Consumers’ interest in developed & developing markets: implications for responsible business Pradeep S Mehta Secretary General, CUTS International OECD CSR Roundtable Paris, 15 th June 2009

Outline of the presentation Variations in consumers’ interest/awareness between developing and developed countries Large no of contributory factors (externalities) in developing countries Relationship between law enforcement, company behaviour and consumer welfare Highlights challenges and traces the road ahead

Consumer Interests Developed CountriesDeveloping Countries  Low-levels of consumer awareness  Consumers poorly organised, few Cons. Organisations  Views of consumers seldom incorporated into laws  No involvement of consumers in law enforcement  Redressal mechanism ill-developed, cumbersome and costly  Bargaining power very low/absent  Standards often reflect views of a particular class of consumers

Consumer Interests Developed CountriesDeveloping Countries  High levels of consumer awareness  Consumers play active role in advocacy  Play active role in enforcement of laws  Redressal process transparent, simple and cost effective  Consumers have high bargaining power  Consumers play active part in standard-setting, etc.

Contributory Factors (Law & Regulation related) Developed CountriesDeveloping Countries Laws absent; or ineffective if present Enforcement Institutions resource-strapped Multiple institutions created but limited capacity on enforcement Interference of interest groups hamper functions Consumer standards not observed (goods and services) Poor governance and weak functions of regulatory institutions

Contributory Factors (Law & Regulation related) Developed CountriesDeveloping Countries  Effective laws and better enforcement  Dynamic process of legislative/regulatory reforms  Effective governance mechanism and efficient functioning of regulatory institutions

Contributory Factors (External Factors) Developed CountriesDeveloping Countries  Policy often inclined to benefit SoEs  Monopolies and abuse of dominance by companies  Unfair Trade Practices (UTPs) predominant  Poor service standards (e.g. after sales service)  Bad infrastructural facilities act as dis-incentive for Cos  Use of obsolete technology; labour intensive processes

Contributory Factors (External Factors) Developed CountriesDeveloping Countries  Predictable business environment and rules  Markets often competitive (level-playing field)  Excellent service standards – high levels of consumer satisfaction  Well developed infrastructural facilities  Improved technology leading to improved products

Implication for Businesses Developed CountriesDeveloping Countries  Often extractive, to source raw materials  Non-transparent operations, little or no communication with communities/consumers/shareholders  Weak enforcement – help avoid actions  Low propensity to re-invest in host countries  Consumer ignorance used to their benefit  Viewed with suspicion by civil society (no dialogue)  Large no. of SMEs – little or no incentives by the State  Old (often ineffective) marketing practices

Implications for Businesses Developed CountriesDeveloping Countries  Stern action (precedents) facilitate responsible conduct  Transparent policy and operations  Close involvement with consumers/shareholders  High level of consumer awareness (watch dog)  Incentives from the State for responsible conduct  Dynamic marketing strategies

Challenges & the Way Ahead Making relevant information available to consumers in developing countries – enhancing awareness Promoting cooperation between regulatory institutions and consumers/groups in developing countries International (donors) community to strengthen regulatory regimes/institutions in developing countries MNCs to maintain consistent standards of performance across host (developed & developing) countries

Thank You!