With increased awareness of ‘doing good while doing well’, multinationals are realising that profit maximization is not the only route to success. They also need to demonstrate that their existence is beneficial for society in general.
This is the subject of a major research study being co-led by Axele Giroud, Professor of International Business at AMBS.
In developing countries multinationals are often blamed for only serving the elite population. In these emerging markets, they also rely on local governments to create infrastructure that supports their activities, thus sometimes diverting resources from underserved communities within that country.
So how can multinationals increase profits while also addressing the needs of these underserved communities? This is precisely the issue that will be explored in-depth in a major five-year research study, funded by the ESRC and co-headed by Alliance Manchester Business School and the University of Birmingham.
The project will look at how UK multinationals can create value for marginalised communities and reduce inequalities while still turning a profit. In particular, the study will focus on the experience of UK multinationals operating in Brazil and Colombia.
Co-lead investigator Axele Giroud, Professor of International Business at AMBS, said most business and entrepreneurial initiatives targeted at disadvantaged communities have traditionally been undertaken by NGOs or by local small and medium enterprises.
“Although some local large companies have successfully served poorer consumers, it is rare to find multinationals from advanced markets actively engaging with poorer communities. This really matters because multinationals are such important and sizeable players in these emerging markets.
“The central question we will pose in this study is how can multinationals incorporate marginalised communities into their activities. To date there has been little research conducted on how multinationals from advanced markets engage with local stakeholders in countries such as those in Latin America, even though it has been emphasised by the UN that collaborative efforts by businesses, society and governments are necessary to achieve Sustainable Development Goals (SDGs).”
The study, entitled Creating competitive advantage by serving marginalised communities: UK multinationals and inclusive development in Latin America, will specifically explore how multinationals can contribute to the achievement of SDGs by addressing the needs of underserved populations and marginalised communities in emerging markets, while also providing expectations of long-term economic return to their shareholders.
Added Professor Giroud: “For companies to satisfy both their quest for economic performance and also to make a contribution towards sustainable inclusive development, a good opportunity lies in addressing the relatively untapped needs of underserved populations in emerging markets.
“We want to look at how multinationals can contribute to the achievement of SDGs by creatively serving disadvantaged populations in emerging markets, and create competitive advantage at the same time. How can they do good while also achieving their economic objectives?”
The project will begin in the New Year and it is hoped that the outcome of the research will contribute to a much broader understanding and identification of sustainable business practice by multinationals, in both theory and practice.
As Professor Giroud added: “We will create an online platform to disseminate key results and demonstrate value creation by multinationals for underserved communities. We will also run a series of multi-stakeholder workshops to demonstrate the benefits of bringing different players together. Indeed, it is only by talking to a variety of stakeholders that we can truly find ways to identify good practice and identify exactly what some firms do really well.”
The £1m project is being run in conjunction with co-lead investigators Professor Pervez Ghauri from the University of Birmingham and Dr. Jorge Carneiro from the FGV Sao Paulo. The funding from the ESRC is the result of an effort to promote collaborative work based on an agreement between ESRC-UKRI and the FAPESP Research Foundation in Brazil.