Feature Story: UNIDO Business Partnerships Programme

The successful participation of any firm in global markets depends heavily on the capacity to innovate. Long-term profitability requires continuously improving a firm's performance to stay ahead of competitors through new products and processes, recombining activities, or exploring new markets. In this process, the economic networks in which a firm operates are key determinants of the profitable options that are open and the priorities a firm sets. Transnational corporations (TNCs) are often major drivers of innovation. In a globalizing economy, it is therefore vital that small and medium-sized enterprises (SMEs) become attractive partners for large firms. The integration of SMEs into global value chains can lead to transfers of know-how, skills and expertise contributing to sustainable development. This know-how can help developing countries and countries in transition to catch up while creating a balanced economy.

Achieving this means dealing with issues and time spans, which will often be beyond the range of individual actors. In those cases, the public and private sectors and civil society must cooperate, complementing each other’s development resources (technical expertise, finance, management know-how, etc.).

Why UNIDO Business Partnerships? Linking its own limited resources to those of other actors, in particular private business, has become a matter of priority for the entire UN system. In global economic development, the private sector is the key driver and international capital flows are dominated by private investment. Partnerships with private business, however are more than a matter of money. 

In a broader approach and perspective, the purpose of the UNIDO Business Partnership Programme is to draw on the expertise, know-how and resources of major business players and bring their experience to bear on the aspirations of SMEs to become competitive players in their own right as well as attractive partners for large firms.  It therefore seeks to exploit the synergies between the objectives and activities of the business community and UNIDO, with its mandate for promoting sustainable industrial development, for the benefit of industries in developing countries and economies in transition. 

By joining forces with TNCs through joint projects, varied but complementary resources of the UN and the business community can be pooled for the benefit of SMEs. The business community can provide funds, skills, technology, market access, and a wide range of other resources.  The UN and its specialized agencies can provide access to their global information networks, facilitate contacts with important support institutions and policy makers, and help the business community to enter difficult markets (e.g. the least developed countries (LDCs)). Consequently, the Business Partnership Programme is much more than a funds mobilization strategy. By tapping into complementary resources and balancing different interests business partnerships can create a win-win situation for all who have a stake in industrial development.

Another dimension of business partnerships related to the issue of Corporate Social Responsibility (CSR). The increasing public demand for CSR in Western countries on developing-country SMEs seeking to penetrate those markets, either directly or as suppliers of larger international companies, consequently led to TNCs increasingly selecting their suppliers not only according to price and quality but also based on environmental and social criteria in their supplier selection. In other words: more and more pressure is pushed down the supply chain. Recently UNIDO has initiated research to assess the implications of this growing trend for SMEs in developing countries and the development of a framework for small business responsibility. Chapter 4 below, describes UNIDO’s studies on this and other related themes in greater detail.

UNIDO involves business partners in multi-sector partnerships (also involving governments, industry associations, research institutions, civil society organizations (CSOs)) on the basis of guiding principles, which inter alia include acceptance of UN values, fairness, transparency, non-exclusivity and non-endorsement of commercial products. So far, a number of such partnership projects have been initiated.  In addition to other UNIDO services that promote business networking, these partnerships are becoming an important vehicle for stimulating industrial development, from the local to the international level. Some examples follow of UNIDO Business Partnership Projects in Asia, Africa and Latin America.

In India, the UNIDO business partnership programme was initiated in 1999 with a pilot project involving the establishment of a multi-sector partnership to support the development of the primarily small and SME-based automotive component industry in the Western region of India.  In addition to UNIDO and the Government of India, the partners in this undertaking comprised FIAT S.p.A., the Automotive Component Manufacturer's Association of India, Automotive Research Association of India, the European Business School INSEAD, and the Prince of Wales Business Leaders Forum.  The encouraging outcome of this pilot phase resulted in the extension of the project to the Southern region of India. The second phase of this project, launched in February 2003 in New Delhi, Pune and Chennai, aims at further strengthening small and medium-sized automotive component suppliers. Within this context, the programme envisages to build up a sustainable institutional framework for providing practical services to SMEs to ensure their inclusion in global supply chains.

