In an increasing globalised world economy, Multi-National Corporations (MNCs) have been accelerating their push to shift production of their goods and services from higher cost developed countries to more economically attractive labour markets in the developing world. Developing countries are attractive not only from the standpoint of lower wages, but also because they often lack the means and or the political will to hold businesses accountable for violations of these nation’s respective environmental, human and labour rights regulation regimes. However, the growth and globalization of Human, labour and environmental rights Non-Governmental Organizations (NGO’s) has recently begun to act as a counterbalance and hold MNC’s accountable for violating those norms. As a consequence, MNCs that demonstrate a lack of respect for environmental, human and labor rights will eventually feel an impact on their bottom line, especially if one looks at the cumulative effect of avoiding such responsibilities over a period of years. In Part I, this paper seeks to delineate how, and in what areas of its business, offending MNC’s might expect to experience adverse economic impacts in the future. Said analysis is based largely on the negative consequences that have already been suffered by various MNC’s in a wide variety of different industries. Part II of this paper examines the growth and development of the NGO community as well as international norms dealing with human, labour and environmental rights around the world. It also explores the emergence of “corporate social responsibility (CSR) agreements designed to function as a non-state actor global business governance regime. In Part III, this paper concludes with an alternative strategy as well as some other methods Non-Governmental Organizations (NGOs) might wish to consider if they want to be successful persuading MNCs to show greater respect for environmental, human and environmental rights concerns within their respective workplaces. By using these alternative strategies and methods NGOs can also positively rather than negatively impact many MNC’s long term profitability in the process.
Original Title
Multinational Corporations: Making Dollars (and Sense) by Showing Respect for Environmental, Human and Labor Rights Issues
In an increasing globalised world economy, Multi-National Corporations (MNCs) have been accelerating their push to shift production of their goods and services from higher cost developed countries to more economically attractive labour markets in the developing world. Developing countries are attractive not only from the standpoint of lower wages, but also because they often lack the means and or the political will to hold businesses accountable for violations of these nation’s respective environmental, human and labour rights regulation regimes. However, the growth and globalization of Human, labour and environmental rights Non-Governmental Organizations (NGO’s) has recently begun to act as a counterbalance and hold MNC’s accountable for violating those norms. As a consequence, MNCs that demonstrate a lack of respect for environmental, human and labor rights will eventually feel an impact on their bottom line, especially if one looks at the cumulative effect of avoiding such responsibilities over a period of years. In Part I, this paper seeks to delineate how, and in what areas of its business, offending MNC’s might expect to experience adverse economic impacts in the future. Said analysis is based largely on the negative consequences that have already been suffered by various MNC’s in a wide variety of different industries. Part II of this paper examines the growth and development of the NGO community as well as international norms dealing with human, labour and environmental rights around the world. It also explores the emergence of “corporate social responsibility (CSR) agreements designed to function as a non-state actor global business governance regime. In Part III, this paper concludes with an alternative strategy as well as some other methods Non-Governmental Organizations (NGOs) might wish to consider if they want to be successful persuading MNCs to show greater respect for environmental, human and environmental rights concerns within their respective workplaces. By using these alternative strategies and methods NGOs can also positively rather than negatively impact many MNC’s long term profitability in the process.
