Private sector
The private sector encompasses a vast array of profit-seeking organisations, ranging from very small-scale social enterprises, to medium and large privately or publicly owned domestic companies, to major multinational corporations.
Oxfam GB believes that the private sector plays a central role in development, having an impact on or contributing to poverty reduction in many different ways. Where there is a healthy, vibrant, thriving, and responsible private sector, there are greater possibilities for sustainable development and economic growth that can lead to poverty reduction.
By enabling poor people to access employment, goods, services, and credit, as well as improving incomes through access to markets, businesses make their most important contributions to development that benefits poor people. These contributions have a real impact upon poverty reduction when companies integrate their social and environmental responsibilities into their core business operations and decision-making processes. When this happens, businesses have the potential to:
- create jobs that offer decent and fair working conditions
- make goods and services accessible to and affordable for poor people
- enable poor producers to access markets
- enhance poor people’s skills and access to technology
- generate revenues that contribute to spending on basic services, and
- promote respect for human rights and protection of the environment in their operations and supply chains.
When companies decide not to integrate social and environmental responsibilities into their core business operations, contributions to economic growth, wealth, and job creation may not automatically translate into development that favours poor people, and can often contribute towards deepening poverty. For example:
- Jobs may be created, but where those employed have their rights abused, then poverty is exacerbated
- Poor people may become part of companies’ value chains as producers, distributors, or workers, but the wealth generated in these chains is often not captured by poor communities
- Private-sector delivery of basic services may compound inequalities and inaccessibility to these services for poor and marginalised people, particularly where it is not regulated effectively
- Technology is not always transferred – often it is the low-skilled, low-value parts of the value chain that are serviced by or outsourced to poor people
- Aggressive marketing and predatory pricing of goods can compound poverty – poor people most often pay more per volume for goods, and they are targeted by advertising to expand consumption of non-essential and sometimes harmful products
- Business and industry are significant contributors to environmental damage. Where regulation is weak, the environmental costs of business are carried by poor people whose livelihoods and health are most directly affected
- Weak bargaining power of some governments means that the potential tax earnings from foreign direct investment are often negotiated away in return for the promise of jobs, or lost through transfer pricing. Similarly, regulation that would protect the environment, workers, and consumers are often waived to attract companies
Regulatory, political, and economic environments influence the ways in which companies have an impact on poverty. For markets to work and for businesses to benefit poor people, there need to be adequate levels of regulation and strong redistribution measures. An unregulated private sector, operating within free markets and a free-trade regime, can result in concentrated wealth and power which may not help to lift people out of poverty. Redistribution measures range from effective and progressive taxation, to ensuring protection for workers’ rights, to investing in financing facilities for poor producers and distributors engaged in company value chains. Forward-looking companies support a regulatory framework for corporate behaviour in order to ensure respect for human rights, protection of the environment, and development that helps poor people. This is essential to creating a level playing field for all companies that reflects social and environmental responsibilities. It allows for good practice and innovation to flourish.
Businesses also wield significant political influence and play an important role in shaping public policies nationally, regionally, and internationally, which in turn determine the prospects for poor people’s development. This influence must be exercised responsibly, transparently, and with public engagement on the implications of policies that effect the environment and poverty.
Oxfam works with businesses to influence them to adopt practices that help poor people, and to increase the benefits of private-sector investment for poor people. We do this through campaigning, lobbying, partnerships, and channelling corporate philanthropy. We prioritise changes that alter the policies and practices not only of individual businesses, but, importantly, whole sectors. The choices we make about how to get involved are driven by our evaluation of what will bring the maximum contribution to poverty reduction.
Oxfam GB believes that one of the benefits of the corporate social responsibility agenda is that it has mobilised a critical mass of business people to lead a fundamental re-think of the role of business within society. Many companies and business leaders are looking at the potential of business to address sustainable development, justice, and security. They are looking at how their companies can turn lobbying to social purpose, their practices to innovations for the future, and their resources to generating wealth for the poorest. We seek to encourage this through our involvement with the private sector.
Through our advocacy and campaigning, we seek to overcome the difficulties that limit businesses from operating in a manner favourable to poor people. Often, our analysis and lobbying are aimed at constraints internal to the company. We challenge the short-term outlook of investors that can result in companies adopting practices that seek to create profits at the expense of poor people and the environment. Towards this end, we seek to influence and engage investors in order to encourage them to change adverse incentives, as well as to adopt strategies that favour poor people.
As a development, relief, and campaigning organisation that works with others to find lasting solutions to poverty and suffering around the world, it is important for us to persuade and inspire businesses to operate and behave in a way that achieves poverty reduction. Oxfam works in partnership with companies that show a commitment to developing policies, strategies, and practices that work in favour of poor people where we are convinced that this relationship will deliver real and lasting benefits. Oxfam's partnerships are not an endorsement of a company, its products, services, or practices, but they form the basis of a relationship intended to deliver changes that will lead to poverty reduction. Our partnerships are based on mutual respect and transparency, and Oxfam's right to question and criticise.
We also work with businesses in a number of other ways. Some companies are encouraged to support our work through financial support; this may take the form of philanthropic giving, employee fundraising, or through cause-related marketing ventures, such as the joint promotion of affinity credit card schemes. Some engagements enable us to capitalise on the expertise and skills offered by businesses, or encourage the donation of products and services that enable us to carry out our mandate more effectively, or at reduced operational cost. Alternatively, support may be through adopting initiatives such as fair trade, which Oxfam champions, and which directly benefits individuals or communities with whom Oxfam works.
As an organisation which bases its philosophy around human rights, Oxfam adopts a careful approach when choosing whether or not to engage with a corporation, especially with those who do not have a demonstrable commitment to human rights, environmental protection, and poverty reduction. Oxfam uses publicly available ethical screening to review all potential corporate donors to determine this.