In Nigeria, access to affordable transport for country's large SME sector is an important factor in the reconstruction of the country’s economy. Although Nigeria has a domestic automotive industry, it has been affected seriously by the country’s prolonged overall economic and political problems. Upon a request from the Government of Nigeria, UNIDO implemented a business partnership project to promote local production of two- and three-wheeler vehicles, keeping in mind their environmental impact. Bajaj Auto Ltd. from India, the world’s largest three wheeler manufacturer, is a partner in this programme. The objective is to strengthen technological capacities in local micro enterprises and SMEs, so that they can become part of the supply chain for simple but environmentally sound motor vehicles, produced in Nigeria. 

In Morocco, as a pilot exercise, UNIDO worked with BASF of Germany, a transnational chemical corporation, in a Global Compact project to establish a comprehensive yet easy to apply eco-efficiency analysis tool for SMEs in developing countries. The ultimate goal was to help SMEs to assess and improve the environmental level of their products and processes with regard to international standards. The analysis and related services will allow SMEs to prepare for the integration into local and global supply chains. The UNIDO/UNEP National Cleaner Production Centre (NCPC) in Morocco worked with BASFand local enterprises to develop the tool. Once tested, it will be made available to all centres and will be added to the range of high quality services provided by the NCPCs to SMEs in more than 20 developing countries.

In South Africa, the UNIDO Business Partnership Programme aims at strengthening small and medium-sized automotive component suppliers to meet the requirements of the vehicle and first tier automotive component manufacturers. It comprises three inter-related objectives: Performance enhancement of South African SMEs in the automotive component industry to enhance their international competitiveness; facilitation of access to international markets; ensuring programme sustainability through strengthening the institutional set-up and further building up a pool of well-trained national engineers and market experts in the automotive component industry. The Programme contributes actively to the enhancement of the performance of domestic SMEs in this sector to ensure their sustainable inclusion in domestic and, in particular, international supply chains. As a result, the country’s automotive sector will benefit from stronger backward linkages with a pool of indigenous component suppliers, thus, increasing the overall developmental impact of the Programme in terms of sustaining and expanding higher levels of employment, production, and exports, which, eventually will contribute to income generation and sustaining the overall developmental goal of poverty alleviation.

In India, Pakistan, Sri Lanka and Thailand, in 2001, UNIDO launched the first phase of a Triple Bottom Line (TBL) Project. The concern of the UNIDO TBL project was market access for developing countries. To address this concern it has developed a generic decision support system for export-dependent small and medium-sized enterprises (SMEs) in developing countries to be better able to comply with the environmental and social requirements of global buyers and supply chains. Without such compliance, SMEs risk losing their access to world markets. The TBL decision support system builds on UNIDO’s successful cleaner production assessment methodology and extends it to include employee-related social as well as financial issues. It comprises a gap analysis, application of an improvement methodology, and use of a standardized reporting method. The key tool for both the analysis of the baseline situation and the self-documentation of changes, is REAP (Responsible Entrepreneur Achievement Programme), a computer-based monitoring system. REAP is not a "code of conduct" or a quality standard, but a "management support system" that can be used to improve performance against any chosen standard, particularly environmental and labor practices - not covered by conventional accounting systems. Phase II of the TBL project, which has already been fully formulated, will move beyond the pilot activities and foresees more extensive field-trials in five Southeast Asian countries. 

In Burkina Faso, the objective is to contribute to food security through the development of a viable dairy industry, aiming at supporting the entire value chain. UNIDO will cover the training and technical assistance, access to the Government, institutional support, and assistance in marketing and market development. It will bring together the know-how of world-leading dairy expertise of the private sector, international and local research institutions and local institutions in order to achieve synergies between their related activities and consequently a positive development impact. At the centre of this project is a business partnership UNIDO is in the process of developing with Tetra Laval, the leading company in systems for processing, packaging and distribution of milk. UNIDO will cover the training and technical assistance at farms, collection centers and the dairy, access to the government, institutional support, and assistance in marketing and market development. The Tetra Laval Group will focus on expertise and other in-kind contributions to each stage of the value chain in addition to the commercial aspect (investment) necessary to establish a pilot dairy plant.

Latin America, China, the Mediterranean and Central and Eastern Europe, are the focus of a recently concluded Agreement between UNIDO and Telefónica of Spain. Under the cooperation agreement, Telefónica is providing 2.5 million dollars to promote the exchange of data, technology and opportunities, while UNIDO is providing access to UNIDO Exchange, an existing electronic platform developed by UNIDO as an information network for the promotion of international trade, investment, technology transfer and data exchange. UNIDO Exchange has already set up specialist regional networks such as the Colombian mini- exchange and Mediterranean Exchange, but the Telefónica project is more extensive, involving interregional networks and sub-networks such as Ibero-American Exchange, Ibero-China Exchange, Ibero-Mediterranean Exchange and Ibero-CEEC Exchange (central and eastern European countries). 

