Engineering: issues, challenges and opportunities for development ...

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ENGINEERING AND HUMAN DEVELOPMENTket forces. This view is often associated with the economistMilton Friedman in his influential article, The social responsibilityof business is to increase its profits. 44 The problem withthis perspective is that it overlooks the social contract thatexists between the corporation and the state. The primaryresponsibility of business is the production and distribution ofthe goods and services that society needs. The right to makea profit from this social function is granted to corporationsby the state and demands justification. CSR is an attempt tojustify this right by responding to society’s changing expectationsof business.The objections to CSR from campaigning and market economyperspectives both have important lessons. Robust regulationis necessary to curb unrestrained corporate behaviour andensure compliance with minimum standards. This is particularlyimportant in the developing world where workers andpoorer communities are especially vulnerable. But unlockingthe full potential of the private sector also requires incentivesthat encourage companies to go beyond compliance withminimum standards and innovate in delivering high standardsof social and environmental performance. Getting this combinationof regulation and incentives is of critical importance indeveloping the second generation of CSR.CSR and the engineering industryThe engineering industry and its clients have been at the forefrontof the development of CSR in recent years. There are twoimportant reasons for this. First, the markets for its goods andservices are increasingly shifting towards the developing world.A number of factors have combined to boost governmentexpenditure and increase demand for infrastructure and services.These include several years of record economic growthin many low and middle-income countries prior to the currenteconomic crisis, sustained increases in natural resource commodityprices over the long term and higher levels of developmentassistance. The OECD estimates that through to 2030,telecommunications, road, rail, water, electricity and otherenergy related infrastructure will require investment equalto 3.5 per cent of global GDP. 45 This means we should expectapproximately US$2.6 trillion dollars to be needed annuallyfor constructing new and maintaining and replacing existinginfrastructure by 2030. Developing countries will be majorgrowth centres for the engineering industry in the next twentyto thirty years.in close proximity to them. Companies must manage theirrelationships with the disadvantaged who are either directlyor indirectly affected by their operations, as well as a range ofother stakeholders who tend to prioritize poverty reductionincluding governments, NGOs and international agencies. CSRoffers companies a way of managing these complex relationshipsand building a ‘social license to operate’.Of course there are a range of additional factors that are alsodriving the need for a second generation of CSR that applyacross industrial sectors. These include pressure from campaigners,shareholders and ethical investors, the demand fornew technologies, compliance with global frameworks suchas the UN Global Compact 46 and the growing recognition thatresponsible companies tend to attract and retain the bestemployees.Identifying opportunitiesWhen fully integrated into corporate strategy, CSR canbecome a source of opportunity and competitive advantage,and a driver of innovation. Jane Nelson has proposed aframework of four strategies for individual firms to strengthentheir contribution to local development and poverty reduction(Figure 1). Three of these strategies, compliance withregulation, charitable contributions and managing costs, risksand negative impacts, represent the conventional corporateresponses to managing social issues. The more innovativefourth strategy ‘creating new value’ combines improved socialoutcomes with competitive advantage and is a critical principlethat underpins the second generation of CSR. Porter andKramer refer to outcomes based on this principle as ‘sharedvalue’. They argue that the most valuable corporate societalcontributions, ‘ …occur when a company adds a social dimensionto its value proposition, making social impact integral tothe overall strategy.’ 4746 See http://www.unglobalcompact.org/47 Harvard Business Review, December 2006, Harvard University, Cambridge MA. pp. 10.Second, the core activities of the engineering industry, suchas building, maintaining and operating infrastructure, exploitingnatural resources and large-scale manufacturing, impactdirectly on the lives of poor people and are often conducted44 Friedman, M. The Social Responsibility of Business is to Increase its Profits, The New YorkTimes Magazine, September 13, 1970.45 Organisation for Economic Cooperation and Development (2008) Infrastructure to2030, OECD, Paris.© Arup Evinos Dam, Greece.51
ENGINEERING: ISSUES CHALLENGES AND OPPORTUNITIES FOR DEVELOPMENTFigure 1: Strategies to strengthen the contribution to development bythe individual firm 48SocietalvalueaddedBusiness as usualCharityComplianceBuild competitive advantageCreate newvalueControl• Costs• Risks• Negative impactOpportunities for creating ‘new value’ or ‘shared value’ areparticularly strong in the engineering and construction sector.Its activities are of great societal importance, e.g. the creationand maintenance of essential social and economic infrastructure.Also, engineering and construction activities tend to havea large physical, social and economic ‘footprint’ that creates awide range of opportunities for creating new value. However,the opportunities will vary between sectors and geographicalregions and even between the individual operations of a particularcompany. It is important therefore to adopt a systematicapproach to identifying and selecting opportunities. TheEconomic and Social Performance Framework (ESPF) developedby Engineers Against Poverty is an example of a practicaltool designed for this purpose. 4948 Adapted from Nelson, J., Leveraging the Development Impact of Business in the FightAgainst Global Poverty, Working Paper 22, John F. Kennedy School of Government,Harvard University, Cambridge MA.49 Go to: http://www.engineersagainstpoverty.orgShareholder value addedDo positivegoodDo no harmThe ESPF encourages companies to seek a detailed understanding ofthe local environment and those using it are encouraged to consultwith local stakeholders. The knowledge that is acquired and the relationshipsbuilt tend to discourage thinking about the companies’interaction with society as a zero sum game. The opportunities thatemerge are measured against their potential to create value that ismeaningful to local stakeholders and provide competitive value forthe company. The ESPF also encourages companies to think aboutCSR as a driver of innovation. Poverty, sustainability and climatechange have become ‘market shaping’ issues that are unlikely to disappeareven during periods of economic downturn.The second generation of CSR has to have a firm theoreticalunderpinning, but it also requires practical methods, suchas the ESPF, to implement improvements and measure theireffects. This is where the engineering industry can excel andlead the development of the second generation of CSR.The consequences of failureThat CSR is such a prominent issue is evidence of a deficiency inthe relationship between business and society. If this relationshipcan be reconstituted on the basis of shared value, the interests ofthe company and of society can become mutually reinforcing.And the activities that we currently refer to as CSR will becomeindistinguishable from the core business of the company.Business should not be expected to lead the fight against poverty,which is the role of governments and multilateral agencies,but simply increasing aid and writing off debt are unlikely todeliver cost effective and sustainable solutions in the long term.Unlocking the development potential of the private sector representswhat is probably the single greatest opportunity to stepupthe fight against poverty. A window of opportunity exists forbusiness to innovate and lead the necessary changes and if theyfail, they will probably come to regret the disruptive social, environmentaland economic consequences that are likely to resultfrom a failure to meet the Millennium Development Goals.Figure 2: Schematic of an Economic and Social Performance Framework (ESPF)for the oil and gas industry 50Economic and SocialDrivers(demand-side)Constrainstdemand-side andsupply-sideLocal ContentGeneral Strategies(options)Local ContentOpportunitiesLocal Content ValueProposition• CompetitiveDifferentiationScope of Work andCompetenciesDrivers50 Adapted from EAP & ODI. 2007. http://www.odi.org.uk/events/details.asp?id=168&title=underutilised-value-multinational-engineering-firms-supportingoil-companies-tackle-poverty(Accessed: 5 May 2010).52
Page 2 and 3: UNESCO ReportEngineering:IssuesChal
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5Engineering around the world
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APPENDICES9.1Engineering at UNESCO
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