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close this bookBusiness Responsibility for Sustainable Development (UNRISD, 2000, 62 p.)
View the document(introduction...)
View the documentAcknowledgements
View the documentAcronyms
Open this folder and view contentsSummary/Résumé/Resumen
View the documentIntroduction
View the documentI. Boarding the Bandwagon
Open this folder and view contentsII. Meaningful Change?
Open this folder and view contentsIII. The Forces of Change
View the documentIV. Limits to Change
Open this folder and view contentsV. Moving Forward
View the documentBibliography

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).

34 Two surveys carried out in the United Kingdom in 1996 indicated figures of 55 per cent and 67 per cent (see Wild, 1998:6).

35 In 1994, one company critic estimated that the Body Shop’s Trade Not Aid programme represented less than 1 per cent of company trade. The company itself reportedly acknowledged that it was impossible to quantify the figure but that it was “more than 1 per cent but less than 10 per cent” (Jack and Buckley, 1994:8).

The nature of the political process underpinning corporate management reform is also likely to result in piecemeal reforms. As indicated above, corporations are quite capable and increasingly adept at responding to certain concerns of environmentalists, consumers or development activists, in order to dim the spotlight on their activities. This can be seen in the case of certain large oil companies such as Shell and BP Amoco. It is often possible to do this through very selective management reforms, such as the introduction of a code of conduct, and/or through advertising and multi-stakeholder dialogues. The chemical industry’s Responsible Care programme has been somewhat successful in this regard.

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

36 See, for example, NEF and CIIR, 1997; Bendell, 1998; Murphy and Bendell, 1999.

37 In their analysis of eco-labelling and certification, various authors highlight the dangers that can arise when international institutions responsible for standard setting are unduly influenced by Northern business interests and lack the balanced participation necessary for effective policy-making in the broader public interest (see, for example, Dawkins, 1995, and Krut and Gleckman, 1998).

For their part, civil society groups and movements are often limited in their capacity to exert pressure, particularly on a sustained basis. Of the many issues associated with corporate irresponsibility that activist groups are concerned with at any one point in time, only a few can be addressed with sufficient momentum and force to make a large corporation pause, take notice and respond in some shape or form. There is also the strategic problem of knowing where to intervene in the system and with which actors to engage and ally. Considerable effort can be wasted by intervening in the wrong places. The analysis of global commodity chains reveals the presence of multiple actors in any product sector, some of which are far more powerful than others in terms of being able to influence the process of environmental management reform (von Moltke et al., 1998). The example of the NGO campaign to reduce the production and consumption of tropical timber not sourced from sustainably managed forests suggests that, for many years, attempts to influence logging companies, consumers and governments had limited effect. It was not until a very small group of European wood-product retailers was targeted that significant progress was achieved, given their strategic location in the chain and their ability to exert pressures both downstream and upstream, on producers and consumers, respectively.38

38 The author is grateful to Jean-Paul Jeanrenaud at WWF-International for these observations.

The analysis of the structural underpinnings of corporate environmentalism and stakeholder accountability also suggests that it is likely to be a very uneven phenomenon in both sectoral and geographical terms. Developments associated with flexible specialization, global commodity chains and foreign direct investment affect some product sectors and countries far more than others. Furthermore, each commodity chain can assume very different characteristics in terms of the actors and market conditions that shape the possibilities of improvements in environmental management. This is brought out clearly in the analysis of four commodity chains carried out by von Moltke et al. (1998). Analysing the case of copper in Zambia, semi-conductors in the Philippines, cotton in Pakistan and eco-tourism in Costa Rica, these authors show how the environmental response throughout the chain is likely to vary considerably, depending on such aspects as the distribution of power among different actors in the chain, their (related) ability to capture rents and finance environmental improvements,39 the degree of integration and dispersion of the chain40 and the type of environmental problem involved.41

39 It is observed in relation to some product chains that it is often larger (mainly Northern-based) companies higher up the chain that have this ability rather than smaller downstream producers in developing countries. In the case of the eco-tourism chain in Costa Rica, however, it was found that a significant proportion of revenues accrue to local providers of goods and services (von Moltke et al., 1998:20).

40 In the cotton chain, for example, it is observed that the presence of many small producers greatly complicates the flow of information and finances necessary for improved environmental management, whereas this is far easier in the more integrated semi-conductor chain (von Moltke et al., 1998:22-23).

41 Waste issues related to industrial processes, for example, are often far more manageable than environmental problems related to natural resource extraction (von Moltke et al., 1998:22).