May Miller-Dawkins

Written for the Open Government Partnership in September 2017. 

The 2017 Edelman Trust Barometer revealed the largest-ever drop in trust amongst four cornerstone global institutions: business, government, NGOs and the media. In the 28 countries surveyed, trust in all four institutions combined fell below 50%. CEOs suffered the biggest dip in credibility, falling to only 37% globally. These numbers should be concerning to all institutions. But for business this radical drop in trust must be addressed if companies are going to continue to operate successful and sustainable companies.

Why is trust important for business?

Trust is crucial for business. It is the glue that binds companies to their customers and to the communities where they operate. Customers are more likely to buy products from a company they trust and citizens are more likely to support business operations within their community if they trust the company. * Companies interested in lasting for the long term understand that maintaining trust translates to stronger brand reputation, a more reliable social license to operate, and an ability to attract and retain talent and capital. From a purely bottom line perspective, trust counts: a 10-year analysis by Fortune.com has shown that public trust in a company and profitability are strongly positively correlated.

Losing trust – by abusing workers and the environment, bribing officials to win deals, using influence to stack the public policy deck in favor of short term business interests, or by not providing consistent and quality goods and services – comes with significant, long term costs that outweigh the short term gains. For extractive companies, losing the trust of local communities can cost roughly $20 million per weekdue to delayed production. The overall financial consequences of bribery can be ten times the settlement costs considering stock price drops, higher costs of capital and shareholder lawsuits. Bribery also leads to drops in staff morale which can have significant impacts on performance (employee morale has been highly correlated with higher returns).

How can business begin to rebuild this trust?

Companies can take significant steps to increase their integrity and build trust. Beyond the fundamentals of providing quality and consistent goods and services and ensuring that a company is behaving responsibly by respecting the environment and human rights, there are some key steps that business leaders and companies can take.

Firstly, they can be pro-actively transparent – about what they do, how they do it and how they contribute to society. Transparency allows investors, business partners, regulators, civil society, and the media to more easily check claims of responsibility or sustainability – and enables them to act as early warning systems alerting brands to problems. And, there are already companies leading the way in key areas – publishing supply chains (e.g. Patagonia, Nike, Puma, adidas and Levi Strauss), disclosing more beneficial ownership information and group structures (e.g. Unilever and Natura and companies who have pro-actively published on OpenOwnership), publishing tax policies, practices and payments (e.g. BHP Billiton, Repsol, LUSH, Vodafone), setting out policies around political engagement (e.g. Visa, GSK), and being public about pay equity (e.g. Salesforce, Buffer).

In all these areas, there is more to do – both on what is disclosed (e.g. political advocacy policies versus actual lobbying meetings, payments and trade association memberships), how useful it is to end users (e.g. is it available in comparable and open data), and how much of the market is transparent. However, the above examples show that transparency in these areas is possible and leading brands believe it benefits them to invest the effort in doing it year after year.

Secondly, companies and CEOs can build trust by putting real support behind efforts to improve the well-being of people and planet. This means going beyond what is expected or minimum standards, to work together, with civil society and sometimes with governments, to address serious challenges. It can mean speaking out, as CEOs have recently done in support of action to end anonymous companies in the US, or making serious commitments to shift business models towards a net zero carbon economy, or standing up for human rights – for example when Tiffany & Co publicly supported investigative journalist Rafael Marques de Morais when he was targeted for a long jail sentence for exposing corruption in the diamond industry. At a time when many countries have restricted peoples’ rights to speak out and associate in civil society, the need for business leadership that supports democracy and civic rights, in particular, is more urgent than ever.

And what about governments…?

Building trust pays, and losing it costs. However, these in-built incentives can be disrupted by markets driven by short-termism – CEOs with short tenures feeling pressure from shareholders who stick around for even less time.

The constraints of short-termism means we cannot rely upon voluntary action alone. Governments – including all OGP participating countries and subnational entities – have an essential role in shaping markets that prevent abuse and are geared towards long term, sustainable development.

