Committee for Conflict Transformation Support |
CCTS
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Engaging the Private Sector in Conflict Transformation - an overview of possibilities and challengesIn his paper Phil Champain draws on the work being done by International Alert, where he leads the Business & Conflict Programme, to involve international and local businesses in conflict transformation IntroductionThe purpose of this paper is to give an overview of current thinking on private sector engagement in conflict transformation. The debate on this topic has got to a stage at which there is a degree of consensus that business has a role to play in a sphere of activity that remains dominated by civil society and government actors. Private companies are both part of the problem and also potentially part of the solution. In Africa, the oil industry has been a source of conflict in the Niger Delta since the 1960s. The diamond and timber trade provides a source of income for rebel groups and predatory state governments in Sierra Leone and Liberia. The recent military defeat of UNITA by the MPLA in Angola has opened up new opportunities for a more positive and transparent approach to oil revenue sharing, although scepticism persists amongst those lobbying for greater accountability and corporate social responsibility amongst the oil majors. The recent withdrawal from the Congo (following a drop in the price of tantalite) of the Rwandan 'military-industrial' machine that widely plundered coltan further illustrates the central importance of natural resources, and the operations of businesses that exploit these, to sustaining violent conflict in Africa. In the Caucasus, the re-emergence of the oil industry in the Caspian in the 1990s and the recent sanctioning of the Baku-Tbilisi-Ceyhan oil pipeline is attracting close attention from those wary of the predatory development trajectories of 'Petro States' and the need for better ways of assessing the conflict risks of major private sector investments in unstable regions. In addition, in the face of trading restrictions imposed by the frozen conflicts between Georgia and the breakaway regions of Abkhazia and S.Ossetia, and between Armenia and Azerbaijan over Nagorny-Karabakh (together with the controlling influence of Russian policy in the region), illegal trading routes have emerged as alternatives to legitimate trade. The use of these black markets (eg. from Turkey through Georgia and across the S.Ossetian border to Russia) by traffickers of drugs, light weapons and other illicit goods fuels instability and blocks the benefits that thriving, licit business could bring to the region. In the North Caucasus, according to some reports, profiteering from illegal economic activities is a major contributor to sustaining violence in Chechnya, with, for example, both Chechens and Russian military personnel profiting from illegal trade in oil. In Asia the positive role that the private sector can potentially play in supporting and influencing peacebuilding has come to the fore most markedly in Sri Lanka. Following a crippling economic downturn and a persistently harsh business environment (particularly after the LTTE attack on Sri Lanka's main airport in July 2000), businesses based in southern Sri Lanka established a campaigning collective called Sri Lanka First. As peace talks build between the LTTE and the GoSL, Sri Lanka First and the business community in general (including the Tamil diaspora) continue to explore ways of contributing to stability through investment strategies and campaigning activities. Similarly, the Muslim Business Council (MBC) in the Autonomous Region of Muslim Mindanao (ARMM) is actively seeking to influence the economic development policies of the Manila based government of the Philippines, thereby contributing to conflict prevention through appropriate investment that will help meet the grievances of the excluded communities of Mindanao. And in Nepal the interim Prime Minister has articulated the crippling effects of the Maoist rebellion on the tourist industry and the need to put an end to the conflict if wary investors are to return (sentiments which may well be echoed in Indonesia following the recent and horrific bombing outside a nightclub popular with tourists in Bali). One thing this brief snapshot serves to show is that there exists in many countries affected by conflict an alternative economy that is different from the Western capitalist model. Some would say1 that this is symptomatic of those communities excluded from the dominant global economy finding alternative means of survival. Are these economies the result of inequitable development policies by Western governments bent on the liberalisation of trade at any cost? Do they enable those who profit from conflict to perpetuate the violence? Are such economies sustained by greed rather than by grievance? These are all important questions and as such I make reference to them, since they relate to the context within which the private sector operates, a context which private companies have a role in shaping, together with governments and civil society. However, the central purpose of this paper is to throw some light on the specific contribution the private sector can make to conflict transformation and the challenges this poses for companies, NGOs and governments alike. This contribution can be tentative or ambitious; with the company working alone or with others; at a micro or macro level. Thinking about engaging the private sector - some considerationsBefore homing in on this task, a few observations of 'on the ground realities'. First, the business community is not homogeneous. Much of the focus of the debate on business & conflict is on transnational corporations (TNCs), with European and US governments holding an increasing number of seminars and conferences on this subject, to assess how companies operating