The private sector as a partner in conflict prevention and resolution
The Business of Peace
Jane Nelson
The Prince of Wales Business Leaders Forum
International Alert
Council on Economic Priorities
This report was written by Jane Nelson, The Prince of
Wales Business Leaders Forum. The ‘business in
conflict’ project team, consisting of Nick Killick and
Phil Champain, International Alert, Jordana Friedman,
Council on Economic Priorities and Harriet Fletcher,
PWBLF, provided research, case studies and editorial
input and facilitated consultations with business,
government and civil society organisations in the
United Kingdom and Azerbaijan. These activities will
continue to play a key role in the ongoing work of the
three organisations aimed at understanding and
promoting the role that business can play in conflict
prevention and resolution. An external advisory group
drawn from business, government and civil society
served as a review panel and are listed in the
acknowledgements section. The analytical framework
for determining the role of business in conflict was
jointly developed by The Prince of Wales Business
Leaders Forum, International Alert and Council on
Economic Priorities.
The final interpretations and conclusions in the report
do not necessarily reflect the opinions of the member
companies and partner organisations of The Prince of
Wales Business Leaders Forum, International Alert and
Council on Economic Priorities.
ISBN 1 899159 59 2
© 2000 The Prince of Wales Business Leaders Forum,
International Alert, Council on Economic Priorities.
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted
in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without
attribution.
Designed by Alison Beanland and printed by
Folium Press.
Cover photographs: Oil rig, Fred Dott/Still Pictures;
Soldiers, Angola, Carlos Guarita/Still Pictures, Women at
community meeting in India, The Prince of Wales
Business Leaders Forum.
PRINCIPLE ONE: STRATEGIC COMMITMENT
Provide CEO and board level leadership on corporate responsibility issues. Establish
policies, guidelines and operating standards that make explicit mention of these
issues, including human rights, corruption and where appropriate, conflict and
security arrangements. Develop internal management systems, compliance and
incentive structures to embed policies into the company’s daily activities. Invest in
awareness raising and skills development programmes for employees and business
partners to increase their understanding and capacity to address the company’s
socio-economic and environmental impacts. Recruit or contract specialised expertise
where necessary.
PRINCIPLE TWO: RISK AND IMPACT ANALYSIS
Assess the conflict-related risks and impacts of the company's core business and social
investment activities on a systematic and comprehensive basis. This requires an
understanding of: the nature of the conflict (its causes, stage and location); the role
and relationships of other actors; and the characteristics and constraints faced by the
company itself. From this basis of analysis it is possible to build performance
indicators, targets and strategies for action.
PRINCIPLE THREE: DIALOGUE AND CONSULTATION
Identify and engage with key stakeholder groups on a regular and consultative basis.
Take into account different capacities and power structures and the need to facilitate
genuine participation and two-way dialogue.
PRINCIPLE FOUR: PARTNERSHIP AND COLLECTIVE ACTION
Develop mutually beneficial and transparent partnerships with other companies, civil
society organisations and government bodies to address sensitive political and public
policy issues and to invest in practical projects. Collective action can address activities
such as: advocacy for good governance and anti-corruption measures; negotiating
peace; developing voluntary codes of corporate conduct; supporting an open and free
media; and creating innovative public-private financing mechanisms for health,
education, civic institution building and infrastructure development.
PRINCIPLE FIVE: EVALUATION AND ACCOUNTABILITY
Identify key performance indicators for assessing the company's social, economic and
environmental impacts and relationships. Carry out ongoing measurement and
monitoring of these. Aim for independent verification and public reporting of these
measures. Assess and account for processes as well as inputs, outputs and impacts.
Benchmark results against internal and external guidelines and best practices.
PRINCIPLES OF CORPORATE ENGAGEMENT IN CONFLICT PREVENTION AND RESOLUTION
1
2
3
4
5
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
EXECUTIVE SUMMARY
5
1
THE BUSINESS CASE FOR ENGAGEMENT
13
1. The changing context of business
16
2. The changing nature of conflict
18
3. Business costs of conflict
20
4. Business benefits of peace
26
2
PRINCIPLES FOR CORPORATE ENGAGEMENT
27
1. Strategic commitment
30
2. Risk and impact analysis
31
3. Dialogue and consultation
32
4. Partnership and collective action
33
5. Evaluation and accountability
34
3
A FRAMEWORK FOR ANALYSING CORPORATE ENGAGEMENT
35
1. The Conflict
37
2. The Actors
49
3. The Company
56
4
EXAMPLES OF CORPORATE ENGAGEMENT
63
1. Core business operations
65
2. Social Investment and philanthropy
66
3. Policy dialogue, advocacy and institution building
67
4. Developing key performance indicators
70
5
DEALING WITH KEY MANAGEMENT CHALLENGES
73
1. Dealing with repressive regimes
75
2. Benefiting from ‘war economies’
79
3. Developing a nation’s strategic assets
84
4. Managing security arrangements
92
5. Facilitating or facing criminal activities
99
6. Tackling corruption
102
7. Supporting humanitarian relief operations
105
8. Engaging in diplomacy and peacemaking
110
9. Rebuilding trust
116
10. Establishing cross-sector dialogue and partnerships
120
11. Ensuring accountability
126
12. Limiting the means to wage war
137
CONCLUSION
141
APPENDICES
145
I
Definitions and points of clarification
146
II Reference notes
148
III Bibliography
150
IV Partner profiles
153
V Websites of organisations profiled in the report
154
VI Useful contacts
156
VII Acknowledgements
158
Contents
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
LIST OF PROFILES and GUIDELINES
1. Counting the costs of conflict
21
2. Corporate reputation costs associated with conflict
24
3. Perspectives on globalisation and conflict
43
4. Multinational and national companies
60
5. The Free Burma Coalition:
Constructive engagement or withdrawal?
