Integrating corporate strategy with social responsibility
By Pharm. Nelson Okwonna
Earlier this month, I was invited to make a presentation to a small group of development practitioners in Lagos. The event was a brainstorming session to rethink approaches to development practice in general, and for a development organisation in particular.
At the end of the session, we all agreed that at the heart of development in Africa is achieving socio-economic development, which can only occur when we have sustainable productive entities – that is, profitable firms. A good development agenda therefore must be holistic and should be tailored to address the challenges that limit our competitiveness as a nation, rather than focusing on increasing specific inputs, which though good initself, cannot bring us to the intended path.
For example, while donations to charities as part of corporate social responsibility is a good deed and is intended to help with the wellbeing of the recipients, if it does not improve the chances that a profitable sustainable productive entity would emerge, then it is not a sufficient contribution by itself; though necessary, it is not sufficient.
Considering that the bulk of our private and corporate giving is in this category, it is not surprising that Africa has not been helped much by even well-intentioned aids. The simple reason is that the factors that make the African business environment non-competitive have not been sufficiently addressed. For example, increasing the volume of research and development funding, without developing sufficient platforms for interactions between research institutes and the industry, is an inefficient strategy for innovation development.
When Finland adopted a policy that each undergraduate student must have an industry partner for their projects, the government set the stage for creating industry-relevant personnel; it saw the need for a catalytic systemic approach that emphasised the complementary nature of the inputs that make for national development. When such a structure exists, it is still not sufficient; access to finance and a robust intellectual property regime would also be critical requirements.
Firm strategy in the health care sector
To be profitable and remain in business, organisations must not only be more competitive than their competitors, they also have to exist in a nation that offers some certain levels of competitiveness. For instance, an equal investment in two pharmaceutical firms, one situated in Nigeria and the other in India, would offer different returns, even when both firms are focused on the Nigerian market.
Several factors act to contribute to the national competitiveness of a particular industry and the aim of this article is to state that we would all do better if the corporate social responsibility investments of firms are made to increase the national competitive soil within which they compete.
The diagram above reflects the factors that influence national competitiveness as outlined by Prof Michael Porter of the Harvard Business School. The four factors identified as Porter’s Diamond contribute to the competitiveness of any industry.
The pharmaceutical industry, for example, would benefit from increases in demand conditions if the Nigerian government pursues a more aggressive health insurance policy. An industry-sponsored health insurance promotion programme directed at the government to influence policy could be packaged as a corporate social responsibility programme with the attending tax benefits.
For example also, I have personally been leading a programme (www.wapip.org) to promote the interaction between research and industry actors for the advancement of pharmaceutical innovation in West Africa. To us, supporting such an initiative is a fantastic corporate social responsibility initiative as it offers numerous advantages, such as increased rate of pharmaceutical research industry partnerships for product development and lead identification. The first event we helped make happen – the NIPRD Industry Business Summit which held at Sheraton, Lagos in 2013 – witnessed some firms making strategic commitment in the area of increased dialogue and alliance formations with NIPRD. We are also working to help make similar contributions in the area of innovation capacity analysis and industry report to assay areas of national competitiveness.
Such efforts, as the ones enumerated, are within the arena of “factor endowments” – in other words, the nature and quality of human and material resources. The factor endowments in the Indian pharmaceutical and health industry would include the rich educational structure that has succeeded in producing a large number of industry-relevant professionals. This factor endowment, coupled with other factors, makes the Indian pharmaceutical industry relatively more attractive for direct foreign investment.
Investments in fostering the quality and volume of the human resources in the Nigerian health care sector cannot be overestimated. Personally, I believe that this is one of our biggest challenges, hence, efforts like those made by Juhel Pharmaceuticals with the support of the Faculty of Pharmacy, Nnamdi Azikiwe University, Awka, is quite laudable. We’ve also been canvassing for investments in pharmaceutical research structures where a sponsoring industry partner could dictate the research questions an MSc or a PhD project should seek to answer. When structured properly, an arrangement of this nature could pass for a corporate social responsibility initiative.
In the area of promoting the supporting industries – besides the health insurance industry, the finance, agricultural and petrochemical industries are other areas that companies can focus their corporate social responsibility efforts on. The phyto-pharmaceutical industry in Nigeria offers immense opportunities, considering the volume of local demand, with the right factor conditions (the kind we are trying to create) and with the right supporting industry (agriculture), there is a lot that can be done when the corresponding firm strategy and structures are in place.
One of such structures has to do with intellectual property protection which lacks strong enforcement in Nigeria. This is perhaps one good reason why despite the courage of the private sector, it still would take a good government to help Nigeria emerge from her myriad of challenges. The private sector could, however, help in articulating what the remedies should look like.
An innovation system perspective
To help buttress the earlier points, which for me, involves a challenge – that of helping well-meaning organisations synthesise these thoughts to practical projects(a gap we also identified at the brainstorming session) –I’ll employ the illustration below.
From the diagram above and from the Porter’s Diamond, the factors contributing to the innovative nature of firms are most times beyond the scope of their regular business operations. Identifying, designing and implementing projects that would help boost their competitive advantage, even if the advantage is not limited to their firms alone, would go a long way. The options become even more attractive if those projects can be constructed as corporate social responsibility projects.
Finding individuals with the depth and breadth of knowledge base required to make such projects feasible is another challenge on its own. Even though this author has been contributing in this area, the demand gap is still huge, considering the level of time and resource commitments required to see appreciable impact.
Beyond CSR to CSI
At the brainstorming session, we coined a phrase that summarised the thoughts above – “Beyond CSR to CSI” – Beyond Corporate Social Responsibility to Corporate Social Integration. The underlying thought frame is that, most times, the same things that would help a nation to be competitive are the same things that would make its citizens and its firms competitive.
Porter, M. E., and Mark R. Kramer. “Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility.