ILO is a specialized agency of the United Nations

268th Session
Geneva, March 1997
  Committee on Employment and Social Policy ESP  


The role of enterprise development in
promotion and social progress:
An ILO strategy



I. The rationale for enterprise development as an ILO concern

II. Enterprise development in the ILO programme

III. Towards an ILO enterprise strategy


1. This paper has been prepared in response to a request by the Officers and other members of the Committee on Employment and Social Policy of the Governing Body at its meeting of November 1996. It is intended to highlight the ILO's involvement in enterprise development, including policies arising from the first ILO Enterprise Forum, held in Geneva in November 1996. The first section of the paper establishes the rationale for enterprise development as a major ILO concern; the second section presents the main thrust and key elements of the ILO's enterprise development programme and related activities, and illustrates the universality and practicability of enterprise development in the context of the ILO's global programme; and the third section provides the framework of an ILO enterprise strategy, including guidelines for promoting entrepreneurship and enterprise development as a means of attaining the objectives of employment promotion and social progress.

I. The rationale for enterprise development as an ILO concern

1. Relationship to the ILO's core mandate and principles

(a) Basic mandate: Employment creation and tripartism

2. As a tripartite organization founded to promote social justice through full employment and improvements in labour conditions, the ILO has worked closely with enterprises since its inception, as implied from the "Labour Charter" of the Treaty of Versailles by which the Organization was created. The Preamble to the ILO Constitution defines the original mandate of the Organization with reference to issues and concerns related to enterprises as the basic unit of production and the focus of working life -- the need for fair and just wages; social security; equal treatment for workers; freedom of association; and the abolition of child labour. Stemming from the realization after World War I that social justice was a prerequisite for universal and lasting peace, the ILO was created as a tripartite forum in which employers -- as representatives of enterprises -- were mandated to play an important role, alongside representatives of government and labour, in the pursuit of employment and social objectives. The tripartite structure and universality of the ILO have therefore constituted an appropriate framework for incorporating labour and social issues pertaining to enterprise activity at all levels of production and development into the ILO's global programme.

3. The promotion of tripartism is an important ILO objective which can be enhanced through ILO activities pertaining to enterprise development. The role of the State as a facilitator of enterprise activity could be reinforced by technical assistance designed to strengthen human and institutional capacity to formulate and implement policies to improve productivity and competitiveness, while at the same time providing guidelines to promote social objectives. Employers' organizations (as the representatives of enterprises and entrepreneurs) could be strengthened in order to expand their coverage and increase the impact of their promotional activities on all types of enterprises, as well as providing a broader institutional framework within the ILO structure for channelling technical assistance to promote enterprise development. The interests of workers and their organizations could equally be served by the ILO's work to promote enterprise development through technical assistance designed to improve working conditions at the enterprise level, encourage equitable sharing of productivity gains, and promote the basic rights of workers, in accordance with existing labour legislation and ILO principles.

(b) The Declaration of Philadelphia and economic concerns

4. The adoption of the Declaration of Philadelphia by the Conference in 1944, prompted mainly by the terrible effects of the Great Depression on employment security and the welfare of workers, effectively broadened the scope of the ILO's original mandate to include competence in economic policy issues. This extension of its mandate enabled the ILO to assess the impact of national and international economic and social policy on labour conditions, as well as providing a broad framework -- in addition to labour legislation -- for dealing with unemployment and related economic and social problems. More specifically, the Declaration also provided a basis for the ILO to focus on the influence of enterprise activity on a range of economic and social policies which affect employment and working conditions: responsibility for employment creation and improvements in working conditions was no longer perceived only as the obligation of the State, but was also to take the form of social initiatives by enterprises. The significance of the Declaration of Philadelphia for enterprise development and enterprise activity in general is to be found in section IV of the Declaration, which linked "the fuller and broader utilisation of the world's productive resources" by enterprise to the achievement of ILO objectives, and pledged the Organization to take action, independently and in cooperation with other international agencies, on a number of issues of direct relevance to enterprise activity and its influence on national and international economic policy; including "measures to expand production and consumption, to avoid severe economic fluctuations, ... to assure greater stability in world prices of primary products, and to promote a high and steady volume of international trade". In this regard, the principles and objectives of the Declaration remain as valid today -- especially in the light of current liberalization and globalization processes -- as they were in 1944, when ILO action through influence on economic and social policy was seen as necessary to deal with the negative consequences of the Depression and its aftermath.

