> Executive Briefing

Miriam Mertens Reza Moussavian

Miriam.Mertens@detecon.com Reza.Moussavian@detecon.com

Corporate Responsibility -
business enabler in
emerging markets
Corporate Responsibility (CR) is en vogue. Many business leaders
and multinationals acting in emerging markets decorate themselves
with CR activities presented as an act of charity. Only a few
corporations have identified its business potential. This Detecon
Executive Briefing outlines a new approach for telecom operators in
emerging markets to pursue innovative integral Corporate
Responsibility – aligned with business strategy and operations.

Detecon International GmbH z 10/2008 1 www.detecon.com

 Corporate Responsibility
Corporate Responsibility – business enabler in emerging markets

> Executive Briefing

Telecommunications in emerging markets

Increasing ARPU expectations and the triple-digit growth rates of mobile subscriptions are
encouraging more and more international operators to invest into emerging markets. In
developing countries telecommunication providers are confronted with the question as to
how and to what extent they can and want to contribute to the economic welfare of the local
society. An integrated corporate responsibility strategy can help operators to create
sustainable business, build trust with local stakeholders, and thereby establish a broadly
accepted “license to operate”, to the benefit of the corporation as well as the surrounding
society. With respect to corporate responsibility three central questions arise:
O Is CR an unavoidable expenditure needed to comply with moral and legal
obligations, or is it an opportunity to enable business success?
O Should CR be clearly marked as charity and social sponsoring, or should it be
linked to core business?
O Can CR foster competitive advantage and support strong moves towards
sustainability?

From one-off charity to balanced business

CR as a business success factor is a long-term process which can be defined in four steps.
It is essential that the correct starting point is assessed, and that the right, comprehensive,
and compelling strategy is defined.

Step 1 - Stand-alone CR: Usually driven by social values and business ethics, stand-alone
CR can be characterized as corporate philanthropy. It has a pure charity focus and aims to
“give something back to society”. The focus is merely on “good citizenship” by donation and
accompanying action-related communication.

Step 2 - Chartered CR: At the next level of CR, social activities are leveraged in order to
improve brand preference and familiarity. It can also be determined by a legal or
regulatory license obligation, often communicated to the public as corporate donations,
scholarships’ sponsoring, aid supports or other prominent engagements. Since the CR
activities are not linked in any way to the offered products and services, the positive impact
on brand awareness or company image might still be limited.

Step 3 - Functional CR: Various business functions are aligned with internal or
external CR guidelines. These functions may include finance, technology, sales, marketing,
human resources and product development. The widely known case of combined micro-
finance, micro-crediting and mobile payment services, offered by Grameenphone,
Safaricom, MTN and others, fits into this category. Another case concerns operators
struggling with unreliable power supplies in emerging markets. They make use of renewable
energy sources to increase energy efficiency and network reliability. In addition, and this is
where the CR link plays in, the network sites become “energy hubs”, ideally points of sale
(for rural areas) and device charging spots, overcoming one of the biggest barriers to mobile
telephony in emerging markets.

Detecon International GmbH z 10/2008 2 www.detecon.com

 Corporate Responsibility
Corporate Responsibility – business enabler in emerging markets

> Executive Briefing

Step 4 - Integral CR: This step is achieved when CR becomes a core element of the
business strategy and spans all business functions. Social entrepreneurship becomes a
leadership style, performance measures and balanced scorecards reflect social and
environmental commitment, marketing and sales are used as a means of community
building, supported by Green ICT - climate neutral, eco-compliant technology operations with
staff motivated by the sustainability cause. The organization evolves into an integral CR
entity.

Corporate Responsibility Maturity Model

Integral CR 4 1 Charity only
Q
Corporate philanthropy, charity
high

O
focus
O No or poor (PR) connection to core
business
Functional CR 2 Chartered CR
Q
CR benefit

O PR focus, selective business units

medium

3
engaged
Chartered CR O C(S)R manager assigned
2 3 Functional CR
Q
O CR products, segments, sales
Charity only channels
4 Integral CR
Q
1 O Business strategy outlines CR as
low

key element, part of corporate goals

and vision
O CR is organization driven (rather
than leadership)
short-term mid-term long-term
Time

Fig. 1: Corporate Responsibility Maturity Model

In the following section exemplary opportunities and measures for each business-related CR
maturity level - chartered, functional and integral CR - are presented.

