Bill Bierce, Founder & President, Bierce & Kenerson, GSC Resources Chair
Beyond their own company-sponsored contributions to the local communities where it operates, BPO sourcing companies can consider a community-drive development model to get more consistent, long-term, wider-spread benefits. Based on a 2007 article by the World Bank (see citation at end), this article outlines two models for possible consideration by either service providers or enterprise customers, or both.
The World Bank identifies two principal types of development partnerships between the private sector and local communities. In reviewing these two types, the “economic linkage” model appears more consistent with current corporate sustainability notions, and thus easier to adopt and implement, than a “social investment” policy.
Social Investment. In the “social investment” model of community-driven development, company funding is channeled to projects that seek to improve general welfare. For example, these could involve local health, transportation, housing, general education or cultural preservation.
Economic Linkage. In the “economic linkage” model of community-driven development, private enterprise channels its funding and not-for-profit (donated) services into building a local community that supports the for-profit functions. Such a model is used where the private sector’s economic contributions to the community are linked to the economic benefits that recycle back to the private sector. In one example, by working with local universities, service providers can define the skill sets that university education will need to provide to produce eligible employment candidates. In another example, a local employer might provide quasi-governmental benefits, such as late-night transportation, to their employees that help improve the quality of life for employees and, by extension, the families of employees.
Such economic integration of the private sector into the local community “development” can prove more effective when multiple service providers support a common community benefit, such as education or transportation. The integration challenge is not only to identify an “economic linkage” between the service provider and the local community generally. This challenge invites corporate CSR policies makers to coalesce their respective separate companies’ “economic linkage” initiatives into more institutional, collectively defined and community-managed development activities. The integration challenge likewise invites global service providers to identify and integrate both corporate and social benefits of their community actions as part of the same general policy on global sourcing and global corporate citizenship.
Community-Driven Approach. In adopting policies and programs for corporate social responsibility (CSR) in global sourcing, service providers and service recipients (enterprise customers) can support local communities seeking sustainable economic development. In a community-driven development approach, outsourcing service providers, enterprise customers, or both, can team with local non-profits and local government to generate a lasting benefit from the financial, technical, training and organizational support by global private enterprise for local community benefit.
Key Differentiators. As globalization, pricing transparency and price-arbitrage thrust second- and third-tier cities into BPO production services, service providers can identify and implement policies that support such economic linkages and their own self interests. Service providers might invest in such community-driven development initiatives for several reasons:
- To avoid wage inflation by bringing new talent pools onstream into new, or extended, BPO service delivery centers.
- To obtain access to a broader talent pool for any tasks that fit within the BPO or shared-service center business model.
- To improve access to supply chains in new locations.
- To obtain governmental grants from local governments for job creation, capital investment, job training, tax holidays, escape from service import taxes (such as in Brazil), reduced electricity rates and other incentives to foreign direct investment.
- To enhance brand value and reputation among enterprise customers who measure not only service delivery metrics, but also social metrics associated with outsourcing and offshoring.
- To redefine CSR broadly to mitigate negative social impacts of global sourcing as well as promote positive social impacts.
- To manage reputational risk of being branded as a low-cost provider that does not contribute socially to the low-wage economy.
A Community-Based Model for BPO CSR. Global BPO sourcing companies can craft their community-based development initiatives using various simple tools. Unlike mineral extraction companies, global BPO service companies don’t need to worry about certain reputational issues such as pollution, environmental damage or sustainability of extractive resources. Rather, such service companies can choose to view local community development linkages as an integral part of their foreign investment processes, linking local training to local employment. And they can combine economic goals with philanthropic goals by directing both cash and free services (such as employee volunteers) to assist in community-based development of job skills, transportation, health, and even financial services. Ultimately, global BPO sourcing companies need to measure and disclose the benefits of their global “good corporate citizenship” operations, both to their shareholders and their global enterprise clients.
Inherent Conflicts in the Paradigm of Community-Directed Development. In global services, joint CSR efforts are more difficult than individual efforts. Finding like-minded local “players” (governments and non-governmental organizations, or NGO’s) as partners requires an assessment, vetting and negotiation, all of which take time and effort from private sector decisionmakers. Once such a “CSR partnership” for community development is initiated, conflicts will arise over who controls the selection, management, accountability, transparency and measurement of the benefits of individual projects.
As a result, it is foreseeable that BPO service providers will continue their individually sponsored initiatives for community development without control by local governments or local NGO’s. The only exceptions might be compliance with the rules governing incentives for foreign direct investment (to get job credits, tax holidays and credits and other grants) and for local NGO’s that meet modern standards of probity, neutrality, transparency and, most important, measureable social impact. Such models exist in the United Way, Nasscom and in service organizations such as Rotary International, Kiwanis and Lions Club.
In addition, CSR initiatives in global services need to look increasingly at each community affected by the sourcing process. Social impacts affect people in the communities of the global enterprise’s headquarters and branch offices and customer markets, not just in the supplier markets and supply chain. The real challenge for CSR in global services is to identify and implement programs that mitigate the impact of globalization on those displaced by Internet-driven workflows. In the U.S., trade adjustment assistance offers such a program.
New Paradigms for CSR in the Global Services Economy. New paradigms for sustainability of the globalized economic model, need to be developed. The Global Sourcing Council, as a forum for thought leadership in this field, invites your suggestions.
SOURCE: World Bank, Report No. 37379-GLB (March 2007) (summary by Daniel P. Owen).
©2011 William B. Bierce. All rights reserved.