Business Community Consultation during The Hague Conference on Business and Human Security

in Program

During the afternoon session of The Hague Conference on Business and Human Security, attendees participated in the second consultation on the work of the Commission on Global Security, Justice, and Governance. The joint secretariat of the Commission, consisting of The Hague Institute for Global Justice and the Stimson Center (Washington D.C.), identified the conference as an opportunity to solicit the thoughts and experiences of the private sector and corporate social responsibility experts on the Commission’s three thematic issue areas: Fragile and Conflict-Affected Environments, the Cyber-Economy, and Climate & People.

The questions posed during the consultation were tailored to a private sector-oriented audience. Two break-out groups were assigned to cover the Fragile and Conflict-Affected Environments (FRACAE) focus area, while one group was assigned to cover each of the Cyber-Economy and Climate and People areas. This decision was based on the markedly higher interest in the FRACAE consultations during registration. As the conference focused primarily on the intersection of human security norms and the private sector in conflict-affected countries and regions, it was unsurprising that many attendees indicated that they lacked familiarity with either cyber-economy or climate and people issues.

Conference participants included a diverse international group of business representatives (mostly from small- and medium-sized enterprises [SMEs], including from conflict-affected countries, with a few representatives from multinationals), nonprofits and consultancies that assist start-ups, multinationals, major nonprofit donor organizations, government officials, and academics.

The consultation began with an introduction of the project’s conceptual framework by Dr. William Durch, the Research Director for the Commission and a Senior Associate at the Stimson Center; Dr. Richard Ponzio, Head of the Global Governance Program at The Hague Institute; and Dr. Joris Larik, Senior Researcher in the Global Governance Program. The three speakers explained the Commission’s focus on the interplay between security and justice in global governance, both within and beyond the purview of states. This segment of the consultation was chaired by Professor Jan Wouters, Director of the Centre for Global Governance Studies at KU Leuven (Belgium), who also shared some thoughts on the origins and development of the concept of global governance.

Following this introduction, Dr. Peter Middlebrook, CEO of Geopolicity Inc., an international management consultancy and think tank based in Dubai, was invited to comment on the project. Dr. Middlebrook began by sharing his conceptualization of the promise of globalization: the opening of new opportunities to individuals, including those disadvantaged by circumstances of birth. He urged the Commission to keep this end-goal in sight, and also to recognize that injustices in contemporary patterns of capital accumulation are preventing the realization of this promise. Another key trend Dr. Middlebrook highlighted is the dual emergence of hyper-locality and hyper-globalization. While globalization and larger modes of organization are inevitable, there is an increasing number of local groups vying for recognition.

Dr. Middlebrook ended his brief discussion by listing several issues which he felt the Commission had an obligation to consider. First, the world still does not properly understand the implications of the Arab Spring protests, or how to manage the aftermath of this monumental event in regional history. Second, new centers of capital and potential foreign direct investment, such as the Gulf States, are looking for new modes of overseas investment that differ from those promoted by Western states. Third, the international community needs to move past imposing a Weberian definition of the state on political communities and consider frameworks for recognition and participation by new, “hybrid” forms of local governance. Fourth, established institutions such as the World Bank and International Monetary Fund failed to predict the Great Recession and are likely to fail in foreseeing the next crisis. This is symptomatic of an institutional inability to identify and promote views outside the current consensus assessment. Finally, the potential for and implications of the replacement of fiat currencies with crypto-currencies remain poorly understood. Dr. Middlebrook concluded his remarks by stressing the importance of garnering high-level political traction for the institutional reforms and policy innovations to be advanced by the Commission on Global Security, Justice, and Governance.

Each break-out session was moderated by two staff members from the convening organizations and SPARK, an international development organization focused on entrepreneurship and employment, which also co-organized The Hague Conference on Business and Human Security. Each session was also assigned a staff note-taker. The moderators were instructed to ask attendees to volunteer as rapporteurs, who would then report conclusions back to the plenary. Some groups structured their discussions using the prepared questions, while others diverged from the questions.

Break-Out Sessions

Fragile and Conflict-Affected Environments (Red Group) Moderators: Dr. Sofía Sebastián and Dr. Richard Ponzio

Participants began by endorsing several comments made by Dr. Middlebrook in the introductory discussion, emphasizing that there are many emergent trends that the Commission is not looking at and which have a clear impact on the international security environment. Multiple participants reiterated Dr. Middlebrook’s point about hybrid, less-than-sovereign states and the need to find a way to bring them into the international community. The failure of existing governance structures to manage new conflicts and the breakdown of the non-intervention and use-of-force norms all pose pressing questions of legitimacy and effectiveness. One participant noted that their private organization is stepping in for traditional intergovernmental actors in Syria to provide humanitarian food aid. Another participant noted the lack of a “common language” on the relationship between business and the state and challenged the Commission to take on the problem of “state capture” in states such as Russia, where the government and the private sector are completely intermingled. In connection with the need for the project to focus on the most pressing issues, another participant argued for more representative membership of the Commission.

