Working with Business

Virtually all developing countries are now convinced that they need the vitality, know-how and efficiency of a vigorous private sector to generate the economic growth that is a necessary, if not a sufficient, condition for their sustainable development. The fostering of such a private sector is thus a basic long-term component of conflict prevention. At the same time, a widening community of business actors around the world is moving to adopt new approaches to corporate social responsibility, and a “triple bottom line” of profitability, social and environmental responsibility.
 Under the right conditions, the private sector may be able to help prevent violent conflict. Like public and aid supported investments, the private sector needs to be guided by an informed commitment to guard against side effects of its investments which may have negative impacts on the “structural stability” of the local and national host society, and plan for ways in which it can ensure the maximum positive benefits.

Roles of business in conflict situations

 Business — local, small and medium-sized enterprises, multinationals and large national companies — can play a useful role in conflict situations. Conflict implies higher risks and costs for businesses, and it is therefore in the interest of most businesses to support efforts that prevent, resolve or avoid exacerbating conflicts. Challenges include how to:

• Develop a sufficiently long-term perspective to promote sustainable development and help reduce conflict, and strike a balance between long-term thinking and short-term investment horizons, with the need for quick returns in unstable situations.
• Understand the role of some trade actors or networks in causing or exacerbating conflict — in particular in extractive industries (diamonds, oil, forest products, etc.) that are major sources of revenue for warring parties and arms sellers.
• Encourage big business to stimulate local development, job creation and basic social infrastructures, especially in remote areas. This can contribute to long-term social stability and improved local livelihoods. 
• Link the social investment programmes that are sometimes supported by companies, in particular in the health or education sectors, to wider development and conflict concerns. 
• Harness the potential role of companies as powerful players who could use their influence positively on political actors not only to negotiate immediate conditions for their investments but also to avert violent conflicts.
• Ensure that the use by companies of private security firms to secure installations and protect staff is not at the expense of the security of the local population, and that illegitimate armed groups are not being inadvertently supported or financed by them. 

Business and development co-operation

Building business-donor partnerships is a new and challenging area for development 
co-operation. An enlightened economic self-interest is part of the incentive for firms to engage as corporate citizens working to help solve local problems, including the threats of violent conflict, and to avoid exacerbating situations or taking advantage of “chaos” for business interests.

Further work is needed on raising awareness of conflict prevention issues among the national and international business communities, and on developing and reinforcing norms (some of which already exist in current codes of conduct). Important issues include:

• The social responsibility of firms and implications for their behaviour as stated through codes of conduct. States can play a role in reinforcing codes.
• Taking more account of the role of the media, which is increasingly part of the globalised business world and, in particular, its linkages with the commercial system and its awareness-raising potential.
• Considering the current role and further potential of consulting companies, as well as think tanks or academics, in analysing conflict and social impacts.
• Exercising greater transparency and debate around sovereign guarantees — a governance issue.
• Drawing attention to examples of best practices in employment creation, technical training, social services, etc., and using public awareness campaigns to influence consumer behaviour as well as to disseminate/share best practices.

Orientations for development co-operation

The following key areas and actions have been identified where donors could engage productively to help enhance the development and peace-building aspects of private sector activity:

Capacity building

• Support government capacities to define or enforce national legal frameworks and corporate governance regimes in line with international laws/norms, in order to ensure accountability, in particular for corporations in the extractive industries, e.g. OECD Guidelines for Multinational Enterprises, OECD Principles of Corporate Governance, OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions. 
• Support efforts to find solutions for special claims of indigenous peoples such as those for ancestral land rights, and formalisation of control over investment projects, employment preferences, etc.
• Provide support for the effective enforcement of national legislation on labour and environmental standards.
• Promote the use of peace and conflict impact assessments by local, national, international/big businesses (whether national or foreign).
• Encourage Diasporas to become engaged in positive development roles in their countries of origin.
• Explore the scope for support to partnership programmes that can be developed through 
  co-operation between government, NGOs and enterprises, i.e. development of clear laws and local regulations, compensation, community funds, grant making activities, capacity building and creation of local employment. 

Helping create an enabling environment

• Explore how development co-operation assistance can foster and promote private sector development, with particular respect to micro, small and medium-sized enterprises in order to create more opportunities for employment and other local spin-offs which will reduce risks of disaffected groups (e.g. ex-combatants) engaging in violence.
• Support local co-operation and bridge building, and building social capital, e.g. through agricultural co-operatives and small entrepreneurial activities.
• Streamline and improve codes of conduct on specific issues, and risk-insurance mechanisms.
• Identify types and areas of collaboration between national and international trade unions to work with national and international NGOs to lobby companies to respect relevant rights and standards.
• Engage business in responding to natural disaster relief.
  

