In Mexico, Corporations May Be Better Poised to Address Social Concerns

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Here’s a link to my AQBlog article “In Mexico, Corporations May Be Better Poised to Address Social Concerns”, published on August 18th, 2010.
http://www.americasquarterly.org/node/1782

Here’s a copy of it:

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According to Keynesian economics, the state (and specifically government) was created to step in, regulate and control market abuses. The idea was that laissez faire gave profit-seekers the power to sidetrack certain aspects of organized societal living, such as fair distribution of wealth, worker conditions and education so government involvement was necessary to tame the private enterprise beast.

Ironically enough, today in Mexico (and one could argue the world), large companies are making it part of their business strategy to get involved and address those problems in which government has faltered. Corporate social responsibility (CSR) is becoming much more efficient than state action and the past 15 to 20 years have seen visionary companies embrace this concept, creating a partnership and bonds with communities that politicians have never been able to nurture.

Large companies like Banamex, Bimbo, CEMEX, Cervecería Cuauhtémoc Moctezuma, FEMSA, and even Telmex have been setting up ambitious projects and foundations to promote development, alleviate poverty and improve health and welfare. They are also finding a business logic to self-regulation and obtaining efficiencies in their processes that deal with carbon emissions and use of natural resources.

Why does CSR have a better chance of succeeding than government actions? Three key concepts: ongoing concern, a drive for profitability and accountability.

We learn about ongoing concern in accounting classes. It is the idea that for accounting purposes, one should believe that the entity will continue to exist perpetually. Though companies may come and go (after all even business mammoths go bankrupt, think Mexicana de Aviación) they are far more permanent than government administrations at a state and federal level. The fact that Mexico does not have re-elections (or political memory, see my previous post) provides no incentive for specific government administrations to address problems or worry about their reputations in the long run.

If a company is efficient in its use of natural resources, its costs go down. If they are able to project themselves as a company that honestly (and this is key) wants to partner with civil society and cares, their products become more attractive and may even provide better margin. If managed correctly, CSR provides profitability advantages to companies willing to invest themselves in intelligent business strategies. Government administrations on the other hand, seldom seek profitability or even sustainability. Government officials try to find personal profit and many a time they do it in very creative (corrupt) ways, but that’s a topic for another article altogether.

The third key aspect is accountability. Today’s consumers are becoming more and more selective with their brand preferences and in many product categories. Price is no longer the only variable. Even after massive PR campaigns we still remember the child labor stories of a certain shoe company. The Gulf of Mexico crisis is not yet contained and BP is already thinking of changing its corporate branding to try to soften the PR blow. Consumers are making companies accountable for their actions and hitting them where it hurts the most if they do not deliver.

Even in terms of talent attraction, companies must keep in mind that tomorrow’s (even today’s) white collar labor market will choose to approach companies based on their reputation as a respectable entity. It’s easy enough to understand why a company is more concerned in pushing forward the social agenda than government. When was the last time that a Mexican governor or president was effectively held accountable for his shortcomings?

So I say give my taxes to the business mammoths. They’re more likely to put them to better use.

*Arjan Shahani is a contributing blogger to AmericasQuarterly.org. He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.

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