In an increasing globalised world economy, Multi-National Corporations (MNCs) have been accelerating their push to shift production of their goods and services from higher cost developed countries to more economically attractive labour markets in the developing world. Developing countries are attractive not only from the standpoint of lower wages, but also because they often lack the means and or the political will to hold businesses accountable for violations of these nation’s respective environmental, human and labour rights regulation regimes. However, the growth and globalization of Human, labour and environmental rights Non-Governmental Organizations (NGO’s) has recently begun to act as a counterbalance and hold MNC’s accountable for violating those norms. As a consequence, MNCs that demonstrate a lack of respect for environmental, human and labor rights will eventually feel an impact on their bottom line, especially if one looks at the cumulative effect of avoiding such responsibilities over a period of years. In Part I, this paper seeks to delineate how, and in what areas of its business, offending MNC’s might expect to experience adverse economic impacts in the future. Said analysis is based largely on the negative consequences that have already been suffered by various MNC’s in a wide variety of different industries. Part II of this paper examines the growth and development of the NGO community as well as international norms dealing with human, labour and environmental rights around the world. It also explores the emergence of “corporate social responsibility (CSR) agreements designed to function as a non-state actor global business governance regime. In Part III, this paper concludes with an alternative strategy as well as some other methods Non-Governmental Organizations (NGOs) might wish to consider if they want to be successful persuading MNCs to show greater respect for environmental, human and environmental rights concerns within their respective workplaces. By using these alternative strategies and methods NGOs can also positively rather than negatively impact many MNC’s long term profitability in the process.
Multinational Corporations: Making Dollars (and Sense) by
Showing Respect for Environmental, Human and Labor Rights Issues
Author: Charles A. Laffiteau
Abstract
In an increasing globalised world economy, Multi-National Corporations (MNCs) have been accelerating their push to shift production of their goods and services from higher cost developed countries to more economically attractive labour markets in the developing world. Developing countries are attractive not only from the standpoint of lower wages, but also because they often lack the means and or the political will to hold businesses accountable for violations of these nations respective environmental, human and labour rights regulation regimes. However, the growth and globalization of Human, labour and environmental rights Non-Governmental Organizations (NGOs) has recently begun to act as a counterbalance and hold MNCs accountable for violating those norms. As a consequence, MNCs that demonstrate a lack of respect for environmental, human and labor rights will eventually feel an impact on their bottom line, especially if one looks at the cumulative effect of avoiding such responsibilities over a period of years. In Part I, this paper seeks to delineate how, and in what areas of its business, offending MNCs might expect to experience adverse economic impacts in the future. Said analysis is based largely on the negative consequences that have already been suffered by various MNCs in a wide variety of different industries. Part II of this paper examines the growth and development of the NGO community as well as international norms dealing with human, labour and environmental rights around the world. It also explores the emergence of corporate social responsibility (CSR) agreements designed to function as a non-state actor global business governance regime. In Part III, this paper concludes with an alternative strategy as well as some other methods Non-Governmental Organizations (NGOs) might wish to consider if they want to be successful persuading MNCs to show greater respect for environmental, human and environmental rights concerns within their respective workplaces. By using these alternative strategies and methods NGOs can also positively rather than negatively impact many MNCs long term profitability in the process.
Introduction
Some business scholars contend that a lack of respect for environmental, human and labor rights will eventually have a negative impact on the multinational corporation's (MNCs) bottom line, especially if one looks at the cumulative effect of avoiding such responsibilities over a period of years. Therefore the purpose of this paper is to answer the research question; Do MNCs suffer financially if they chose to evade or ignore international norms or national laws designed to protect human and labor rights as well as the local environment? I will 2
endeavor to answer this question by delineating how, and in what areas of its business, the multinational will experience these adverse economic consequences. I will then suggest some alternative methods Non-Governmental Organizations (NGOs) might wish to use, if they want to be successful persuading MNCs to show greater respect for human rights issues within their respective workplaces and, by doing so, increase their long term profitability. All too often, well meaning human rights advocates get so caught up in their rhetoric, that they loose sight of their goal(s). The primary goal is to persuade multinationals to demonstrate support for human rights as a means to foster greater respect for human rights by the host national governments within the countries they operate in. Money talks and this is what the multinational brings to the table, when it is discussing direct or indirect foreign investments with various national governments around the world. "Studies show a positive correlation between the presence of MNCs and economic, political and social rights as well as civil liberties in the third world." 1
