International Political Economy the Issue

International Political Economy

The issue of multinational corporate ethics in the area of sustainable development has forced the hand of many CEO's to act in what is perhaps against the better wishes of their shareholders, but perhaps not of the stakeholder. The question many embattled CEO's must continuously ask is the following. As the executive leader of this company, should I enact a sustainability plan at the cost of short-term investment for the promise of engaging a long-term sustainable development strategy for environmental stewardship?

To answer this question, it is important to identify what the global perspective is and the nature of the governmental agreements that have put pressure on corporations to comply with increased environmental controls to limit pollutants and contaminants released into the atmosphere and into the tangible environment. A case analysis of the U.S. And Germany will then be investigated.

Multinational corporations within Germany have engaged in the strategy of sustainable development and have more actively engaged in environmental stewardship as a function of such agreements as the Kyoto Protocol. Historically, these developments are of a major change from the previous notion of multinational corporations and the negative environmental sentiment leading to the destruction of natural lands and water bodies across the world. Stories are ripe with multinational corporations with operations in developing nations where manufacturing plants pollute the regions local water supply with toxic industrial wastes.

Additionally, within the U.S., multinationals have frequently been cited by environmental lawyers as the primary concern behind environmental pollution in developing nations. Similarly, government contractors and government agencies have also been to blame for domestic pollution content as well, such as high mercury content in the waters around the Virginia/D.C. area. The 'greening' of multinational corporations is a statement that indicates these companies have engaged in practices that cease to introduce contaminants and/or pollutants into the natural environment and to also invest in the cleaning and maintenance of the environment and surrounding ecology. Collins (2010) offers advice on ways multinationals can improve their local external operating environment.

Facilitating Sustainability

"Multinational corporations can help improve the local environment in the communities they work in by interacting with government and residents. This study looks at the environmental perceptions of residents in the binational community of Calexico, California, United States and Mexicali, Baja, California, Mexico. Through the results of a series of qualitative interviews and focus group meetings in the region, the workplace was found to be an important component to improving the environment. This leads to a conclusion that greater interaction by multinational corporations in environmental concerns can make a real difference in people's lives and the sustainability of the world for future generations." (Collins, 2010)

Within the U.S., the first area of responsibility is ascertaining from local government and the community leaders the scope and method of interaction between these entities and the representatives from the engaged multinational corporation. Often, there are multiple multinational corporations in the area and all are looking to engage the community toward environmental sustainability through stewardship. The primary method of engaging the community is by preventing environmental contamination.

"Environmental contamination has a number of impacts on the economic and social growth in a community. If a community has a high level of environmental, and consequently health, problems, residents might fight against the placement of any new industry. There are additional impacts related to economic productivity, as sick employees or employees with sick children caused by environmental contamination are unable to attend work or are distracted at work because of illness. The social impacts include the overall health of the residents and pride in the community. Both of these are related to educational levels for children as they are absent from school because of respiratory or gastrointestinal diseases. Community pride comes along with having a clean school because of respiratory or gastrointestinal diseases. Community pride comes along with having a clean town and generally a nice place to live." (Collins, 2010)

Over the course of the 20th century, U.S. And German economies have clearly been affected by populations that suffer from the social impacts created by multinational corporations that have polluted the environment. Community pride is a function of community activism that has brought to light the number of atrocities committed by multinational corporations that have left a lasting and unwanted impact. By engaging the communities that have been affected by environmental contamination, the corporate image of the organization shifts, the level of Goodwill value on the balance sheet increases, and the impact of multinational involvement on the community becomes palpable.

"Multinational Corporations have always operated under increased public scrutiny. However, the political aspirations towards the liberalization and opening of national markets during the last two decades of the 20th century have intensified the debate about the multinational's proper role in the globalizing world. The notion of the global citizen refers to the multinational corporation's genuinely global character. This global character is neither dependent on the number of countries a company is doing business in nor does it contradict a strong tie of the multinational corporation to its home country; it is not to be confused with 'footloose'." (Wettstein, 2005)

Environmental consciousness is niche' area to which multinationals are emerging into. Countries including the United States and Germany are able to engage to yield an environmental impact to improve health. "In this era of worldwide environmental consciousness, the multinational corporation can be an effective agent possibly the most effective agent available today -- to improve health and environmental conditions in developing countries. One major challenge in globalizing product stewardship is how to organize. Policy and standards are usually set at the corporate level, while responsibilities for implementation rest within each country. Efficient management of sales and marketing often groups several dissimilar countries together. This leads to the difficulties of managing an organization with multiple cultures, religions, languages, differing attitudes toward environmental, health and safety concerns, and varying systems of government with distinct regulatory policies." (Bond, 1996)

The issue that Bond brings to the forefront, environmental sustainability, establishes multinationals as the means to an ends for establishing the model for environmental sustainability. By engaging the multinational corporation to enable government and private citizens, the major component to drive change in the environment is the multinational of which is indoctrinated with the opinion of a diverse set of employees.