78
6. Oil and diamonds in Angola
81
7. Oil in the Sudan
82
8. The global campaign against ‘conflict’ diamonds
83
9. Oil, gas and geo-strategic interests in the Caucasus
84
10. The Ilisu dam and the politics of water
85
11. Passing tax revenues back to oil producing regions
88
12. Key principles for community development
programmes
90
13. Building local community foundations:
The experience of Rio Tinto
91
14. Security guidelines for companies:
Human Rights Watch and Amnesty International
98
15. South Africa’s Business Against Crime initiative
101
16. Principles of conduct in disaster
response programmes: The Red Cross and NGOs
105
17. Commercial solutions for disaster relief and
reconstruction
107
18. Social investment and philanthropic solutions for
disaster relief and reconstruction
108
19. The Institute for Multi-track Diplomacy
110
20. Collective corporate action: South Africa
112
21. Collective corporate Action: Northern Ireland
114
22. Collective corporate Action: The Philippines
115
23. Building trust through business ventures:
Peaceworks
117
24. Building trust in the workplace:
Counteract and Future Ways
118
25. Building trust through regional development:
The Peres Center for Peace
119
26. The UN Global Compact
121
27. Cross-sector dialogues on peace building
123
28. The World Bank: The Post-Conflict Unit and Business
Partners for Development
124
29. Donor governments working with business:
the UK, USA and Norway
125
30. Guiding principles for conflict transformation work:
International Alert
132
31. Engaging stakeholders:
The experience of Shell and BP
134
32. Engaging stakeholders: A view from Amnesty
International’s UK business group
136
33. Examples of progress in controlling the arms trade
139
34. Defining the defence industry
140
35. Conditions for peaceful societies: Oxfam
142
LIST OF DIAGRAMS and TABLES
1. Countries at risk: Control Risks Group
15
2. Strategies for corporate responsibility
28
3. Framework for analysing business engagement
in conflict
36
4. Causes and triggers of conflict
42
5. Stages of intervention along the
peace-war continuum
44
6. Location of conflict
48
7. Evolving business-NGO relationships
52
8. Roles for different actors in conflict
prevention and resolution
55
9. Business as actors in conflict
56
10. Industry risk-responsibility profiles
58
11. Corporate spheres of influence
61
12. Summary of key questions for analysing
corporate engagement in conflict
62
13. Framework for types of business engagement
64
14. Examples of business engagement
68
15. Shell’s key performance indicator framework
71
16. Examples of performance indicators for peaceful
and progressive societies
72
17. Cuttings from the Financial Times
74
18. BP’s stakeholder dynamics in Casanare, Colombia
128
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
D
uring the past decade the forces of political transformation and
economic globalisation have created a world of new opportunities and
hope for some, but increased instability and insecurity for others. As we
enter the 21st Century violent conflict continues to affect the lives of millions
of people, undermining human progress and economic development. This has
important implications for the private sector, which has become an influential
player in many conflict-prone or conflict-ridden countries. From Azerbaijan to
Zimbabwe, the potential and reality of violent conflict is becoming an
unavoidable business issue.
Consider the following statistics:
• There are 72 countries where the security risk for the majority of locations in which
foreign business operates is rated medium, high, or extreme for 2000.1
• Multinational companies are investing more than US$150 billion annually in
nearly 50 countries which fall below the intermediate point in Transparency
International’s Corruption Perception Index – in other words in countries which may
be confidently described as fairly to very corrupt.2
• Today, only about 4% of the world’s GNP is military related; 96% of the
international business community provides civilian products and services. Most of
these business sectors have a vested interest in stability and peace.3
The private sector – ranging from large multinationals to informal micro-enterprises –
has a vital role to play in creating wealth and promoting socio-economic development.
It also has a role in contributing – both directly and indirectly – to the prevention and
resolution of violent conflict. There is growing evidence that as market economies
become more widespread and as business becomes a more central actor in societies
around the world, the importance of this role is increasing.
A few companies are already playing a pro-active role. They are increasingly aware of
their negative and positive impacts on society and are developing management and
accountability structures aimed at minimising their negative impacts and optimising
the positive ones. Other companies are making valuable contributions to society, but
are not actively managing or measuring these, let alone thinking about them in terms
of socio-economic development and conflict prevention. Some companies, however –
and not only those in the arms industry or in illegal sectors such as the drug trade –
are being identified as direct causes of violent conflict or as being complicit in
Executive summary
sustaining it in the countries and communities in which they operate. Sometimes this
is a genuine result of unintended consequences arising from a company’s operations or
those of its business partners. In others, it is due to the actions of a repressive or weak
government in the country in which the company is operating. This raises the
challenge of whether the company withdraws from the country, tries to influence or
advocate for better governance, or stays silent. In other situations, it is a result of bad
management, lack of awareness and inadequate policies and operating controls within
the company itself.
There has been relatively little research on these linkages between business and
conflict. Although the arms industry and the impacts of illegal commercial activities
such as drug dealing and illicit commodities trading have been extensively researched,
relatively little analysis has been carried out on the role of industries such as the
natural resource and infrastructure sectors, travel and tourism, consumer goods and
banking. In particular, there are limited examples available on the specific role that
these industries can play in preventing, creating, exacerbating or resolving conflict and
how this differs from and relates to, the roles of government and civil society.
The purpose of this report is to review these issues and linkages and to provide a
framework for understanding both the positive and negative roles that business can
play in situations of conflict. The report focuses on mainstream legitimate businesses,
especially multinational companies, and outlines:
• Why the private sector can no longer afford to ignore the causes and costs of
conflict;
• Some of the key factors that determine whether business plays a negative role by
creating or exacerbating violent conflict, or a positive role by helping to prevent it
or resolve it when it occurs; and
• The practical actions that companies can undertake, with other actors, in
preventing and resolving conflict and some of the challenges associated with these
actions.
