How international organizations are changing the world of business
In 2010, a “Fit not Fat” publication called for taxing sugary drinks as a steadfast way to tackle the rising rate of obesity globally. Soon after, Belgium, Chile, Finland, France, and Mexico heeded the report’s recommendations and put taxes that are still in place today.
Since 2014, leading tax experts from multinational companies regularly discussed the impact the “Base Erosion and Profit Shifting” project could have on their business models. In 2021, 138 governments adopted a legally binding instrument that sets a minimum corporate tax of 15% across all jurisdictions. The new global tax revenue this agreement will generate is estimated at 150 billion US dollars annually.
The 2030 Agenda on Sustainable Development identifies 17 goals that companies from all sectors actively use as benchmarks to show the benefits their contributions bring to society.
What do these initiatives have in common? They were all mandated and driven by international institutions including the G20, the OECD, and the United Nations.
Global engagement matters
Similar hurdles, different borders. Leading stakeholders convene in international platforms to devise solutions to the same problems each of them faces at home. No industrial sector is spared from the coordination efforts that stem from these exchanges. Perceptions about corporations form quickly at international levels, and the reputational and commercial stakes from these debates are high. Recent global initiatives have had tangible impact on the main operations of industries as diverse as food and beverage, energy, technology, and life sciences.
Originally, the United Nations agencies were created to promote peace and human rights, Bretton Woods institutions like the IMF to promote financial stability, and the OECD to expand global trade and achieve economic growth. However, over the past decade their missions have coalesced around major political and social issues that directly intersect with economic considerations. As they expand into broadly-shared objectives, multilateral organizations have become vocal advocates as they position themselves as go-to platforms to solve the world’s most pressing matters. It should then be no surprise that the race to decarbonize, ways to regulate Artificial Intelligence and cutting-edge digital technologies, and pursuing “security” across systems—food security, energy security, health security—are all part of their agendas.
Highly regulated sectors are familiar with this story, and this is why business leaders actively seek to better understand how these multilateral organizations work, how to best engage with them, and how they affect a company’s performance and reputational objectives. But engagement is not limited to sectors that face imminent threats. As international institutions grow in remit, visibility, and impact, industrial sectors that thought were exempt from their scrutiny have been caught off guard. Startups and companies entering international markets must develop foresight capabilities to prepare for potential economic and social changes that can quickly escalate to global crises that governments will address through international organizations.
International engagement has become a strategic element for corporations across all sectors. It allows companies to grasp the intricate ways in which multilateral organizations exert influence through their multi-layered processes. The challenge consists in deciphering how to navigate access and advocacy in these forums, and in understanding that their deliverables are built over the medium term—a stark difference from the more immediate cycles of national politics. These dynamics call for a different engagement approach. Proactively, it enables businesses to articulate their own needs and contributions in global markets to an audience of governments, civil society, and other business representatives.
Fragmentation is accelerating their relevance
It might seem like a paradox, but current protectionist trends have increased the role of multilateral institutions as pertinent guardians. The architecture and tools they have built over the past half-century provides stability through legal instruments, binding treaties, policy guidance, and standards that impact business operations. As some administrations pursue nationalist approaches, recourse to these agreements has proved a powerful route for business and governments to remind countries of the economic and reputational damage that comes from not meeting their obligations.
At the same time, geopolitics provides openings for governments to champion regional or topical alliances and build out influence gradually towards global scales. They use international institutions to anchor these efforts and imbue them with credibility. Key examples include an initiative that promotes collective bargaining through international framework agreements, or programs that develop a certification system of infrastructure projects that meet particular standards defined by governments.
In the case of the OECD, country accession to the Organization is highly selective and a way for business and government stakeholders to request substantial reforms in markets of interest. 38 economies make up membership of the Organization, which makes it a like-minded forum that can get things done given its ability to reach consensus and move in a decisive direction. To obtain this coveted status, any aspirant country must convincingly prove during a multi-year candidacy process that its policies are market-oriented, stable, and up to the standards and day-to-day practices of its current members. With Brazil, Bulgaria, Croatia, Peru, and Romania embarking now on this process, plenty of occasions lie ahead to stimulate policy and market changes.
