epd Development Policy: Prof. Klaus M. Leisinger, it’s just three years since Kofi Annan proposed a new partnership between the United Nations and private-sector business at the World Economic Forum in Davos. The proposal met with a strong response – and when the Global Compact was finally signed and sealed, Novartis was involved in it right from the start. Have there been any visible signs of success yet on the path toward a “globalization with a human face” proclaimed by Kofi Annan?
Leisinger: It depends, of course, on how you measure success. I can see at least three positive results. In the first place, it’s remarkable that many national and transnational companies are now concerning themselves with how they can help develop a globalization process that has a human face. An astonishing learning process has started, in which commercial companies are getting themselves involved in topics such as “living wages,” discrimination, and other human-rights aspects of labor relations – topics they had always thought they would not have problems with.
The second point is: when a company commits itself to the Global Compact, it needs to look for ways and means to operationalize that commitment. You start to see your own business activities in the developing world and industrialized countries from what might be called a company-ethics point of view – and, even more important, not only your own business, but also the performance of subsidiaries, suppliers, and business partners. There are tremendous positive forces that radiate out from this.
Third, it is likely that a new form of competition is developing out of this as well – between the large pharmaceutical companies, for example, treating their company-ethics profile as a new level of competition and putting a corresponding effort into it.
epd: Some critics have suspected that participation in the Global Compact is first and foremost a matter of cultivating a good image in branches of industry with a public reputation that is not just as ideal as it might be…
Leisinger: There will always be some critics who we’ll never be able to satisfy. Once in a while I meet people who have once and for all formed their opinions and made up their minds whatever the facts are, and who will live with those opinions until their dying day. If anyone thinks that a company is going to sign such an important contract with the Secretary-General of the United Nations just in order to mislead the rest of the world, then they simply don’t know what goes on in the video porno gratis world today. The debate over social corporate responsibilities isn’t new, of course, but the UN Global Compact has given this debate a substantial push forward – mainly toward extending these responsibilities beyond what has been common or conventional practices in one’s own company.
epd: In what ways is the commitment to the nine basic principles of the Global Compact being implemented at Novartis?
Leisinger: In many ways: At Novartis, first we set up a “Global Compact Steering Committee,” on which management representatives from all the business areas of the company are represented.
Second, we established a “Global Compact Clearing House,” which is meant to act as a catalyzer and facilitator for appropriate further development of company policy in Global Compact relevant areas. This is where management briefing papers for the various aspects of the Global Compact are produced, where part of the monitoring is carried out, and where networks with relevant stakeholders are established. What we are trying to do here is, for example, to consult with individuals and groups – from NGOs such as Amnesty International to church representatives – not just to make sure we are all pulling in the same direction, but also to compare and adjust our perceptions of reality.
In modern pluralistic societies, it would be completely irrelevant if only we at Novartis were convinced that our own house is in order – business today gets its social acceptance in a globalized economy through a process of external certification. Hence, we need a societal license to be able to work sustainably – and to obtain it, we must be in permanent contact with the relevant stakeholders of society, listening to them and learning about their values and interests but also communicating our views about critical issues.
The next step is then to get out of headquarters and go to all the subsidiary companies and say, this is the Global Compact that we’ve signed: Do you think you have any problems with it? And looking a bit further afield, what about your suppliers? Eventually, the goals of the Global Compact have to become part of the program of performance appraisals and incentives in our company. Only if and when employees and managers have a coherent motivational system in the company can you ensure that certain criteria are going to be followed. Otherwise, you’re just doing them lip service.
epd: Recognizing the Global Compact and its principles in the context of a company’s business activities is one thing. Over and above that, members of the UN Global Compact are also expected to contribute to promoting the United Nations development targets through strategic partnerships.