Part I Human rights advocates will always have a hard time persuading developing countries to show greater respect for individual human or labor rights, so long as their governments are struggling to ensure that their people have adequate food, clothing and shelter. The focus of these governments is on how to grow their economies in order to meet those basic needs. If an individuals human or labor rights get trampled in the process, they see this as the price one must pay in order to reach the more important goal of providing for the individual's basic human needs. The multinational is in the best position to help those governments address their primary concerns, so it is also in the best position to influence or persuade those nations to
1 William H. Meyer, "Human rights and MNCs: theory versus quantitative analysis" Human Rights Quarterly, (May 1996): 377 3
show greater respect for individual human and labor rights. Often times corporate personnel policies, which determine the way a growing business enterprise treats its employees, can be a powerful influence on the surrounding communities and thus on the national government. The MNC can approach a government with offers of economic development and investment capital, provided that government agrees to respect the MNC's need to protect its image in other countries where it also does business. The MNC can explain that they are not judging that particular government on this issue, but that they are just dealing with the realities of doing business in a global marketplace. "This is nothing personal, its just business." How then do we show the multinational player, that it makes dollars (and sense) for them to be proactive in their human resources conduct by paying close attention to human rights issues in those countries where they have or plan to have operations? For starters, let us look at what it can cost a corporation when it isn't proactive in dealing with human rights concerns. "From its very beginning, Nike did not own any of its manufacturing factories. Instead, it specialized in product design and manufacturing." 2
This method of operating, where manufacturing is outsourced to lower cost manufacturing operations at home or abroad, has become an increasingly popular model used by domestic and multinational companies over the last 20 years. It has many advantages for companies, which derive a large percentage of their business revenues from the sale of goods under their corporate brand(s). Chief among them is that these companies don't have to spend substantial sums of money building and maintaining capital intensive, manufacturing plants. Companies, which historically were vertically integrated (owning their own manufacturing and production facilities), such as IBM have also adopted or begun to adopt this model in
2 S. Prakesh Sethi, Setting Global Standards (Hoboken NJ: John Wiley and Sons, 2003): 152
4
recent years. Nike failed, initially, to anticipate the problems attendant to outsourcing to the lowest cost provider and when it did become aware of the problem, it failed to address the issue in a timely and judicious manner. The majority of the vendors selected to produce Nike shoes and equipment (outside of the US) contracted most or all of their factories' production capacity exclusively to Nike. "They are totally dependent on Nike, and the company has enormous leverage on these plant's owners". 3 Most, if not all, of these suppliers would have changed their labor practices in very short order, had Nike been willing to accept the increased cost of production due to these changes. Problems first arose as an outgrowth of Nike's ongoing search for lower production costs. After Nike had shifted most of its production from Japan, Taiwan and Korea to China and Indonesia, human rights groups and the media started to investigate and raise questions about the business practices of some of Nike's production partners. Nike tried to ignore these criticisms at first, claiming it had no control over its business partners. Then Nike tried to burnish its image by hiring former UN Ambassador Andrew Young, to act as a spokesperson and ombudsman dealing with the issue on its behalf. Nike also increased advertising expenditures in a vain attempt to use its public relations muscle to counter its critics. Nike tried everything it could think of to put the issue to bed except one. It failed to use its considerable leverage on its partners to force them to change their "sweatshop" practices. The end result of Nike's defensive, reactionary strategy in dealing with the "sweatshop" criticisms was felt where it hurts a multinational most, on the bottom line. Nike's image was seriously tarnished by the criticisms and its own lack of concrete action to address the problem with its suppliers. "Nike was no longer cool, and its sales (and its stock) took a plunge in 1998 and 1999, by which time Nike had become the poster boy of
3 Sethi: 172 5
sweatshop outsourcing." 4 By then Nike started to realize that it had a serious problem on its hands and no amount of public relations or advertising dollars was enough to overcome it. So it made further revisions to its Corporate Code of Conduct and took the first steps aimed at bringing its vendors into synch, as regards working conditions in its factories. Once again it was too little, too late. The public wanted to see more serious and concrete actions, as well as evidence that Nike's suppliers were complying. Finally, "Nike established a full-fledged corporate compliance department which currently (2003) has 58 people, including 12 people at the head office." 5 Many of these "corporate overhead" costs (as well as increased media expenses) could have been avoided, had Nike done a better job of assessing how its lower production costs were being achieved, prior to changing suppliers. How many millions in sales and profits (not to mention shareholder value) has Nike lost over the last decade due to its tarnished public image? Just ask any long term investors who have owned the stock since 1988. Nike's experience should serve as a lesson to multinational corporations as regards the risks and the costs associated with pleading that they have little or no control over human rights issues in countries where they do business. Nike's image, sales and stock price are still suffering from the after effects of their earlier decisions to ignore or soft pedal human rights concerns at home and abroad. Instead of focusing exclusively on the benefits of lower production costs, it would have been much more cost effective (long term) to use their leverage over their suppliers to force compliance with human rights standards, and accept the minor increase in production costs which would have resulted. Nike has now taken the correct approach in dealing with this issue, but they were ten years and hundreds of millions of dollars too late.