abroad can contribute to peacebuilding. But TNCs are not the whole picture. In some conflicts they are not part of the picture at all. The local business sector (by which I mean companies more than 50% locally owned and with their HQs in the conflict region itself) is of particular relevance to conflict transformation, offering opportunities for engagement, given their stake in the conflict, that TNCs do not. More on this later. Second, each conflict has its specific dynamic, an obvious point perhaps, but important when assessing the role of the private sector. In attempting to design generic frameworks, tools and understandings to progress private sector engagement in conflict transformation, the specificity of conflict must be considered and puts constraints on those wanting to design neat 'models' and theories. Third, process is key. In an increasingly output driven working environment, with target setting, deliverables and logframes to the fore, the importance of process-driven engagement that focuses on relationship building, stakeholder ownership and problem solving is in danger of being downgraded. In finding long-term solutions to complex conflicts, the importance of building relationships between the conflicting parties and of establishing high degrees of ownership amongst the different stakeholders is central. The role of third parties can be an important part of this process - but not necessarily so. Fourth, regulation has its place. Regulation of the private sector and those that determine the environment within which the private sector operates, has an important role to play. This has been most marked with respect to the extractive sector and TNCs. For example, the sanctioning of UNITA mined diamonds in Angola severely dented Jonas Savimbi's income and hence the ability of UNITA to continue to wage war. Fifthly, a private enterprise is not an NGO or a government ministry. It has its own culture, mandate and motivations. Profit (and the provision of services from these profits) drives a business venture, rather than 'cause', which is more the territory of an NGO. Attempts to engage businesses in conflict prevention must take account of the particular characteristics of the private sector and of the specific company in question. Finally, wars have their leaders/freedom fighters and so do peaceful movements for social and political change. Where are the enlightened private sector leaders who see a new vision for corporate governance in the 21st century - a vision that can harness the power of the private sector for peace rather than as a contributor to the growing divisiveness within our societies? Whatever the role of the private sector in transforming conflict, leaders please come forward. These six observations are echoed in six key questions put to a group of local business leaders in Sri Lanka in November 2002 by Brian Whittaker, CEO of the Business Trust in South Africa, which has played such an important role in the country's transition from apartheid to post apartheid. In developing a strategy for private sector engagement in social and political change, he argued that it would be useful to consider the following: Who will lead? What does the context demand? Which companies will work together? Who will they reach out to? What projects will they lead? Who will be the intermediaries? These questions and the observations above may provide a basis from which to attempt to draw out some general points about how the private sector might engage in conflict transformation. However, given the specificity of conflict and the diverse nature of the private sector, it is best to be mindful of the limitations of such an approach. Conflict transformation processes and the private sectorBoiling down conflict transformation process, one could simply say that it involves getting the right people together in the right environment to discuss the right issues. Clearly, this is not a simple task, as anyone involved in conflict transformation can testify. A meeting is called and key parties do not turn up. The dialogue is held at a venue controlled by one party or the other and therefore not deemed safe, stifling interaction and honest debate. The key issues are swept under the carpet, to be replaced (or high-jacked) by ones which are not really relevant to the conflict. And so on. There is much trial and error, persistence sometimes rewarded by an encounter that hits some of the right notes. But this takes time and patience - and constant analysis. Analysis of conflict is something that the private sector is gradually coming to grips with. The risks of operating in a conflict zone need to be factored into any business venture. However, traditional private sector methods of risk assessment are not generally geared towards analysing the causes of conflict, the actors in it, or the part played by the company itself in the conflict. Conflict transformation actors, including private sector companies, need to respond to 'what the context demands'. The context therefore needs to be constantly analysed and assessed. From the standpoint of the conflict transformation practitioner, conflict analysis is best done in a participatory way, drawing on the understanding of those involved in the conflict. As such, it is not a desk-based enquiry, but rather a process of identifying stakeholders and engaging them in collective analysis of the conflict. As such, the analysis itself is part of the longer term conflict transformation process. It serves to support a process of relationship building amongst stakeholders and to determine the key causes of conflict and the roles each different stakeholder (including in this case private companies) can play in helping to resolve it. Practical projects will be an outcome of this defining of roles and issues. Some may focus on a company's core business, over which it has a high degree of control (eg. employment