The methodological framework of the Partnership Programme started to take shape as the first pilot Partnership Programme in India developed, and drew on this learning-by-doing experience as well as global best practices. In this connection, an expert group meeting was convened in October 2000, bringing together representatives of the business community, academia and other UN and bilateral agencies. A document recording the proceedings of this meeting was published in May 2001.

UNIDO has also published a study covering the integration of SMEs into global value chains, as well as a Guide for the formation and management of multi-sector partnerships, which defines the overall framework of proper and effective processes of working together with the private sector. 

The UNIDO study on Corporate Social Responsibility, published in 2002, analyzes CSR-related trends, the approaches and strategies being adopted to comply with CSR requirements, and the implications for the development of SMEs in developing countries and their integration into global value chains.

In the context of a knowledge partnership aimed at promoting the participation of SMEs in developing countries in global electronic and mobile business, UNIDO joined hands with L.M. ERICSSON, one of the world’s largest telecommunication enterprises to produce a joint UNIDO-ERICSSON study, which provides an overview of the challenges involved in improving the access of SMEs to electronic communication and related services.

UNIDO has always seen its work in developing business partnerships in the context of furthering the goals of the Global Compact of UN Secretary- General Kofi Annan. The Global Compact calls upon business to "embrace and enact" nine principles covering human rights, labour and the environment, both in their individual corporate practices and by supporting appropriate public policies. UNIDO has a long-standing record of successfully working with private business in industrial development, both in the area of investment and technology promotion and in many of its environmental programmes. The parameters and principles of such cooperation, formally laid down in the Business Partnership Programme are an important contribution to the practical application of the Global Compact.

A UNIDO delegation will be in New York in June, 2003, to discuss an Action Plan to further define and enhance its role within the Global Compact. Impetus for the plan came from the request of Member States during the 26th session of the IDB for the enhancement of UNIDO's cooperation with the private sector, as well as a letter on the subject of the Global Compact from the UN Secretary-General to UNIDO’s Director-General in December 2002, which gave praise for the "excellent work already undertaken by UNIDO in the context of its own Business Partnership Programme" and invited UNIDO "to explore concrete modalities of a strengthened collaboration" with the Global Compact Office.

The engagement of the private sector to assist the UN System solve the challenges of globalisation through the Global Compact has implications as well in the mobilization of resources. The ongoing UNIDO Business Partnerships projects have been able to generate both financial and in-kind contributions from the private sector and governments. The most notable being the recently concluded agreement with Telefonica, which has led to the largest ever financial commitment (US$2.5 million) of a private company to the Organization. Resources attracted by the other project is as follows: in phase I the India Automotive Project received US$50,000 from the Magneti Marelli/Fiat company as well as 100,000 USD from the Indian Government; the second phase of the India Automotive Project has US$250,000 from the Indian Government and US$250,000 from the private sector; the South Africa Automotive Project obtained US$100,000 from the private sector; the three-wheeler project in Nigeria was supported by the Japanese Government with funding of US$200,000. In addition to these financial contributions, in-kind contributions from business partners amounts to some US$150,000.

For the UN in general - and for UNIDO - entering into concrete operational partnerships with private business is a fairly new development. It is a new challenge requiring innovative approaches, openness to new ways of working and certainly time to evolve and mature. It is not business as usual. Actors on both sides are still learning how to understand each other and how to ensure that different working cultures can meet to serve the ultimate goal of sustainable development. Accordingly, a lot of time and effort is still being spent on creating awareness, ensuring commitment and identifying tools and mechanisms, in other words: on defining a proper and effective process of working together. However, at the end of the day, what counts is the impact achieved: poverty reduced, employment increased, skills enhanced, competitiveness strengthened or markets accessed.

Publications covering the UNIDO Business Partnership Programme  
  Business Partnerships: Kai Bethke, Tel: +43 1 26026/3179,  E-mail: K.Bethke@unido.org
  Business Partnerships: Barbara Kreissler, Tel: +43 1 26026/3420,  E-mail: B.Kreissler@unido.org
  Global Compact: Syed Asif Hasnain, Tel: +43 1 26026/3390,  E-mail: S.Hasnain@unido.org