Good Business in the Global Landscape

Maria Otero
Under Secretary for Democracy and Global Affairs 
Ronald Reagan Building
Washington, DC
June 11, 2010

Thank you, Karen, for your kind introduction. Good afternoon. It is my pleasure to be here on the final day of the 5th annual Global Business School Network conference. It is impressive to see such an array of representatives from business schools, civil society and the private sector.

Of course, I am particularly pleased to be here as a University of Maryland alum. I received my undergraduate degree and a master’s in English literature from Maryland—had I known I would spend most of my career working in the field of social business, I might have gone to the business school too! So, I would like to thank the University of Maryland’s Robert H. Smith School of Business and the Global Business School Network for inviting me to speak to you today.

Your presence at this conference signifies your commitment to educating and developing future business leaders. As recent events indicate, it is now more important than ever to cultivate leaders who are not only business- savvy but also socially conscious and responsible.

I understand that this year’s conference focuses on exploring innovative ways business schools can strengthen business education in emerging markets—and foster business leaders for the 21st century.

This century, like many before it, is ripe with opportunity for the business community. First, we are connected to one another like never before. Soon, there will be a trillion points of connectivity around the world. Promising technologies are emerging every day—from vaccines to ever-shrinking laptops to cloud computing. With online networks, tens of thousands of miles are crossed at the click of a button. Never before have we have had so much exchange with people around the world.

Along with this connectivity, philanthropists and investors are recognizing the potential of placing their resources in development and governance projects, and they are financing much needed research and innovation. In many cases, non state actors are leading the charge on issues that are vital to American and the world’s interests: securing the rights of women and girls, recognizing the power of our youth, providing education in rural areas, increasing the capacity and yields of rural farmers, and the list goes on.

The critical resources, infrastructure and expertise that exist in the business and NGO communities are interwoven in the functioning of our global community. And indeed, many of our objectives are the same. But, recognizing this, we must go further. And that is why you all are here. There is great opportunity for increased efficiencies and more profound impact if we harness the combined efforts of the public and private sectors. And I am pleased that the Global Business School Network is leading the way in this important work.

My former organization, ACCION International, a leader and pioneer in microfinance, was a great example of applying business principles to the greater good. We built banks that broke the mold of traditional banking. We developed innovative collateral for loans that took into account the unique circumstances of poor individuals, and we developed a sustainable platform for financial services. All of this was underpinned by our ability to use character—not assets—as collateral. The result was astonishing for most b-school alums, bankers, all of us—over ACCION’s nearly 30 year history, the poor paid us back at a record 98%.

Over the course of three decades, microfinance has evolved from a nonprofit activity to a new asset class that attracts the attention of investors, multinational corporations, and governments. It has moved from microloans that might buy a new sewing machine to a full suite of financial products like remittance-backed housing loans, microinsurance, and savings accounts.

Fortunately, my personal transition, from CEO of an international organization to senior diplomat, comes at a time when the United States government is elevating partnerships, sustainable business, and international development to an unprecedented level of importance in how we envision, plan, and conduct our foreign policy.

Now let me speak a bit about my current responsibilities: As Under Secretary for Democracy and Global Affairs, I oversee a broad range of global issues: Democracy, Human Rights and Labor; Oceans, Environment and Science; Population, Refugee and Migration; and Trafficking in Persons. I am also the Special Representative for Tibetan Affairs.

Though this portfolio is diverse, it is united by a common thread—that of human security and protection. The idea that peace and prosperity are contingent on protecting and empowering individuals on a variety of fronts—political and economic security, food security, and health and environmental security.

Secretary Clinton has been a forceful and effective advocate for what she describes as “Smart Power.” Within the foreign policy context, smart power is addressing the basic necessities of people’s lives, understanding their challenges and empowering them to help themselves—all to ensure national and global stability.

In the business world, I think smart power would translate as social business. It’s a shift in thinking—from one bottom line to two or three. It’s the acknowledgement that, while we’re making a profit, we can also foster economic empowerment, clean up the environment, or build better community infrastructure. Secretary Clinton described it as a “new mindset for a new century. Time to retire old debates and replace dogmatic attitudes with clear reasoning and common sense.”

We—and I mean ‘we’ as if I was sitting where you are sitting—we have an opportunity with this Administration to play an important role global development; apply the lessons from business and innovation, and also – for me - that many of us have learned from working in the world of social business. Let me share the key lessons that I’ve found to be most transferable—from CEO to Under Secretary—and also transferable to those of you in the business world.

First, we must work locally. Long-term success is only possible when we engender local ownership and pride of development projects. I saw this with the banks my former organization, ACCION, helped to start in Latin America and Africa—we did not create our own model from scratch, with the ACCION brand and foreigners at the helm. Instead, we sought out competent and willing partners—locals who shared our priorities of helping the poor in a sustainable manner. And when we left, the banks not only stayed standing—they grew. Such local capacity—coupled with motivation—is at the heart of sustainability in development. It also stimulates dignity, confidence, and self-worth—among both the local operators and their poor clients. So it becomes a multiplier of success.

Second, we must draw our solutions from all realms—governments, private companies, multilaterals, universities, nonprofits and so on. What we are finding today is that innovation occurs at the intersection of worlds that are newly connected. When you bring people together, tapping new expertise and resources from every corner, and think outside of your respective box, perspectives shift and challenges break down.