practice, developing human resources, creating jobs, etc.). Others may be philanthropic or part of a company's social investment strategy (eg. education and health programmes). The most challenging interventions by private companies will be characterised by 'policy dialogue' (eg. with government to support the judiciary or police, combating corruption, supporting political reform, etc.). Although a company will be able to control its core business activities, its social investment and policy dialogue will require partnerships with others to design and implement effective projects that respond to the contextual analysis. Constant analysis, defining roles/relationships through dialogue and project response are the three key building blocks for private sector engagement in conflict transformation. They are the 'right hand' of the conflict transformation practitioner and would appear relevant therefore to any conflict transformation process. They are not however, so familiar to the private sector, since there are a number of factors at work, which make company involvement in these processes problematic. Additional catalysts are required to cement the building blocks. Key catalysts for private sector engagement in conflict transformationPrivate sector companies are not generally regarded as 'trusted social partners', to coin a phrase from Brian Whittaker. In Georgia for example, local businesspeople are spoken about by civil society organisations in the same breath as the mafia and ineffectual politicians. In Sri Lanka big businesses in the South are wary of accusations against them of economic colonisation of the North and East, reminiscent of the reputation of the Christian business community in Mindanao amongst Muslim communities. The oil companies operating in the Niger Delta are seen by many as complicit in the theft of billions of dollars from the communities there that continue to suffer poverty and environmental degradation despite huge oil revenues to Federal and State government. Much of this negative attitude towards the private sector is justified. The case for the defence is more or less built on different interpretations of roles and responsibilities. Whose responsibility is it to address issues of governance, territorial integrity and security? The government? Civil society? Or the private sector? 'All' I hear you say, and yes, sure. However, to what degree is each responsible? Who should take the lead? What role should each play? Are there some things the private sector cannot/should not do? Are there dangers in encouraging the private sector to play particular roles? There are certainly dangers, particularly if a company chooses to try and control a process that it should rather assist and influence. The influential Business of Peace report2 identifies three spheres of private company activity that can potentially contribute to conflict transformation. It is important that the roles applied to each of these activities are appropriate to the context. This is beginning to be recognised by some companies. However, in IA's view, the theory of applying appropriate company roles, particularly in conflict zones, has yet to be applied with much success in practice. As previously mentioned, core business relates to the impacts that business can have through its core business operations (in the workplace, the market place and along supply chains); social investment relates to what are often company funded social or environmental projects that benefit the community but not the company directly (benefit usually coming in the form of enhanced reputation); and policy dialogue is a term used to describe business engagement in dialogue with governments and other stakeholders, advocacy and institution building. Policy dialogue can relate to the difficult structural issues that often underpin conflict such as corruption and cronyism, human rights abuses, inequitable distribution of revenues and patronage and lack of democratic process. In general terms, a company plays a lead role in relation to its core business. In this sense, getting its own house in order (through appropriate employment practices, procurement policies which encourage local contractors, etc.) is a prerequisite to working with others on more far reaching initiatives. Social investment projects in conflict zones are best done in collaboration with others so that they can target the pertinent social issues and avoid duplication of what other companies are doing. However, companies in general show a tendency towards leading and controlling these projects and the processes that determine them, mainly because the company's reputation is the dominant driver, and, since reputation is linked to competitive advantage, the company will hold its cards close to its chest. The Oil Industry Forum in Azerbaijan was an attempt to encourage greater levels of collaboration on oil company social investment programmes, but has yet to realise its full potential for these reasons. The inability of private sector companies to relinquish control on setting social investment agendas in conflict zones means that many of the projects are at best ineffectual in transforming the conflict (because the issues do not come from shared analysis with stakeholders), and at worst have the potential to make the conflict worse. If a supporting role is preferential for social investment, it is a must for policy dialogue. Companies will be the first to accept that they cannot be the sole provider of solutions to what are very complex problems. It may well be that in engaging in higher risk processes that, for example, aim to strengthen governance and combat corruption, companies take a back seat in order to minimise the threat to their business. Certainly, strength in numbers is advisable when tackling more controversial and sensitive issues. Although partnerships are more evident in these types of intervention, there is