What is the current key note of Public Private Partnerships (PPP) in the German development cooperation?

Partnerships between corporations, civil society and the public sector have generated much attention over the last decade. However, it is also important to put things into perspective: in 2008, less than 2% of the development assistance distributed by donor governments has been channelled to non-governmental organizations. Multilateral and bilateral development agencies, which distribute an important share of these funds instead, show a growing commitment to work in partnership with private actors. But the overall volume of these efforts is still tiny compared to the grand total: the German Development Corporation (GTZ), for instance, reported in 2008 new contracts worth USD 2 billion, most of which from the German Federal Government. The value of public-private partnerships the organization facilitated over the same period amounts USD 67 million, i.e. a mere 3% of the overall contracting volume.

On the other hand, it would be wrong to focus on alliances between public and private stakeholders alone. In fact, many new and interesting partnerships begin to emerge between corporations and non-governmental organizations without the direct involvement of public institutions. Because of that I would prefer the less specific term multi-stakeholder partnership to describe recent developments.

So, what is it that drives an increased engagement of private actors in development?

Firstly, there has been an important structural shift in world politics with new players entering the stage, namely multinational corporations and transnational civil society organizations: today, the global economy is made up of more than 80.000 transnational corporations and global civil society constitutes a USD 1.3 trillion industry which accommodates more than 35.000 active international NGOs.

In addition, the number of policy issues that reach beyond the borders of the nation state, such as public health, climate change and security, are proliferating. This has sparked innovative thinking and experimenting with new forms of collaboration across traditional borders of sectors and nation states: whilst international organizations no longer shy away from making contact with the business world, corporations increasingly put the concept of shareholder-value under scrutiny and non-governmental-organisations try to learn from business to become more efficient in pursuing their goals.

Secondly, an increasingly multi-polar world creates new risks, particularly in an environment where consumers become more attentive to corporate behaviours: a breakdown in one corner of the world may quickly affect the supply chain, the reputation, and hence the bottom line of the entire business. In that regard, the ability to collaborate locally becomes an important instrument of risk and reputation management. Thirdly, to use the words of Peter Drucker, “every pressing social and global issue of our time is a business opportunity”. More and more companies understand that getting engaged early on in frontier markets is a major business opportunity: over the next 20 years markets in emerging economies will need to serve more than 2 billion new consumers - and we are not only talking about the "base of the pyramid": between now and 2030 more than 70 million people will enter the ranks of the middle class – per year.

Why are corporations interested in cooperating with other stakeholders in society?

On a general level one needs to distinguish between classic "corporate citizenship" and strategic business development in the so called "growing inclusive markets" as key drivers for collaboration.

Within the classic concept of Corporate Citizenship (CC), companies get involved in the development sector in a philanthropic way – that means without an immediate profit motive. Cooperation with public authorities and local NGOs helps in the identification and implementation of the right projects. This improves both the legitimacy and the effectiveness of the philanthropic engagement and increases the confidence people have in the company´s commitment.

When it comes to business and market development in the growing inclusive markets development cooperation is a matter of business solutions. It is about offering people an access to infrastructure and to institutions of everyday life; aiming at improving livelihoods. In this context, the drivers for partnering are more fundamental: One key motive is learning and the trading of comparative advantages: companies discover that there is a lot to learn from non-governmental organisations and so-called social enterprises - from organizing effective distribution systems to new and innovative approaches of sustainable development. Another motive, especially for partnering with public institutions, is the sharing of political and financial risks. In general, it is fair to say that the less known the new market, the more valuable an early collaboration with local stakeholders. The principle challenge for the organisation's management is then, of course, to work out a partnership which is effective and mutually beneficial. That is the challenge of sustainable governance. It requires a deep and implied understanding of the other organisation.

Once you link the relevant players to the respective challenges according to their capabilities there is a lot to gain: e.g. the NGO Environmental Defense is partnering with the private equity firm KKR to identify energy efficiency measures within KKR´s portfolio. After two years their partnership generated already USD 160 million of savings.

A good example of comprehensive partnerships is the so-called eco-industrial parks. Companies are cooperating with the municipal administration and research regarding waste disposal, energy efficiency or material life circles. The pioneer of this kind of company network operates in Kalundborg (Denmark) for over two decades now.

An example for vertical networking is the Aid by Trade Foundation's project “Cotton made in Africa”. The project aiming at poverty alleviation by trading only fair-trade cotton started in 2005 in West Africa. Therefore, the Otto Group, the German Agency for Technical Cooperation (GTZ), the World Wide Fund for Nature (WWF), Bill & Melinda Gates Foundation and many more aligned with each other. The consulting company Accenture supported the set-up of supply chains within the African markets, and drew up a detailed marketing concept.

From your point of view, what are the essential conditions for a successful implementation of the concept?

To put it in a nutshell, multi-stakeholder collaboration has five essential criteria for success.

The first is a rigorous selection of the partners. In a “partnering due diligence”, the respective competences of the partners should be assessed, the “connectability” of soft (e.g. corporate cultures) and hard (e.g. assets) factors should be discussed, and, finally, the “business case” of the project needs to be calculated. This preparatory phase is an important test phase for the “compatibility” of the potential partners.

A second criterion is an "actionable" vision for the partnership which is shared by all members. This is key because it avoids frustrations later in the game and allows for the development of actionable and measurable steps. Key questions to address are: what do the potential partners expect from each other? What are conflicting and what are overlapping goals, and how can these flow into a shared objective for the partnership? Successful partnerships are able to monitor their impact and report it accordingly. Thus, the collaboration has to be made measurable on both sides.

Thirdly, the partnership needs to be properly integrated with the member organisations. This includes not only a clear definition of responsibilities (ownership), but also a noticeable commitment of the top management. Furthermore, it requires transparency and clear accountability structures to ensure progress along the objectives that have been agreed upon by the partners and to make sure the partnership is perceived as legitimate. Bi- and especially multi-stakeholder collaborations require an own governance structure to manage the relevant inter-connectors.

Fourth, as partnerships often occur at the periphery of organisations. There is a risk that important learnings get lost. Thus, in order to make all partners benefit from the partnering experience, it is important to institutionalise the process of learning. Therefore, again, it is helpful to have a top management supporting the partnership. Also “soft factors” such as corporate culture need special attention - otherwise they become a hard factor of failure.

Finally, partnerships are usually temporary arrangements. That means, unless there is an explicit goal to create a permanent hybrid organisation, partners should think ahead of a result-oriented end right from the start – with this early awareness, both knowledge sharing and up-skilling are to move in to the project's everyday life.

Daniel Schmitz-Remberg studied Economics & Management (dipl.oec) in Witten/Herdecke (UWH), Budapest (CEU) and Barcelona (UPF). He works as consultant at Accenture Sustainability Services in Düsseldorf. He supports companies implementing sustainability into their core business. At the moment, he is advising an international trade NGO on operational excellence and future service models. In cooperation with Sebastian Buckup from the World Economic Forum he will start researching on a “toolbox” for multi-stakeholder collaboration this autumn. A subsequent institute at a renowned German University is in development.

This interview was conducted by Carmen Paul, AidConnect.