Structure of the report
Part 1 of the report reviews the Business Case for Engagement. It outlines the
changing context of business and the changing nature of conflict, before highlighting
some of the key cost and benefit drivers for companies. It concludes that the case for
corporate engagement in conflict prevention and resolution is compelling. In
situations of existing conflict most businesses, other than those that are directly
benefiting from war economies, pay heavy costs and struggle to carry out their
operations under unstable and dangerous conditions, where their employees, assets and
routes to market are under constant risk. Furthermore, there are potential reputation
costs and the threats of international litigation and lawsuits for companies that are
accused of complicity with either state or non-state actors that are perpetrating the
violence. Over the longer-term, it is clear that the private sector has as much to lose as
other sectors of society if economic and social development is seriously jeopardised,
which it undoubtedly is when faced by violent conflict. Apart from the costs and
benefits and the growing ‘bottom-line’ imperatives for business to play a more
proactive role in conflict prevention and resolution, there is also a strong moral case
for greater corporate leadership in today’s world where the private sector is an
increasingly prominent actor. As Sir Geoffrey Chandler, Chair of Amnesty
International’s UK Business Group argues, ‘ ...to fail to do good when it is in one’s
legitimate power to do so is rightly condemned by the world.’
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
At the very minimum, companies should comply with
national regulations (even if host governments are
not effectively implementing or monitoring
these) and multinational companies, in
particular, should benchmark their local
practices against internationally agreed
laws, conventions and standards.
Beyond basic compliance, companies should be aware of their real and
potential socio-economic, political and environmental impacts and
their ability to create or exacerbate violent conflict. Building on
this awareness, they should develop and implement policies and
procedures to minimise any damage that may result from their
own business operations or those of their business partners.
Beyond compliance and doing minimal harm, companies can proactively create
positive societal value by optimising the external multipliers of their own business
operations and engaging in innovative social investment, stakeholder consultation,
policy dialogue, advocacy and civic institution building, including collective
action with other companies.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
Value creation
Risk minimisation
Compliance
Part 2 of the report introduces some key Principles for Corporate Engagement.
These can be defined as the management policies and processes that a company needs
to establish in order to minimise its negative impacts on society and optimise its
positive ones. They are applicable for companies operating in any industry sector,
country or community, but have particular relevance in conflict-sensitive or conflict-
ridden situations. The principles can be summarised as:
• Strategic commitment – CEO and board level leadership on corporate
responsibility issues, supported by internal management systems, compliance,
incentive and training structures to embed policies into the company’s daily
activities.
• Risk and impact analysis – Assessment of the conflict-related risks and impacts of
the company’s core business and social investment activities on a systematic and
comprehensive basis.
• Dialogue and consultation – identification of and engagement with key
stakeholder groups on a regular and consultative basis.
• Partnership and collective action – development of mutually beneficial and
transparent partnerships with other companies, civil society organisations and
government bodies to address sensitive political and public policy issues and to
invest in practical projects.
• Evaluation and accountability – identification of key performance indicators for
measuring and monitoring the company’s social, economic and environmental
impacts and reporting on these to internal and external stakeholders.
Part 2 also describes three different strategies that companies can adopt in managing
their impacts on society. These strategies are not mutually exclusive and can usefully be
viewed as building blocks for corporate responsibility. At a very minimum, for
example, a company should aim to be compliant with national regulations and where
applicable international laws and standards. It should aim beyond compliance,
however, to minimise risks and harm from its operations. Ideally, a company should
aim to proactively create societal value-added and new business opportunities by
optimising its positive multipliers and impacts on society. The following diagram
illustrates these three strategies:
Company
• type of industry
• size
• history
• ownership
• collective action
• spheres of influence
• causes
• stage
• location
Conflict
• role
• power
• capacity
• relationships
Actors
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
Part 3 of the report develops a Framework for Analysing Corporate Engagement. It
suggests a set of questions to help companies and their stakeholders to analyse the
causes, stages, locations and actors of a particular conflict or conflict-prone situation
and how these relate to the company’s own characteristics. Undertaking this process of
analysis can help companies to:
• understand the linkages between their business and the conflict; and
• assess the ways in which the company, acting individually and with others, can play
a proactive role in conflict prevention and resolution.
The framework of analysis is summarised below:
Part 4 provides a framework and practical Examples of Corporate Engagement at
different stages of conflict. It also introduces some key performance indicators for
peaceful and progressive societies against which to analyse and benchmark both
corporate performance and country performance. The practical examples illustrate how
companies can contribute to conflict prevention, crisis management, and post conflict
reconstruction and reconciliation through their:
• Core business operations;
• Social investment and philanthropy programmes; and
• Engagement in public policy dialogue, advocacy and institution building.
The performance indicators are drawn from a framework developed by The Prince of
Wales Business Leaders Forum in its 1998 report Building Competitiveness and
Communities. The report identified five main areas in which companies can make a
positive contribution to their host countries and communities. These five areas provide
a useful framework for thinking about the broad conditions needed for developing
peaceful and prosperous societies and for preventing and resolving conflicts. They have
been used in this report to develop examples of both country and company-level
performance indicators. The five areas are as follows:
• Strengthening economies
• Building human capital
• Promoting good governance (at both the corporate and national level)
• Protecting the environment
• Assisting social cohesion and respect for human rights
The indicators listed in this report are not intended to be an exhaustive list. In
practical terms, most companies would probably choose to select a small number of
indicators to manage and monitor on an on-going basis. Different indicators will be
relevant for different industry sectors, but the list outlined in the report provides a
broad framework that can be adapted by any company or industry sector.
Part 5 of the report focuses on Dealing with Key Management Challenges. It
reviews some of the practical and strategic dilemmas that companies face when they
are operating, investing, or trading in conflict zones and the processes that they can
undertake to address these. The dilemmas include both:
• structural challenges at the macro-level that raise strategic policy issues for corporate
executives; and
• day-to-day management challenges at the micro or operational level of the
individual enterprise.
The twelve dilemmas or management challenges covered in the report are as follows:
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
1 Dealing with repressive regimes – what are some of the issues
that companies need to consider in deciding whether to invest or
disinvest in countries with repressive or corrupt regimes? What
actions can they take to operate in accordance with international
standards and encourage better governance if they decide to
invest in such countries?
2 Benefiting from ‘war economies’ – are a company’s
investments and operations helping to fund or sustain a war
economy? If so, what actions – individually or collectively – can be
taken to limit negative impacts and improve the situation?
