When Companies Invest in Fragile Markets, Everyone Gains
In Nigeria, identification documents are indispensable to get access to credit or to launch a business, yet many people don’t have them. The solution to the problem came from a business, not public institutions: One multinational company provided women with ID cards, easing access to critical public and private services and enabling them to start their own businesses.
In South Sudan, decades of war have all but wiped out the modest development gains of the young country. Farmers lack basic infrastructure and technical support in a country almost entirely dependent on oil and foreign aid. South Sudan faces monumental hurdles for business activity, yet one multinational company worked with hundreds of smallholder farmers to improve their harvests. This way, the farmers could export overseas, resulting in a transformational impact on their revenues and their communities.
These are just two of many examples highlighted in a report by the World Economic Forum’s Global Agenda Council on Fragility, Violence and Conflict. They demonstrate the huge potential for businesses to make a profit and simultaneously strengthen local communities through responsible investment.
The report features case studies of companies operating in challenging environments and the lessons that can be learned from their experiences. An estimated 1.5 billion people live in an environment of continuous fragility, violence and conflict.
For businesses to work efficiently and profitably in such environments, they must understand the complexities and dynamics surrounding them. Otherwise, they risk inflaming the situation, causing more harm than good for their companies and the communities around them. The case studies profiled in the report demonstrate the private sector’s significant potential to contribute specific skills, resources and networks that can be highly useful in building resilience.
We must understand the factors that cause fragility, violence and conflict in order to develop solutions.
Fragility, violence and conflict are complex. Fragility is influenced by a wide set of factors, many of which are deeply entrenched, such as high social and income inequality. The lines between criminal, inter-communal and politically motivated violence are often blurred. Conflicts are increasingly causing devastation in densely populated urban centers rather than open battlefields, creating a host of new problems through the cumulative impact from the destruction of vital services such as water and electricity.
We must understand the factors that cause fragility, violence and conflict in order to develop solutions that will meaningfully reduce instability at its roots, rather than merely addressing the symptoms.
This responsibility is not borne solely by governments and civil society, but, just as importantly, by businesses that are operating in complex and fragile environments. Mitigating fragility and building resilience is not just a humanitarian imperative; instability and violence are bad for business.
The private sector must harness its vast potential to mitigate fragility by investing, stimulating economic growth and job creation, paying taxes, building capacity and empowering local populations. For example, unemployment undermines society’s ability to manage shocks, so creating job opportunities will strengthen resilience in the face of heightened destabilization.
Lessons from Businesses Operating in Fragile Markets
The report provides a number of clear steps needed to improve and increase responsible investment in fragile contexts:
- To mitigate fragility in a long-term, sustainable way, state institutions must be strengthened and businesses should work hand-in-hand with the public sector and civil society to support capacity building.
- Local businesses and communities must be included from the very start in developing solutions to fragility, violence and conflict.
- Beyond traditional B2B sales and procurement, companies operating in fragile environments should be integrating B2B support or partnership into their core operations. In many cases, small business owners only need a small amount of support to get their businesses off the ground, after which the multiplier effects of increased business activity can greatly benefit all actors in society.
- Stimulating positive impacts from the private sector in contexts of fragility, violence and conflict will require long-term leadership to integrate responsible investment into core business practices. Companies must see the clear business case for positive investment in fragile settings.
- Businesses must work with governments to ensure the transparent and equitable management of revenues from the export of natural resources, which will benefit all actors in the long term.
This report is a step in the right direction, but we must now deepen the conversation about the challenges in fragile, conflict and violence-affected regions—businesses, governments, civil society and local communities together. It is our joint responsibility to harness the immense potential of public-private partnerships to build resilience in the world’s most complex and fragile environments. Responsible investment can generate profits for businesses, benefits for local communities and progress for governments.
This piece first appeared on the Agenda from the World Economic Council.