4 Sethi: 152 5 Sethi: 167 6
The key to use, to open doors and deal with multinationals on the issue of human rights, is to cite the long-term costs and risks associated with a short-term production cost driven strategy, which ignores the costs associated with looking the other way on human rights issues. "MNCs face complex challenges in establishing and maintaining legitimacy, or their license to operate, across many host countries with differing social and cultural norms and values." 6 They cannot afford to have their images tarnished in markets where consumers have alternative choices (such as Reebok and Addidas) available to them, which are price competitive with their own brands, or they will suffer the same consequences that Nike has. MNCs need to be proactive in their approach to human rights issues in the developing world, so they can avoid the stigma of being more concerned with profits than with human beings. Legitimacy contributes to firms' survival and prosperity by reducing costs associated with stakeholder conflict and improving long term sustainability and employee satisfaction." 7
Stakeholders include MNC suppliers, shareholders, employees as well as the consumers who buy its products or services. There is a simple formula that explains what it takes to satisfy MNCs (or any companys) stakeholders. In a chat I had with Herb Kelleher, former CEO of Southwest Airlines, he told me that the following was his formula for running a successful business: Employees (yours or those of your suppliers) who enjoy a supportive work environment have higher productivity, produce higher quality goods or services and do a much better job of taking care of the customer. This in turn, results in customers who are pleased with their supplier or service provider and look forward to doing business with the company again. This
6 Leeora D. Black, Charmine E. J. Hartel, "The five capabilities of socially responsible companies", Journal of Public Affairs (Wiley) (May 2004): 125 7 P. Bansal and K. Roth, "Why companies go green: A model of ecological responsiveness", Academy of Management Journal Vol. 43 No. 4 (2000): 726 7
leads to increased sales and profits for the company, which means its shareholders and investors are going to be happy. But the entire process of customer satisfaction begins and ends with your employees so you need to focus on taking care of them first. 8
There are other consequences, which can occur due to a lack of sensitivity to human rights concerns. MNCs can avoid litigation and proxy contest costs associated with fighting shareholder resolutions ("by 1990 over five hundred shareholder resolutions had been presented to over ninety companies with operations in South Africa." 9 ), which embroiled companies doing business in South Africa during the years of apartheid. "Between 1984 and 1990 over 200 U .S. companies withdrew from South Africa after intense pressure from critics at home." 10 But these companies did not receive much public credit or public relations value from their actions, because they were viewed as simply doing so as a reaction to public outrage, rather than being viewed as progressive companies taking a stand on principles by addressing legitimate human rights abuses. Lawsuits filed in U.S. courts on behalf of foreign citizens are a new and growing concern for many multinationals. In 1984, Union Carbide experienced an industrial accident at one of its foreign subsidiaries chemical plants in Bhopal, India, killing more than 2,000 people and injuring over 200,000 other Indian citizens. "Attorneys for the victims pushed for a U.S. trial, but a U.S. judge finally ruled that the trial should be held in India on the condition that Union Carbide submitted to discovery under United States legal principles." 11 The case dragged on for several years with Union Carbide claiming that the gas leak was the result of employee sabotage. Then the Indian government filed criminal charges against Union Carbide
8 Interview with Herb Kelleher (6 May,!999) 9 Oliver F. Williams, Global Codes of Conduct: an idea whose time has come, ( Notre Dame: University of Notre Dame Press, 2000): 80 10 Williams: 57 11 Thomas Donaldson, The Ethics of International Business (New York: Oxford University Press 1989):111 8
