IV. Limits to Change
What further light does the above analysis shed on the significance of trends associated with corporate responsibility and their implications for sustainable development? In this section it will be argued that, while there may exist some powerful forces that are encouraging greater responsiveness to environmental and social concerns, the process of change is likely to remain fragmented and spread unevenly in terms of the business practices, sectors, countries and regions. The minimalist and uneven agenda, which was described in section II, is not simply a reflection of the fact that the process of change is of recent origin; it also derives from the way companies choose to respond to the economic, political and structural drivers identified above.
In relation to micro-economic aspects, many factors may constrain a firm’s ability to respond to environmental and social concerns and derive net benefits. These include, for example, limited investment resources for altering production processes and adopting cleaner technology, the relatively high costs of certain environmental management reforms, lack of information and know-how, the difficulties in quantifying the benefits of environmental management, the limited size of niche markets for certain environmental goods and services, and organizational inertia or lack of incentives for innovation (Levy, 1997:132-133; Porter and van der Linde, 1995:127; Dawkins, 1995:2).
There is considerable debate regarding the “win-win” supposition that environmental improvements can go hand in hand with cost reduction. For certain firms, particularly small and medium-sized enterprises, this may not be the case. In fact they often find themselves having to introduce innovations simply to keep up and stay in the market, rather than to gain any additional advantage. Even large corporations may find it difficult to justify certain improvements in environmental management systems. As one study of US-based corporations notes, “case-study evidence... suggests that financial factors do constrain environmental efforts, and that firms assume that environmental efforts impose at least a short-term net cost on the firm” (Levy, 1995:47, referring to Kasperson et al., 1988). Clearly, such constraints are likely to be more pronounced during periods of recession.
Even if the cost-reduction component of “win-win” scenarios is weak, there is still the possibility of enhancing competitiveness. Indeed, this is probably one of the main strategic advantages that companies can gain from improvements in environmental and social policy and practice. But it is far from clear what this means for the promotion of sustainable development. To the extent that improved competitiveness can be gained largely through imagery as opposed to significant improvements in a firm’s environmental and social performance, it may mean very little. This partly explains the vast sums spent by big business on “green” advertising and public relations.
There are also doubts concerning the size of “green” and “ethical” markets. While some consumer surveys in industrialized countries indicate that a large number of customers regard themselves as ethical shoppers34, far fewer actually buy the relevant products. According the managing director of Fair Trademark Canada, “market research has shown that 30% of consumers say that they are willing to pay extra to ensure justice for producers, but that only 5% will actually do so...” (Thomson, 1998). Many niche markets quickly become saturated. The various “alternative trading organizations” that are promoting fair trade, for example, are already encountering difficulties in expanding their markets and catering to the demands of producers in developing countries who want to participate in such schemes (IFAT, 1999). Even a company such as the Body Shop, which actively promotes its image of “fair trader”, only purchases a relatively small percentage of ingredients through its ethical “community trade” programme35. Despite the relatively high levels of public concern in the richer industrialized countries with the destruction of tropical forests, it has been estimated that only 5-10 per cent of the US market and 10-20 per cent of the EU market will demand and pay for certified timber (IIED, 1996:63).
The social and regulatory pressures that partly drive corporate environmentalism can also be accommodated and deflated through “incorporation” or co-option. Several forms of business-NGO partnership may have the effect of diluting activist pressures (Currah, 1999). Many NGOs and activists have shifted tactics, reducing or abandoning more confrontational forms of activism and co-operating with business to provide technical assistance and services. There are, of course, many instances where such collaboration results in improved environmental and social performance.36 There are concerns, however, that closer NGO relations with business are being driven as much, if not more, by funding rather than political considerations, and that they may involve a trade-off with the political pressures that are a crucial driver of corporate responsibility (Currah, 1999). Where this trade-off is particularly apparent is in situations where partnerships or the participation of business in policy-making processes result in so-called “institutional capture”, i.e. where business interests unduly influence the decision-making processes of standard-setting and regulatory institutions.37
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