A new research initiative co-launched by The Asia Foundation will study Asian firms and their responses toward responsible business and growth models (click here for the research project website). This will include not only corporate philanthropy but in-depth business models impacting society. The research will also examine the value chains of large companies and small enterprises in delivering long-term value to people, profit, and the planet and its implications for business and policy leaders.

The research is also unique in involving six different organizations, including The Asia Foundation, Erasmus Initiative Dynamics of Inclusive Prosperity, Erasmus University Rotterdam, Hanyang University, the Economics of Mutuality (EoM) Foundation, and the Centre for the Economics of Mutuality. Among those institutions, Dr. Krul highlighted the involvement of The Asia Foundation in the research project, given the Foundation’s footprint and local knowledge in Asia.

Excerpts from our interview with Dr. Krul (by Inseo Yang):

Could you share the purpose of your research project?

The project is called Inclusive Economic Growth Models for Asia. We are exploring corporate responsibility's role and current state in Asia, with implications for business leaders, policy-makers, and academia. I see a lot of evidence about the state of corporate responsibility in the West but less in Asia. I think that is an interesting gap that we are trying to address.

Also, if you look at the development status of Asian economies like Korea, it has developed very quickly over the last couple of decades. Still, you see that this growth is starting to decline. You will also find that inequality is rising too—the top 10% in Korea continue to become wealthier while the poor grow poorer. So, I think it is relevant now to introduce the idea of mutuality in Asia. Hopefully, this approach can lead to more inclusive economic growth, which is also the aim of The Asia Foundation.

Could you share about the Inclusive Economic Growth for Asia project? What is the idea behind it?

There is a growing recognition that capitalism fails to sufficiently address the balance between material wealth, environmental sustainability, and social stability. Revisions to the global capitalist system are well underway. Businesses have come under increasing scrutiny from investors, policymakers, and the public to incorporate financial returns with social responsibility and environmental management. This reflects a new momentum for more inclusive and sustainable growth models in the private sector. I examine new models of inclusive economic growth in Asia through this research. While rapid Asian development has been conceived as a ‘miracle’ by some, in recent years, several countries in the region have been affected by slow growth and rising inequality. This project looks for new methods to revitalize the Asian growth model through businesses and their stakeholders.

What is the Economics of Mutuality? How would you explain the idea to people who are new to it?

We have seen different forms of corporate responsibility, such as CSR and ESG. Economics of Mutuality focuses on changing the business model from within and with stakeholders towards a shared social challenge. It is a management and investment innovation that started in a think-tank within Mars Corporation over a decade ago. It is a much deeper form of corporate responsibility. 

What I also find very interesting about this idea of mutuality is how companies are embedded into society. Usually, there is a distant relationship with a company that wants to maximize the profit and the community it is a part of. EOM decreases this gap and establishes a closer connection that a company has with its employees, its local environment, and society.

Various economic metrics are already being used in corporates. Could you elaborate on the difference between those, such as CSR, CSV (shared value), ESG, and EOM?

CSR has been popular but criticized for its screening method, as it is often a public relations exercise instead of channeling the force of business for good. Suppose a company builds a factory in Africa and pays for the pollution caused by spending some compensation money. The business model does not have to change, except by adding the amount of compensation to the annual budget. This is not sustainable, meaning the negative impact on the business will continue.

For ESG, I think it is about self-accounting. If you look at the CEST (Check Employment Status for Tax) indicators, almost all the data you get is self-reported from companies, which they just compile at the end of the year. It is a report compilation of, for example, how they scored on the environment and social governance. You wonder how reliable that self-reported data is---this is a massive problem for ESG. However, it is improving through adapting means like hiring independent accountants and some standardization efforts.

It is more difficult to explain the difference between shared value creation and EOM. They both aim to create value for both business and society. I think the shared value stems from a company-centric perspective, while EOM tries to have a more outside perspective where a company is part of a purpose and ecosystem of stakeholders. The very first step in practicing EOM is analyzing the problems that a society is facing and planning responses that contribute to solving social issues. I would say that among those four discussed categories, EOM is on the most proactive side in making fundamental changes to companies' operations and mobilizing other stakeholders.

How do you see the role of Foundations and NGOs like The Asia Foundation in EOM?

It is fantastic to have The Asia Foundation in this project because it knows what is going on at the ground level. With offices in all parts of Asia, the Foundation has local knowledge of stakeholders and challenges facing Asian countries. International NGOs like The Asia Foundation also have a comparative advantage in mobilizing multiple stakeholders, even compared to large companies. I greatly appreciate The Asia Foundation in this collaborative research, and look forward working together to realize more inclusive economic growth in Asia.