Leisinger: There are examples of that with Novartis as well. Let me mention some: With regard to the human rights statements, we have concentrated on the “Right to Health” and tried to analyze what this means in concrete terms in relation to access to treatment and access to appropriate health care. Some years ago, we made an agreement with the World Health Organization in which we committed ourselves to Provide All Leprosy Drugs Free of Charge until the complete elimination of leprosy has been achieved. After signing the Global Compact, we’ve agreed on a differential pricing system in which we are providing the WHO at cost price with one of the best malaria drugs that is available globally, in order to treat poor patients in the poorest countries. We have also made an agreement with the Global Fund to Fight AIDS, Tuberculosis, and Malaria, through which we are providing tuberculosis drugs free of charge. Last but not least, the Novartis Foundation for Sustainable Development runs Social Development and Health Programs in co-operation with important NGOs from the South and the North.
epd: But despite that, many development stakeholders continue to come to you with solid demands and expectations…
Leisinger: Of course, not all the demands that NGOs make necessarily represent obligations that are relevant for a corporation such as Novartis. One of the most important and yet often neglected questions – not only in the context of the UN Global Compact – is: “Where does a company’s responsibility reasonably come to an end?”
At the moment, one has the impression that with the leaning of the state, the loss of credibility in political parties, and the growing skepticism with which transnational companies are regarded, NGOs in particular are enjoying a relatively high level of credibility. Some of them are using this to dump all the miseries of the world at the door of the pharmaceutical industry and say, “This is your problem.”
Sustainable solutions need to be structured in such a way that whatever a business enterprise or a development stakeholder is able and willing to contribute can continue in a sustainable and reliable way. Anyone can make himself look good in the short term – a company such as Novartis can give things away for free in the short term, but in the longer term any private-sector corporation can only give away things under exceptional circumstances and in a limited way. The reason for this is not greed but a historically successful division of duty and responsibility: It can’t be the job of a pharmaceutical company just to give things away for free. The basic questions are:
What is a fair and balanced division of duties and rights between the different actors in a society when we are working toward overcoming global problems?
Which groups and stakeholders in a given civil society have which duties and what responsibilities? Who is accountable for exactly what?
What societal requests to a private-sector corporation are obligatory (the “musts”)? What can be expected in addition (the “oughts”)? And last but not least, what on top of that would be the enlightened desirables?
Having answered these difficult questions, one would have to discuss and hopefully agree on the various degrees of obligation and the corresponding structures for action – and that’s where things are getting interesting, because that’s where learning processes happen that help us all move things forward.
epd: A brochure produced by the Novartis Foundation for Sustainable Development includes the statement, “We do not perceive conflicts of loyalty between the development-policy goals of the Foundation and the legitimate economic interests of our donor company.” Are there really no contradictions between being oriented toward private economic profit and being oriented toward the common good?
Leisinger: Of course, there may be tensions here in principle. But so far as the Foundation is concerned, we have over the past 25 years experienced conflicts of interests of such a nature in only two instances – and we learned from those how to avoid repetitions. With the Foundation’s resources we are working in countries and with partners marked by significant collective or individual poverty. By definition, these partners do not have the purchasing power to be markets for Novartis products. Nevertheless it is sometimes said that the commitment to development of the Foundation has nothing to do with corporate humanitarianism but is a shrewd way of developing future markets.
The facts are available to be judged by anyone who cares: We are working with the poorest of the poor – for example, in an AIDS Orphan Project in the Border Area of Rwanda/Uganda/Tanzania, Projects With Slum Communities and Street Children in Brazil, Community Development Programs All Over Sri Lanka. All of the beneficiaries do not constitute present markets, nor will they in the foreseeable future. Novartis is a company that is trying to meet its social responsibilities in a generously defined way and guided by enlightened self-interest. And this is the right thing to do – I share in this respect the demands of most development-oriented stakeholders who expect that a company should expand their understanding of social responsibilities in a globalized world.
epd: Instead of optional common values and principles, isn’t it clear, legally binding rules and codes of behavior that are needed? Even when the UN Global Compact was first presented, Amnesty International criticized its optional character and demanded that the observance of the nine basic principles be monitored by an independent body.
Leisinger: The UN Global Compact and traditional “Codes of Conduct” are two different things. There are more than 160 different codes of conduct that are applicable for multinational companies nowadays. If you take, for example, a look at the OECD or ILO codes of conduct, all the basic issues are covered in a very comprehensive way.
In the end, what matters is that a company that has signed up to a commitment such as the UN Global Compact does implement it within the company itself by making it part of its existing internal codes of conduct. This must be a company-specific action plan, because different things are relevant for a company such as Novartis than for another companies such as Siemens or Microsoft, for example. This is why most of the global codes of conduct are largely ineffective – quite apart from the fact that all they do is create large “command and control” bureaucracies.
