Public private partnerships pose challenges for companies, but those who persist can find their efforts rewarded. By John Russell


Cross-sector partnerships -- such as those between business and non-governmental organizations, or business and government -- are an increasingly popular way for companies to contribute to society.

But making partnerships work can be difficult. Establishing clear rules of engagement and building trust is often a problem.

Too often partnerships are more like sponsorship, with companies footing the bill for projects in which they are not closely involved.

To be successful, partnerships have to have a strong business case.

"You can't just subsidize businesses wanting to do things in developing countries," says Jörg Hartmann, director of the Center for Cooperation with the Private Sector at the German Technical Development Cooperation (GTZ).

Speaking at a conference on Business NGO partnerships held in London in March, Hartmann highlighted the benefits of private sector involvement in development projects.

"The advantage of PPP [public-private partnerships] is that private sector investment means that the investor is still interested in the sustainability of the project," he said.

The balance between charity and subsidy may be hard to strike. Hartmann advised: "be clear about the balance of the good cause and the business case and communicate accordingly."

The conference session identified three ways for companies to ensure the success of public-private partnerships: drive up demand, take risks, and have patience with government.

Lesson 1: Drive up demand -- go commercial.

Bottom of the pyramid (BOP) projects -- such as microfinance initiatives -- are attracting more and more interest in recent years.

Hartmann insists that to be successful, such projects “must be demand driven.”

One such example is Vestergaard Frandsen, a Danish company providing insecticide-treated mosquito nets to combat malaria in the developing world.

Its chief executive, Mikkel Vestergaard Frandsen, is well aware of the commercial prospects of partnerships:

“Partnership -- like marriage and democracy -- is here to stay. It may lead down a troublesome road but it is worth it in the end.”

Vestergaard Frandsen aims to turn its involvement in targeted humanitarian interventions into sustainable businesses.

The company wants to work with its NGO partners to “create a culture of trade for life-changing products,” Frandsen told the recent conference.

To date, Vestergaard Frandsen has developed two strong commercial markets, in Uganda and Zambia. In Ghana, Senegal and Mali it is driving up demand through TV advertising campaigns.

Lesson 2: Take risks -- don't go by the book.

Partnerships vary according to the parties involved. Although there are clear principles that partners should follow -- a willingness to engage fairly and transparently in the interests of everyone involved -- there are no set rules. “There are no blueprints in different sectors,” says Hartmann.

This offers scope for partners to take the initiative. Unlike the public sector, the private sector is more able to take risks.

Mikkel Vestergaard Frandsen believes this is exactly what it should do: “If you go by the book a lot of these programs will fail.” In the case of Togo, the company had mosquito nets produced and shipped before it had secured a contract for their distribution.

Lesson 3: Be patient when working with governments.

It can be difficult working with governments. As Mikkel Vestergaard Frandsen says: “[it is] more difficult to break work down into pragmatic milestones and the goal line is much more flexible. The vision for the investment changes as we go along: the money pledged is not always what ends up in the partnership.”

Hartmann says that companies must engage in policy dialogues, conducting regulatory impact assessments, and talking about how to tackle corruption or improve the enabling environment.

Some companies, such as Statoil in Venezuela and Nigeria, are helping build 'institutional' capacity to tackle such complex issues in developing nations, by setting up programmes, that in Statoil’s case, helps the judiciary receive human rights training.

In the past Premier Oil has done something similar with military and government figures in Burma.

But some observers are concerned that partnerships may undermine the legitimacy of governments as the providers of public goods and guardians of social welfare.

In Germany critics of CSR complain of a “new feudalism,” where groups who are closer to the corporate “court” receive disproportionate benefits from partnership programmes.

Hartmann acknowledges this accusation, but says the dynamic between public and private sectors depends on the context: “In developed countries, CSR is supporting the roll-back of the state. But in developing countries, CSR is supporting the development of the state.”

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This article has been reprinted courtesy of Ethical Corporation. It was first published on April 26, 2006.