In contributing direct support to security-building in fragile environments, the United Nations and other organizations are handicapped by finite resources and conflicting priorities. Furthermore, reliance on direct support can stunt the growth of indigenous capacities. How have these limitations affected businesses in fragile and conflict-affected environments? How can the private sector pick up the slack and contribute to security-building? Is there a role for the private sector in providing basic services that neither states nor intergovernmental organizations can fill?

Participants were initially challenged by the generic use of the term “private sector,” voicing confusion about its real meaning. They expressed a preference to better define the different types of actors involved in (or associated with) the private sector (e.g., SMEs, multinationals, etc.) in order to better address the questions under consideration. Participants also noted a wide divide between cases where the private sector acts as a surrogate for an incapacitated government on a non-core, charity basis and cases where firms partake in a government-led development agenda as a core part of their business. Examples of corporate social responsibility projects by Shell and Heineken were mentioned.

Initially, participants questioned the premise that the private sector has a role to play in providing basic services that states are supposed to provide, especially in the area of security-building. There was a general consensus that while some services can only be delivered by the state, the private sector can have a constructive role if brought into the planning phase by the government at an early stage. At the same time, participants recognized the potential for conflicts of interest and a lack of public accountability when firms control essential services. One participant explained his experience in the Democratic Republic of the Congo, where his firm had successfully delivered a service that the state was unable to provide but argued this was a rare exception.

Is there a role for the private sector in the prevention and resolution of violent conflict that is overlooked by the international community? Should international organizations be leveraging support from businesses better in the management of transitions?

Participants noted examples in Nigeria, Northern Ireland, and South Africa where the private sector had a role in peacebuilding following a period of conflict. However, the group also mentioned limitations, including where economic development can have counterintuitive effects in generating violence due to a growing competition and a clash of cultures.

A key problem identified by the group was “poorly conceived training,” where ex-combatants or other types of under-skilled job-seekers are provided with new skills that do not advance their employment prospects. To avoid this problem, participants emphasized the importance of bringing the private sector into these peacebuilding initiatives as early as possible to identify actual needed skills for the marketplace. One participant also discussed ways in which the private sector had contributed to the prevention and resolution of violent conflict, pointing to various examples that were successful in the past.

Fragile and Conflict-Affected Environments (Orange Group) Moderators: Dr. William Durch and Dr. Joris Larik

In this break-out group’s discussion, which departed from the questions and instead drew on the various experiences of the participants, participants emphasized the different capacities, priorities, and interests of local SMEs and multinational businesses in fragile states, while also stressing that corporate social responsibility is “not core business.” Local businesses have a strong interest in peacebuilding because peace is a prerequisite for the sustainability of their ventures (except illicit business, whose interests are the reverse as they tend to benefit from the cover of conflict and instability). Local businesses are often more adaptable than foreign firms because of their knowledge of the local context and ability to operate informally. Since licit (legitimate) local businesses cannot readily escape if peacebuilding efforts collapse, their interest in sustaining development efforts can run deeper than the interests of multinational groups. Often, they require only minimal assistance following a conflict to help them become viable business prospects again. One participant noted that this is particularly true in agriculture, where small sums of technical and financial assistance can go a long way if delivered between planting and harvesting periods, when no income is flowing to firms and families. That is, farming requires long periods of stability to realize profit; other sectors can work on a shorter time-scale, and even operate despite instability (e.g., artisanal mining). Smaller firms can more readily develop a business case for early post-conflict Foreign Direct Investment (FDI) than larger firms, whose plans must conform to wider corporate strategy.

Participants noted that some large firms like to set up export-processing terminals in conflict-affected places “because there are no rules”, and since their governments do not invest in the interior, the general state of infrastructure is of little importance. Multinationals can, however, also be peacebuilders to the extent that they need good infrastructure and a stable and enforceable investment environment. Some multinationals are particularly adept at operating in conflict environments; one example is Ericsson, which brought mobile phone service to refugee camps. Others maintain valuable country-specific institutional knowledge accumulated through pre-crisis business operations, and some of that knowledge might prove useful in post-crisis peacebuilding. Shell, for example, was engaged in Syria before the civil war and could provide important assistance when the conflict subsides. Participants also noted that multinationals can be pressured to integrate global norms into their business operations by shareholders, which was the case with Statoil’s operations in Nigeria. The company subsequently turned to the international non-governmental organization (NGO) Amnesty International to provide human rights training for its staff. Some extractive industry players may be more transient, however, and less likely to take local considerations seriously, and industrial investors may collaborate with authorities in large development projects that displace local populations.

Participants noted that outside assumptions about conflict-affected areas often focus too much on risks and not enough on opportunities. For example, in connection with the latter, diaspora communities can play a role in linking outside investors with local knowledge by leveraging their connections. Participants also pointed out that the norm-propagating community needs to be aware of the potential for compliance issues to block investment where a business case would otherwise be sound. NGOs can have a role in helping multinationals manage their responsibilities. A good example is where one outside actor created a directory of local capacity in conflict-affected zones, including Haiti, Afghanistan, Liberia, and East Timor, to enable international businesses to better identify and engage local partners.

