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Ethics for Latin American Businesses*
What is happening in the business world? Forty-five percent of the top 250 businesses in the world produce regular information regarding their environmental, social and corporate governance activities. This is a requirement for the societies in which these businesses are involved, and also for their investors. A meeting of large pension fund managers organized by the ONU concluded that “these types of activities have clear material effects in the long-term, and businesses and investors that ignore such benefits do so at their own risk”. Goldman Sachs states that “considerations of the environment and of society in general do indeed count. In a world that is becoming more and more complex, these activities are part of the type of quality management necessary for a business to be successfully competitive”. Price Waterhouse Cooper shows in a recent study (CEO Argentina, 2) the importance that social balance is now playing in investor decision-making.
The leading businesses are expanding, or have expanded their activities of social responsibility in business (RSB). Bill Gates has established the largest foundation in the world, giving over 31 billion dollars for its employment. This foundation focuses on helping to eliminate the many inequalities related to health care provision throughout the world. Brin and Page, the creators of Google, have formed a foundation that seeks to “use Google as a means of applying innovation and significant resources in order to solve the world’s most pressing issues”. The management of eBay contributes millions of dollars in order to “make the world a better place”. The owners of Intel have been leaders in the world of donations over the past five years. The president of General Electric says that the future of the business lies in its capacity to “be on the leading-edge of clean energy and environmental technology”. The ground-breaking Soros Foundation actively supports democratization processes. Schmidheiny, creator of the prestigious Avina Foundation, created the World Business Council for Sustainable Development, which unites the 160 most important businesses of the globe and defines (RSE) as “the commitment of businesses to contribute to sustainable economic development, by working with employees, their families, the local community and society in general to improve quality of life”.
The bar for assessing where a business actually stands in terms of social responsibility continues to be raised. Public relations are no longer enough for satisfying demands for social responsibility, neither is conventional philanthropy. Deep compromise is being requested and concrete actions demanded. The pioneer Peggy Rockefeller Dulany noted: “With money comes education, the capacity to make decisions, links with the elites of other countries and enormous power. We wish to promote that those using these advantages, money and connections, whether they are personal, family-related or drawn from business, do so to create public benefit. Caustically, Reich questions tax breaks that are used only to aid “things like schools for the elite, concert halls, etc...”. He notes that before this type of philanthropy, “self-serving behavior must be delayed until after much more is done for the world’s poor”.
Social Responsibility in Business grows beneath the combined pressure of an ever-more active civil society, organized consumers, and investors made increasingly anxious by the ‘Enrons’ of the business world. The management Guru Charles Handy says that “if you are rich, you want to be on the list of those that give, no less than you want to be on the list of those that are rich”, and the Economist cites the advisor to a leading Swiss bank who estimates that 25 percent of his most wealthy clients have substantial commitments to philanthropic ventures, 40 percent are actively thinking about it and 15% are currently placing such ventures on their agendas. SRB is seen as a test of managerial efficiency and as a very important competitive advantage. As a result of this, a new book dedicated to successful experiences in SRB is named: How executive leaders do well by doing good.
Is creating SRB in Latin America the same as doing so in the developed world? We suggest that it is not. The agenda in a region like ours needs to be more expansive. To reach the goals, a company should comply with environmental requirements, with good corporate governance, with their responsibilities to personnel and consumers, and with participation in programs of public interest and information. There is a long road to be travelled in order to improve all of these aspects in the region. According to Monica Araya of Yale University, between 1990 and 2003, only 6 percent of published sustainability reports from the Americas were from Latin America. However, on top of this, in a continent with high levels of poverty and inequality, businesses should put the tools of which Dulany speaks, at the disposal of these causes through strategic alliances with public policy-makers and NGOs. Additionally, in a region where family is a collective value, and according to surveys, the institution that is most respected by youth, businesses should search for innovative routes by which they can conciliate family and work. In countries like Spain, they are actively searching and have put forth the idea of the “family-like responsible business”. In countries with tax evasion rates higher than 40 percent, the business should be a model of proper fiscal conduct.
But there is more, the goals – today recognized throughout the region – of guaranteeing quality education and health for all, of helping the small and medium sized business, of rising above discrimination based on ethnicity, color and gender, and of taking care of the elderly, require ample coordination and even more financial resources. SRB should include a forceful restatement of the existing fiscal situation in the region: it is regressive and it generates resources that are significantly inferior to those produced by developed countries. In all of Latin America, the income of the state is estimated to be 18 percent of gross product, which is much less compared to the 36.60 percent average in developed countries.
Do businesses run risks by following an updated SRB agenda? The answer appears to be no. According to Julio Moura, president of the highly successful Grupo Nueva that operates regionally in 15 countries, throughout his management he applies the notion of the “triple result”, economic, social and environmental, and this brings immediate benefits: “Our companies are starting to see that this is a clear element of differentiation within the market, they understand that the analysis of the labor climate shows that our employees feel better motivated and are more satisfied. They feel that they are initiating processes of dialogue and they are consulting their communities to receive help in identifying new possibilities for business, reducing risks and strengthening reputation.
The risks, then, are run by those companies that do not employ an agenda with emphasis on high-quality SRB practices, and by those societies without an acute “network for ethics” that reaches throughout the area.
Coordinator of the Inter-American Initiative
for Social, Ethical, and Development Capital
Inter-American Bank of Development
*The ideas, thoughts, and opinions expressed are not necessarily of the OAS nor of its member states. The opinions expressed are the responsibility of the authors.