(c) Social protection

5. The ILO's interest in enterprises is further justified by its role as the custodian of the "social mandate" within the international community -- a role that has its foundation in the Organization's basic mandate and which was recently reaffirmed in the Declaration adopted by the World Summit for Social Development. This responsibility could not be seriously discharged by the ILO were it not for its tripartite structure and its particular expertise in promoting enterprises and cooperatives to facilitate the creation of productive, sustainable and quality jobs in safe and humane working conditions. In relation to current developments in the labour and social fields, the ILO's involvement in enterprise development provides a context for analysing and responding to the consequences of economic liberalization and globalization for employment, work organization, working conditions and labour relations. This implies that the ILO should have a full understanding of how emerging economic and political issues and trends such as trade liberalization will affect social objectives pertaining to the world of work in general and to enterprises as the basic production unit in particular.

(d) International labour standards

6. With reference to the traditional standard-setting function of the ILO, a number of Conventions and Recommendations recognize the crucial role of enterprises in employment creation with regard to employment policy and human resource development, as does the proposed instrument on job creation in small and medium-scale industries, due for first discussion by the Conference in 1997. These instruments provide a basis for analysing and monitoring the effects of economic and social policies and trends on ILO objectives at the international, national and enterprise levels. In general, international labour standards are the basis of national labour laws and practices, which constitute a means of promoting the development of efficient enterprises and enhancing social initiatives taken by enterprises in favour of job creation and humane conditions of work. In this regard, the adoption of a Recommendation on job creation in small and medium-sized enterprises (SMEs) in the near future would complement and reinforce ILO technical activities for enterprise development as tools for achieving the ILO's aims of employment promotion and social progress.

2. Enterprises and present-day realities in the labour and social fields

(a) Response to emerging socio-economic issues and trends

7. The 1990s have witnessed an upsurge in the liberalization of economic policy in virtually all regions of the world, which has served to reinforce the crucial role of enterprises in economic and social development in general, and the creation of meaningful employment opportunities in particular. Nowhere has this trend been more obvious than in the former centrally planned economies, where the process of economic liberalization has been accompanied by a parallel process of change in the political regime: in this model of economic transition the main change has been a shift in the ownership and management of production assets in favour of the private sector and the concomitant disengagement of the State from production and enterprise activities, leaving governments with the responsibility for putting in place institutional and legal frameworks appropriate to the functioning of a market economy. In the case of the market economies which relied mainly on private enterprises to organize production, the adoption of policies and programmes for deregulation and privatization have significantly reduced the involvement of the State in private sector activity. Many developing countries, especially in Africa, have adopted liberalization policies as part of wider structural adjustment programmes to tackle problems of economic decline and financial crisis; these have led to changes in development policy and the pattern of economic management, which has often meant a reduced and modified role of the State in economic activity. The process of economic liberalization in the dynamic economies of East and South-East Asia has incorporated measures to open up trade and investment to foreign competition while at the same time providing an enabling environment for private sector-led growth and enterprise competitiveness. All of these point to the increasingly important role assigned to the private sector in promoting economic growth and overall development, and also to the dynamic role of the State in providing the right type of policy environment for enterprise development in the private and public sectors.

(b) Enterprise development and job creation within a market framework

8. With the shift in economic policy in favour of the market system, there has been an upward trend in enterprise activity in all regions of the world, and consequently in its relevance for job creation. It is important here to view enterprise development as an objective of general economic policy, and to assess the contribution of enterprises to overall development in terms of the impact of enterprise activity on the quantity and quality of employment. The contribution of enterprise activity to job creation in a given context would depend, however, on responsiveness to economic opportunities created by changing circumstances and reform programmes, such as structural change and globalization. This brings into focus the issue of enterprise competitiveness, which is linked to enterprise performance and which can be influenced by national and international economic and social policies. Action taken to promote enterprise development should, however, take into account the need for some regulation to correct market imperfections and protect social objectives without necessarily jeopardizing economic efficiency: the ILO with its tripartite structure and social mandate is best suited for ensuring this balance between the goals of economic efficiency and equity, especially in the context of enterprise restructuring and globalization, which could increase the risk of exclusion and marginalization for weaker social partners or countries.

(c) Productivity improvement and enterprise competitiveness

9. Productivity improvement is crucial to increase the competitiveness of enterprises and thereby make it possible for them to take advantage of the opportunities for expansion of output and employment provided by the worldwide wave of economic liberalization and globalization of production. The issue of productivity improvement is therefore central to national economic policy, mainly on account of its impact on employment and output at both the enterprise and national levels. An important feature of the ILO's enterprise development programme is to help member States to develop and implement strategies to improve productivity at the enterprise level and increase the competitiveness of local-based enterprises in domestic and global markets. This requires the active participation of the main social partners and stakeholders, particularly employers and workers' organizations, to support a favourable climate of industrial relations. The ILO is also committed to ensure that the benefits of productivity improvement at the enterprise level are shared equitably with workers. Activities carried out to support productivity improvement and competitiveness include advisory services to constituents on policies and programmes designed to develop human resources and to improve institutional capacity for better working conditions. It is expected that the adoption of strategies to improve productivity and promote enterprise competitiveness would not only contribute to ILO objectives in the labour and social fields, but would also facilitate the integration of developing countries and transition economies into the global economy on the basis of their comparative advantage.