executives, blaming lax safety procedures at the plant for the disaster. "Finally, on February 14, 1989, the Indian government announced the settlement of claims against Union Carbide. Union Carbide agreed to pay $470 million to the Indian government and in return, India agreed to drop criminal charges." 12 Prior to the settlement, Union Carbide executives had been afraid to travel abroad for fear of being arrested and handed over to India to face criminal charges. "Throughout, Union Carbide's image has suffered at the hands of a skeptical public." 13 The expenses associated with this chemical accident dwarfed whatever additional profits Union Carbide may have realized, as the result of locating its insecticide plant in a lower cost developing country. The controls, training for employees, safety procedures and maintenance, which are required by government regulations at Union Carbide plants in the U.S., probably could have prevented this disaster from ever happening. The company's disregard for the risks they were taking with the environment as well as the health and lives of their workers and Indian families, stand as a testament to MNC abuses in pursuit of corporate profits. Hopefully it will also serve as a cautionary lesson to other multinationals around the world. Corporations that focus on lower production costs (regardless of how this is being achieved), need to be questioned by savvy investors as to whether they have set aside adequate "reserves" to pay for the consequences of such behavior. A legitimate business strategy must include assessing what the potential financial liability will be if things don't go according to plan. More recently Unocal was taken to court in the United States under the Alien Tort Claims Act, for its part in human and labor rights violations, which occurred during the building of a natural gas pipeline for a minority owned subsidiary in Myanmar. While Unocal
12 "Damages for a Deadly Cloud", Time, (February 27, 1989): 53 13 Donaldson: 111 9
did not direct or take part in the human rights violations, it had been warned by an advisor in1992 (prior to the beginning of construction) that "throughout Burma, the government habitually makes use of forced labor. Later as the pipeline was being built, the same advisor told Unocal that forced labor, forced relocation of villagers and arbitrary killings by the military were occurring along the pipeline route." 14 This lawsuit, filed on behalf of some villagers in Myanmar by attorneys for a NGO called the International Labor Rights Fund, represents a watershed event in the history of litigation by various NGOs against multinational corporations. "The Alien Tort Claims Act was drafted in 1789 to deal with piracy and to permit sailors press-ganged into the British Navy to sue Britain in American courts. 15 As a result, MNCs which had previously used ignorance or claims that they had no control over national governments and their business partners, are now confronted with the possibility of financial liability for their partners human and labor rights violations. Part II "Over the past 20 years, hundreds of human rights NGOs have been formed to document and publicize abuses and proselytize for legal change." 16 Bad publicity is one thing, but financial liability for another governments' human rights abuses was something Unocal and other MNCs had never anticipated prior to this lawsuit. This new avenue of litigation represents a new option for NGOs, which they can use to help persuade multinationals to step up and be more proactive in dealing with host country governments on human rights issues. MNCs can now explain to their hosts that this is another reason why they most show respect for environmental, human and labor rights and curtail abuses if they want to do business. Its
14 Joshua Kurlantzick, "Taking Multinationals to Court: How the Alien Tort Claims Act Promotes Human Rights," World Policy .Journal, (Spring 2004): 60 15 Kurlantzick: 61 16 David Manasian, "The power of publicity", Economist (12/05/98): 13 10
not because they care so much about the environment or the victims of these abuses, but rather they have a fear of the financial consequences of ignoring such abuses. "Today multinationals are under pressure as never before to justify their dealings with abusive regimes and their treatment of employees in developing countries. Firms used to brush off criticism, saying they had no control over third-world suppliers, and or that politics was none of their business. This is no longer good enough." 17 But MNCs still have a desire to do business with stable regimes, be they democratic or authoritarian. They want assurances that contracts will be honored and that there is some semblance of the rule of law. They also want assurances that expatriate employees and their families will be safe. The resources that they need, to produce and provide goods or services to their customers are often in unstable and dangerous areas of the world. Authoritarian governments have found that foreign investors show a strong preference for the stable environment that they can provide. A logical connection emerges between political authoritarianism and the promotion of economic growth (as opposed to economic development) through foreign investment." 