Just think of the new terms that have arisen out of combining otherwise foreign concepts: Social+Entrepreneur, Micro+Insurance, Corporate+Responsibility, Financial+Inclusion. We’ve brought poor people into banks, put modems on the back of bikes, delivered agricultural advice through mobile phones. We can power a cell phone with a solar panel the size of a credit card and turn dirty river water into a clean drinking source with a packet of solution the size of your palm. Through public-private partnerships, companies like PUR and Hewlett Packard are distributing those little packets in villages around Africa.

In addition, we view our partnerships as a way to promote global corporate social responsibility and to hold constructive dialogues on ethical and responsible business practices. As Secretary Clinton has stated, “the core tenets of corporate social responsibility complement both our diplomatic and development efforts.”

The State Department takes a holistic view on the term “corporate social responsibility” - for us, it encompasses the idea that respect for and the promotion of human rights and environmental protection are a moral obligation and exemplify good corporate citizenship.

There is a growing awareness and expectation among stakeholders that good business practices include the integration of human rights concerns into a company’s operations.

Companies have an obligation to respect workers’ rights and to combat the use of child and forced labor not only in their own operations and in those of their direct suppliers, but along their entire supply chain. And we believe that effective monitoring is not enough: where wrongs are found, companies need to make redress in a way that is open and verifiable.

Likewise, in a world where the internet is a primary platform for communication and business, we are seeing the importance of Internet freedom—advancing citizen’s freedom of expression through any media and regardless of frontiers.

So, we must draw on the resources of all sectors and stakeholders to ensure that the 21st century world is one in which business, technology, and innovation work on behalf of the majority, with human rights secured at every step of the process.

Allow me to tell you about one area where the State Department is actively working with a wide variety of stakeholders. With the private sector, we are promoting measures to keep supply chains free of conflict minerals, while also promoting legitimate mineral trading practices that benefit individuals and mining communities. The exploitation of natural resources – particularly in emerging markets, is an important issue for the State Department, and it is also a challenge shared by private industry and civil society.

We face particular challenges in the Democratic Republic of the Congo, where the illicit exploitation and trade of minerals have funded armed groups and fueled conflict, leading to widespread human rights abuses.

Finding a comprehensive and lasting solution is not easy—mining operations are frequently located in remote areas where difficult working conditions are the norm. Poor infrastructure and weak state authority compound the challenge.

Beyond due diligence and responsible business practice, it also depends on working with these partners to strengthen communities, promote respect for the rule of law, provide access to education, promote economic opportunity and safeguard the rights of the poor and the dispossessed.

Now, back to my lessons from ACCION and the microfinance world. I think I’m on number three: that we must focus on social business models that work and are capable of scale. The need is too great—the numbers too large—for us to dally on efforts that deliver results only for the few. We should recognize what we do well, and expand on it.

Fourth, perhaps my most important lesson from ‘micro’ finance—there is nothing ‘micro’ about the human spirit. Perhaps the best way to tell you what I mean is by sharing the story of a woman I met while I was taking a delegation of business school professors to Guatemala. On one of our visits to microenterprises, we met with Esperanza, a tiny woman of Mayan descent who made shoes in a corner of her one room house with a dirt floor.

Esperanza welcomed us in and proudly showed us her businesses, which probably produced 20 pairs of shoes a week. After a few minutes, one of the professors asked me to translate “Can you ask her what her unit cost of production is?”

I turned to him and said, “No I can’t do that. She will be embarrassed in front of their two daughters because she doesn’t know.”

He insisted persistently, until apologetically I asked: “Dona Esperanza, this professor from the north wants to know if you know - if you can tell him what your unit cost of production is.”

She looked up at him, and answered with a strong, assured voice, “Of course I know, it is 18 quetzales (Guatemalan currency) a pair, and please come and I will show how much it is at each step of production.”

I felt so humbled, but I was also thrilled! This woman, with a little capital, was able to do things she never before imagined. She didn’t have formal training, but she figured out how to create and sell a product – at a profit. Her sense of self-worth, of dignity, of empowerment spilled over into the roles her daughters, as she juggled running a business and taking care of them.

To this day, I imagine her mentoring other young women in her community, perhaps taking the lead in demanding water and sanitation facilities from the Municipality, and telling her daughters that of course they should go to college, even though she didn’t finish the third grade.

Esperanza reminded me that I should never make assumptions about the capabilities or potential of the people I meet—more often than not they will surprise me, and not only that, they will likely have something important to teach me. But this is not just a sentimental anecdote. It also speaks to one of the premises of development, as first articulated by the great economist and thinker Amartya Sen—that human dignity is at the core of social justice and progress. We cannot measure our success in development only by the number of teachers trained or incomes raised, but by the dignity inspired in women like Esperanza.

So, the lesson I would leave with you is to continue to be the business leaders who know the power of a woman like Esperanza. Understand the power of innovative thinking and creative partnerships. Don’t be afraid to put words together in new phrases like “corporate and responsibility.” Take risks, but always with an eye on scale and sustainability. Seek inclusion rather than exclusion.

Thank you. And go Terps!