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To Conference of "Caribbean Latin American Action"
October 14, 2002
First, I want to thank the organizers of this conference for inviting me to appear today. It is a pleasure to share my thoughts with you on the topic of corporate social responsibility and to hear your ideas.
Ladies and gentlemen, while we often think of governments as the principal agents working to improve the living conditions of a country's population, civil society and business can also play vital roles. Today, an increasing number of multinational and local companies based in the Americas have voluntarily undertaken a variety of activities for the improvement of the working and living conditions of their communities. These firms demonstrate social responsibility by engaging in ethical business practices for their various stakeholders including shareholders, employees, customers, vendors, public authorities, NGOs, communities and the natural environment.
Corporate social responsibility practices comprise a number of diverse activities which range from traditional philanthropic programs such as support for local charitable, cultural and educational activities to a more integrated and comprehensive set of policies and practices linked to the companies' operations. Today, more and more companies are developing their own codes of conduct, and larger corporations are abiding by international codes that monitor their behavior towards the environment and society at large. These socially responsible businesses have a purpose that complements their profit motive. Their challenge is to achieve the triple bottom line: financial results, sustainable economic growth with more and better jobs, and greater social equity.
In signing the Trade Act of 2002, President Bush made a clear connection between business and development. He said, "Free trade is also a proven strategy for building global prosperity and adding to the momentum of political freedom. Trade is the engine of economic growth. In our lifetime, trade has helped lift millions of people, and whole nations, and entire regions, out of poverty and put them on the path to prosperity."
Let me give you an example of what USAID, as part of a broader U.S. Government strategy, is doing to promote more development activity by the corporate world. We support linkages between the business sector and USAID programs through an initiative called the Global Development Alliance or GDA. The GDA serves as USAID's new business model, one that allows us to multiply our official development resources by creating alliances with private corporations, foundations, universities and colleges, and other private organizations interested in working in the developing world. These alliances make best use of USAID's field presence, technical expertise, and institutional infrastructure and our partners' financial resources and commitment to humanitarian and development goals. Through this mechanism we hope to improve the quality and extent of partnerships with a wide range of non-governmental entities to increase non-governmental financing for development assistance, and enhance policy reform through advocacy.
Sustainable economic development is more achievable in an atmosphere where companies, governments, and civil society play their role, where synergies encourage inclusive economic growth that is good not just for companies or a country's elite, but for all of society. The challenge facing business in the 21st century is to support an enabling environment in developing countries for economic growth. In this era of globalization, as business transcends borders, corporations and even medium and small business can play a fundamental role in spurring economic growth in developing countries.
A specific example of a public-private partnership we are brokering is in the coffee sector in Central America and the Caribbean. The current situation of dramatic decline in international coffee prices due to new production in Viet Nam and elsewhere, along with the recent drought in much of Central America, has led to job losses, food insecurity in poor households, the increased incidence of acute malnutrition in some countries, abandonment of farms, and increased migration out of rural areas including illegal immigration into the United States. Because of falling coffee prices, many farmers, including small-scale producers, cannot earn enough to cover their production costs. Many hundreds of thousands of seasonal jobs, and hundreds of thousands of permanent coffee farm jobs, have been lost. As a result, an increasing number of families dependent on coffee incomes will face hunger in the coming years.
USAID has implemented a program as part of a comprehensive development strategy for Central America, to try to address the adverse effects of the coffee crisis. This year we will provide $6 million to assist coffee producers to enhance the quality of their coffee, to improve their business practices and marketing skills, and to support governments in making market-based policy reforms. In order to help producers tap specialty coffee markets, we are engaging corporate allies who are interested in signing long-term purchasing contracts or by investing jointly, using their corporate social responsibility funds, in this endeavor. To name a few, we are working closely with our GDA office to develop industry alliances with coffee companies including Starbucks, Proctor & Gamble, with colleagues from Green Mountain Coffee Roasters (specialty roasters), Holland Coffee (specialty roasters) and the Neumann Group (coffee traders). By working closely from the outset with industry, our assistance to producers will be demand-driven and based on market potential.
Now, let me give you two other examples of how USAID is providing development assistance that supports the enabling environment for business growth.
The lack of good governance and the lack of sound regulatory and physical infrastructure not only make it hard for existing businesses to operate but also for new businesses to start. Many feel the number one obstacle to starting a new business is lack of capital. Our micro-finance program partners with private financial institutions to give men and women small loans-from as little as $40 to $1000 to start and expand their own businesses. USAID is helping micoentrepreneurs throughout Central America and the Caribbean. In Mexico, for example, the lack of a regulatory framework was identified as a key constraint to growth. After President Fox took office, a working group formed to provide policy guidance for a micro-finance strategy. As regulatory issues were resolved, USAID backed two credit guarantee programs. One guaranteed $2 million for a Mexican partner to make new loans, and the other guaranteed $1 million for Wells Fargo to partner with a different Mexican institution for increased lending.
To cite a final example, the environment is an area in which corporate behavior has a huge impact. USAID has been working to support pollution prevention and clean technology processes in Latin America and the Caribbean since 1993. USAID works with the World Environment Center to address pollution prevention and accident mitigation and prevention. With USAID support, the World Environment Center conducts projects in Mexico and the Caribbean to develop models for innovative clean production and financing models that build on multinational corporations' existing supplier management programs. The Center's board of directors includes the Environment, Health and Safety directors for some of the world's largest corporations including IBM, GM, Dow Chemicals, Johnson & Johnson and Pfizer.
USAID is committed to continuing our work with developing nations to create the right climate for business to help businesses compete in the global marketplace to ensure that the issue of corporate social responsibility gets the attention it deserves, and develop partnerships that stimulate sound economic growth. We are excited about the opportunities that this new era brings, and we are working to make sure that it is a time of responsible globalization that leaves no one behind.
Thank you.
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