The loss of life from the recent earthquakes in Nepal is approaching the scale of the earthquake that devastated Japan in 2011, where more than 20,000 perished. Major companies can and should be at the forefront of disaster relief there, but so far they have been slow to respond.
In relative terms, Nepal has been hit very hard. Japan lost one inhabitant for every 10,000 residents; Nepal, has lost one for every 3,000. The cost to Japan came to about 6 percent of its GDP; the cost to Nepal may be close to 50 percent of its GDP.
Yet Nepal has received far less business aid. In the aftermath of the Japanese disaster, firms around the world rushed in with cash and goods, providing more than half of the total international aid for Japan’s relief. But the corporate flow into Nepal has been barely a trickle. During the first several days after the earthquake, business aid arrived at a rate of $5,000 an hour. Compare that to Japan’s earthquake, when it was $150,000 per hour.
The disparity reflects an uncomfortable truth: Corporate contributions tend to go to countries that are already the most, rather than the least, prepared to dig themselves out. When the World Economic Forum rated countries by their readiness to come back from great shocks, Japan ranked near the top, Nepal near the bottom.
It makes sense that corporations act to cushion their own economic shocks from natural disasters by directing relief to countries where they have the greatest stake. Tracking international relief by the 2,000 largest multinational enterprises, we find that their donations closely followed their country operations.
The far greater business assistance to Chile than Haiti, after both countries experienced massive earthquakes at about the same time, had much to do with the fact that 37 percent of these firms operated in Chile but only 8 percent in Haiti. Companies like Wal-Mart, American Airlines, and the mining company Anglo American already had a strong presence in Chile and donated millions of dollars to its relief.
Now we see this same disparity in Nepal. Just 15 companies – fewer than 1 percent of the world’s 2,000 largest multinational firms – operated in Nepal when the first earthquake hit. So it is unfortunately no surprise that little business assistance has been flowing into Nepal, even though the country’s needs have never been greater. By one estimate, of the $550 million in outside aid to Nepal to date, corporations have contributed just $28 million.
The limited business assistance to Nepal reflects the limited company footprint there at the moment, but that absence will likely constitute a big strategic mistake for the future.
Though still one of the poorest countries in the world, Nepal and its 28 million residents will one day become an attractive market for many multinational enterprises. Today’s distressed residents of Nepal will long recollect the corporate brands that stepped forward in their moment of peril. Though business giving may seem un-strategic at the moment, that’s not only an uncompassionate way to think, it’s tactically shortsighted.
The U.S. pharmaceutical company Merck gave out Streptomycin for free to post-war Japan when it was ravaged by tuberculosis. Today, Merck has become one of the leading U.S. drug companies doing business in Japan.
During the recent outbreak of Ebola in West Africa, American companies like medical and dental supplier Henry Schein and aluminum maker Alcoa came forward with materials and staffing. The immediate return on their investments will likely be nil, but that commitment will be long recalled in Liberia, Sierra Leone and Guinea.
Business giving when it seems least strategic in the moment will be the most strategic for the long term. With Nepal already devastated by the first earthquake and new aftershocks adding to the disaster, now is both an important time and a smart time for companies to step up the flow.
Michael Useem is a professor at the Wharton School of the University of Pennsylvania and co-author of Leadership Dispatches: Chile’s Extraordinary Comeback from Disaster (2015). Luis Ballesteros is a research associate and Ph.D. candidate at the Wharton School.