In unstable environments, businesses increase conflict — unless they commit to inclusive development.
We want to think that business is a force for good. But in some places, business operations may actually increase conflict.
Professor Brian Ganson (Stellenbosch University Business School) studies the role of business in places where there is violence, deep-rooted conflict between groups, or a government that lacks legitimacy. These are sometimes called “conflict environments.”
Conflict Environments Challenge Sustainability
Operating in conflict environments may be economically attractive. But good social and environmental practices often fall by the wayside. “Companies have little to no real ‘business case’ for sustainability in fraught socio-political environments,” Ganson said. That means that, at least if measured in purely financial metrics, sustainability practices often don’t make economic sense.
In a conflict environment, “the best way to make profits is to take advantage of weak ESG regimes, externalizing social and environmental costs,” Ganson said. “If one can get in bed with an authoritarian regime, all the better from a profit standpoint.”
The war in Ukraine illustrates some of these dynamics. Companies are pulling out of Russia because of political and reputational risk. Yet these companies “have for decades been integral to the building of the system they are now jumping on the bandwagon to decry,” Ganson said.
How do companies influence conflict and governance? And how can they do better? After 25 years studying these situations, especially in Africa, Ganson provides some answers.
5 Ways Business Contributes to Conflict
Ganson and colleagues have looked at conflict between groups in a society — e.g. different racial and ethnic groups, rich and poor, rural and urban populations, or winners and losers from globalization.
Their research identifies at least five ways that business contributes to conflict between groups. Each reinforces the winning and losing groups in society by unequally distributing costs, risks, and benefits. The result is greater social conflict, less ability to address shared challenges and, at the extreme, increased risk of violence.
Here are the 5 ways business contributes to conflict:
Gross human rights abuses. Even a business that does not engage in such abuses itself sometimes benefits from them indirectly.
Example: The government of Uganda wanted to give land for forestry development to New Forests Company. People were already living on the land; the army removed them with guns and flamethrowers.
Reinforcement of existing divisions. The benefits of company operations can fall to one group or region, while the costs and risks fall on another. This is an especially dangerous situation when these groups have previously engaged in violent conflict.
Example: In Mozambique, gas development disrupted society in one region, while most of the benefits flowed to the capital in another. This dynamic contributed to renewed armed conflict in which thousands have died, over a million people have been displaced, and war crimes are commonplace.
Exclusion of certain groups. Businesses direct opportunities toward elites or a particular ethnic group in order to curry favor and gain access to resources.
Example: After Sierra Leone’s civil war ended in 2012, national and international policies and initiatives to “rebuild” the economy through private sector development largely reinforced pre-war discrimination and inequality.
Avoidance of international norms and standards. Companies may disregard international rules and fall back on claims that they are complying with national law.
Example: In Brazil, mining and metals company Norsk Hydro supported government efforts to build a railroad through indigenous land, even though they knew that free, prior, and informed consent had not been sought or granted, as required by International Labour Organization Convention 169.
Avoidance of legal obligations. Companies take advantage of weak rule of law or corrupt judiciaries to avoid responsibility for their own wrongdoing.
Example: In Guinea, mining companies flouted environmental and safety standards while ignoring community complaints. This led to protests that were violently suppressed by the government and built popular support for the country’s recent military coup.
How Business Can Reduce Conflict
If these practices are negative, can businesses achieve positive results simply by turning these divisive strategies on their head? It’s a starting point.
Companies are increasingly expected — by shareholders, lenders, or home governments — to understand and address how their presence and operations interact with conflict dynamics. Established standards exist, such as Guiding Principles on Business & Human Rights and guidelines for conflict-sensitive business practices. Ganson and colleagues have developed a free resource to help managers take these steps: Management in Complex Environments: Questions for Leaders. These practices help to reduce harm and mitigate conflict risks.
However, these approaches, on their own, do not build peace. Fundamentally, businesses need to commit to collaborative approaches and inclusive development. Ganson’s research shows that strategies that do not build social cohesion undermine it: “There is no middle ground,” he said.
Most directly, companies must explore how to address the needs of poor, vulnerable and marginalized groups at scale, tipping the balance towards greater equality. They must also work with groups in conflict to build consensus on a path forward. This requires business leaders to build broadly inclusive stakeholder networks — pursuing collaborative processes for the company’s strategy and operations, that consider social risk assessments and mitigation plans; allocation of benefits, risks and costs between stakeholder groups; monitoring and evaluation; and conflict resolution.
Companies must stand with the marginalized and vulnerable on issues of human rights and inclusive development, and they must be willing to join and support initiatives led by others. For example, the power producer ISAGEN in Colombia used its political capital to help to establish a forum in which ordinary citizens could directly confront senior military officials and demand accountability for the human rights conduct of the Army.
Obstacles Businesses Face in Reducing Conflict
There are many reasons companies don’t pursue these better alternatives. Obstacles include:
Missing expertise. Companies often lack relevant skills and capabilities: for example, in analyzing power relationships or building coalitions for positive change.
Bad reputation. Communities may be skeptical of company efforts – especially if outreach only happens when the company faces challenges.
Missing business case. Inclusive development may not make economic sense. Companies often have “less difficult and less expensive ways to protect their own interests,” Ganson noted, from insurance to spreading risk globally.
Political risk. When companies side with marginalized communities, they may alienate more powerful actors.
Less control. Involvement in coalitions means that companies must give up some power over their strategies and operational decisions.
Time and resources. Building trust and effective coalitions is substantially more time- and resource-intensive than business as usual.
Leadership Can Overcome Obstacles
What do leaders able to overcome these obstacles look like? Ganson describes such leaders and the organizations they develop:
Morally centred enough to prioritize peace outcomes, even at the expense of profits
Patient enough to put in the time and effort to catalyze the collaborative processes required for groups in conflict to build consensus
Humble enough to realize that they play only a supporting role in what in the end are peace negotiations on matters of the economy
It’s a reach, but it’s more necessary than ever for peace- and development-positive outcomes.
Professor Brian Ganson heads the Centre on Conflict & Collaboration at the Stellenbosch University Business School, a platform for research and reflection at the nexus of the private sector, conflict, and peaceful development. This article was adapted from his Inaugural Lecture at Stellenbosch University, as well as communications with the NBS Sustainability Centres Community and other recent work.