A good example :: Sekem

Good works: A lesson from small businesses
By Patrick Blum International Herald Tribune

WEDNESDAY, MARCH 15, 2006
BARCELONA In 1975, Ibrahim Abouleish, the Egyptian-born head of research at an Austrian pharmaceuticals company, took his wife and two children on a holiday to show them his native country. After almost 20 years of studying and working abroad, he was shocked by the poverty that he saw.

Two years later he founded Sekem, a company that would revolutionize Egyptian farming. The company was acclaimed in 2003 by the Right Livelihood organization of Sweden, sometimes known as the alternative Nobel Prize, as "a model for the 21st century, in which commercial success is integrated with and promotes the social and cultural development of society."

Johanna Mair, an assistant professor who teaches general management at Iese, a leading European business school based in Barcelona, cites Sekem as an outstanding example of how an innovative and socially responsible company, grounded in local conditions, can do well by doing good.

"Social entrepreneurs are making a business contribution to sustainable development based on local needs rather than on the centralized assumptions of large institutions or governments," Mair said in an interview. "At the moment there is a lot of action going on in this respect in developing countries."

Sekem, which started from almost nothing on 50 hectares, or 125 acres, of desert land near Bilbeis, a town 60 kilometers, or 36 miles, northeast of Cairo, in 2005 reported a net profit of 10 million Egyptian pounds, or $1.7 million, on sales of 108 million pounds.

Along the way, it has pioneered biodynamic and organic farming methods designed to turn the land into a self- sustaining, self-regulating habitat and has expanded into a business making foods, textiles, pharmaceuticals and health products.

It also provides schools, vocational training, clinics and cultural services for local communities and has worked with the national government since 1990 to encourage the use of organic methods to control pests and improve crop yields - a program that led in 1993 to a ban on crop dusting throughout Egypt.

Mair cites other examples of social entrepreneurship in Asia, Africa and Latin America. Their common feature, she said, is that they cater directly to local needs that have not been met by conventional institutions.

Grameen Bank of Bangladesh, a pioneer of microcredit, lends to poor rural women who would not qualify as standard bank customers. Its loans, typically for the equivalent of less than $200, help borrowers to develop small, self-sustaining businesses. Started in 1976, the bank counts 5.6 million customers in more than 60,000 villages, according to a January statement on its Web site.

In Kenya, KickStart, founded in 1991, designs low-cost technologies and simple tools that it sells through a chain of retail shops to small businesses. Its product range spans the fields of agriculture, construction, transport and sanitation, and its target customers are local entrepreneurs who may be starting businesses with loans of less than $1,000.

Mair says multinational companies would do well to pay more attention to initiatives like these and the roles of local businesses.

Corporate social responsibility is often too abstract, she said. Chief executives talk about it at conferences but not enough gets transmitted to people lower on the business chain. "What is really missing are the guys who actually do the job, the middle managers, the line managers," she said.

Critics say the corporate social responsibility programs of multinational companies also too often are little more than public relations exercises focused on wealthy home markets.

"Philip Morris has smoking cessation programs in the U.S." as part of their corporate social responsibility program, said Deborah Doane, director of the Corporate Responsibility Coalition in Britain, an umbrella organization for about 130 activist groups. "But they're certainly not doing that in emerging markets, where they're not pressurized to do so."

The idea that companies can save the world and make a profit underestimates how global markets work, Doane added.

Nestlé, for example, sells a fair trade coffee brand that helps small farmers in Ethiopia and El Salvador. "That's probably very good for those smallholders, but it's not having any impact on the overall structural problems of the coffee market," she said.

"We're not suggesting that in some markets there are no incentives to bring about socially responsible behavior, but when you take the globalized competitive environment as a whole, those incentives are few and far between," she added. Responsibility seems to work only "where there is enough pressure being brought to bear."

As long as the primary duty of companies is to their shareholders, finance directors will look only at investments that pay off within two to five years, Doane said. "If you want to make an investment that has a 10-year payoff, it's virtually impossible."

This can change, Doane said, only if corporate governance rules are toughened or if the legal status of companies is changed "to make them stakeholder-based, like some cooperatives, rather than shareholder-based."

An overhaul of corporate law is unlikely to happen fast. In the meantime, the pressure for tougher rules is growing. Still, there is a danger in having too mechanical a view of social responsibility, said Antonio Argandoña, a member of the anti-corruption commission of the International Chamber of Commerce, and associate dean at Iese.

"You have your code of conduct, you publish an annual report on social issues in your company and you have a dialogue with stakeholders. Then you do whatever you want," Argandoña said. "This is why we put a lot of emphasis on personal responsibility. I think people are more conscious today, but I'm not sure they are more responsible."



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