Inside the national museum of emerging science and innovation in Tokyo, Japan.
Miraikan, Tokyo, Japan. (Ryo Tanaka via Unsplash)

How multinationals can leverage social innovations to tackle COVID-19 challenges

MNEs' social innovations have successfully contributed to addressing the COVID-19 challenges, but how sustainable are they in the long run?

By Fernando Santiago, Jahan Ara Peerally, Claudia De Fuentes and Shasha Zhao

The year 2022 marks the third year of the COVID-19 pandemic. Is the world nearing the end of the pandemic? Will 2022 mark the yearSARS-CoV-2 is  classified as an endemic disease?1 How long will the pandemic’s health, social and economic aftermath last? How can we chart a path towards recovery and build back better2 while accelerating progress towards achieving Agenda 2030 and the sustainable development goals (SDGs)?3

Debates around the production, distribution and use of COVID-19 vaccines continue to condition the progress made in vaccination campaigns. The differentiated levels of vaccination coverage across regions and countries  highlight the challenges we face in fighting the pandemic in a highly unequal world. The share of vaccinated people in low-income countries (figure on the left below) and in Africa (figure on the right below) remains very low relative to the rest of the world.

Share of people vaccinated against COVID-19 (June 2022)

Mathieu, E., Ritchie, H., Ortiz-Ospina, E. et al. A global database of COVID-19 vaccinations. Nat Hum Behav (2021). Update March 12, 2022, 14:46hr.

In addition, the COVID-19-related fatality rate has been higher in low-income countries (figure below).

Case fatality rate of COVID-19

Notes: The case of fatality rate (CFR) is the ratio between confirmed cases and confirmed deaths.

Source: Johns Hopkins University CSSE COVID-19 Data.

One positive outcome are the efforts that have been made to evaluate the approaches and measures introduced by various actors—ranging from governments to firms—to respond to the pandemic’s impacts and to address some of the vulnerabilities that have exacerbated these impacts.4 Our aim is to glean some lessons from the experiences of these actors and to inform current strategies to build resilience against future shocks.

In a recent article5, we review the role multinational enterprises (MNEs) can play as key societal actors in mitigating global shocks and tackling grand challenges. In response to the pandemic, several MNEs had to innovate beyond their traditional profit-seeking approaches to deliver adapted or new products and services in the fight against the health crisis. While the use of frontier digital manufacturing technologies and novel scientific practices enabled several such innovations, the measures implemented by MNEs targeted other business areas as well, helping them identify and adopt workable solutions, including the sharing of both knowledge and experiences with governments, research organizations and even with competitors. MNEs adapted and reoriented their productive activities, with some even committing to fund access to COVID-19 vaccines.6

The question that arises is whether these socially responsive MNE business models induced by the pandemic are transitory in nature or whether they can and should be sustained in the long term. We argue that a redefined understanding of MNE social innovation is necessary so policymakers can devise suitable incentives for MNEs to potentiate their contributions to address current and future global grand challenges. By the same token, substantial efforts by all stakeholders are necessary to make a convincing case to MNE investors and shareholders about the important role businesses can play in tackling the grand development challenges the global community is facing.

MNEs’ social innovations to mitigate the impacts of the pandemic

The literature highlights two MNE approaches in the face of unfolding emergencies and external shocks. On the one hand, MNEs may pursue rationalizing strategies, leveraging on their cross-border activities, assets and investments to maintain efficiency and to reduce negative economic impacts. Thus, they might exit, divest or maintain/expand operations directly affected by the exogenous shock(s).

On the other hand, MNEs may intensify their corporate philanthropy efforts in the most severely affected regions. There is ample evidence of MNEs endorsing a traditional corporate social responsibility approach to social value creation. MNEs responded to pandemic-induced social needs by developing interventions that were unrelated to their core business activities. Examples of this include philanthropy, such as the donation of food, hospital supplies and equipment, cash gifts and collaborations with charitable organizations to help vulnerable groups.

Neither of these two approaches has resulted in any major changes in MNEs’ overall business models, product portfolios or customer bases. However, in the wake of COVID-19, MNEs pursued a new approach to deal with an exogenous shock. It is indisputable that the pandemic induced unconventional incentives—beyond business opportunities—for MNEs to pursue novel forms of social innovation across borders, with MNEs drastically altering their usual product offerings to cater to the needs of the most vulnerable and at-risk societal groups, including those outside their regular customer base.

MNEs were well-positioned to globally source materials and inputs that became scarce during the pandemic; they engaged in global collaborations for the common good, including the production and delivery of goods and services, from very simple to highly technologically and logistically complex ones outside the MNE’s core portfolio of products and services.