Cyber-Economy (Blue Group) Moderators: Ms. Sash Jayawardane and Mr. Xiaodon Liang

Data-driven management paradigms have emerged in parallel with data-driven public-policy making. “Data”, whether in the expansion of traditional quantitative analyses to new fields or the rise of “big data”, is increasingly seen as a prerequisite for understanding complex issues, including global governance problems. In demanding more information from businesses and society at large, have these approaches helped or hurt your business?

A participant noted that data collected by the government and released publicly can be very helpful for business planning. Examples include data related to crop yield and weather. However, this data can often be unreliable or subject to temporal restrictions, which limits its usefulness. The limited availability of technology in many parts of the world also impacts data-gathering, with farmers and other rural groups unable to report in an accurate and timely fashion. A participant engaged in business in Rwanda pointed out that public institutions may have data that is useful for local farmers, but that knowledge is often restricted to ivory tower research settings. Better methods for gathering and sharing data are, therefore, needed urgently.

Participants also noted that data that is relevant to governments may be irrelevant to businesses. If governments want businesses to operate as data collectors on behalf of the state, appropriate incentives must be created. Businesses are willing to share data with other businesses and governments if doing so does not disrupt business operations, create employee unrest, or compromise competitive advantage. These limitations must be borne in mind when devising data gathering/sharing strategies involving the private sector.

Concerns about data privacy also affect the private sector. One participant noted that in Russia and Ukraine, businesses are very careful about what they communicate via email because that medium is subject to surveillance and potential competitive exploitation. Government or non-State actors can use this data in a manner that compromises business interests and the personal security of clients. A group member noted that in Afghanistan, the security of data gathered by banks has been compromised by groups attempting to learn about individuals’ ability to pay ransoms if kidnapped.

Businesses that provide services on the internet have come under increasing pressure from two fronts: governments concerned about security issues (terrorism, crime), and rights advocates concerned about fundamental freedoms. Is this pressure harming the growth of the private sector online, and at what point do the costs of compliance become prohibitively expensive? Are we near that point?

A participant noted that the costs of complying with state laws and standards for data gathering, storage and use are very high and create barriers to entry and growth for start-ups and SMEs. These costs could be alleviated for SMEs if compliance software is provided as a public good by governments or developed as open-source applications.

Adapting to diverse technology ecosystems in underdeveloped markets has been a hallmark of innovation and growth in the developing world. For instance, growth in mobile payments technology has had positive effects on associated businesses. Have there been cases where your firm adapted to local technology peculiarities?

In response to a moderator question about the role of public-private partnerships in extending internet access to underserved populations, participants noted that businesses often try to avoid partnerships with governments. When public-private partnerships are necessary and helpful, it is important that a clear division of responsibilities is established and upheld. Clarity about business models and how the private sector fits into government development goals is much more important than subsidies. The participants agreed that subsidies can obscure how benefits accrue and to whom. The best thing the government can do is establish a clear regulatory framework and allow the private sector to conduct its operations.

Climate and People (Green Group) Moderators: Ms. Manuella Appiah and Dr. Menno van der Veen

The moderators introduced a proposal for establishing a global patent-licensing facility for climate change mitigation and adaptation technology. Intellectual property rights are a key field of competition among firms, with a “gold rush” towards the development and patenting of new technologies. The problem is that developing countries are not core markets for firms, and there exists no incentive for the development of solutions tailored to their climate-related needs or the sharing of established technologies. Participants assessed the challenges presented by such a proposal, such as the reluctance of companies to license their proprietary assets on a concessionary basis and the potential for creating a disincentive for climate research and development. They also pointed out that companies are very sensitive to creating new legal liabilities that are outside their control. The group noted that a UN mechanism has already been set up and agreed that it would be best not to create parallel structures where unnecessary.

A separate idea considered by the group was the opening-up of patent databases and open-source development of new technologies. One participant noted that Tesla Motors had recently made its entire patent portfolio accessible to the public. Another possibility is engaging developing states as testing grounds for technologies that are still under development.

Participants also discussed the disproportionate effects of climate change on developing states and how these are creating security concerns. One participant mentioned the close link between climate change and migration, and how the latter can lead to social conflict and labor exploitation.

Conclusions

Participants emphasized that businesses and governments have distinct responsibilities and motivations, and that successful coordination between the two depends on a shared understanding of their core competencies and limitations. Nonprofit and intergovernmental actors can benefit from the private sector, but they should also think about how they can facilitate the growth of businesses in conflict-affected environments as a central pillar of peacebuilding.

While attendees were supportive of the goals of the UN Global Compact and similar normative frameworks, in many discussions, participants pointed out that compliance costs can create a trade-off between commercial viability and strict compliance. While the profit-motive can create positive externalities for human security, it cannot function when the business case is untenable.

Another recurring point was the importance of distinguishing between the capabilities and responsibilities of small-and-medium-sized enterprises from those of multinational companies. Across break-out groups, participants highlighted the difficulty of applying the discussion prompts to one type of actor or the other.

The consultation was a valuable exercise in that it brought to light concerns with themes and issues raised by the project from diverse international actors that would otherwise have been under-appreciated. The Commission will continue to benefit from similar dialogues that draw on the unique viewpoints of important sectors, regions, and stakeholders.

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