It is often argued that corporate environmental and social responsibility is basically a rational business response to ecological constraints and market opportunities (Murphy and Bendell, 1999). Furthermore, it can be part and parcel of a win-win strategy - companies can simultaneously improve their environmental and social performance as well as “the bottom line”.23 Practices associated, for example, with energy efficiency and waste reduction may reduce costs, while the use of modern cleaner technologies may increase productivity. Responsiveness to environmental and social concerns can also enhance a firm’s competitive advantage. Indeed, it has been argued that in product sectors where global competition has reduced the scope for differentiating products in the market-place on the basis of features that have to do with price and quality, companies are likely to attempt to maintain or gain competitive advantage through other product or company features, such as those associated with environmental and social responsibility (Flaherty and Rappaport, 1999; Welford, 1997; Watts and Holme, 1999).
23 See, for example, Porter and van der Linde, 1995, and Henderson, 1996.
Some TNCs are also seeking greater uniformity in production methods and product standards in their operations around the world. For both economic and political reasons, there may be less incentive to use inferior technology in developing countries. Indeed, in some sectors it is apparent that the most competitive companies are not those with access to the lowest-cost inputs, but those that are able to use their resources more productively as a result of advanced technology and methods (Porter and van der Linde, 1995:133). To stay ahead, companies need to innovate constantly in order to find ways of using resources more productively and to make products that are more valuable to consumers. The upshot of this approach is that some companies will seek ways to minimize waste at various stages of a product’s life cycle and prevent pollution, rather than simply adopting the type of “end-of-pipe” pollution control measures often required by government regulation (Porter and van der Linde, 1995).
The protection of brand-name image and company reputation has become a key managerial concern in certain product sectors (Nelson, 1996). To minimize or avoid any tarnishing of reputation, some companies are not only attempting to respond to environmental and stakeholder concerns related to business practices that have put them in the spotlight, but also trying to anticipate where the next problem or threat might come from and take preventive action.24 Such action might involve changes to environmental management systems and increased public relations efforts, including perhaps dialogues with stakeholders and pressure groups.
24 This point was stressed by several participants (notably those currently or previously connected with large oil companies) at a workshop organized by UNCTAD (20 May 1999) on corporate social responsibility, which was attended by this author.
An increasing number of TNCs and other companies are strategically positioning themselves to take advantage of growing markets for environmental goods and services in both industrialized and developing countries (Flaherty and Rappaport, 1999). The size of some markets is increasing rapidly. BP Amoco, for example, plans to increase the turnover of its solar energy subsidiary, BP Solar, from approximately $80 million25 in 1997 to $1 billion in 2007, while the global solar energy market is expected to grow from $800 million in 1997 to $3-5 billion by 2010 (Bruno, 1999). Competition strategy also involves creating new markets, particularly for higher value “environmentally friendly” products. A few corporations, such as the Body Shop, are also promoting “ethical” or “fair trade”.26 By ensuring that the producers and communities that manufacture the products receive a decent return, the company can enhance its reputation and thereby increase its competitive advantage.
25 All references to dollars are to US dollars.
26 Traidcraft, UK, defines these forms of trade in the following terms. “‘Fair trade’ recognises that most international trade excludes the poorest and most disadvantaged in the developing world ...[It] targets disadvantaged communities and organisations working with them, who need particular support to enable them to become involved in international trade. Producer organisations are [participatory] ... Many fair trade producers are in the informal sector of the economy ... ‘Ethical trade’ works within existing mainstream trade ... [and] targets workers in predominantly formal sector businesses” (Traidcraft, 1998).