18 The reality for MNCs is that democracies in the developing world are rarely very stable, which in turn makes countries under authoritarian rule more attractive alternatives for the multinational corporation. Some critics will say that multinationals are really not in the best position to press governments to show greater respect for environmental, human and labor rights. They would argue that this is the job of the United Nations or maybe even the WTO. While these organizations may have a role to play in making a case for greater respect for human rights, they have some inherent limitations, which hinder their effectiveness. The United Nations is a
17 Manasian: 14 18 Conway W. Henderson, "Multinational Corporations and Human Rights in Developing States", World Affairs, (Summer 79): 27 11
forum for all countries throughout the world, whose primary mission is to keep the peace while protecting and safeguarding the sovereignty of its member states. It is not in the business of telling member states how to conduct their domestic or internal affairs, but rather their dealings with other member states. "The Global Compact (developed by the United Nations) has had various successes. But the objections raised by NGOs that the compact is toothless, and allows multinationals to gain favorable publicity without actually improving their behavior has merit, too. 19 Nonetheless, the very fact that MNCs are signing up to the principles of the UN's Global Compact, shows that they are becoming evermore sensitive to the financial consequences of being viewed as human rights "apologists" rather than "advocates". Is the WTO a more viable avenue to use in pressing for enforcement of environmental, human and labor rights? The mission of the WTO is even more narrowly focused (than the United Nations) on promoting trade and encouraging its members to reduce tariffs and other impediments to trade between its members. Critics say that it promotes the use of cheap labor in the developing world by companies in the developed world with its emphasis on opening markets in all countries around the world. "This criticism of the WTO is unfair to the extent that the organization was never intended to monitor human rights or labor standards." 20 To remain effective in its attempts to eliminate trade barriers between its member states, the WTO cannot afford to lecture them on environmental, human and labor rights. Doing so would only serve to harden the positions of many of the developing countries involved in the Doha Round of WTO negotiations, which are currently at an impasse over farm subsidies. Environmental, human and labor rights NGOs are the special interest groups in the
19 Daniel Litvin, "Memo to the President. Foreign Policy (Nov/Dec 2003): 70 20 Kent Jones, Who's Afraid of the WTO? (Oxford: Oxford University Press 2004): 126 12
best position to persuade multinationals to adopt and adhere to basic environmental, human and labor rights standards as apart of their respective Corporate Social Responsibility (CSR) guidelines. These NGOs can then monitor the MNCs compliance and publicize their failures when the need to do so is called for. A variety of different strategies can be employed by human rights NGOs to influence the behavior of multinational corporations. 21 To be successful in achieving their goals of greater respect for human rights, NGOs will have to change their mindset. They need to look at the MNCs the way a salesperson views a potential customer or sales distributor. A salesperson looks for ways to persuade the customer or sales partner to buy. Salespeople show the customers how they will benefit or profit from buying whatever it is they have to offer. They do not threaten their customer's business interests; rather they seek to become "partners" in their customer's overall business success. Bono's recent RED "partnerships" with Motorola, Gap, Converse, American Express and Armani are good examples of this type of strategy in action. These MNCs believe that they will benefit from these partnerships with Bono by burnishing their corporate images with the buying public. This will result in increased sales (and profits) for their other goods and services, which are not directly linked to the RED promotion. In turn, Bono is increasing public awareness of the myriad of problems in Africa, while also raising money to address those issues through the sales of specific goods and services to concerned consumers in other parts of the world. Multinationals are potential change agents in those countries which have been identified as places where environmental, human or labor rights abuses are occurring. All too often rights activists view multinationals as the enemy. The tactics they use put the MNCs on
