Instability, Profitability, and Behavioural Change in Complex Environments

 

Major General (Retd) Andrew Mackay CBE

Jim Derleth Ph.D

Commander Steve Tatham Ph.D

 

EXECUTIVE SUMMARY 

The world's supply of easily accessible resources is rapidly declining. With the global population expected to reach 9 billion by 2050, additional arable land and resources will be needed to satisfy growing demand. This will require agricultural and extractive industries to venture into more complex and unstable regions of the world. 

Since the scale and profitability of production is closely related to a stable operating or production environment, in order to be successful firms need to foster stability in the areas they operate. Traditionally this has been attempted through the use of development projects and/or security mechanisms. However, as can be seen in places as varied as Afghanistan, Mozambique and the Niger Delta, this approach has significant limitations. In some cases, far from mitigating problems, security policies have actually fostered instability and severely disrupted multi-national corporations' (MNC) production. One leading policy research organization noted that 36 percent of all global mining projects have been delayed because of public opposition, with over 70 percent of those being delayed by between one and four years. 

Although this situation stems from a broad range of problems, many of them specific to local areas, there is one broad underlying theme that spans all sectors, regions and projects: the failure of MNCs to properly understand the 'human factor', i.e. the motivations, current and future, of people living in project areas. This failing is not unique to MNCs. The authors' combined experience in Iraq, Afghanistan, and Africa provides numerous examples where government policy and good intent founder as the reality of conditions on the ground, which are always unplanned and invariably unwelcome, becomes apparent. 

In this paper the authors argue that just as governments and militaries have had to adapt, so too must MNCs if they are to meet shareholder expectations and pass domestic and international scrutiny. MNCs must become smarter and more agile in their working practices, in particular by embracing social science research to understand and predict behaviours in production regions. This in turn will foster a secure operating environment and increased profitability. The paper explains how Corporate Social Responsibility (CSR) policies can be turned into meaningful and demonstrable 'Shared Value' programmes uniting corporations, local communities, and host country governments. This provides the key to moving away from potential confrontation over foreign investment and development projects in unstable regions, and toward a consent-based strategy based on inclusivity and mutual benefit that foster long-term stability and profit.

 


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