For example, the code of conduct at Novartis as a consequence of signing the UN Global Compact states that we promote human rights not only in our own company, but also among our business partners. What this means is that we not only have no sympathy for practices that show contempt for humanity such as child labor, prison labor, and other coercive practices, but also that we certainly want to pay more than “living wages” and to offer our employees excellent social-welfare benefits in addition to training on the job, etc.
Of course, there are also companies that are reviving old PR stories under the banner of the UN Global Compact and telling the public, “This is our commitment to the Global Compact.” But they will be filtered out as time goes on. It’s not a serious way of dealing with the Compact – as a matter of fact, it is a pity because it damages the visionary ideas of the Secretary General’s initiative.
In the meantime, a UN Learning Forum for the Global Compact has been set up, where a wide variety of experiences in companies are analyzed and made available for inspection by development stakeholders and other companies. Very often, inadequate implementation is not due to malevolence or underhanded intentions, but to an inability to operationalize plans. This is an opportunity for the Learning Forum.
epd: A few weeks ago, the WHO Commission on Macroeconomics and Health presented its report, which unsparingly details the devastating economic consequences of the global health crisis and calls for a global alliance for health care in the poorer countries. The extra finance required for this is given as up to US$ 25 bn per year. “The public sector cannot bear this burden on its own,” the report states. “The pharmaceutical industry must be a partner in this effort.” Is the pharmaceutical industry accepting this challenge?
Leisinger: I can’t speak for the pharmaceutical industry as a whole – all I know is that we at Novartis have accepted this challenge. For many years we have had our leprosy program, we now have our malaria program, we have our tuberculosis donation, and we offer our employees throughout the developing world free diagnosis and treatment for HIV/AIDS, TB, and malaria. In addition we have founded a new research institute in Singapore that exclusively carries out “pro bono” research on a non-profitmaking basis, such as for tuberculosis and dengue fever. I am very proud of this and I think we have given a clear signal with our initiatives. Other companies should now come forward with their own programs and projects. Anyone with sufficient grey matter knows that the pharmaceutical industry would be at a complete dead end if it were perceived by a majority in our societies as a bunch of profit-greedy villains who didn’t care one iota whether millions of people die because they have no access to drugs.
epd: But the WHO Commission’s report also states that the pharmaceutical industry should give the poor access to drugs at reasonable prices, at low cost. The Commission’s proposal points to a differentiated pricing and licensing system.
Leisinger: That’s certainly what we’ve done with malaria. But the question is whether the same method can be applied generally. I had a discussion with Jeffrey Sachs about this. His assumption is that patients in the North will in principle be willing to purchase drugs at higher prices so that they can be provided at cost in the poor countries. I’m afraid that’s wishful thinking.
One of the most damaging reactions to the price reductions for HIV/AIDS drugs for sub-Saharan Africa countries was the reaction by some North American AIDS patient groups, who complained that they wanted the drugs at the same low prices that South Africans had. If the political pressure becomes strong enough, this may actually happen in a few cases, but you can take it for granted that not a single private-sector company will ever carry out any new research for that kind of disease again if it knows a priori that there’s never going to be a profitable market for the innovations that result from this research.
But we also have to look at things in a different way: Given that the market economy functions the way it actually does, where is the public sector with its research? In the agricultural field, for example, there’s the Consultative Group on International Agricultural Research (CGIAR), which organizes public-sector research through well-known centers like the International Rice Research Institute (IRRI) and the International Maize and Wheat Improvement Center (Centro Internacional para Mejoramiento de Maiz y Trigo, CIMMYT) – but as yet there’s nothing like that in the health care sector. I would like to see the creation of a Consultative Group on Tropical Diseases or on Diseases of Poverty, with on the one hand a tuberculosis center, an HIV/AIDS center, a Chagas center, and other specialist centers, but on the other hand all gathered together under a common roof to achieve added efficiency (resource mobilization, networking, etc.). This type of umbrella organization would also have the advantage of being able to discuss licensing and other conditions with the pharmaceutical industry.