3 Developing a nation’s strategic assets – how can companies
that are developing a nation’s natural resources or infrastructure
influence the distribution of costs and benefits from these
strategic activities and manage the negative social, economic and
environmental impacts associated with the ‘honey-pot’ effect of
large-scale projects?
4 Managing security arrangements – how can companies best
manage their security arrangements, either with state or private
security forces, in a manner that protects their own staff and
assets without undermining the security of people in surrounding
communities and especially without causing human rights
violations in these communities?
5 Facilitating or facing criminal activities – what measures can
companies take to limit the risk of being a target or conduit for
criminal activities?
6 Tackling corruption – how can companies address the
challenge of bribery and corruption in their own operations, in
the countries in which they are investing, and at the international
level?
7 Supporting humanitarian relief operations – what type of
contributions can companies make, either through their
commercial or social investment activities, to contribute to
humanitarian needs and disaster relief?
8 Engaging in diplomacy and peacemaking – is there a role for
the private sector, either on an individual or collective basis, in
the sensitive area of diplomacy and peacemaking? If so what are
some of the issues to consider?
9 Rebuilding trust – how can companies help to protect or
rebuild social capital, such as interpersonal relationships and
formal and informal networks and associations, which may be
threatened or destroyed in situations of conflict?
10 Creating cross-sector dialogue and partnerships – what
types of relationships can companies establish with civil society
and governmental organisations to address areas of common
interest in preventing or resolving conflicts?
11 Ensuring accountability – in conflict situations what are
some of the key issues that companies need to consider in
measuring and reporting on their impacts to a wide range of
stakeholders? What are some of the most effective tools or
mechanisms for engaging with these different stakeholders?
12 Limiting the means to wage war – what role do defence and
other industries have in helping governments to decrease and
control the trade in arms, remove arms already in circulation and
undertake security sector reforms?
KEY MANAGEMENT CHALLENGES IN CONFLICT ZONES
Although reviewed separately, there are strong links between most of these challenges.
In many conflict situations a company will have to address several of them at the same
time. Each of them is the subject of differing perspectives from business, non-
governmental organisations (NGOs), governments and the media and is worthy of a
detailed report in its own right. This report aims only to:
• highlight some of the key issues and different opinions relating to each challenge;
• raise some critical questions that companies need to ask in order to take action; and
• offer some examples of recommendations, partnerships and corporate actions that
are currently being undertaken to address these challenges.
It would be possible to develop individual company, industry-wide or international
guidelines and standards for most of the eleven challenges outlined in Part 5. In several
cases, such as dealing with security arrangements, tackling corruption and supporting
humanitarian relief operations, there are already efforts underway to do this. These
efforts are being led by a variety of different actors ranging from industry groups, to
national or international governmental bodies and the NGO community. Examples of
some of them are included in the report.
Scope of the report
The two core subject areas that underpin this report – the prevention and resolution
of violent conflict and the role of business in development – are areas that have
been extensively researched and documented on a separate basis. This report cannot
capture all the complex details of each of these two subjects. What it aims to provide is
a general framework for analysing the linkages between the two, supported by
examples from different industry sectors, geographies and conflict situations.
Such linkages are themselves highly complex. It would be simplistic, and in many cases
incorrect, to suggest that non-contestable, causal relationships exist between them. In
particular, it would be incorrect to assume that there is a linear conflict-economic
development-peace continuum. In many situations economic growth does indeed help
to improve situations of existing or potential conflict, but not always. If the benefits of
economic growth are unequally distributed, for example, this can increase the potential
or existence of conflict rather than decrease it. In such cases private sector investment
can have ‘net’ negative impacts rather than positive ones, no matter how good the
intentions of these investments. Equally, in most post-conflict situations there is the
continued likelihood of violent conflict re-emerging if economic development is not
accompanied by the strengthening of social capital and civil institutions. Again, the role
of a particular company or industry sector can be positive, negative, or a combination of
the two, depending on the specific situation. Having said this, there is little doubt that
economic progress is all but impossible in situations of sustained conflict, except for a
minority of interests that benefit directly from war economies. In short, the relationship
between violent conflict, economic development and the role of the private sector is
often a complex and situation-specific one. A core aim of this report will be to explore
some of these complexities and dilemmas.
Given the complexity of the issues covered, the wide variety of definitions in use and the
diversity of opinions that exist on the subjects of corporate responsibility and conflict,
the report is based on a number of ‘starting assumptions and definitions’. These are
outlined in Appendix I. They relate firstly to the terminology used in the report to
describe the different stages of conflict and corporate responsibility. They also cover the
fact that this report focuses on multinational and large national companies working
within legal frameworks and pursuing legitimate business objectives. Whilst recognising
the importance of small and medium size businesses and the serious impacts of illegal or
illicit commercial activities in most conflict situations, the report does not focus on these
10
The Business of Peace – the private sector as a partner in conflict prevention and resolution
other than in terms of their linkages to legitimate, large-scale companies. Nor does the
report cover the arms industry in any detail, which has been extensively researched
elsewhere, but it summarises some key issues for controlling arms in Part 5. In terms of
geographic focus, the report looks mainly at countries in transition – mostly developing
economies and countries in the former Soviet bloc – although it recognises the potential
of localised violent conflict in OECD economies.
Every example included in the report is worthy of a detailed case study to capture the
complexities and different opinions involved. In the interests of space and in order to
provide a comprehensive overview of the linkages between business and conflict, a
decision was made to use these examples as illustrative vignettes and brief profiles, rather
than to provide detailed and lengthy case studies. Some of the cases that have been
written by other people are listed in the bibliography and website addresses are provided
for most of the examples profiled.
Key messages from the report
Drawing on examples from over 30 countries and from a variety of industry sectors, the
report concludes with the following key messages:
1. The business imperative for action
Domestic and multinational companies have an increasingly important role to play in
conflict prevention and resolution. In today’s global economy they have a growing
commercial rationale for playing this role, in order to avoid the direct and indirect
business costs of conflict and to reap the business benefits of peace. They also have a
moral imperative and leadership responsibility, given the increasingly central position
of the private sector as decision-makers and influencers at the national and
international level.