Detecon International GmbH z 10/2008 3 www.detecon.com

 Corporate Responsibility
Corporate Responsibility – business enabler in emerging markets

> Executive Briefing

Chartered CR - Commit to community

Organizations aiming at chartered CR should utilize social marketing campaigns to induce

customer preference for their brand and products. Consumers are becoming more aware of
the environmental and social implications and consider them in their buying decisions.

Such a shift to ethical consumerism should be reflected in marketing strategies. Social

sponsorship such as the support of universities with joint projects, on-the-job training for
graduates, supply of technical expertise for public institutions, or the facilitation of research
centers can be a powerful tool since the sponsored association can be used for brand
endorsement, which provides more credibility than advertising messages.

Functional CR - Explore innovative customer touch points

Functional CR looks at the different business areas within an organization and aligns them to
positively impact society. In sales for example student organizations in universities or
medical clinics in rural areas can be used as sales channels. While the operator gets access
to previously untapped customer segments, they also contribute to the economic
development of these segments and benefit from the accompanying positive brand
perception.

These Private Public Partnerships with needy, but pivotal, organizations can drive a
profitable business if they are offered franchises for points of sale within their organizations
using a special commission scheme. An alternative model would be to give these
organizations space for offering important basic services, health services for example, at the
operator’s point of sale. Customers are drawn into the shop while the non-profit
organizations benefit from floor space and infrastructure.

Integral CR – Tap the bottom of the population pyramid

Fully integral CR is achieved if the products and services offered are CR compliant. Profit
generation and the achievement of a positive impact on society or environment go hand in
hand - the ultimate art of corporate responsibility practice.

In developing countries the poorest class of society is not often considered sufficiently in
profit-generating business models. The development of products for this segment of the
population not only taps a new revenue source, but also contributes to their economic and
social advancement. Developing this market requires a change in conventional
segmentation. The customer base in emerging markets can be characterized by two main
groups: One can afford sophisticated ICT services, is largely saturated and often carries two
to three mobile numbers. The other group is too poor to afford a SIM card, let alone acquire
a handset. Since more than ¾ of world population belongs in this long-neglected segment,
the bottom of pyramid, this is where future subscriber growth will be determined and is
hence where more attention should be paid.

Detecon International GmbH z 10/2008 4 www.detecon.com

 Recommendation
Corporate Responsibility – business enabler in emerging markets

> Executive Briefing

% of capital % of population

Top of
80% pyramid 2%
Key focus:
premium goods

Middle pyramid
15% Key focus: consumer goods 10%

Bottom of pyramid
5% Untapped segment: Focus of integral CR 88%

Fig. 2: Consumer pyramid in emerging markets

The telecoms industry is well positioned to offer profitable and affordable products for
this new segment. Simple product and tariff innovations enable low-income customer
groups to afford telecommunications services, for example the introduction of per-second
billing and low-denomination top-up cards. These products had in several African mobile
markets a massive impact and significantly improved peoples living conditions.

By interweaving CR across functions into the company’s core business operators benefit
in two ways: while achieving rapid growth in subscriber bases and subsequent revenues,
they walk the talk and demonstrate their serious responsibility for society. Utilizing these
achievements in advertisement and PR positively impacts CR credibility and company image
towards all relevant stakeholders.

Recommendation
If operators in emerging markets decide to initialize an integral CR we recommend
considering the follow three elements in their approach:
O Advance from pure charity: Leverage social projects, sponsoring and
donations towards private public partnerships and thus closer integration with core
business using a comprehensive and thorough CR strategy. Use CR as a means of
communication to strengthen customer value propositions and determine your
brand and company image.
O Assess the different business functions for their potential to contribute to CR.
Mediate corporate culture change and organizational governance when CR is
practiced throughout the organization.
O Integrate CR into your core business: Identify the contemporary challenges of
emerging markets - bottom of pyramid customer segmentation, supply using
alternative vs. fossil energy, etc. - as the business opportunities of the future, and
develop CR-compliant business models.

Detecon International GmbH z 10/2008 5 www.detecon.com