21 Morton Winston, "NGO Strategies for Promoting Corporate Social Responsibility", Ethics and International Affairs Vol. 16 (2002): 76
13
the defensive and engender greater resistance instead of increased cooperation. The MNCs tend to view shareholder environmental, human and labor rights resolutions as a nuisance and an obstacle that they have to overcome. Litigation, or the threat of it, is much more effective if it is only used as a last resort, when all other methods of persuasion have failed. Showing the MNC how it can open windows to new markets by making a deal with you is an infinitely more effective approach. The World Wildlife Fund (WWF) has recently struck an environmental agreement with Asia Pacific Resources International Holdings L TD. (April), by acknowledging the merits of this type of approach. April has agreed to protect some valuable rainforests in Indonesia from logging in order to open up new market opportunities for its pulp products with companies like Proctor & Gamble (which would not previously consider buying from April because of its bad reputation with environmentalists). In return, the WWF received strong guarantees of protection, from both legal and illegal logging, for one of the last stands of ecologically valuable rainforest in Indonesia. Part III In 1995 Ray Anderson, the Chairman and CEO of the multinational Interface Corporation, was asked to speck to his sales force about his companys efforts to protect the environment because some of Interfaces customers had been asking their sales people about this issue. When he investigated he discovered that his company, which had a 34% share of the global market for carpet tiles, was a very large polluter even though it was in full compliance with all environmental rules and regulations. Mr. Anderson realized that continuing to use natural resources without also adequately protecting them was also a recipe for disaster at some point in the future. So he challenged his managers to reduce the 14
companys adverse impact on the environment by setting a deadline of 2020 for Interface to become a restorative enterprise; a sustainable operation that takes nothing out of the earth that cannot be recycled or quickly regenerated, and that does no harm to the biosphere. 22
Given the myriad of challenges that are involved in protecting and sustaining the environment including things like CO 2 emissions, depleted aquifers, and millions of tonnes of industrial waste, Mr. Anderson was convinced that the only institutions that were big enough and pervasive enough to address these types of problems were multinational companies such as Interface. So his companys manufacturing and operations personnel started to develop new manufacturing methods as well as ways to recycle that would start reducing the companys carbon footprint. Among other things, his engineers designed and fabricated a customized multi-million dollar machine to recycle all of their carpet scraps. They also developed and implemented a plan to adapt their boilers to run on methane gas from the local landfill and to recycle worn carpet tiles and use them to make the backing for new ones. Thanks to his companys energy and conservation methods, Interface has reduced its use of fossil fuel consumption by 50% (over 60% by weight) and is half way to its target of a zero carbon footprint. It should also be noted that this was accomplished without any push from government or new environmental regulations. So today, based on his companys own experience, Mr. Anderson says the environmental protection and sustainability doesnt cost, it pays in customer loyalty, employee spirit and hard cash. He says Interface sustainability efforts have saved the company more than $336 million since 1995. In fact, sustainability has been such a successful strategy that Interface established a consulting arm last year, to market
22 Cornelia Dean. Executive on a Mission: Saving the Planet New York Times (22 May, 2007) 15