This means ensuring that companies and people know who they are dealing with in the market through beneficial ownership transparency. It means that when governments turn to the private sector to deliver infrastructure, technology and support social services, they ensure – through approaches such as open contracting – that citizens can see that public money is being put to its best use, and that innovative firms can have confidence that they are competing in a fair market. It also means that governments remain committed to the foundations of open government – that citizens can speak up, identify problems, shape public policy and demand rights. Without that, there can be no trust in how decisions are made and who they ultimately benefit.

Trust is good business, but it can best thrive in transparent markets and healthy democracies.

Originally published by the Open Government Partnership at https://www.opengovpartnership.org/stories/business-of-trust-how-companies-can-build-credibility 

By Kathrin Frauscher, May Miller-Dawkins and Eryn Schornick for the Open Contracting Partnership blog

If you brought together 400 purchasing and sustainability professionals what would you expect? We were surprised by both their vision and the challenges involved in harnessing the power of procurement to create a prosperous and sustainable future.Purchasing, such as when the federal government spends tax dollars, can be perceived as a means to an end, full of complicated rules that are driven by compliance. The opening of the 2017 annual Summit of the Sustainable Purchasing Leadership Council (SPLC) – a network of buyers, suppliers and experts that promote sustainable procurement – proved that stereotype to be wrong. The key message was that purchasing is big power and big opportunity. If done right, this multi-billion industry can be used to shape the future. Vien Truong, the opening speaker from Green For All, asked purchasers and suppliers to be ‘heros.’ Meaning that the choices we make with each contracting process can determine whether our communities and families have access to safe water or clean air.

This message resonated with us. We believe that open contracting, i.e. transparent, accountable and efficient purchasing, is the bricks and mortar of public benefit. It is where public funds get converted into roads, schools and hospitals through the contribution of the private sector. Here are some of our key takeaways for open contracting and sustainability from the Summit:

• No sustainability without transparency. Opening up information about who is buying what from whom for what price and under which terms is integral to achieving sustainability goals. With greater access to information about the real people who own bidding companies, who win contracts, and whether they are delivering what they promised, we can ensure that the most capable and ethical companies get business. With access to more information, we can also ensure that it is incrementally easier to understand and communicate the environmental and social benefits created.
• Transparency helps address market failures. The biggest benefits from transparency are when companies and the public have access to useable, accessible information in markets. Making products traceable, building public open data registers of who owns and controls companies, and clearer information about how government sources and purchases help prevent risk while enabling greater efficiency and accountability. The SPLC community can not only lead by example in this area but also be a key voice encouraging change from national and state governments.

• Sustainability is core business. We couldn’t agree more. The recent uptake of open contracting, as well as company ownership transparency, shows clearly that transparent and efficient procurement processes can save both buyers and suppliers money and time. Better market intelligence makes it easier and quicker for companies to prepare bids, conduct efficient and accurate due diligence on partners and suppliers, and for public agencies to select the best suppliers.

• We need hard numbers to make the business case for both sustainability and open contracting. In our session, a representative from a manufacturing company shared that she wanted to make a case for ethical sourcing to her upper management but lacked the hard numbers to do so. We see that too. It is one of our big quests to deliver metrics for how open contracting improves value for money, market opportunity and innovation. We can already point to Ukraine where competition has increased by 50%, but we want more hard data from more places.

• Cities and universities are at the frontier. We loved meeting so many representatives from cities and universities at the Summit. Cities and universities purchase goods and services on behalf of their residents. Sometimes these residents are left in the dark when it comes to important questions about what is being procured, how sustainable the purchase is and who is being paid. Cities and universities are opening and sharing information about their acquisition needs, contract process, and the performance of their vendors will help to improve their communities and will increase opportunities for potential vendors.

We are thrilled to be part of the sustainability purchasing community, and we are keen to continue working with SPLC and the broader business community to truly harness the big powers and opportunities of purchasing.