Almost all companies, in any industry sector, have an interest in helping to build
peaceful and prosperous societies and a role to play by contributing to: equitable
economic development; human development, especially education and health;
environmental sustainability; good governance; social cohesion and respect for
human rights.
Certain companies and industry sectors, most notably the defence, natural resource
and infrastructure industries, have a particularly important responsibility to
understand and address their direct roles as potential causes of conflict. Others, such as
banks, travel and tourism companies and companies providing products and services
to humanitarian agencies, also have a direct and growing role in conflict prevention
and resolution.
2. Strategies for individual corporate action
In managing their wider societal impacts, companies need to move beyond strategies
of compliance and risk minimisation, although these are necessary ‘starting points’.
Their goal should be to pursue strategies of pro-active, systematic value-creation,
aimed at creating positive value for as many stakeholder groups as possible, including,
but not exclusively, shareholders.
Companies can create societal value and enhance shareholder value in three main areas
of corporate activity or spheres of influence. These are: their core business operations
(in the workplace, the marketplace and along their value chains); their social
investment and philanthropy programmes; and the way in which they engage in
public policy dialogue, advocacy and institution building. All three have relevance for
corporate engagement in conflict prevention and resolution.
11
The Business of Peace – the private sector as a partner in conflict prevention and resolution
In dealing with conflict, companies also need to recognise the dual challenges of
addressing practical problems at the level of the individual company’s operations (over
which the company has some control) and structural problems at the regional, national
and international level (over which the company has less control, but usually some
influence, especially if operating collectively with other companies and actors).
Linked to the above, multinational companies need to develop systems and competencies
for addressing conflict at different management levels. Staff at the head-office, for
example, have a key role to develop global frameworks for corporate values and
management systems. It is the line managers, however, especially country officers and
local plant managers, who must have the skills and capacities to deal with situation-
specific issues within these frameworks.
Companies also need to adjust their external communication strategies from assertion to
accountability. The traditional role of corporate communications and one-way public
relations must evolve into a more complex structure of multi-way stakeholder
engagement, ranging from dialogue and consultation to accountable reporting processes.
3. The importance of partnership
Apart from ensuring compliance, minimising risks and creating value in the way they
manage their own individual operations and stakeholder relationships, companies can
engage with each other in collective action. This can be especially valuable in addressing
politically sensitive issues, such as bad governance, corruption and human rights abuses.
Having said this, business cannot be expected to ‘do it alone’. The enabling framework
for preventing and resolving violent conflict must first and foremost be in the hands of
governments – at the national and international level. The private sector can support and
influence government action, but corporate engagement cannot, and should not, be
viewed as a substitute for good and pro-active government. This is the case in all
societies, but especially those ridden by conflict.
Linked to this, new types of cross-sector partnership between business, government and
civil society will be absolutely critical in building peace and preventing or resolving
conflict. Although not easy to achieve in practice, such partnerships can be valuable
mechanisms for addressing policy issues, mobilising resources and improving mutual trust
and understanding between different groups in regions of existing or potential conflict.
4. The need for leadership
Ultimately the challenge of conflict prevention and resolution is about values-based
leadership at every level of the company and at every level of society. The question of
whether a company contributes to conflict or helps to prevent it, depends on the values,
policies and operating guidelines of the company and the way its employees and
business partners accept, interpret and implement these. The same can be said for
society-at-large. Here the creation or prevention of violent conflict will depend on the
values, rules and norms of the society and the way its citizens accept, interpret and
implement these. Corporate, political and civic leaders are needed to help shape these
values and guiding principles and to provide the incentives and frameworks in which
their respective stakeholders must live and operate. Such leaders are needed at local,
national and international levels. They have the power to lead their communities, their
companies and their countries towards either peace and prosperity, or towards conflict
and poverty. Developing future leaders capable of building peace and prosperity in a
complex world, is one of the greatest challenge we face in the 21st Century. It is a
challenge that government, civil society and business must address, both individually
and in partnership. Responsible leadership is the cine qua non of conflict prevention
and resolution.
12
The Business of Peace – the private sector as a partner in conflict prevention and resolution
13
The Business of Peace – the private sector as a partner in conflict prevention and resolution
STATEMENTS MADE BY BUSINESS, CIVIL SOCIETY AND GOVERNMENT AT A BRITISH PARLIAMENTARY COMMITTEE HEARING ON THE PREVENTION OF CONFLICT 1998
[Conflict] threatens our whole commercial presence in a country since, for such a presence to be sustainable, we need
prosperous, peaceful and content societies. Stability built on repression or violence is fundamentally flawed, and contains
the seeds of its own destruction.
The British Petroleum Company plc, Statement to International Development Committee, UK, 1998
Insecurity threatens investments in conflict-vulnerable countries, reduces the opportunities which peace could bring in
future markets, and helps to make the world less stable for business dependent on trade. Investing in conflict prevention and
post conflict reconstruction is a moral imperative and a legal obligation which also makes economic sense.
Oxfam, Statement to International Development Committee, UK, 1998
Businesses have a strong interest in peace and security in the countries in which they are operating or might wish to operate.
Conflict and instability creates risks and disruption for business in terms of heightened insecurity for staff and property, risks
to investments, weakening of local markets and damage to infrastructure.
Clare Short, Secretary of State for International Development, Statement to International Development Committee, UK, 1998
1. The changing context of business
2. The changing nature of conflict
3. Business costs of conflict
4. Business benefits of peace
The business case for engagement
1
T
he private sector has been engaged in areas of conflict and its aftermath ever
since international trade began. It plays a role in many ways – positive and
negative, direct and indirect – and has always done so. Over the past decade,
however, this role has become more prominent. This is due to dramatic political,
socio-economic and technological developments that have changed both the
context of business and the nature of conflict. For example:
The growing acceptance of market-based economies and the processes of privatisation
and liberalisation have resulted in a massive transfer of assets to the private sector and
a large increase in foreign investment in emerging markets. These markets represent
the new investment frontiers for many industry sectors and companies. They also
represent new risks and management challenges such as:
• weak legal frameworks and governance structures;
• sizeable populations who are antagonistic to foreign investment; and
• unfamiliar social challenges such as high levels of poverty, human rights violations,
bribery and corruption.