Environmental consciousness is the most effective agent available against combating the effects of environmental degradation (Bond, 1996). By identifying the level of stewardship required on behalf of the multinational, the alliance can determine the most utilizable methodology to coordinate efforts on an internal scale to bring about a fundamental plan to coordinate environmental change on the small scale. Although the effort requires a macro organizational response that is somewhat against the core, internal mission of the organization, by internally focusing the organization to focus on environmental stewardship, the organization is able to internalize its organizational response from a diverse scatter to an organized diversified, response.

Environmental issues have generated a sociological impact, having been blamed for various health problems suffered within the U.S. population. The multinational investment into communities to increase responsibility to stakeholders is increasing. U.S. corporations do receive tax incentives to 'green' their businesses, sustainable design and other uses of renewable resource energy generation are encouraged.

"Today, previously ignored social and environmental issues increasingly affect the future of corporate business. Corporations that successfully manage these issues and view the management efforts as an investment rather than an expense may well assure a competitive advantage over those that do not. Benefits from such investments include project security, improved relations with communities and governments, the support of potential customers and investors, positive reactions from international stakeholders and the ability to secure future contracts." (Dabbs, Bateson, 2002)

Climate change is an additional political ideology that has produced pressure on multinationals to change business models and change the ways they do business. Steel Mills were no longer able to be gross pollutants, and cars manufactured in the U.S. And Germany, for either market, were mandated to comply with ozone gas emission restrictions. The state of California in the U.S., requires that all cars registered after the year 1972 have to produce a smog inspection.

"The Stern Review on the Economics of Climate Change advises us to invest in sustainability now to avoid much worse later on. Overall, those in the sustainability implementation hot seats identified with both the conventional corporate mindset (i.e., traditional capitalism) and the new sustainability paradigm. Accompanying this was a perceived ambivalence, which tended towards negativity, concerning the effectiveness of the corporate implementation of environmental sustainability. Boards in particular typically gave mixed messages." (Ahern, 2009)

Ahern points to the expected outcome of advancing an environmental sustainability program on the multinational corporate agenda. Many board of directors as well as executive management do not understand the accounting increase in Goodwill by heading an environmental sustainability program an internal mechanism to create a private/public partnership in preserving the environment and community existing around the multinational.

U.S., Germany, Globalization, and Environmental Sustainability

"In an increasingly globalized world, MNCs have gained considerable power. They are used to the existing state-based system of commercial regulation, and there are several reasons why they might wish to maintain it. The advantage of using this system is that the MNCs know the system well, and the system uses effective tools for managing and currently provides them with significant leverage. They have proved adept at using leverage: globalization has forced firms to raise efficiency and adopt cost-minimization strategies that both raise sustainability questions and arouse the ire of the NGO community. A growing number of MNCs acknowledge the need for sustainable production practices, but face considerable practical problems in implementing them." (Detomasi, 2006)

Multinational Corporations (MNCs) have been extended a large responsibility as well as authority as a matter of correction with regard to the responsibility and capacity these organizations hold to handle environmental issues and assist to combat the social problems inherently produced by neglecting environmental degradation.

"One issue which links strategy scholars, institutional researchers and business ethicists concern is whether MNCs should follow local practices or act according to global standards. In terms of the identity literature, the issue becomes: Will MNCs develop multiple identities in their different markets or rely on one single identity in guiding their CSR practices? Multiple identities could help firms to cope with location-specific demands and appeal to a heterogeneous set of stakeholders. On the other hand, multiple identities could result in stakeholder confusion and loss of legitimacy." (Huemer, 2010) "Key hallmarks of the modern economy are the continuing expansion and increasing significance of multinational corporations. Furthermore, multinational corporations already account for a sizable portion of world output and trade." (Costello, 2010)