Businesses interested in why transparency of company ownership and government purchasing matters and how they can play a leadership role can do three things:

• Learn more about why company ownership transparency helps business lead with integrity and reduce risk at www.ownershiptransparency.com, and read up on why open contracting can make doing business with government more efficient and competitive in our new publication Opening up public procurement.

 

• Share your expertise and engage in the conversation by registering for an upcoming webinar or event about how the private sector can drive innovation and change in government purchasing. Or contact Madeleine McCarroll at The B Team on mm@bteam.org if you’d prefer a conversation about how your company can contribute to this growing field.

 

• Take action by disclosing your ownership or encouraging your suppliers to do the same and be leaders in transparency at www.openownership.org. The OpenOwnershipplatform can help make purchasing more efficient by giving buyers better (free, open and public) access to company ownership information across jurisdictions.

We look forward to hearing from you!

First published on From Poverty to Power at http://oxfamblogs.org/fp2p/have-those-hard-won-accountability-reforms-had-any-impact/. 

Many readers of this blog may have spent part of the 1990s and 2000s campaigning for increased transparency and accountability from the World Bank and other development banks in. Under often intense external scrutiny and pressure a range of development finance institutions have since acknowledged the need to answer for their decisions to an expanding group of ‘stakeholders’ outside their organization, to promote adherence to their internal policies and in some cases to provide access to grievance procedures for those affected by their lending.

Was it worth the effort? Have relationships of accountability, which we understand as “moral or institutional relation[s] in which one agent (or group of agents) is accorded entitlements to question, direct, sanction or constrain the actions of another”, actually shifted? And if so, has it really made a difference to people’s lives?

• We pulled together a special collection of articles for The Global Policy Journal to explore these questions. Lidia Cabral and Iara Leite on accountability in Brazilian development cooperation in Mozambique.
• Samantha Balaton-Chrimes and Fiona Haines on the engagement of the World Bank International Finance Corporation’s independent accountability mechanism, the Compliance Advisor Ombudsman, in the Indonesian palm oil sector; and
• Susan Park on the evolution of accountability mechanisms in the Asian Development Bank.

Here are some of the insights they generated:

Downwards accountability mechanisms oriented towards affected communities have been enthusiastically embraced by many lenders, but with mixed results

Accountability arrangements now look different, with more explicit commitments to strengthened accountability to affected people. This is particularly true of the multilateral development institutions.

The studies on Indonesia and the ADB find that the new accountability mechanisms have indeed enhanced the capacity of communities to air their grievances. In some cases they have also enabled communities to access compensation for project impacts, such as loss of livelihoods, or to negotiate other improvements to their conditions.

However, the potential for these mechanisms to prevent or redress harm in the first place remains limited.

The new accountability mechanisms can usually only ameliorate social or environmental harms resulting from a project, rather than stopping or fundamentally reconfiguring contested projects.

Multilateral accountability mechanisms are still influenced by the power and interests of powerful creditor governments, and governments of borrowing countries in which controversial development projects are located.

Notable differences are evident between the accountability practices of bilateral development cooperation programs, and those of multilateral institutions like the World Bank or ADB, reflecting the differing political environments that each must navigate. Bilateral aid is dominated by accountability practices answering to domestic political constituencies on the use of public funds, and to recipient governments with regard to broader policy frameworks. They have often placed less emphasis on direct accountability to citizens of host countries affected by lending projects.

Local, national and cross border campaigning is an important driver of donor accountability. Particularly in cases where community grievances relate to whether or not a project goes ahead in the first place, or to more fundamental transformation of the terms of such projects, protest and opposition by people’s movements seems more effective than reliance on institutionalized accountability mechanisms that lenders themselves have established.

For example, a coalition linking protest movements in Mozambique with like-minded organisations in Brazil and other countries has fundamentally challenged the premises of a Brazilian funded project in Mozambique, which many of them view as imposing a paradigm of large scale commercial agricultural development, threatening the livelihoods of both peasant farmers and the environment.

