A CSR case study

Market driven capitalism has caused tremendous economic growth for many countries like the Philippines. But the fruits of capitalism have not been felt by the majority of the population. The cliché is right. The few get richer while most people remain poor. Income inequality has actually worsened even in the most progressive countries like the United States and Hong Kong.

Well-meaning business leaders and philanthropists have resorted to corporate social responsibility programs; but these have done little to alleviate the situation and rarely produce transformational change. In an article in Harvard Business Review, three authors – Robert Kaplan, George Serafeim, Eduardo Tugendhat – contend that companies’ CSR projects are not ambitious enough. According to them: “The traditional corporate approach is to engage with socioeconomic problems to make specific investments in infrastructure, waste reduction, environmental protection and local training, and health programs.”

These projects provide tangible evidence of a company’s corporate social responsibility while remaining under the direct control of the company. However, these types of programs normally benefit only a small number of people and do not change the fundamental socioeconomic conditions of a community. They are also not an integral part of the company’s business strategy. Therefore, these programs are often cut during lean times. These types of programs also have limited impact because they are positioned as a social or environmental or charitable program and not a profit generating one.

Their proposal is not just aim at improving an existing system but rather “...unleash market-based forces to create a new ecosystem that is economically selfsustaining and organically growing.” This is a highly complex undertaking that requires investments from many sources. The authors gave several actual case studies. I chose one that I believe can be duplicated in the Philippines.

Uganda is basically an agricultural country where 70 percent of the population survive by growing crops, mainly low-quality maize, on tiny plots of land. Farmers dry their maize on bare ground and thus lose 30 percent to 40 percent of their crops. Average annual income was only $307 a year in 2010. These conditions persisted despite the presence of Nile Breweries, a large regional company owned by SABMiller, a multinational beverage company. Here is the case study:

“That year Carana, a global economic development consultancy (since acquired by Palladium) initiated a project aimed at creating a supply chain that could bring small maize farmers into the mainstream regional economy. This required deep engagement with multiple players, including Nile Breweries, grain traders and the farmers themselves. It involved multiple investments in new assets and capabilities for the traders and farmers, including the creation of maize demonstration plots to showcase good agricultural practices and proper postharvest handling techniques. An offtake agreement with Nile Beweries facilitated farmers’ access to credit and attracted input suppliers that could help farmers finance the purchase of improved seeds, equipment, and fertilizers along with access to irrigation and pest and fungus control solutions.

Fast forward five years. By 2015, the enhanced supply chain encompassed 27,000 farmers , more than half of them female. Median crop yields had risen by 65 percent and the median price per metric ton had increased from $139 to $179. Annual household incomes had more than doubled to $688, and participating farmers’ grow margins had increased by 50 percent. Farmers’ families had a more diversified and nutritious diet that included vegetables, nuts, fruits and occasionally meat, fish and eggs. Farmers were buying drought resistant seeds and could access crop insurance and interim financing through mobile phone payment systems.

Downstream in the new supply chain, annual sales of maize grits from the lead grain trader, AgroWays, to Nile Breweries had increased from 480 to 12,000 metric tons, and the improved quality and processing meant higher prices. This enabled AgroWays to recoup the investment in its new storage and processing facilities. Another company, Maganjo Grain Millers, built a regional facility to turn maize germ from AgroWays into high nutrition porridge and other products. Other companies were entering the region, creating the sustainable mass for an agribusiness cluster.”

In that region, the quality of life for the ordinary farmer had changed dramatically in just five years.

In that Uganda project, one principle established was that a corporation desiring to go into this type of CSR program needs to partner with a “catalyst” organization which can be an NGO or a project management or consulting company. According to the authors: “Ideally, it [ catalyst] has a deep country knowledge as well as expertise in helping create new ecosystems on the ground, such as enhanced supply chains for products or talent. Most important, it has a strong reputation as an independent player that understands and respects the perspectives of all participants in the new ecosystem.”

There have been too many cases where corporate social responsibility programs are actually charitable projects such as donating food or clothing to the needy especially during times of natural disasters. Philanthropy is another term that has been sadly mistaken as CSR. How many corporations actually believe that they have a responsibility – an obligation – to society?

Perhaps, one of the greatest challenges to our capitalists is to be able to pursue profitable strategies while transforming impoverished communities into vibrant, sustainable economies. Most CSR programs have yielded very little returns in terms of social transformation. Corporations must be willing to partner with all sectors of society to address the persistent problem of poverty and inequality in our country.

Creative writing classes for kids and teens

Young Writers’ Hangout on Sept. 15 (1:30pm-3pm; stand-alone sessions) fiction writing with Sarge Lacuesta on Sept. 22 (1:30-4:30 pm) at Fully Booked BGC. For details and registration, email writethingsph@gmail.com.