its methods to other companies. 23 Mr. Andersons mantra to other business executives is to protect the environment because doing so positively impacts their companies bottom line. So as the Interface example demonstrates, there is another way to get MNCs on board with respect for human rights and the environment as well as their obligations for corporate social responsibility. But it will require a reduction or elimination of inflammatory rhetoric by activists within the NGO community. It will require cooperation and a pooling of NGOs resources. It will require time to investigate and understand the organizational structures of specific multinational corporations. Are they centralized with most decisions coming from a headquarters location or are they decentralized with individual divisions or subsidiaries operating as separate profit centers? Which MNCs should you target within different industries, the market leader, the number two competitor or maybe the new guy on the block? (If you can get the right target on board, the competitors will generally be forced to follow suit.) Who is the "fox" in the corporation, that person two or three management layers removed from the CEO, who wields the most influence on the primary decision maker(s)? What are the personal interests or hobbies of the key executive decision makers and other members of their Board of Directors? These are strategies a salesperson uses when preparing to approach a potential customer or business partner. Over the course of my career dealing with a variety of corporate executives, it has been my experience that most executives make decisions about who they are going to buy from or partner with based on trust, rather than price, performance, and or features. Are the human rights NGOs willing to invest the time that it takes to develop trust relationships with key players within the MNCs? Are they willing to change their attitudes and mindsets from
23 Cornelia Dean Executive on a Mission
16
regarding the MNC as the "enemy" to looking at it as a potential "partner"? If they just want to stand on the moral high-ground and be "righteous", then they will miss out on opportunities to at least make some progress on behalf of those whom they say they want to help. If environmental, human and labor rights NGO's become more willing to compromise and focus on accomplishing as much as they can with the help of the multinational corporation, then they will open up new opportunities to serve the interests of those who truly need their assistance. I believe we are now seeing some hopeful signs that we are finally moving in a more pragmatic manner. That we are trying to see what we can realistically achieve (with respect to environmental, human and labor rights) as opposed to what we wish we could accomplish. Multinational corporations are also beginning to find it progressively more difficult to hide abuses and or avoid damaging publicity. Only continued progress over time will tell if this is an accurate assessment. Bibliography Bansal, P. and Roth, K. Why companies go green: A model of ecological responsiveness Academy of Management Journal. Vol. 43 No. 4 (2000) 717-36 Black, Leeora D., Hartel, Charmine E. J. The five capabilities of socially responsible Companies. Journal of Public Affairs (May 2004):125-144 Damages for a Deadly Cloud. Time, (February 27, 1989): 53 Dean, Cornelia. Executive on a Mission: Saving the Planet New York Times (22 May, 2007) Donaldson, Thomas. The Ethics of International Business Oxford University Press, 1989. Henderson, Conway W. Multinational Corporations and Human Rights in Developing States. World Affairs (Summer 1979):17-31 Interview with Herb Kelleher (6 May,1999) 17
Jones, Kent. Who's Afraid of the WTO? Oxford: Oxford University Press, 2004.
Kurlantzick, Joshua. Taking Multinationals to Court: How the Alien Tort Act Promotes
Human Rights. World Policy Journal, Vol. 21, No. 1 (Spring 2004):60-67
Litvin, Daniel.Memo to the President Foreign Policy, No.139 (Nov. /Dec. 2003):68- 72 Manasian, David. The power of publicity: publicity about human rights has put pressure on governments and multinationals. Economist, Vol. 349, No. 8097 (Dec. 5 1998):13-15 Meyer, William H. Human rights and MNCs: theory versus quantitative analysis. Human Rights Quarterly.Vol. 18 (May 1996):368-397 Sethi, S. Prakesh. Setting global standards: guidelines for creating codes of conduct in
multinational corporations. Hoboken N. J.: J. Willey, 2003.
Williams, Oliver F. Global codes of conduct; an idea whose time has come University of Notre Dame Press, 2000. Winston, Morton. NGO Strategies for Promoting Corporate Social Responsibility. Ethics and International Affairs Vol. 16 (2002):71-88