Not seeing the forest for the trees
By focusing attention on the specific initiatives taken and the innovations introduced by individual companies in the field of corporate environmental and social responsibility, it is easy to lose sight of the forest for the trees - that is, the bigger picture related to investment, production and marketing trends, and their environmental and social implications. It is important to retain a sense of perspective of the broader trends related to corporate policy and performance.
As noted above, relatively few companies are actively involved in what has been referred to as the “social responsibility movement”. Writing earlier this decade, Hawken notes that “... the roughly 2,000... committed companies... have combined annual sales of approximately $2 billion, or one-hundredth of one percent of the $20 trillion sales garnered by the estimated 80 million to 100 million enterprises worldwide” (Hawken, 1993, quoted in Thomson, 1998). Since this estimate was made, some of the world’s largest corporations have joined this movement. As already indicated, however, the TNCs involved represent a small fraction of the world total and, in most cases, only minimal aspects of their activities are affected.
Although CEOs of so-called lead companies talk increasingly of their commitment not just to the bottom line of profitability but to a triple bottom line, the bulk of their investment is in activities associated with “business-as-usual” (Welford, 1997). In a recent interview with CNN, the chairman of Shell likened his corporation to a three-legged stool: the three legs, symbolizing financial, environmental and social goals, were essential for stability. The problem with this analogy is that the three legs are in no way even. Clearly the amount of corporate resources geared towards environmental and social aspects pale in comparison with those that are attempting to generate profits from conventional business activities. A look at BP Amoco’s investment portfolio for 1999 illustrates this point. While the corporation expanded its interests in solar energy, through the $45 million purchase of Solartex (Bruno, 1999), the vast bulk of its investment went towards expanding its regular exploitation of non-renewable resources-through, for example, the proposed purchase of the oil company ARCO for approximately $31 billion (BP Amoco, 1999). According to the Greenpeace Media Center. “For every $10,000 BP Amoco spent on oil exploration and development in 1998, $16 was spent on solar energy” (Media Center, 1999). In such circumstances, talk of a triple bottom line and three-legged stools surely needs some qualification.
It is clear that there are various structural aspects, associated with how production is organized, that constrain corporate responsibility. It is often pointed out that a fundamental constraint on corporate environmental and social responsibility derives from the logic of capitalist production, i.e. the quest for profitability, which puts pressure on firms to cut or externalize costs and seek locations with weak labour and environmental regulations. Such pressures may well be escalating in the harshly competitive environment associated with globalization and liberalization. Through mergers and acquisitions, downsizing, outsourcing, the feminization and informalization of employment, and the lure of largely deregulated havens, such as Export Processing Zones, many corporations are reducing their core labour force and shifting production to sites and systems with lower social and environmental standards. Such sites and systems also tend to be associated with weaker or non-existent forms of trade union organization.
The tension between profits and responsibility may be even more acute during the early phases of corporate activity, when companies attempt to obtain quick returns on large-scale investments by externalizing as many costs as possible. An analysis of the Brazilian pulp industry reveals this problem (Carrere, 1999). Power structures can also reinforce this possibility; not only did the large Brazilian pulp companies use political and economic power to obtain subsidies from government, but they also had the coercive power of the state on their side when the externalities generated local opposition (Carrere, 1999). The analysis of corporate environmental and social responsibility in this sector also highlights another structural problem-scale. Even companies committed to environmental protection and sustainable development are unlikely to realize these goals when the inherently large scale of their operations means that large-scale environmental impacts are inevitable (Carrere, 1999). The question arises whether the choice should only be between a very destructive and a less destructive corporation, or whether we should also have the option to promote an economic system based on smaller scale enterprises more in tune with the local culture and the environment (Carrere, 1999).
Looking at the bigger picture also means considering the nature of national, regional and sectoral investment patterns. In Mexico, for example, it has been shown that, although an increasing number of firms are now taking steps to improve their environmental management systems, and institutions are emerging to facilitate this, the economic system as a whole continues to demonstrate very perverse characteristics (Barkin, 1999). Patterns of investment are such that polluting industries are expanding. Furthermore, trends in industrial location suggest that firms are being established or are moving to areas of the country where planning and regulation are weak. As has been pointed out in relation to India, the process of competitive deregulation to attract investment involves not only countries, but also regions or states within countries (Jha, 1999).
Institutional structures, associated in particular with macro-economic policy, can also constrain corporate environmental and social responsibility. This is apparent in Central America (Pratt and Fintel, 1999). Firms are less likely to adopt environmental improvements when, for example, the financial services sector imposes high interest rates and short lending terms. These can act as a disincentive for adopting the type of long-term business planning horizon that is often required for environmental management. Other policies of this sector, for example recommendations regarding the use of certain technical packages, may encourage agricultural producers to use outdated and environmentally damaging technologies. Similarly, the fiscal system discriminates against the importation and adoption of cleaner technology and undervalues the use of natural resources (Pratt and Fintel, 1999).
Progress along the corporate responsibility path is not linear - it may ebb and flow or unravel completely. Most obviously, this may happen during periods of economic recession when firms seek to cut costs in various ways that may have negative environmental and social implications. But it may also reflect changes in the balance of social forces when social and political forces promoting deregulation, or that mobilize to prevent regulation, become stronger, and/or those favouring various forms of regulation become weaker. The role of the Global Climate Coalition in attempting to dilute, if not derail, the Kyoto process is a case in point.
These broader trends associated with the evolving nature of capitalist production and economic liberalization raise serious concerns for the process of corporate environmentalism and social responsibility. But it is also evident that certain processes and forces commonly associated with globalization may serve to facilitate corporate responsibility. What they are, and their relative power to promote change are discussed in the following two sections.
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