addressed in these regions.
BSR recently explored this new geography of corporate sustainability in depth through a series of workshops organized by the UN Global Compact LEAD as part of a project initiated by A.P. Moller-Maersk, Novo Nordisk, and Novozymes, and additional research funded by Novo Nordisk. During our research, we discussed three key questions with thought leaders in business, government, and civil society:
- How is corporate sustainability being defined in emerging markets?
- Who is shaping the discourse and action in these regions?
- What's the trajectory of corporate sustainability in these countries?
What follows is a snapshot of trends in corporate sustainability in each country--and a look at what this means for the evolution of CSR in new geographies and the world at large.
China: From Risk Management to Capturing Opportunities in the Environment
In China, the current thrust of CSR has been toward mitigating the increasingly acute environmental effects that rapid economic growth has had on the country. Discourse and action on energy efficiency, air, and water pollution dominate national "sustainability" regulation and public sentiment. In 2005, the government's "harmonious society" construct outlined a commitment to societal balance, and today, there is a clear understanding that environmental degradation, if left to progress, will undermine the delicate balance of Chinese society.
Perhaps because of this emphasis on environmental issues, China's CSR focus is beginning to move from risk mitigation to opportunity capture, with the clean-tech sector receiving investments from the state, private equity, and larger institutional investors.
Another defining aspect of CSR in China is the strong role of government, particularly in shaping the agenda for state-owned enterprises (SOEs) and foreign enterprises. CSR has evolved over recent years under the aegis of the state—the growth in corporate reporting on sustainability has been driven in large measure by the publication of SASAC's CSR guidelines in 2008. The growth in independent groups advocating for increased transparency on companies' environmental performance in an effort to hold companies accountable for improved environmental performance (including the Green Choice Alliance) has also been enabled by tacit government support.
At the same time, an independent civil society in China is still nascent, at best. The sector is hampered by high administrative hurdles and associated set-up costs. It is likely SOEs, certainly those with more global experience, will increasingly shape their own actions on sustainability performance, but within parameters defined by government.
India: A Localized Approach to CSR
Given the country's history, corporate sustainability in India has traditionally been anchored around social issues such as injustice and poverty at the local level. The lack of health and education infrastructure also continues to be profound in the poorest Indian states, and people in India expect companies to help fill these gaps.
It may seem, to those looking in, that India has a robust civil society, very much concentrated on meeting the needs of the poor. But to those operating within the country, civil society is fragmented and hampered in its potential for positive impact by a lack of coordination and resources. (Indeed, "pan-Indian movements, such as the anti-corruption movement catalyzed by campaigner Anna Hazare, are rare.) For some, an analogy to "a thousand flowers blooming" underscores the huge opportunity that exists for civil society to innovate and explore new models of collaboration with business. To others, this chaos will never settle, thus preventing new models from scaling up.
In this context, expectations of corporate paternalism are encouraged and shaped by civil society, especially at the local community level, where education and health needs are most acutely felt. To date, business has been satisfying demands placed on it in order to secure local license to operate, and this local nature of corporate sustainability will ensure it continues to be shaped from the bottom up.
Brazil: Trying to Achieve the Right Balance in CSR
Relative to India and China, Brazil appears to be the most balanced in terms of its corporate sustainability orientation, although addressing social issues is still paramount. In addition, discourse about the Amazon--its importance to Brazil's future development, its role in climate change, the importance of protecting its natural resources, and the question of land tenure in the region--also shapes the agenda. More recently, corporations have become increasingly alarmed by the so-called "talent blackout" facing the country, and they are focusing financial resources on education programs.
In terms of the forces shaping Brazil's CSR agenda, civil society is vibrant and has been effective in lobbying for specific causes. Society is also becoming more open to opinions from international NGOs focused on effective governance of the Amazon.
Meanwhile, business is characterized as the productive sector--one that is pragmatic in its dealings with civil society, government, and foreign value chain partners. As a result, transparency on corporate sustainability performance is growing, as shown by the popular uptake of the Global Reporting Initiative (GRI), and civil society is holding corporations to account for their sustainability performance.
In contrast, many view the federal government as ineffective in its CSR role due to excessive bureaucracy, or what companies call "the Brazil cost." While regional governments are piloting new legislation (Rio de Janeiro, for instance, is developing a carbon credit scheme), there is skepticism about whether these programs will really take off.
The Future Focus of CSR
Unsurprisingly, there is not a "one size fits all" approach to corporate sustainability in these new geographies. However, there are certain commonalities among the countries that can be gleaned from the research--and those will be important for companies' CSR strategies going forward.
Prioritize social and economic development: Brazil, India, and China are still in the throes of rapid social and economic development, with all the challenges and opportunities that such growth entails. Companies in these markets are approaching corporate sustainability as a nation-building tool to improve development outcomes. For example, companies in Brazil are building educational institutions and are training teachers to populate them. In India, companies are being called upon to build bridges, hospitals, and other infrastructure. In China, they are expected to help build a harmonious society. In all these cases, the role of business in society is underpinned by a broad expectation of corporate paternalism.
Don't underestimate the need for stakeholder approval: Corporate sustainability in these markets is focused on seeking approval and gaining legitimacy from a broad array of domestic and, in some cases, global stakeholders. In China, for example, corporate sustainability emphasizes alignment with government priorities on sustainable development: Companies seek approval from the government for their actions in this regard. In Brazil, corporate sustainability is driven by local reputational considerations and also by an increasing need to gain legitimacy among potential (Western) value chain partners looking to invest. And in India, companies seek approval from communities to acquire local license to operate. International frameworks like the GRI and UN Global Compact provide structured processes for companies to collect and report data that legitimize their actions in the minds of multiple stakeholder groups. This appears to be particularly important for "home grown" companies that are growing globally.
It is clear that the research to date on the new geographies of corporate sustainability has only just begun to surface the many insights on the topic in emerging markets. Further work is needed to expand the dialogue beyond Brazil, India, and China to engage a broader, more diverse audience from business, civil society, and government, and further test some of the observations gathered thus far.