This radical approach entailed a substantive modification of MNEs’ business models and a reconfiguration of their core business strategies and practices. The repurposing or adaptation of goods and services offered by MNEs reflected their prioritization of pandemic-induced social needs over economic considerations of efficiency or profit. These responses were often fraught with challenges for MNEs, as they were both costly and economically unviable.7 Despite these challenges, we present some examples of MNEs’ pandemic-induced social innovations, mostly by way of extending their responsibility in global value chains. 

A global social media multinational implemented an innovative supplier diversity programme with the aim of giving back to the local community affected by COVID-19. The programme introduced a new financing initiative that reduced supplier entry barriers and established a community-based supply chain. The unpaid invoices of small companies could thereby be settled immediately, unblocking cashflow bottlenecks they were experiencing because they were supplying MNEs, often based on payment terms of several months.8

A Swiss multinational launched an innovative supply chain initiative to partner only with local and global suppliers that meet its high ethical standards. The scheme was built on one of Europe’s most influential initiatives, the Swiss Responsible Business Initiative, for implementing an ethical value chain that focuses on both human rights protection and environmental stewardship. The initiative has resulted in enhanced transparency and accountability for the multinational’s global supply chain.9

Engaging MNEs as key development partners beyond COVID-19

How likely is it that the unprecedented efforts of MNEs observed during the pandemic to innovate their business models for social value creation can be sustained? Moreover, what incentives would help scale up these efforts to meet structural development challenges? Answering these questions is difficult because it entails multifaceted processes to coordinate the actions of governments, international organizations and other stakeholders. Moreover, the sustainability of these business models may elicit an entirely different set of questions for other MNE-specific stakeholders—such as investors and shareholders—and their openness to engaging in social innovations with no immediate benefit over the company’s economic performance.

The mandate arising from SDG-17—revitalizing global partnerships for sustainable development—could guide the future strategies of governments and international organizations for involving MNEs and their stakeholders more closely in the global development agenda.

The pandemic-induced social innovation practices of MNEs and their subsidiaries were possible, in part, because they are resource-rich private sector actors that have the capabilities and cross-border networks to generate positive social impacts on a global scale. Among the other factors that made the social innovation practices of MNEs possible during the pandemic are those already enshrined in the SDG-17 targets.

They include global partnerships that mobilize and share knowledge, expertise, technology and financial resources (SDG17.6), as well as encouraging and promoting effective public, public-private and civil society partnerships (SDG17.7). Collaborating with MNEs to address development challenges thus requires expanding the scope of their interventions beyond finance and technology to also include knowledge, networking and their ability to mobilize global value chains. Ongoing and interesting initiatives to learn from and replicate exist in critical areas such as climate change.10

Systematic efforts by various stakeholders could help create and nurture a close relationship between investments, business activities, government and development interests. Awareness raising, partnership building and related activities to attract the attention of businesses, including MNEs, should be informed by the systematic documentation of their social innovation footprints and influence at all levels, including on their immediate value chains, the communities in their vicinity, and on the environment in which they operate. Such systematic documentation would support the “business case” for MNEs to get involved and address grand development challenges.

In short, a combination of factors needs to be in place to achieve successful long-term sustainability of MNEs’ social innovations and to entrench them in their business models. Firstly, sustainable and innovative government policies that support and incentivize MNEs to engage in social value creation through rewarding business model innovations; secondly, initiatives to foster socially innovative thinking and sustainability-conscious managers, investors and shareholders, which calls for the establishment of business education programmes; and, lastly efforts to revamp international and multilateral organizations with mandates and tools to guide, assist and/or aid countries in elaborating their development strategies.

In essence, we need to redefine what makes an MNE “successful” and move away from an emphasis on economic considerations towards a broader vision of success, which couples financial sustainability with contributions to sustainable development, building on systematic investments in social value creation through social innovation, where skills and corporate leadership play a major contributing and enabling role.

However, MNEs cannot take on the sustainability challenges alone. Despite their resourcefulness, they need stakeholder support—not merely regulations and pressure—to guide them along the difficult path towards long-term change and to encourage more MNEs to pursue socially innovative initiatives.

Social innovation in MNEs must be understood as a cumulative process whereby MNEs and their network of subsidiaries identify and develop novel solutions or replicate existing ones that were created by other enterprises, and to incorporate them into their business models to address societal problems. Thereby, MNEs assume an active role as social innovators who create social value by implementing existing or novel methods, processes and practices that can also be extended to other agents in the value chains in which they participate

  • Fernando Santiago is Industrial Policy Officer at the Department of Policy Research and Statistics (PRS) of UNIDO.
  • Jahan Ara Peerally is Associate Professor of International Business at HEC Montréal, Canada.
  • Claudia De Fuentes is Associate Professor at the Sobey School of Business at Saint Mary's University, Canada.
  • Shasha Zhao is Associate Professor, International Business and Innovation, University of Surrey Business School.

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

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