Engaging the Private Sector in the Post-2015 Agenda

By Philippe Scholtès, UNIDO and Tim Wall, UN Global Compact

Engaging the Private Sector in the Post-2015 Agenda

Philippe Scholtès and Tim Wall consider the new forms of partnership required to implement innovative business models that respond to commercial imperatives, while also delivering on the development front.

In the last two decades, increasing economic growth rates in many developing countries have reshaped the global economy and opened up new opportunities for learning and entering into new activities and sectors. Developing countries are not only accumulating valuable sources of capital and labour but they are also improving their skills and capacities to innovate.

Such continuous changes in the global economic landscape have been characterized by a shift of wealth towards the East and South, shaping new forms of promoting, as well as financing, development. However, leading technology and knowledge towards sustainable growth and moving up the value chain is still a challenge for most of the developing world.

Productive business activities are central to development. A strong private sector is a key driver of local economic growth, knowledge and technology generation, job creation and the provision of fundamental goods and services. Therefore, both developed and developing economies are increasingly realizing the necessity of engaging the private sector as an integral and dynamic agent of development, in order to sustainably address the most pressing global and national challenges. This is central to continuing negotiations for the development agenda that is to replace the Millennium Development Goals (MDGs) beyond 2015.

The problems facing our world today are too massive and too interconnected for unilateral approaches. Complex development priorities require systematic and vibrant global partnerships that succeed in connecting funding and expertise with local resources, implementation capacities and ownership –all essential for advancing towards our shared goals.

The development landscape contains many aspirational partnerships which fall short of implementing their bold objectives of bringing together public sector, private sector, and civil society entities to improve the lives of people living in poverty. Common pitfalls include misalignments between the global strategy and the local execution; a lack of common measurement systems for monitoring and assessing progress; inadequate structures to manage complexity; inability to create shared value; and insufficient resources to guarantee sustainability.

Despite the collective development discourse about the essential role of partnerships with the private sector in advancing development at multiple levels, good practices remain elusive; many are ad hoc or rather limited, and often focus on corporate social responsibility and philanthropy, rather than core business activities. Businesses also usually face obstacles to contributing to the longer-term sustainability of any development effort, mainly due to the lack of an enabling regulatory environment or the necessary infrastructure that allows them to grow.

Undoubtedly, achieving key outcomes in economic development, environmental sustainability and inclusive growth entails working together across sectors and industries in new and more effective ways. Isolated and disaggregated efforts frequently fail to generate the desired results due to partnership approaches which are incompatible with the complexity of the challenges.

As we reflect upon how to better engage the private sector as a key partner for sustainable global development beyond 2015, one cannot over-emphasize the need for multi-stakeholder dialogue mobilizing the full resources of the international community, if we are to deliver measurable results on the ground.

How does an ambitious post-2015 development agenda create a business partnership strategy and structure that works at the global, regional, and local levels?

Meeting this challenge effectively will go a long way towards ensuring progress in the current post-2015 negotiations. This entails identifying new forms of partnership that put forward innovative business models that respond to commercial imperatives, while also delivering on the development front.

Whereas private revenue streams for development are highly sought-after by donors, non-governmental organizations (NGOs) and national governments as a means of mobilizing alternative sources of funding, budget concerns alone are not the main imperative. When partnerships build on the resources, capabilities and influence of a range of stakeholders to tackle complex challenges, they become powerful mechanisms to accelerate development.

Today, transformative development solutions through business exist with the capabilities to have profound impacts on areas including: gender equality, human rights, climate change, agriculture and food, water and corruption. The private sector has been traditionally the driver of technology development and innovation, representing a hub for technical progress. It has, moreover, proven to have considerable ability to combine inventive capacity with access to finance.

But businesses are already engaging in development in a variety of ways – from initiatives seeking to identify new models of incorporating responsible behaviour in core activities, to more traditional initiatives striving to leverage business supply chains and the production process. One particular area where the private sector has played a critical role is in creating innovative solutions to climate change and energy security, which often demand fine coupling between capital and ground-breaking capability. Creating and engaging in platforms for dialogue and knowledge sharing with the private sector can unlock the potential of relevant actors, directly impacting the effectiveness of partnerships.

The Green Industry Platform’s work to ensure more sustainable business practices in manufacturing refers to these initiatives, driven largely by large and small companies adjusting their business model to deal with today’s complex and resource-constrained world. This global multi-stakeholder partnership, launched by the United Nations Industrial Development Organization (UNIDO) and the United Nations Environment Programme (UNEP), creates a platform for businesses, governments, international and civil society organizations to work together, with a view to globally minimizing the negative environmental impacts of today’s businesses, through scaling up and mainstreaming greening practices throughout the global manufacturing and industry process.

