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close this bookBusiness Responsibility for Sustainable Development (UNRISD, 2000, 62 p.)
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View the documentAcknowledgements
View the documentAcronyms
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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
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Introduction

Historically, much of big business has pursued investment, production and marketing strategies that have resulted directly in extensive waste and degradation of natural resources or encouraged consumption patterns that do the same. Logging and mining enterprises, pulp and paper mills, agribusiness, oil, chemical, cement, iron and steel companies, as well as many other enterprises and industries, have degraded or destroyed large areas of tropical forests, marine and coastal resources, freshwater sources, agricultural land and the urban environment, as well as global climate and the ozone layer. Not only has the environment often been ignored, but so too have the concerns of various stakeholders1 for example, workers who must endure poor conditions and pay, indigenous peoples whose livelihoods and cultures have been threatened by corporate activities, community residents affected by pollution and waste, and consumers’ health and nutrition levels.

1 See Box 2 for definitions and debates related to various terms used in this paper. On first use these appear in italics.

By focusing narrowly on objectives such as market share and profitability, much of big business, then, has disregarded environmental and social aspects, which are central to the concept of sustainable development2. Given their size and global reach, transnational corporations (TNCs) have often been singled out, rightly or wrongly, as major culprits of unsustainable development. Today, this sector comprises approximately 60,000 parent firms with over half a million foreign affiliates, which in 1997 accounted for one third of world exports (UNCTAD, 1998; 1999). The economic power of the largest TNCs is indicated in Box 1 where we see that the revenues of just five corporations are more than double the combined GDP of the poorest 100 countries.

2 To define “sustainable development”, the Brundtland Commission referred to “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987). This, of course, is a tall order, which suggests that sustainable development should be viewed more as a process than a goal. Another formulation might be a process that minimizes the contradictions between economic growth, environmental protection and social well-being (Utting, 1993).

Now, at the end of the millennium, there are signs that some corporations are on the verge of recasting their relationship to both the environment and their stakeholders. Many companies, business associations, governments and international organizations are adopting a discourse and policies that suggest that corporations can simultaneously make profits and be good citizens. There appears to be a growing recognition that the increasing freedom enjoyed by business during the era of the so-called Washington Consensus3 needs to be complemented by increased responsibility (UNRISD, 1995). In some countries, processes and policies associated with globalization and neo-liberal reform have weakened the regulatory capacity of certain state institutions. Similarly, at the international level, various attempts to influence TNC practices through codes of conduct have been abandoned.

3 The term refers to the common approach towards the debt crisis adopted by Washington-based institutions such as the World Bank, the IMF and the US government in the late 1980s - an approach that emphasized the need for structural reforms in developing countries associated with more open economies, privatization of state-owned enterprises, deregulation and the down-sizing of the state.

Box 1: Corporate Power
Corporate revenues and gross domestic product
Selected companies and countries*

Global rank

Company
(country)

Revenue
($ billions, 1998)

Country**
(approximate GDP equivalent)

1

General Motors (USA)

161.3

Denmark/Thailand

10

Toyota (Japan)

99.7

Portugal/Malaysia

20

Nissho Iwai (Japan)

67.7

New Zealand

30

AT&T (USA)

53.5

Czech Republic

40

Mobil (USA)

47.6

Algeria

50

Sears Roebuck (USA)

41.3

Bangladesh

60

NEC (Japan)

37.2

United Arab Emirates

70

Suez Lyonnaise des Eaux (France)

34.8

Romania

80

HypoVereinsbank (Germany)

31.8

Morocco

90

Tomen (Japan)

30.9

Kuwait

100

Motorola (USA)

29.4

Kuwait

150

Walt Disney (USA)

22.9

Belarus

200

Japan Postal Service (Japan)

18.8

Tunisia

250

Albertson’s (USA)

16.0

Sri Lanka

300

Taisei (Japan)

13.8

Lebanon

350

Goodyear Tire & Rubber (USA)

12.6

Oman

400

Fuji Photo Film (Japan)

11.2

El Salvador

450

CSX (USA)

9.9

Bulgaria

500

Northrop Grumman (USA)

8.9

Zimbabwe

Top five corporations

708.9***


100 poorest countries


337.8

Source: Fortune, 1999; World Bank, 1999.

* A more accurate comparison of countries and companies should be based on “value added” as opposed to corporate revenue data, but not many companies include such data in their annual reports.

** Based on 1997 data.


*** General Motors, Daimler Chrysler, Ford Motors, Wal-Mart Stores and Mitsui.

In a context where such institutions have weakened, corporate self-regulation and voluntary initiatives have emerged as dominant approaches for promoting business responsibility4. During the 1990s several important TNCs and business associations not only jumped on board the sustainable development bandwagon, but also attempted to lead it. Increasingly, big business is embracing the language of corporate social responsibility and taking measures to reform management systems to make them more responsive to the environmental and social concerns of different stakeholders.

4 The terms “business responsibility” and “corporate responsibility” are used in this paper as convenient shorthand for corporate environmental and social responsibility, although there are, of course, other aspects of responsibility related to business activities.

This paper examines the nature of changes that are taking place in corporate discourse, policy and practice related to business responsibility, and its implications for sustainable development - particularly in the South. The discussion will proceed in five stages. Section I identifies several institutional developments and policy changes that characterize contemporary trends associated with corporate responsibility. Section II describes the current state of play, highlighting, in particular, the incipient and piecemeal nature of these changes. Given that it is probably too early to expect significant progress from a process of corporate reform that is of recent origin, the following two sections consider whether there are forces in place that are likely to promote meaningful change in the future: section III identifies the major drivers that are prompting corporations to be more responsive to environmental and social concerns, and section IV assesses the extent to which they are likely to result in significant change. The final section looks critically at certain mainstream policy and institutional reforms that are currently in vogue for promoting corporate environmental and social responsibility and considers a number of alternative approaches for scaling up and “deepening” corporate responsibility.