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Pascale Bonzom, UNDP, BRCAthens, September 12 2008

Fostering Responsible Business in Eastern Europe and the CIS

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Forum Objectives

To provide an opportunity to Greek businesses and UNDP Brokers to explore “responsible business opportunities and investments” in Eastern Europe and the CIS.

To identify a few concrete opportunities for follow-up with UNDP Brokers.

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Responsible Business Opportunities : A Definition

Business opportunities that include the poor and vulnerable as consumers:

Delivery of needed and affordable goods and services

Packaged goods, financial services, telecommunications and IT, energy, waste management, etc.

Business opportunities that include the poor and vulnerable as employees and entrepreneurs:

Product and service sourcing Agriculture, forestry, packaged goods, IT services, etc.

Responsible investments in product manufacturing or employment intensive service delivery including Public Private Partnerships (PPPs)

Agro-processing, wood work, construction materials, roads and building construction through PPPs and tourism.

4 characteristics:

Profitability, Participation of the poor, Sustainability, and Human development impact

Many examples show that providing basic goods and services as well as income opportuni-ties to the poor can be a sustainable and profitable busi-ness strategy and contribute to human development.

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Why engage in responsible business opportunities?

To access new opportunities/markets To develop/test new business models/innovate To enjoy the first mover’s advantage To create value chain efficiencies (e.g. sourcing

from small holders) To secure the license to operate from local

communities To implement a CSR vision/strategy/commitment To leverage voluntary labels such as Fairtrade

To do good business

while doing good at the same time

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But barriers to Private Sector Development remain significant in most transition economies…

The foundations for private sector activity are not in place:- Unfavorable business environment including weak policies (e.g. competition

policies) and legal and regulatory institutions, - Limited private sector participation in policy dialogue,- Lack of access to finance- Lack of skills and knowledge to respond to market opportunities- Business value chains and market linkages too weak and unbalanced- Lack of adherence to principles for responsible investment and business

Leading to…. - High degree of companies operate in the informal sector- The majority of enterprises are subsistence micro-enterprises, most of which

are concentrated in low value added sectors - Lack of competition - large incumbent enterprises frequently stifle

entrepreneurial energy- Local demand and ability to pay is weak

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How can UNDP help Business engage?

Local knowledge (markets, constraints, service providers, etc)

Convening power (local business partners, governments, civil society and donors)

Regional network (of partners and expertise) Project alliance facilitation Feasibility studies/Market research co-funding Technical assistance for strengthening local value

chain partners Continuous problem solving and facilitation Monitoring and evaluation of development impacts

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Business Brokers: our main delivery mechanism

Dedicated and pro-active Public and private sector background On the ground, with local knowledge and contacts Support of the UN: access to government, donors,

civil society and regional players

Facilitate business linkages Provide country and sectoral information Identify investment opportunities in priority sectors Assistance with addressing knowledge and skill

gaps among local partners

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Challenge

Lead company: My Cycle (Slovenian Company)

Innovation: Brokering partnerships for new employment opportunities in Bosnia

Investment: US$ 6.2 million (EUR 4 mm) over 2 years

• “My Cycle” from Slovenia is seeking new location for its factory

•The company’s core business is manufacturing of wheel chairs, and over 90% of the products will be sold via export

•Srebrenica, known for the 1995 genocide during Bosnian war, is an economically depressed region

•Broker introduces My Cycle to potential sites and facilitated contacts with local authorities

•My Cycle purchases non producing factory in Srebrenica for EUR1 mm (US$ 1.5mm) and renovates it according to their needs

•The company will initially employ 60 people from the Srebrenica area, and later an additional 120 employees will be added to the workforce

Solution Business result

•The project demonstrates the relevance of the GSB service offer and the advantages of the “on the ground” presence

•Factory operations to begin in 2009

Development result

•An opportunity for women to participate in direct formal employment in the factory•Reduced unemployment in the region

Local Manufacturing in Bosnia A responsible business case study

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Challenge

Lead company: Svorov, Pucari (Moldovan SME) and Domain Menada (Polish SME)

Innovation: Brokering new relationships to diversify wine export sales

Investment: Modification of manufacturing practices for EU standards ($TBD)

• Wine accounts for 1/3 of Moldovan GDP and is a major export product for Moldova

• Russia was a key importer, but in 2006 a ban was enacted on Moldovan wine

• The industry and the livelihoods of hundreds of small farmers are now at risk

• Broker facilitated market linkages between Moldovan wine producers (Suvorov Vin and Purcari) with Domain Menada, a Polish importer and wine distributor

• The Moldovan exporters have also changed manufacturing practices - such as bottle size - in order to comply with EU standards, therefore opening up further future opportunities as a result of this project

Solution Business result

• As of 2007, 1.4 million bottles exported to Poland

• Suvorov Vin has contracts with 15 large firms (approximately 1,500 farmers)

Development result

• New markets for smallholder farmers creating greater income security and growth potential for the future

Wine sourcing from Moldova A responsible business case study

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Company: Dari Prirodi and Toplu Yapa – wool collectors Filatura Ungheni – yarn and carpet producer

Innovation: Development of a pro-poor supply chain

Challenge

• Broker approached Filatura, wool collectors as well as USAID (already working with Filatura) and brokered the idea of developing a local supply chain

• UNDP facilitated and co-funded 2 feasibility studies – one on wool sector in Moldova overall and the other on improving the quality of local wool

• UNDP facilitated access to working capital loan for wool collectors

• UNDP and Filatura initiated quality improvement of the wool produced by local farmers

Solution

Business result

Local Wool Sourcing in Moldova A responsible business case study

Development result

• In 2006 Filatura Ungheni purchased 97% of its wool from abroad and only 3% from local sources

• Out of 10,000 sheep farmers in under-developed rural areas, around 2,000 in the supply chain

• Local wool did not meet quality criteria by Filatura Ungheni

• Number of farmers involved in supply chain doubled

• Quality of wool led to a price increase from 10 Lei to 14 Lei/kg

• Filatura Ungheni purchases up to 20% of its wool from local sources, cost savings app. 1 mil USD

• Wool collectors gained access to working capital loan

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Conclusion

Business is good for development and development is good for

business

Good luck in identifying responsible business opportunities

Contact information:

pascale.bonzom@undp.org

UNDP Bratislava Regional Center for Europe and the CIS

EFCHARISTO POLY!

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