Their state of political and socio-economic transition also creates high potential for
instability and violent conflict. The existence of valuable resources, which draws many
companies into these challenging markets in the first place, is a further factor
contributing to conflict. The Prince of Wales Business Leaders Forum estimated that
of the 34 countries listed by the Carnegie Commission as locations of major armed
conflicts in 1997, companies associated with the PWBLF had direct business interests
in 30 of them. A few are locations of significant investment.
More than ever before, large numbers of civilians are entangled in violent crime and
conflict – both as perpetrators and victims. As a result, it is increasingly difficult to
distinguish between combatants and non-combatants in many situations of conflict.
All too often there are no uniforms; no front lines; and no declarations of war.
Hardworking employees by day, may well be inciting violent conflict once they leave
the factory gate. Equally, they may be the targets of such violence. Increasingly,
business cannot simply remove itself from the ‘fray’.
Growing acceptance of and interest in multi-track approaches to conflict prevention
and resolution are placing increased expectations on business, especially major
companies. This is creating pressure on these companies to play a more proactive role
in peace building. In today’s world, failure to play a proactive role, or even worse,
being seen (correctly or incorrectly) as responsible for, or complicit in, the creation or
exacerbation of conflict, means that a company is likely to attract negative media
attention, NGO campaigns and consumer boycotts.
International companies are under greater competitive pressure than probably ever
before to create shareholder value. At the same time, they are under growing pressure
from western consumers, governments, ethical investors, the media and pressure
groups to create wider societal value and at the very minimum to comply with
international laws and standards and to ‘do no harm’. The spotlight shines especially
strongly on companies with major brand names and those operating in politically and
environmentally sensitive regions.
The achievement of human security and prosperity has obvious long-term benefits
for business investment and success. This is especially the case in new, untapped
markets.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
In short, growing investment in conflict prone or conflict-ridden regions is creating
new opportunities, but also new risks and costs for business that cannot be ignored. In
particular, recent developments in international humanitarian and human rights law
have increased the risk of transboundary litigation for companies accused of human
rights abuses or complicity in such abuses. At the same time, the growth in the
activities of non-governmental pressure groups, the international media and the
internet, has increased the risk of reputation damage for companies accused of human
rights abuses or complicity in conflict situations. These two factors, combined with
‘on-the-ground’ costs of risk management and material losses, mean that few
companies operating in transition economies can afford to ignore their links to
existing or potential conflict.
The following pages summarise some key trends determining the changing context of
business and the changing nature of conflict, before focusing on the cost and benefit
drivers for business engagement in conflict prevention and resolution. The map below
illustrates the large numbers of countries where companies faced medium to high
security risks in 1999.
15
The Business of Peace – the private sector as a partner in conflict prevention and resolution
Control Risks Group (CRG) is an international political and business risk consultancy, that also advises companies in strategic
investigation, security and crisis management. Since its foundation in 1975 it has worked with over 3,500 clients in some 130
countries and has developed extensive expertise on conflict-related risks and impacts, as well as stakeholder relations needed to
address these.
COUNTRIES AT RISK
*Only those indicated are at increased risk
Countries where the security risk for the majority of locations in which foreign business operates is rated MEDIUM, HIGH or EXTREME
Brazil (Rio, Sao Paulo,
Salvador da Bahia,
Recife)*
Colombia
Dominican Republic
Ecuador
El Salvador
Guatemala
Guyana (Georgetown)*
Haiti
Jamaica
Mexico
Panama
Peru
Suriname
Trinidad
Venezuela
Angola
Burundi
Cameroon
CAR
Chad
Comoros
Congo (Brazzaville)
Congo (DRC)
Cote d’Ivoire
Djibouti
Eritrea
Ethiopia
Guinea-Bissau
Guinea-Conakray
Kenya
Lesotho
Liberia
Niger
Nigeria
Rwanda
Senegal
Sierra Leone
Somalia
South Africa
Swaziland
Uganda
Zambia
Zimbabwe
Algeria
Israel/West Bank
Lebanon (South
Beirut, South
Lebanon)*
Sudan
Turkey
Yemen
Middle East &
North Africa
Africa
Americas
Afghanistan
Bangladesh
Cambodia
Indonesia
Malaysia
Pakistan
Papua New Guinea
Philippines
Sri Lanka
Asia Pacific
Albania
Azerbaijan
Bosnia
Bulgaria
Georgia
Creece (Athens)*
Kazakstan
Macedonia
Russia
Tajikstan
Ukraine
Uzbekistan
Yugoslavia
Europe & the
Former Soviet Union
1. The changing context of business
During the past decade, development assistance has continued to decline, while private capital flows
to the developing world have risen significantly. This has reduced the relative influence of donor
States and international institutions in developing countries, while increasing the presence of
international corporations.
UN Secretary General Kofi Annan,
1999 Annual Report to the General Assembly,
Privatisation
The privatisation of state-owned enterprises has become a central feature of economic
and political transformation in countries all over the world. Privatisation International
magazine estimates that global proceeds from privatisation have increased from US$36
billion in 1988 to over US$141 billion in 1998.This has resulted in the public sector’s
share and direct control of national economies shrinking, whilst the influence of the
private sector has increased. The process is likely to continue, especially in the world’s
developing and transition economies, many of which are prone to conflict.
Liberalisation
At the same time, countries around the world have opened their markets to foreign
investment, resulting in a dramatic increase in cross-border flows of private capital,
people, technology and products. Although most of these flows still occur between
OECD economies, private capital flows to developing countries have also grown
substantially. In 1999 private capital flows to emerging markets outstripped official
development assistance by a factor of 5:1 having grown sixfold since 1990 to a level of
over US$250 billion. Even though most of this money went to only 12 countries,
according to UNCTAD, foreign investment in the world’s 44 poorest countries has also
risen, from an annual average of under US$1 billion in 1987-1992, to nearly US$3
billion in 1998. (4)
Emerging markets
Linked to the above, and also as a result of political transformation, there is growing
private investment – both foreign and domestic – in many developing and transition
economies. The World Bank estimates that the share of emerging markets in world
trade could grow from being 25% of the European Union’s today, to more than 50%
in 2020. Few companies with global aspirations can ignore such markets, but with
this potential comes the challenges and risks of operating in conflict prone or conflict
ridden regions of the world. In particular, these economies are opening up their
infrastructure, energy, mining, manufacturing, banking and agribusiness industries to
private investors. These are often strategic industries. As such, their transfer to partial
or full private ownership has important political, as well as economic implications.