II. Enterprise development in the ILO programme

1. Objectives and focus

10. Even though The ILO's interest in enterprise activity stems from the Organization's original mandate, it was not until 1991 that an Enterprise and Cooperative Development Department was established as a major programme of the Office and was given the responsibility "to promote policies and programmes which encourage entrepreneurship and facilitate the development of enterprises and cooperatives, in both the formal and informal sectors and in urban and rural areas". This was to be done through the provision of technical advisory services to the ILO's tripartite constituents at the national and regional level and through support for relevant technical cooperation activities executed by governments and the social partners. The aim is to develop and strengthen the human and institutional capacity of ILO constituents to design and implement policies and programmes that facilitate entrepreneurship and enterprise development.

11. The establishment of an enterprise department within the ILO structure could be regarded as a necessary and logical response to changing socio-economic and political circumstances at both national and international levels which impacted on the labour and social concerns of the ILO and have had, in some cases, profound effects on employment and working conditions. In accordance with its basic mandate, it was both necessary and timely for the ILO to establish a framework and develop its capacity to improve the coordination of technical assistance provided to member States (in particular developing countries and countries in transition) to develop and manage enterprises that increase productive employment opportunities while at the same time promoting social progress. The diversity of the Organization's membership and the universality of its mandate meant that the focus on enterprises as the basic unit of production would encompass a wide variety of production units: small and medium-sized enterprises; micro-enterprises in the informal sector; handicrafts and cottage industries; private and public sector enterprises; and cooperatives.

12. Such a broad category also brings the ILO into contact with a wide range of entrepreneurs and employers, as well as workers and self-employed persons, some of whom fall outside the scope of traditional employers' and workers' organizations. This implies that advisory services and support for technical cooperation projects provided by the ILO to facilitate enterprise development should be broad-based and more flexible in order to be effective. Similarly, policies adopted within legal and regulatory frameworks to facilitate enterprise development should reflect the diversity of existing enterprises in member States, and accordingly ILO assistance should be relevant to the dominant as well as other types of enterprises in each context.

13. The ILO enterprise programme itself is quite diverse in terms of the issues addressed, covering the development of small and medium-sized enterprises and cooperatives, the employment and social implications of privatization and enterprise restructuring, enterprise financing, and the development of skills and managerial capacity to improve productivity and competitiveness and to support business initiatives. The programme also includes innovative technical cooperation projects such as the modular "Improve Your Business" (IYB), and "Start Your Business" (SYB) programmes which now have projects in nearly 80 countries worldwide and whose training materials have been translated into over 30 languages. The ILO enterprise programme is also currently addressing employment needs in countries coming out of conflict and in the transition economies through support for enterprise-type initiatives, including the conversion of ex-military facilities into civilian production units and SYB training programmes for former soldiers.

14. The ILO enterprise programme works with all constituents, and covers a range of issues of concern to other ILO major programmes. The enterprise programme provides a framework for advising governments on promotional matters concerning enterprise development in both the private and public sectors. Employers' organizations are crucial for the implementation of the enterprise programme in that they provide the Office with a better understanding of the actual enterprise situation at the country level and act as partners in training programmes. The ILO enterprise programme is also designed to facilitate collaboration with workers' organizations on various matters, such as those pertaining to the improvement of working conditions, the equitable sharing of productivity gains, and the strengthening of managerial capacity among trade union leadership.

2. Policy issues arising out of the ILO Enterprise Forum

15. The first ILO Enterprise Forum (Geneva, November 1996) had as its theme "promoting social progress and enterprise competitiveness in a global economy". It was attended by nearly 600 participants drawn from enterprises in developed, developing and transition economies and from the ILO's constituents and NGOs. The discussions at the Forum covered strategic issues pertaining to enterprise development and enterprise competitiveness in a global economy and the impact on job creation and social progress. The discussions were useful in increasing awareness, among policy-makers, entrepreneurs and representatives of employers' and workers' organizations, of the importance of enterprises for employment creation and other fundamental ILO concerns. A second Enterprise Forum organized on a tripartite basis is proposed for 1999.

