In a world where sustainability has become a global buzzword, companies are reassessing how their business impacts local, national, and international communities. Companies are also taking a proactive approach and thinking about what role they can play in a building better and more sustainable society.
While all that sounds nice, what does it really look like in practice? What does it mean to be a good corporate citizen?
Good corporate citizenship starts with good corporate governance. According to a guidebook recently published by CIPE partner the Association of Development Financing Institutions in Asia (ADFIAP), corporate governance “is an internal set of rules that ultimately focuses on accountability of the business to its investors and stakeholders.” In other words, an organization must ensure good business practices, sustained growth, and risk management before it can be accountable to its community.
Building on the foundation of good corporate governance, corporate citizenship is a combination of many things. ADFIAP’s new guidebook defines corporate citizenship as “adhering to voluntary standards of business conduct as an alternative to regulation, maintaining the integrity of internal business operation, and assuming responsibility for social and economic issues.” In short, it means conducting business with integrity and taking a proactive role in caring for the surrounding community.
While multinational companies like GE and Coca Cola attract international attention for their corporate citizenship programs, business sustainability is not limited to companies with global brand names that spend millions on their own corporate foundations. Development finance institutions like ADFIAP’s members are also getting on board.
Development finance institutions (DFIs) play a unique role in their communities by providing credit where commercial loans are otherwise difficult or impossible to obtain. Unlike traditional banking operations, DFIs operate under a “dual bottom line”: to be financially sustainable and also achieve developmental impact. They support everything from start-up costs for new businesses to long-term infrastructure projects.
Sustainability may be a natural component of DFIs’ development goals; however, in practice, corporate citizenship for DFIs is not always that easy. For example, DFI loans are typically guaranteed by governments, leaving less incentive for the banks to thoroughly vet borrowers.
That is why ADFIAP, a membership organization that brings together development banks and other financial institutions in the Asia-Pacific region, undertook an endeavor to explore how DFIs can be better corporate citizens.
On March 27-29, 2012, ADFIAP, in its capacity as the General Secretariat of the World Federation of Development Financing Institutions (WFDFI), held an international workshop in Makati City on institutionalizing corporate citizenship in development banks. At the seminar, ADFIAP launched the Corporate Citizenship Manual for Development Finance Institutions. The guidebook was a culmination of the year-long joint effort with CIPE to create and implement practical guidelines for WFDFI members on good corporate citizenship. Since its release, ADFIAP has shared the guidebook with WFDFI members in countries around the world.
In light of recent banking crises felt across the region and the world, this manual is an important step towards building sustainable relationships between banks and their communities. As ADFIAP puts it, DFI’s “are in a unique position to show that a financial institution can do good while doing well and provide inspiration for other banks.”