In fact, businesses that integrate sustainability into their business models are increasingly reaping greater opportunities for new markets, innovation, resource efficiency and risk management, while also adding long-term value in economic, social and environmental terms. As they are constantly encountering further opportunities associated with development, businesses are progressively more aware of the need to adapt to the changing global development agenda, and thus recognize the value of partnerships and self-engagement in this context.

Moreover, a number of partnerships focus on helping to shape public policy as well as public attitudes for improved corporate performance. Respective policy advocacy in climate and energy, as put into practice by the Caring for Climate (C4C) initiative, is another example of leveraging the private sector’s capacity for innovation to target pressing global challenges. Launched by the UN Secretary-General Ban Ki-moon in 2007 and jointly convened by the United Nations Global Compact, the secretariat of the United Nations Framework Convention on Climate Change and UNEP, C4C offers engagement opportunities to help prevent a climate change crisis by mobilizing a critical mass of business leaders to recommend and implement climate change solutions and policies. The initiative helps companies to advance practical solutions, share experiences, inform public policy, shape public attitudes and engage in public-private partnerships. More than 350 companies from 50 countries, which support the world’s largest business initiative on climate change, are prepared to set goals and publicly disclose emissions as part of their existing disclosure commitment within the UN Global Compact framework.
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Multiple factors explain the accumulated interest in supporting convergence between business incentives with public policy objectives, and more specifically, in its explicit integration with achieving future sustainable development goals. Despite the fact that we all talk about a globalized world, the private sector is actually a valuable point of contact for reaching local people and meeting local needs. On the one hand, business-reorienting practices around systemic development issues can create positive economic, environmental and social spillovers by promoting local development, inter alia, creating local infrastructure, generating new sources of income, and empowering different groups – particularly the poorest, advancing open markets and enlarging the possibility for local commodities to be exported. On the other hand, their commercial interests in safeguarding supply chains, embracing new investment opportunities, developing new markets targeting the poor and protecting themselves from future shocks, are also preserved. These kinds of win-win solutions are what we need to be looking for. As such, this is a pressing opportunity to ensure a deep and central focus on business engagement within any post-2015 discussions.

National governments are also exploring new ways to enter new sectors and develop new activities in order to accelerate economic growth and strengthen their production apparatus, so as to maintain high and inclusive growth. Transforming their production structures is critical to that effect, and in return will empower them to overcome context-specific needs.

Investing in transforming and upgrading domestic production structures is as important for developing countries today as the design and implementation of industrial policies. In order to better adapt to the world’s changing landscape and to drive economic and industrial growth as a means to address poverty and sustainable development priorities, developing economies are dedicating considerable efforts to identifying new forms of partnerships with domestic and foreign companies to enhance technology transfer and linkages. They are also simultaneously investing in supporting innovation and the development of small and medium-sized enterprises (SMEs), with a view to building up domestic production capabilities and foster diversification. Building inclusive and sustainable value chains by upgrading and strengthening the competitiveness of local producers for their successful inclusion in local, regional and global value chains has proven to significantly benefit from the participation of these producers in embedded business networks and partnerships.

Non-traditional forms of partnerships are also notably populating the international cooperation landscape, particularly as these alternative approaches (e.g. South-South and triangular cooperation) create new channels for making available further development resources, both in terms of expertise, knowledge and funding. Private investment flows from the Global South continue to hold the potential to significantly leverage the development impact of partnerships.

The success of reaching inclusive and sustainable industrial development calls for dialogue with the private sector to build collaborative partnerships, create synergies in investments, identify mechanisms to channel and mobilize resources, and improve domestic institutional capacities, at the national, regional and global levels.

Depending on the sector, businesses can deliver both commercial and development goals through their supply chains, their distribution networks and the benefits they grant to their employees. UNIDO and the UN Global Compact’s expertise in industry-related knowledge and their track record in fostering business partnerships offer valuable resources for facilitating and/or brokering synergies between the public and private sector, thereby enabling investment opportunities that are inclusive and sustainable and supporting skills development to stimulate innovation and productivity.

That said, we must continue to encourage partnerships that seek to scale up interventions involving the private sector core activities or dealing with under-investment in development challenges. Getting the public and private sectors to work together is in itself a challenge, and the need for coordination at multiple levels further contributes to its complexity. However, the discussions shaping the post-2015 development agenda are reaching a crucial stage, and thus the case has never been more compelling for mutually-reinforcing partnerships, enabling contributions from a variety of stakeholders to effect the transformation needed for a more prosperous and sustainable future.

Editor’s Note:

This blog was previously published on Making It Magazine and is reproduced with permission.

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