16. The key policy issues arising from the discussions, and relevant to the role of the ILO in promoting enterprise development, are related to the economic and business environment; the role of the State; the legal and regulatory framework; institutional capacity building; productivity improvement and the equitable sharing of productivity gains; and the challenges and opportunities of globalization. Overall, the discussions highlighted the need for the social partners to work together to achieve the twin objectives of economic efficiency and social protection at the enterprise level, which are prerequisites for the creation of quality jobs on a sustainable basis.

17. The tripartite structure of the ILO was seen as a major factor in enhancing national capacity to formulate policies and develop institutions relevant to the promotion of competitive enterprises, which make a direct contribution to employment creation and social progress. In this regard, the Forum identified a vital role for the ILO through its technical cooperation programmes in supporting and complementing national efforts and enterprise development, including enhancing economic and social initiatives by enterprises themselves.

III. Towards an ILO enterprise strategy

1. The need for a strategy

18. The purpose of an ILO enterprise strategy is related mainly to the need to address basic ILO concerns pertaining to employment creation, improvements in working conditions, labour relations and human resources development, etc. in the specific context of the development and growth of enterprises and cooperatives. The strategy should also facilitate the greater involvement of the ILO with enterprises within the framework of tripartism, and help increase awareness among the social partners of the mutual benefits to be derived from the growth and expansion of enterprises as an objective of economic and social policy.

19. From the standpoint of programme implementation, an ILO enterprise strategy should further a more coordinated approach to the planning and execution of enterprise-related activities within the ILO: the result could be an increase in the effectiveness and impact of technical assistance provided to constituents in member States in the field of enterprise development. Specifically, the strategy could help formulate more appropriate policies as required for creating an enabling environment to support enterprise development; it could enhance entrepreneurial ability and managerial capacity as required for increasing enterprise efficiency and competitiveness; and encourage the creation of productive employment opportunities and improvement in working conditions.

2. Objectives and perspectives

20. Based on the recognition of the vital role of enterprise development in employment promotion, the immediate objective of an ILO enterprise strategy is to increase awareness among ILO constituents of the important contribution enterprises, including cooperatives, can make to economic and social development. In operational terms, this objective is translated into action by the ILO to support national efforts and activities by constituents to increase employment and productivity and ensure that these gains go hand in hand with improvements in human resources management, working conditions and labour relations.

21. As part of ILO follow-up on the World Summit for Social Development (Copenhagen, March 1995) which endorsed the importance of SMEs for employment promotion and poverty alleviation, it is proposed, as part of an ILO enterprise strategy, to launch a major new ILO technical cooperation programme, the International Small Enterprise Programme (ISEP), in the 1998-99 biennium. This global enterprise development programme would also serve as an important instrument for strengthening effective collaboration between the ILO and local entrepreneurs, workers and the ILO's constituents through its implementation at the national level. The ISEP would also address workers' concerns relating to working conditions and occupational safety and health through innovative field activities. The programme will be global and comprehensive, covering activities at both the country and regional levels, thereby providing opportunities to promote technical cooperation between developing countries. At the national level, it will involve the participation of entrepreneurs, government agencies, employers and workers' organizations, and other interested non-governmental organizations. It will also promote networking at the national, regional and interregional levels, and will encourage links between large and small enterprises. Particular attention will be paid to the special needs of women entrepreneurs, as well as to the need to balance economic efficiency with social and equity considerations in the context of enterprise development.

22. The International Labour Conference will in 1997 consider an agenda item on general conditions to stimulate job creation in SMEs (which is to be followed by a second discussion in 1998), with a view to adopting a Recommendation. The aim is to produce a coherent set of guidelines aimed specifically at addressing issues that could contribute to the development of competitive enterprises capable of generating productive, sustainable and socially satisfying jobs. While there is a broad range of ILO instruments dealing with promotional measures to facilitate employment creation through enterprise development, no single instrument offers a coherent set of guidelines on how to fulfil the employment potential of enterprises: the adoption of a Recommendation specifically on this objective would contribute to the successful implementation of an ILO enterprise strategy.

3. International cooperation

23. The successful implementation of national enterprise development strategies depends on the ability to seize the opportunities presented by globalization and economic reform. It is therefore important for an ILO enterprise strategy to include action that can be taken at the international level to support national strategies and efforts by constituents in member States. As the social conscience of the international community, the ILO should initiate action and continue active collaboration with other international organizations such as the World Bank, UNCTAD, UNDP, UNIDO, etc. to promote an international socio-economic framework conducive to the development of competitive enterprises that contribute to both employment promotion and social progress. The ILO should also continue to interact with relevant international and regional organizations, including those representing employers and workers, so as to improve understanding of how the processes of economic reform and globalization affect enterprises and the world of work and the implications for employment, working conditions and labour relations.

Geneva, 18 February 1997.

Updated by VC. Approved by NdW. Last update: 26 January 2000.