So has it all been worth it…?

New accountability systems can serve as useful political channels for marginalized social groups affected by Big Aid. Downwards accountability practices have sometimes achieved modest but significant shifts in the norms and power relations underpinning decision making.

But while such institutional changes have benefited some project-affected people, they have failed to make a difference for many others. The unevenness of such impacts reflect the inescapable ways in which accountability institutions (like all institutions) remain constrained within broader relations of social power.

Whether we think all the hard won claims have been worth it perhaps depends then on the level of ambition or modesty of our initial expectations. Learning from the successes and failures of the new accountability approaches is crucial, both to inform future campaigns or reform efforts, and to allow project-affected people and their allies and supporters to think critically about how they can best seek justice, remedy or change in the future.

Much ink and sweat has been spilled on the subject of the content of the Sustainable Development Goals (SDGs) and their accompanying targets. It is only more recently that more attention is being paid to their form: the ways in which they will be made real in particular places around the world.

As it happens, when you look at which international agreements have had certain effects, and under what conditions, it can make you question some of the current wisdom about what needs to be reflected in the goals for them to be effective.

For example, there is much talk of the need in the final stages of negotiation to make sure that goals are practical. This reflects an underlying assumption that the SDGs are a “project” to be implemented, and that such a project requires SMART goals. This thinking builds on rich veins of technocratic thinking in development, as well as reflecting the more technocratic origins of the MDGs.

However, the SDGs are a distinctly different exercise to the MDGs. They are universalist, ambitious, and grounded in international human rights law. In fact, they resemble international human rights and environmental law more than the MDGs themselves.

The experience of past international agreements and initiatives that have had significant effects – in the form of political commitment, compliance and policy change; normative shifts; and diffusion of approaches – points to two particularly salient lessons for the final negotiation stretch of the SDGs.

Firstly, the effects of the SDGs will be highly contingent on domestic political and policy processes. When I reviewed 150 pieces of literature on the effects of international agreements and initiatives at the national level, the most consistent factor was how those agreements were used in processes of national mobilisation and problem solving.

As the effects of international agreements are “highly contingent” on the dynamics of domestic social mobilisation and existing institutions, it is better that both goals and targets are not overly prescriptive as to how they should be achieved (although it would be good to have well formed global targets and national targets that are set in each country). Successful national problem-solving requires intensive debate and dialogue amongst diverse stakeholders to create a platform for experimentation, not just “implementation”. These national processes will need time and should be built into the timeframe for “implementation” and “results”.

Secondly, high ambition could prove to be a strength of the SDGs. In both human rights and environmental law, high ambition yet low enforcement agreements can sometimes lead to greater change than lowest-common denominator high enforcement agreements. This is particularly the case when governments are committed to action but face uncertainty about what they are capable of achieving (for example, in the case of hazardous waste). This point is clearly linked to the first, in that ambition is useful when it emboldens, enables, or legitimises national groups who can engage in mobilisation or collective problem solving to achieve change. Moreover, the majority of aspirations that the SDGs articulate present complex, even wicked challenges to achieve. As such, it is local problem solving and experimentation that has the best chance of mustering the political, social and economic resources that may be needed to make such aspirations real.

If the SDGs are to be made real country-by-country, and ambition is a strength, what does this mean for the negotiations over coming months? It will mean holding the line while refining the goals and targets to make sure that they are meaningful, grounded in human rights and environmental law, and ambitious but not overly prescriptive as to implementation. Moreover, it means that we need to shift focus to the national level soon, and pay attention to what kinds of platforms and processes are set up for engaging citizens about how to adapt the SDGs to their aspirations, and realise them.

As the rhetoric ramps up about how critical a year 2015 is, we shouldn’t forget that the hardest work will take place step-by-step over coming years in countries around the world.

Originally published at http://practiceforchange.org/2015/04/02/2015-may-be-important-but-its-the-long-haul-at-the-national-level-that-counts/