significantly less involvement of companies at this end of the scale. Core Business practice, then, is the responsibility of and therefore closely controlled by the company. Social investment and policy dialogue however require a supporting role from the company in processes that will also involve civil society and government. Confusing these different roles can create problems and hinder conflict transformation processes. Getting it right will help consolidate engagement in conflict transformation. The defence also includes the fact that the private sector does not have the skills and tools needed to engage in conflict transformation processes. Commitment is one thing. Having the ability to act on this commitment is another. Corporate Social Responsibility (CSR) has provided a useful framework for company executives to consider its wider role in society, and has led in recent years to a number of initiatives involving training for company executives in the role of the private sector in environmental and social issues. CSR is a valuable, though not particularly new, idea. One of the most significant landmarks was the intervention of the entrepreneur and businessman Joseph Chamberlain who applied himself and the business community to the plight of 19th century Birmingham3. More recently, BP has taken things a step further by designing a course on society, the environment and the role of the company with Cambridge University, for all its senior executives. In designing their CSR approaches, both Chamberlain and BP's CEO John Browne emphasised the need for collective action. ' Real progress will only be possible when companies, governments and other interested parties agree to work together through a set of mutually supportive steps'4. However, traditional CSR, whilst increasingly emphasising collaboration and partnership (often most problematic when it comes to companies working together) will not in itself necessarily transform conflict. To begin with, CSR takes the company as the starting point. The acronym demands this - corporate social responsibility. With conflict transformation however, the country/conflict needs to be the starting point. The role and the responsibility of the company will emerge through the analysis of the conflict in the country. This is not to say that the company should not consider what benefits it can potentially gain from a conflict transformation approach, or that project response should not consider company reputation and bottom line. But if the analysis does not start from the country situation, then any response will be flawed and the benefits marginal. This is often because the issues identified through a conflict transformation approach will arguably be different to those of a traditional CSR approach (resulting in dialogue on the wrong issues). For example, in Muslim Mindanao, 'social reforms are the key ingredients to lasting peace and development. Without this the issues that underlay the breakdown of peace and social order will again rear their ugly heads. Lasting peace and development (LPD), therefore, needs a sustained effort at social justice (SJ), good governance (GG) and corporate social responsibility (CSR). LPD=(SJ+GG+CSR)'5. It is in relating to issues such as good governance and social justice that private companies are challenged most. But these are the issues that are often so central to the transformation of conflict. Engaging in conflict transformation requires a company to engage in issues it may not necessarily put in its CSR policy. This 'CSR+' or 'country first' approach is missing from current company methods of risk assessment and stakeholder engagement. Furthermore, methods of Environmental and Social Impact Assessment (ESIA) amongst TNCs are not generally applied throughout the whole project cycle; mitigation strategies tend to be reactive rather than preventative; and engagement with stakeholders in ESIA processes (a relatively recent methodology when one considers BP's first ESIA was conducted in 1997) tends to be project based rather than conflict based (and therefore limited to the development site - e.g. a pipeline). The problem with such a narrow conceptualisation of impact area is that it not only excludes impacts that are beyond this corridor (for instance revenue impacts, energy expectations etc.) but it also excludes mitigation measures from any outlying area. Overall, there is a need to embed a different approach throughout the project cycle6. Constant analysis, defined roles/relationships and project response will therefore be enhanced through the provision of conflict sensitive tools and methodologies for the private sector (which put the country first), and through better matching of 'lead' and 'supporting' approaches to private sector interventions. Challenges for the 'non private sector'If private sector companies have challenges to face in their attempts to engage in conflict transformation, then NGOs and governments have their own hurdles. Companies cannot just plug themselves into conflict transformation processes. Others must play their part. There is much to be said for efforts to regulate the private sector and to establish policy frameworks to guide their behaviour. Although there is no comprehensive, integrated framework for regulating 'unethical' private sector activities that may contribute to conflict, there are a number of significant voluntary, coercive and legal initiatives. The United Nations Security Council has applied sanctions to trading in 'UNITA diamonds' in Angola, a precursor to the broader Kimberly process that seeks to trace conflict diamonds from different regions; the UN Secretary General's office has initiated the Global Compact bringing together NGOs and businesses to help develop tools for the private sector operating in conflict zones; there are the International Labour Organisation's conventions on drugs trafficking and the financing of