This is the case even when the new owners are nationals of the country in question,
let alone foreigners. It creates obvious potential for conflict, based on access to these
strategic resources.
Technological change
The advent of new technologies has increased the reach and scope of the private
sector. Most notable has been the dramatic growth in information and
communications technology. This technological change has not only created new
market opportunities and competitive pressures for business, but also new social
challenges and expectations by underpinning the blossoming of civil society. Certain
new technologies have also created or increased the potential for conflict. This ranges
from the use of information and communications technology by terrorist and criminal
organisations, to the increased potential for conflict around issues such as access to
technology and the impact of certain technologies, such as biotechnology, on poorer
countries and communities.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
Increased societal
At the same time that privatisation and liberalisation have transferred assets and many
expectations
would argue power to the private sector, democratic and technological advancements
have transferred other sources of power, or certainly empowerment, to civil society
organisations and citizens. This takes a variety of forms, ranging from millions of tiny
community initiatives to campaigning on a world wide scale, supported by
unprecedented communications capacity via the internet and the global media. A
strong focus of these activities has been to call for greater accountability on the part of
both governments and business. In a ‘networked world’ there are few hiding places for
companies that are deemed to operate unethically or irresponsibly, especially
multinationals. As Thilo Bode, Executive Director of Greenpeace, pointed out in a
Financial Times interview in August 1999, “Multinationals are much more vulnerable
[than governments], because they have to be accountable to the public every day –
governments have that only once every few years���.
Global competitiveness
The majority of businesses are not only facing rising societal expectations, but also
dramatically increased and relentless competition. Failure to deliver value to their
customers and shareholders will result in board upheavals, market erosion and in some
cases, take-overs or acquisitions by other companies. Whilst being responsive to a
growing social agenda, companies must therefore be more responsive than ever before
to the commercial agenda. Increasingly the two are positively linked, but not always.
Changing ‘governance’
There is fundamental change taking place in our understanding and practice
structures
of governance. Governance used to be principally about what governments do. Today,
the concept is increasingly about balancing the roles, responsibilities, accountabilities
and capabilities of different levels of government and different actors or sectors in
society. This is creating new challenges for all the actors involved, including business.
In the long-term it offers potential for more accountable and effective governance
structures and more active and open civil society. In the process of transition, however,
there is often confusion over the relative roles and responsibilities of different actors,
vested interests operating against change, and increased potential for conflict. Another
serious challenge is the emergence of ‘uncivil society’. Essentially this can be defined as
non-governmental actors – many of which are commercial enterprises or are funded by
commercial enterprise – that are illegal or illegitimate and increasingly difficult to
control in today’s global economy. Drug trafficking and illicit arms trading are obvious
examples.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
The overall implications of these trends for business can be
summed up as growing pressure to perform both commercially
and socially. In almost every industry sector and almost every
country, companies are under greater pressure than ever before to
meet both shareholder demands and wider stakeholder demands.
What is more, they are under greater pressure than probably ever
before not only to manage their actual performance in each of
these areas, but also to respond to external perceptions of this
performance. As a result, the typical company board and senior
management team have to decipher and respond to what is often
a mixed set of signals from an increasingly wide range of
stakeholders. Whilst there is growing evidence of positive links
between corporate social responsibility, reputation and
shareholder value, especially over the longer-term, on a day-to-day
basis the issues are rarely that simple to deal with. Often difficult
trade-offs and value judgements have to be made. Over the past
decade, managing a private enterprise, especially a global one,
has become a much more complex and challenging process.
Nowhere is this more true than in regions that are prone to violent
conflict or experiencing conflict. Companies that have a legal and
legitimate purpose are under pressure to demonstrate that they
are not contributing to such conflict and where possible, that they
are proactively helping to avoid or solve it.
BUSINESS... UNDER PRESSURE TO PERFORM COMMERCIALLY AND SOCIALLY
2. The changing nature of conflict
War between states to
Today more than 90% of armed conflicts take place within rather than between states.
internal conflict
According to the World Bank, of the 101 conflicts that occurred between 1989 and
1996, 95 of them were internal and most were in developing or transition countries.
Geo-politics and ideology to Linked to the increase in intra-state wars is the fact that the underlying causes of
resources, identity and
conflict have shifted from being primarily about geo-strategic interests and ideological
state ‘failure’
differences, to conflicts based on access to resources, issues of identity and ‘state’ failure.
Military casualties to
Civilians, who accounted for between 5-10% of war casualties during the 1st and 2nd
civilian victims
World Wars, now compromise 85 – 90% of all victims. Most are women and children.
In a growing number of situations, far from adhering to the Geneva Conventions on the
Rules of War, combatants have made the targeting of civilians a strategic objective. From
Kosovo to Sierra Leone, there are tragic examples of the close relationship between
human rights abuses and war. Some 5 million civilians have been killed in war and
internal conflicts during the past decade, and a further 6 million injured. According to
UNDP, these conflicts have forced 50 million people to flee their homes and created
more than 10 million refugees and 5 million internally displaced people. In the past
decade, 2 million children lost their lives in conflict, 6 million were disabled or
maimed, 15 million made homeless, and more than 1 million were orphaned or
separated from their families by conflict. The rise in the use of child soldiers, especially
in Africa, has added a further toll. Save the Children estimates that there are over
300,000 children – some as young as 10 – fighting adult wars.
Superpowers to poorer
Most major conflicts in the past few decades have occurred in poorer countries and
states in transition
states that are in the process of political and socio-economic transition.
