Jean-Michel Severino: “Corporate companies have a crucial role to play in developing countries”

Summary

In this interview, development expert Jean-Michel Severino explains why large multinational companies have a responsibility to contribute to develop assistance, and how they must do that with their profitability and social & environmental responsibility always in mind. A balancing act that means great challenges, but also great opportunities.

14Mar.
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Jean-Michel Severino is the former vice-president of the World Bank for Asia, and the former Managing Director of Agence française de développement (the French Development Agency). He is now managing a private equity fund that operates in Africa, South of Sahara, and aims at creating positive social and environmental impacts. Jean-Michel Severino is also a member of the Board of Danone, and Down to Earth asked him a few questions to better understand the role of corporate international companies in developing countries. Here are some of the views of this development expert on how companies like Danone can and must contribute to the economic growth of the poorest regions of the world.

 

What role must corporate companies play to contribute to development assistance?

 

The role of corporate companies in developing countries is multiform and absolutely crucial. And the very first one is to carry their mission, as private companies, with irreproachable rigor and ethics. Economic growth relies firstly on private investments, from local actors but also from large international companies; their investing in African economies, for instance (for exportations as well as on the internal market), is crucial to the economic development of these regions.

By developing “African strategies”, large corporate companies create jobs, hire local managers and executives, help improve managerial culture and competence, introduce new technologies, etc.

They thus have a structuring effect on the economy that goes beyond money introduction or market creation. This is fundamental, and I would say that it is the first service to provide.

 

What are the positionings or prerequisites that allow companies to be really innovative on these emerging markets?

 

The main principle is to work with local actors and to be in tune with the market. It is not always that easy to do, but the key is to work with products that are sourced locally, and thus to understand the possibilities that a particular cultural, natural, historical and industrial background has to offer. Secondly, you must know and understand what it is that the people need and want, how they live, how they consume, etc.

This approach prevailed for instance when Danone designed Lemateki in Senegal: in this country, many children go to school without having eaten anything, but sometimes they have 10 cents with them to buy something on the way.

The challenge was thus to be able to offer to the children nutritious food on the way to school (for more information about the story of Lemateki, you can read our interview of François Colomban here). These are simple principles but they require strong attention and the will to be connected to ground realities. Adapting to the circumstances and trying to reach as many people as possible is key to efficiently contribute to local development, and it is also the best way to reach profitability – and profitability is what makes the projects perennial and durable.

 

What about the social responsibility of corporate companies in these regions?

 

Companies such as Danone have a very particular set of responsibilities in developing areas. There are various reasons for that. There is for instance the fact that large multinational companies face reputational risks in these parts of the world, because they are immeasurably richer than local companies.

In order to be perceived as legitimate when they bring capital to the local markets, but also when they retrieve some, and to be seen by the governments and by the central banks as plain actors of the economy, they must be perceived as being truly socially engaged.

Another reason is that local disparities among the population are often gigantic in these regions, and it can be humanly difficult to work in societies where poverty reaches such high levels. One cannot be and work there without wondering how the company can contribute, even beyond its traditional role, to finding solutions to the problems the society is facing. This is true for local SMEs as well as for larger companies: no one is ever completely cynical, and most of them engage in their social role. I believe that this corporate social responsibility must be integrated at the heart of the companies’ strategy, because at the end of the day, it is even more efficient when it participates to the companies reaching their business goals. For instance, for agrofood companies, it makes sense to work on nutrition, health, safety problematics. You can of course help fund the local football club, but maybe the real challenge is to dig even deeper at the heart of your mission as a business, in order to help improve the local context.

 

And this englobes the environmental responsibility too?

 

Of course. In Africa, for instance, the ground is very fragile, in ecological terms, and easily damaged by agriculture. Urbanisation and population densification are also creating environmental problems that are extremely acute (difficulties in water supply, waste management, urban efficiency, etc.). And the governements, even when they are very willing, have limited means.

Now, companies are also concerned by these environmental challenges, and are impacted by them. If you make dairy products and your milk production chain works poorly, with supply or quality issues, all the environmental problematics that haven’t been dealt with will turn up against you eventually.

There is thus a sort of obligation for international companies to address these issues. I also believe that corporate environmental responsibility means working on your supply chain. In developing countries, the industrial ecosystems are very weak, and there is a major stake for corporate companies to help them grow and reinforce. That means investing on your suppliers, getting involved in the quality of their work, etc. And this is how a company can foster its own efficiency while contributing to the development of the society it operates in.

 

One last word?

 

In developing countries, cooperating with the governments and organisations from the civil society is much more crucial than in Europe, for instance, where the State is constantly present – especially through social regulation, or on health safety. In these areas that are struck by poverty and where the stakes around nutrition are high, international companies have to collaborate with public actors on development and industrial policies even more than in their home countries.

Photo © Shutterstock / maxim ibragimov