And, by the way, anyone who thinks that it is only the price or the patents issue that determines whether a sick person in sub-Saharan Africa has access to life-saving drugs has no proper conception of the realities. To give you just one example: oral rehydration salts, which cost less than 10 cents, have today only reached less than 50% of lower-income groups. Why? People generally have far too little access to health care services.
Above all, it should not be forgotten that 95% of the drugs on the WHO’s Essential Drug List are not patented! And despite this, many sick people can’t get access to them because the health infrastructure is in a state of decline and health care personnel are underpaid. And yet, there are developing countries that spend four times as much on military purposes as on health care systems. In such cases you can’t tell me that it’s suffering a health emergency only because there are too few resources available or because the drugs are too expensive in principle.
epd: Novartis regards protecting intellectual property through patent law as a “lifeline” for the pharmaceutical industry. Against this background, how do you view the Doha vote, reaffirming the right of World Trade Organization member states – already attested in the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement – to issue compulsory licenses when there is a national health emergency? The delegations from the USA and Switzerland voted against including this formulation in the declaration of the World Trade Organization ministerial conference – not least due to pressure from their national pharmaceutical industries.
Leisinger: I’m not sure whether that was actually the case, you would have to ask the negotiating delegations. When a company like Novartis is spending 4 billion Swiss francs a year on research and development, it needs patents to secure the intellectual property – otherwise it’s not possible to finance that type of research. Patents do not provide protection permanently; if all the drugs that were under patent at the beginning of the 1980s and that are no longer protected by patent today were available everywhere in the South, the situation would already be much better.
But also here we should think more creatively – which can mean, for example, applying a differentiated pricing system. We have a patent on a first-class drug against malaria, Coartem, but we do not take advantage of the patent in the poorest countries at prices that are beyond the general purchasing power, but instead provide the drug to the WHO under completely different conditions – at cost. You can’t debate this sort of thing in general terms, you have to discuss it on a case-by-case and country-by-country basis. From the company’s point of view, it is important that the beneficiaries of this type of campaign are genuinely the poor, and that products that we supply at cost to country A do not turn up afterwards in country B being sold at completely different prices for the private profit of the dealers.
There is no doubt about one thing, and this is a matter of clear international law: if a country declares a state of national emergency, patent protection lapses – i.e., a compulsory license can be issued for local production. I’m not sure why South Africa did not declare such an emergency in advance of the litigation over AIDS drugs. If the current scale of HIV/AIDS in South Africa is not a national health emergency, then what is?
epd: The Global Compact and the boom in public-private partnerships in development work must be seen as a reaction to the weakening of the role of the state in regulating market activities and in dealing with the effects of globalization – but also as a reaction to the drastic reductions in public development aid (ODA). In view of this scenario, what do you think the new division of labor will be between the private sector, civil society, and governments? Are there any signs of new coalitions emerging to promote sustainable global development?
Leisinger: I very much hope so, and above all what I hope is that we can get away from the system of confrontation that began on the streets of Seattle toward a system of constructive cooperation. All different parties who can make a contribution to sustainable solutions need to organize round-table discussions to establish a firm consensus on who is responsible for what, and what we can expect from whom. In the end, this will also reveal the true quality of the stakeholders involved.
There will be NGOs that will continue to regard themselves as aloof from and uncooperative with the private sector, and who sooner or later will have to ask themselves what their actual concrete contribution consists of. Then again, there will be NGOs that will be willing to enter into clear, transparent, and verifiable partnerships with other partners, including ones from the private sector, while maintaining their own identity and ideals.
Last but not least, we need “good governance” and better accountability in many states of the developing world. That is, we need governments that set the right priorities when allocating resources, and actually spend the scarce resources at their disposal in a way that’s appropriate to the state of the problems they face, governments that respect the law and are accountable to the people they represent. If we can show three or four positive examples of multi-stakeholder cooperation with good governance, then we can give new heart to the development-policy community and demonstrate that sustainable solutions are feasible if everyone really wants them. The important lesson to learn from the Sachs Commission study is that what we need in the face of great problems is grand coalitions. We need to make an effort to ensure that the various stakeholders in civil society work together in a synergistic way. It doesn’t make much sense to take an accusing or even defamatory tone against some parts of society and then expect them to act constructively and generously on principle.