Early dialogue is a condition for success
As governments turn to international organizations to solve difficult equations, securing business-to-government dialogue throughout the process can make a noticeable difference. Early stage policymaking holds the key to showing public officials business is a trusted partner and to crafting effective solutions together. The pandemic gave numerous examples of how international cooperation enabled innovation both to create new technologies and to reach people who needed them in record time. But it also showed how regulations that were developed hastily without business input or insights have deleterious lasting effects. Most companies still struggle with labor shortages and supply chain nightmares, all of which have slowed down productivity and growth.
Dialogue between stakeholders—both in “normal” times and during crises—is a condition for success. Today’s interdependence calls for more active and meaningful conversations, and international organizations are increasingly aware of it. The advent and massive use of social media in the past 15 years also explains the heightened interest from the public to see how effectively international organizations are using taxpayer money to bring results to populations. As a result, international institutions attempt to clearly delineate a direct connection to people’s lives through the projects they undertake.
The best time to engage is now. In the Artificial Intelligence space, the OECD has put in place an Artificial Intelligence observatory, released AI Principles agreed upon by the United States, the European Union, Australia, and its other country members, and developed a Framework for the classification of AI systems. UNESCO adopted the first ever global agreement on the Ethics of AI. The ITU is organizing an AI for Good Global Summit this coming July. And together with the World Economic Forum, FTI released a white paper with actionable recommendations so all can benefit from the digital transformation.
In the field of climate change, this year’s Conference of the Parties (COP) will meet in Dubai this year, home to the largest oil and gas exporters in the world. The United Nations General Assembly will discuss in September progress towards the Sustainable Development Goals, the OECD is embarking on its ambitious Inclusive Forum for Carbon Mitigation Approaches, and the UN Environment Program is developing a legally binding agreement to end plastic pollution that should be finalized by the end of 2024. These two examples show why it is crucial for business to have a seat at the table and be able to contribute substantively.
Present and future depend on integrated thinking
Two polarities exist in today’s ways of facing and interpreting challenges. Some stakeholders turn to insular approaches while others embrace new models for cooperation. The latter realize how much of a toll political, regulatory, and market divisions take on jobs and prosperity. The pursuit of common themes across international organizations brings unprecedented moments of truth for business stakeholders, who must convey substantive visions of how they are bringing about positive change to the macroeconomic and societal issues that are on everyone’s agendas.
Business leaders are not only able to follow the conversations at international levels, but also to proactively shape them. Recent best-in-class examples include the development of a global public-private partnership to prevent chronic illnesses in vulnerable populations, and the adoption of e-government procedures across countries to reduce red tape for small businesses. These initiatives make significant improvements to people’s well-being and productivity, and are powerful examples of how dialogue leads to enduring outcomes.
Environmental, social, and governance (ESG) factors, the pursuit of a digital transformation that meets trust, security, and privacy objectives, and the pathways to achieve net zero emissions are very clear trends that no single international organization is leaving behind and that clearly resonate with citizens worldwide. The coming years will bring “globally designed, locally implemented” initiatives coming from international institutions that many business sectors in the past did not have on their radar. Anticipation and foresight will differentiate those who plan and succeed versus those who must react and cope.
Businesses, startups, foundations, and international organizations themselves value the benefits that come from integrated action: proactive engagement, enhanced buy-in from stakeholders, and measurable results. Navigating the international arena is complex and requires strategic counsel. Brokering dialogue is a critical first step to address any (mis)perceptions and build trust. Understanding how to align potentially competing interests also requires careful planning and execution. Ultimately, however, international engagement provides considerable returns on investment. Global platforms are here to stay, and they are the meeting place where the best minds can group their thought leadership and translate it into actions that will yield a better future.
FTI Consulting is the only global advisory firm that brings the expertise and services capability to help clients understand and engage with the complex and global ecosystem of all the international organizations, the relationships among them, and the impact they have on local markets. Our team has the sectoral, geographic, and insider knowledge to address challenges and opportunities in this space and turn them into business success.
To learn more about Ali, please read his bio here: https://www.fticonsulting.com/emea/experts/ali-karami-ruiz
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
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