Creating space for dialogue

• Define country-specific approaches, and creation of fora for dialogue between industry, the government, NGOs and other actors to agree on common principles of engagement. 
• Identify mechanisms and create space to involve the private sector in the peace-building process.
• Work with chambers of commerce and other business associations — with both economic development and civil society bridging functions.
• Promote greater policy coherence (for example in the field of environment or as regards policies on trade access, export subsidies, or intellectual property rights).
  

Countering Negative Economic Forces

It is important to focus on controlling the proliferation of weapons.  It is just as important to control the flows of economic and other resources which continue to fuel, can be the aim of, and often stoke violent conflicts, as well as some of the corrupt and nepotistic economic practices that can help spark and thrive on them (see Part I, Chapter III, “Security and Development”).

The experience of recent years has highlighted the phenomenon of the transformation of conflicts over time, with a political economy of violent conflict taking shape in which some powerful groups and networks take on a compelling vested interest in continuing warfare. This is coupled with an increased importance of economic factors such as the exploitation of valuable natural resources and linkages with systems of organised crime of global reach.

Some of the key orientations that have emerged for external actors are:

• Disentangling the political, economic and criminal interests and actors at play and working to find the appropriate responses to each. When a “rebel” movement is, or has degenerated into, an organised crime organisation, responding with political solutions is likely to be misguided and ineffectual. But some governments have become highly corrupt, and ineffective at reinforcing laws to counter organised crime.
• Strengthening norms to ensure enforcement of the prohibition of bribes, ensuring transparency and defining appropriate mechanisms to ensure such enforcement, recognising corruption as an obstacle to civil peace, as well as economic development (see OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions).
• Understanding the economic aspects of civil wars and, in particular, working to counter the criminal forms of business often flourishing in situations of conflict and the rent-seeking and loot-seeking “spoilers” — who can in some cases include the military engaged in profitable activities — that tend to exacerbate and perpetuate conflicts, and obstruct peace.
• Discouraging and, where illegal, preventing the negative roles that can sometimes be played by individual and corporate citizens (including Diasporas) from feeding conflicts in other countries, e.g. OECD Guidelines for Multinational Enterprises, OECD Principles of Corporate Governance, OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.
• Recognising that conflict prevention should enhance transparency in trade transactions, eliminate corruption at all levels, as well as exploitation of common goods which sustain the power of kleptocratic groups or regimes and fuel conflict. 
• Working with countries in troubled regions to prevent the spread of cross-border corrupt business practices and illegal resource flows. Criminality, corruption and conflict usually go hand-in-hand.
• Establishing international norms to strengthen accountability in the use of private security firms — by public bodies or private enterprises. 
  

The control over territory for cultivation, production and trafficking of narcotic drugs is part of the economic forces fuelling conflict, as are the growing interlinkages between criminal trafficking in illicit commodities and in human beings — it is becoming clear that the “trade routes” are the same. The prospects of serious action on these issues by the international community has been heightened by the exposure by the UN Security Council on embargo-breaking trafficking in diamonds, and the subsequent measures undertaken by the main actors in the international diamond trade to stifle the traffic in “conflict diamonds.”  Donors and their counterparts will need to address the political economy of violent conflicts as a major focus of their work in the future.

Conclusion

Enduring peace rests on fundamental principles of democracy, human security, respect for the rule of law and human rights, gender equality, good governance, and social and economic development in the context of sustainable development and open and fair market economies. Helping developing countries to achieve these goals will not be easy. But OECD/DAC Member countries are committed to working together — across different parts of government — to improve the analysis of violent conflict, build a culture of prevention, use a lens of conflict prevention and try to ensure more coherent policies. They intend to improve co-ordinated, timely action among and between all external actors and with developing countries in [potential] violent conflict settings.  A broad range of solid partnerships between development co-operation and government, civil society including women’s organisations and the private sector in developing countries are key to success and human security. 

 Lasting peace requires that men, women and children feel secure from violence and extreme economic, social and environmental damage. In many cases, this may call for reformed security systems and particular support in demobilisation, reintegration, justice and reconciliation processes. As part of building human security, external actors are also trying to understand the political economy of violent conflict and work to dismantle the negative economic forces that can perpetuate violence. 

In the face of these challenges, donor agencies intend to work together and with other internal and external actors. The guidance provided in this volume is based on experience provided by practitioners in donor agencies and their governments, and conflict experts world-wide, and is intended to contribute to donor governments’ policies and operational activities to help prevent the scourge of violent conflict.

 
Notes 

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Contents	Speeches and Issue Notes	EF Homepage
Preface	Programme	EF Texts and Reports
Summary of Discussions	List of Participants