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Is Cargill the Next Bono?

September 13, 2011

When it comes to identifying actors in international development, we point to the World Bank, the Millennium Challenge Corporation, Bono, and even Transparency International. Whether they’re heroes or villains is a decision for development wonks. The point is, however, that we don’t generally think of big private corporations like Cargill; they don’t usually play a role in development, right?

Wrong.

Some of them actually make quite hefty contributions to development initiatives. The problem, a skeptic would tell you, is that they’re probably not doing it for the right reasons; they may be doing it for publicity, thereby (theoretically) increasing their profits and building their brand.

In some instances, the skeptic might be right. And this may have to do with the fact that sometimes for-profit ventures and development initiatives don’t have much in common.

Recent experience, however, has shown that there are times when profits and development activities can go hand-in-hand, meeting in the hearty middle and creating (buzzword alert) shared-value. The concept is simple enough: when you train farmers in best practices, they can increase their yields. Higher yields will result in more compensation for the farmer. This initiates the sort of multiplier effect that can transform entire communities. It’s called creating shared-value because both sides have a stake in maintaining a sustainable and fair economic relationship.

For the curious, CGP first highlighted the concept when reviewing the Cargill Corporation’s approach to cocoa farmers in Ivory Coast for our 2011 Index of Philanthropy and Remittances. The venture has been so successful that Cargill has attempted to replicate it. A recent article by Reuters reports on Cargill’s plans in Cameroon, where they will “not only train individual small-scale farmers on good agricultural practices, but will also focus on strengthening farmer organizations”.

Of course, the job isn’t as simple as it seems. Part of it is that dumping money into a community doesn’t necessarily transform it for the better. Development requires, among other things, institutions, a dose of financial education, and adequate health services. To overcome these issues, private-nonprofit partnerships can be of tremendous help.

Development nonprofits often possess the know-how to tackle education, health, and institution-building programs. When they enter into agreements with for-profit corporations to help a community, they create a triangle of shared-value, drawn to the left. What this figure shows is that under this scheme nonprofits provide services to both the corporation, by mobilizing its assets to help with the management of development projects, and the community, by providing some of these services. Presumably, the nonprofit receives money in exchange for some of these services and gain utility from helping an impoverished community.

To provide a specific example of this relationship we turn, once more, to Cargill.  In its work in Africa and elsewhere, Cargill has partnered up CARE. In Brazil, for instance, the partnership is responsible for helping cocoa growers diversify their income to protect them against economic downturns. In their activities across the world, CARE and Cargill have tackled a number of other significant issues, including nutrition, sanitation, and education programs.

This sort of behavior has created an interesting shift in how corporations approach development. Traditional corporate social responsibility models are being replaced with more hands-on initiatives, the sort that benefit everybody involved. It has also transformed the way nonprofits relate to donors. CARE, for example, is less interested in partner corporations willing only to write a check. Today, they seek partners interested in real engagement.

Whether these attitudes will change across the spectrum of nonprofit and private corporations involved in development is difficult to assess. What we do know, from the CARE -Cargill experience, is that there is the possibility to do some good. The challenge is to determine whether or not Cargill-CARE’s success is replicable. Intuition suggests that replication should be possible. To discover whether it is, governments, nonprofits, and corporations should challenge themselves to establish these shared-value triangles. If corporations are committed to these ventures, and success becomes the norm, these types of partnerships may very well be on solid ground and ready for public vetting.

Moving forward, however, we should be ready to accept the possibility that the incentives that brought CARE and Cargill together may be unique to their situation. That is to say, it is possible that similar ventures could fail.  The key take-away, then, is rather nuanced: corporation and nonprofit joint initiatives have been shown to be productive, but this might not always be the case.

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