terrorism; the OECD has produced a set of guidelines for multinationals and has its own convention on bribery; a group representing almost all the major extractive mining, gas and oil companies, together with several NGOs and the US and UK governments, produced a set of voluntary principles on human rights and security for the extractive sector in 2000; other voluntary initiatives include the Sullivan Principles and the Global Reporting initiative. Some of these initiatives are clearly aimed at regulation through coercion, name and shame tactics and legal frameworks such as sanctions. NGOs active in campaigning for more ethical business practices have played an important role in opening the door for dialogue with the private sector. A number of voluntary and self-regulating initiatives have gathered pace, in part due to the success of campaigns such as Fatal Transactions (launched in 1999, alerting the public to links between diamonds and the funding of war in Africa). Both approaches are important. Those of us engaged in dialogue with companies in an attempt to find collective solutions to complex problems may not have abandoned 'public protestƒbut protest is a means to an end, not an end in itself. Protest is relatively easy, engaging is difficult.' (Geoffrey Chandler, ex-Chair of Amnesty International's UK Business Group). The challenge for those outside the private sector is to find a role that can effectively harness the influence of the private sector for the transformation of conflict. In relation to TNCs, this role is likely to focus more on advocating new approaches to stakeholder engagement and policy dialogue, on tools development to assist with these new approaches (eg. new, conflict sensitive risk assessment methods), and collaboration with companies on social investment programmes. Amongst the TNCs, resource based industries continue to grab most of the attention. This is important since resource based industries are often linked to conflict given the proximity of the natural resources to the conflict, the high value of their products and their strategic importance to the West. Within this group the oil industry is significant, since extracting oil is increasingly technical and specialised and therefore requires production agreements between the host government and Western companies, raising important questions concerning the accountability and responsibility of TNCs and their agreements with governments which are often weak, in transition and corrupt. Local businesses however, are also central to conflict dynamics in that they are a permanent feature of every society where conflict persists. A functional economy is a pre condition of any peaceful society and local businesses are a central part of this economy. Local businesses arguably have a more complex relationship with political actors and have been more vocal in their support for peace processes than TNCs, since peace not only affects their business, but also the social fabric that sustains them. For these reasons local businesses are more integral and connected to peacebuilding initiatives than TNCs, and the approaches adopted in supporting this engagement subtly different. Dialogue, process and policy dialogue are likely to be the central characteristics of local business engagement in conflict prevention and initiatives involving them are likely to be long term. This distinction between approaches to TNCs and local business communities is a reminder that we cannot treat the private sector as homogeneous. Conflict transformation approaches involving the private sector are dependent on the context and also the nature of the company involved. Some conclusionsConflict transformation approaches focus in large part on creating spaces for dialogue that will assist those actors in the conflict to engage in processes that help identify key issues (needs and fears) and to develop ways of addressing these issues. Middle range leaders are regarded as key players in these processes since they have access to both grassroots communities and political leadership . Although community, religious, youth, women and government leaders have been effective conflict transformation agents, the private sector has tended to be neglected. Local business leaders, as important actors in the community, have an important role to play in working with others to transform their societies from ones characterised by violence to those offering peace and stability. TNCs find it harder to see themselves as agents for change in countries where they are perceived as 'foreign'. Expatriate staff often live apart from local communities. Shareholders live even further away. And yet the contribution of the company to the country is often huge in material terms and its potential to effect change very significant. (For example, Kenzo Oshima, UN Under-Secretary General, noted in a briefing to the Security Council on Angola that the entire UN OCHA humanitarian appeal for Angola for 2002 'represents only ten days of Angola oil production, and is equivalent to three weeks' government revenue from oil production'). Furthermore, local and transnational businesses operate in an environment influenced by the economic and development policies of western governments and multilateral institutions. Companies need to get their own house in order, but collective approaches are also central to finding solutions to violent conflict. In seeking to involve the private sector in finding these solutions, efforts need to be made to develop new forms of collaboration that take forward our collective sense of role and responsibility in contexts where these roles are hard to define. There is also an urgent need to develop new tools and methods of analysis that will help private companies mainstream conflict prevention into their risk assessment and project planning. Phil Champain
Footnotes
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