State-sponsored war to
In recent years the world has witnessed a dramatic increase in the privatisation of
privatisation of violence
security and violence. Examples of this trend range from the growth of unauthorised
and security
militias and local warlords, to the activities of narco-guerrillas, mercenaries, private
security and military companies. Many private security and military companies are
legally constituted enterprises, but their operations raise new challenges for the state
and for the private companies that hire their services. There is also the problem of
violent crime and renewed conflict caused by demobilised soldiers in many post-
conflict societies. These people have either been unable to integrate back into civilian
professions, or have decided that their access to small arms and the pursuit of illegal
activities is more lucrative.
Weapons of mass destruction Whilst the threat from weapons of mass destruction has not disappeared, their
to small arms
production has declined. There has, however, been a dramatic increase in the legal and
illegal trade in small arms. About 90% of all deaths and injuries in present-day
conflicts can be attributed to small arms, of which UNDP estimates there are about
500 million in circulation around the world. Many of these arms are in the hands of
private operators, rather than state-controlled armies. Their size makes them easy to
transport and to transfer between legal and illegal ownership. They have become
central components in many internal conflicts and in undermining the fragility of
post-conflict reconstruction and reconciliation. Landmines represent an especially
serious problem. The World Bank estimates that there are 80 to 100 million
landmines deployed in over 65 countries, causing more than 25,000 casualties a year,
most of whom are civilians. It costs US$3 – US$10 to buy a landmine and between
US$300 – US$1000 to remove one.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
State-based diplomacy
The changing nature of conflict has had major implications for approaches to
to ‘multi-track’ diplomacy
preventive diplomacy and peacemaking. Traditionally these have been the sole preserve
of the leaders or authorised representatives of states. In today’s multi-polar world, such
an approach whilst still important, is no longer adequate on its own. There is a need
for more multi-disciplinary approaches. This requires a growing role for non-state
organisations and private individuals, including business, in the process of negotiating
and making peace. As a result, there has been an increase in what is termed ‘two track’
or ‘citizen’ diplomacy, whereby unofficial and often informal negotiations occur
between members of adversarial groups or nations. The Institute for Multi-Track
Diplomacy has developed the concept of multi-track diplomacy and identified the
following key actors: governments; churches; professional organisations; the media;
training and educational institutes; funding organisations; activists; private citizens; and
the business community. Examples include the roles played by: former politicians, such
as Jimmy Carter in his visits to North Korea and Haiti in the 1990s; the Norwegian
Labour Union’s social research institute in facilitating the Oslo Peace Process between
Israel and Palestine in 1993; and business leaders in promoting peace in Ireland, South
Africa and Mozambique.
Military security to
In recent decades there has been a shift in our concept of security. Traditionally a
human security
nation’s security was measured by the size of its army and military installations. Whilst
this mindset is still the norm for many governments, there is growing acceptance in the
international community that security is also about human security and freedom from
oppression, violence, poverty, hunger and disease. State security systems remain
important mechanisms for ensuring human security from both internal and external
threats. There is growing evidence, however, that in many recent conflicts state forces
are all too often turned against a nation’s people, rather than protecting them. This
trend has raised serious questions about the inviolability of a nation’s sovereignty and
created new challenges for the international community in terms of when and how to
intervene in internal conflicts. Humanitarian and human rights principles have been
increasingly invoked to justify external interventions in internal conflict, as happened
in Kosovo and East Timor in 1999.
Intervention to prevention
At the same time that the international community is starting to undertake military
interventions to prevent gross violations of human rights within sovereign states, there
is growing recognition of the need to shift towards a more preventative peace-building
approach to security. This approach places economic and social development as integral
aspects of the international security agenda. This contrasts with traditional approaches
that have characterised international aid and peacekeeping activities in the past, which
tended to separate peacekeeping and conflict resolution from poverty reduction and
sustainable development.
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The Business of Peace – the private sector as a partner in conflict prevention and resolution
Human centred development, which places human security at its core, is increasingly accepted as a
necessary condition for peaceful and progressive societies. Private enterprises have a potentially
vital role to play in supporting such development. They can create the economic wealth and
livelihood opportunities, and support the social development activities needed to meet basic
human needs. In doing so, they can help to counter some of the key causes of modern conflict.
Failure to play a proactive role in this process positions business as part of the problem rather than
part of the solution. It also creates direct and indirect costs for business as outlined on the
following pages.
BUSINESS... PART OF THE PROBLEM OR PART OF THE SOLUTION?
3. Business costs of conflict
Conflict is almost always an impediment rather than a spur to private sector investment and
economic growth. With the exception of the 3-4% of world trade generated by the arms
industry, certain illegal commercial activities, and situations where business gains directly
from being part of war economies, few industries benefit from violent conflict. In the short-
term, employees are threatened, if not killed, markets are slashed, infrastructure is damaged
and in many cases company assets are seized or destroyed. In the long-term, the way in
which conflict undermines social and economic progress will seriously impact a company’s
own prospects for successful investment and economic progress. The private sector therefore
has commercial interests as well as a moral imperative to help prevent and resolve violent
conflict.
It is useful to think of the business costs of conflict in two categories:
3.1 Indirect societal costs of conflict – such as ‘internal’ costs to the country, region or
locality in which a violent conflict is occurring and ‘external’ costs to the international
community, both of which have an indirect impact on business; and
3.2 Direct business costs of conflict – the costs that directly hit the individual company’s
bottom line and/or reputation. These are often linked to the broader societal costs, but
have a more direct impact on a company’s immediate business operations or investment
strategies.
3.1 Indirect societal costs of conflict
The ‘internal’ costs that a country faces as a result of conflict can be summarised as the
destruction or undermining of human, social, economic, environmental and political capital.
To the extent that all of these types of capital are critical for the success of most private sector
investments, it follows that their destruction will have a negative impact on current
investment – both domestic and foreign – and will put off new investment. It is impossible
to put a ‘price tag’ on the human misery and breakdown in systems of governance, trust and
tolerance that are a common legacy of conflict. The more quantifiable economic and
environ