Colombia’s economic transformation is presenting new opportunities – and challenges

Corporate philanthropy and social investment have a long tradition in Colombia. Figuring highly in that history have been successful, family run Colombian businesses that recognised a “necessity” to give back to society.

In the 1950s and 1960s, some of Colombia’s first corporate foundations were established. Margareth Floréz of RedEAmerica identifies this period as a “first wave” in the development of Colombia’s modern corporate foundation sector.

Social development was a priority for this early generation of corporate foundation, as was the need for operational independence from the founding business. This tendency towards corporate social investment in Colombia, which has continued, reflects stark national statistics on poverty and inequality. Colombia is in the top seven most unequal countries in the world, and 34% of its population live in a state of poverty. It is for this reason that corporate environmental programmes have traditionally played second fiddle to the social.

Corporate foundations continue to play a pivotal role in delivering the corporate social investment strategies of Colombian corporations. While they now increasingly operate as part of a holistic corporate responsibility programme, and are more closely aligned with the operating business, the sector is widely regarded as one of the most active and efficient in Latin America.

Social welfare

Historically, the other major intervention of the corporate sector in Colombia’s social development was the system known as cajas de compensación familia (CCF) – or family investment funds. Established by a group of businesses in 1954, the cajas system came during the first wave of modern corporate philanthropy.

Now, the non-profit cajas provide a wide range of social services to the families of employees linked to affiliated businesses. They receive their funding from businesses whose employees make obligatory payroll contributions. As of 2011, 43 funds were delivering social services to 6.4 million Colombian employees with the support of 350,000 businesses.

Whereas in Europe social service provision is typically associated with the state, the Colombia model is recognised as a public-private association, originally conceived by enlightened business. It has become one of Colombia’s most important social welfare delivery programmes.

Identified as one of six emerging nations (the Civets group: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) by the Economist Intelligence Unit in 2009, Colombia’s economy has witnessed a dramatic transformation in the past few years. An improving internal security situation combined with business-friendly government policy has boosted exports and attracted foreign direct investment. Colombia also boasts a young and growing middle class, guaranteeing a future generation of Colombian consumers.

This rapidly improving economic situation has had an inevitable impact on the size and sophistication of Colombian businesses. Many are now capable of actively investing in overseas markets. Others are also looking to attract foreign direct investment. They now see a robust corporate sustainability strategy as a pre-requisite for competing in foreign markets and for attracting foreign investment.

“In the last four years, we have seen a dramatic increase in the number of large Colombian family-run businesses interested in sophisticated CR strategies,” says Pablo Uribe, director of Compartamos con Colombia, a quasi-NGO/management consultancy formed by 15 professional services firms.

The growth of Colombia’s consumerist middle class is also beginning to influence the behaviour of Colombian businesses. “There is an emerging interest among Colombian consumers,” says Ernst Ligteringen, president of the Global Reporting Initiative. There is pressure on the government to engage with sustainably minded local businesses as part of a “productive transformation” programme.

Ligteringen adds: “They have been inspired by the advances made in the transition of the country towards more peaceful social relations. Increasingly they want to be assured that the products they buy are fitting with a future they want.” 

Conscious consumers

This nascent interest among Colombia’s growing middle class is also stirring much larger public debates about the role of multinational corporations in the country’s economic future, and the ability of the Colombian government to shape corporate tax and regulatory frameworks in the long-term interests of the country.

For several years this debate has found its epicentre in the mining sector. A mining boom has been both encouraged by the Colombian government and enabled by the improved security situation in the country’s vast, resource rich, rural territories.

How this debate will play out is uncertain. What is clear is that as the government’s economic policy prioritises agricultural production and mineral extraction in sensitive rural areas, the pressures will grow on private businesses to operate more sustainably.

Companies now see a robust corporate sustainability strategy as a pre-requisite for competing in foreign markets

References:

Socio-economic statistics obtained from recent publications from the CIA Factbook and the Human Development Index.

Guideline and standards statistics obtained during June 2012 from official website of each initiative.