Corporate Social Responsibility (CSR) is at the core of the environmental sustainability movement. Without the collaborative effort of an organizational CSR plan to engage the environmental standard put forth by globalization policies, the CSR effort stands to lose ground and return inefficient with regard to the cost/benefit. "The increasing awareness, by the public, of environmental issues and global warming, does present a considerable opportunity for shopping centers and retailers to attain a competitive advantage while differentiating themselves in the marketplace. The development and implementation of appropriate environmental policies can be a major market differentiator, as well as being commercially advantageous." (Walker, 2008)

MNCs are forced to determine the level of environmental impact to which they are able to contribute through sustainability policies and programs. "In addressing environmental issues, the retail industry needs to develop an understanding of what it means to the shopping center environment, and that values and culture, which it will require to adopt. The role of appropriate environmental management is to promote compliance beyond the requirements of legal compliance, involving areas such as health and safety, emissions, energy use and waste management" (Langston and Ding, 2001). (Walker, 2008)

Many companies hold the following belief in environmental sustainability practices. "Our vision is this: we will build environmental sustainability into everything we do so that our profitable growth helps restore our environment. So we wanted to link the environment through our guided market process and we also want to tie it to profitable growth," says Anderson." (Walker, 2008) "Business leaders must now get actively involved in defining and managing the process of environmental communications. Failure to do so will increasingly pose the risk of their companies' real present (and potential future) value being challenged; their position as a responsible corporate citizen being undermined; and competitive advantage draining away as customers and consumers turn to others who are -- or are seen to be more environmentally responsible" (Elkington, 1994, p. 97). (Levy, 1997)

When multinational corporations decide to not engage in environmental sustainability, then environmental degradation, in some form, is likely to occur. "For an illustration on how environmental degradation fosters rural to urban migration, consider the following anecdotal evidence. Agreements reached in the late 1980s among the Hun Sen government of Cambodia, the Thai military, and private timber corporations have led to uncontrolled pillaging of Cambodia's forests (Hong 2001).

Environmental concerns as a function of polluting water bodies including oceans and the contamination of land resources including depositing industrial waste such as chemicals into the ecology is at the forefront of many burgeoning communities throughout the world. In countries like Nigeria on continents such as Africa, the level of environmental degradation due to mining and exploitative efforts used to harness the resources from the land has rendered the society as well as the environmental base as compromised.

"In assessing the performance of both Shell and the Nigerian government in the Niger Delta, it can be argued that since 1995 Shell has increasingly assumed more of the government's role in the development of the Niger Delta (Ite, unpublished workshop report; Ite, 2002). On the other hand, it can be argued that the increased level of Shell's community development activities is a reflection of the fact that MNCs face levels of environmental and social responsibility higher than their national counterparts, because of the mechanisms of international reputation side effects and foreign stakeholder salience" (Zyglidopoulos, 2002). (Ite, 2004)

Furthermore, environmental responsibility is detailed by Liu (2010). "The effects of the environmental destruction are getting worse increasingly. The corporations want a strong economic development, and they are aware that many of the environmental policies are in conflict with their economic growth. Corporation need to find a way to promote both economic growth and environmental protection. On one side, governments could played major roles in controlling and supervising the environmental issues. On the other side, corporations could improve the environment and quality of life by adopting the application of innovative technology and the strategic environmental management. Because multinational corporations run their businesses around the world, they especially need to recognize ecological ethics and social responsibilities in order to solve the near- and long-term problems of environmental pollution. By enhancing corporate environmental responsibilities and ethics, both the healthy environment and the strong economic development could be achieved optimistically and effectively." (Liu, 2010)

Government appears to be the mitigating factor across the globe in environmental politics to ensure that multinationals are investing into sustainable ecological practices even at the multinationals economic expense. The review of literature thus far has pointed out that management at multinationals are capable of finding methods to incorporate the environmental sustainability practices whilst engaging in a growing economic engine to grow revenue and subsequently grow profits. "The environmental issues have generated the public's attention leading to heated disputes. Questions such as those regarding the seriousness of environmental issues; the petition to those who seem responsible for taking action to reduce the adverse effects of pollution; and the preservation of endangered species, have arisen with the resurgence of environmentalism. However, the viewpoints tend to polarize into the following two views: the optimistic and pessimistic perspectives." (Liu, 2010)

Additional concerns with environmental degradation due to globalization are expressed by d Aquino (1996), "There are other problems associated with globalization and they are gaining more and more public attention in both the developed and developing world. While it can be argued that the effects of economic liberalization over three decades have been largely positive, concerns are rising in capitals throughout the world that accelerating change is carrying an increasingly high price in terms of unemployment, social dislocation, income disparities, the exploitation of workers and environmental degradation." (d Aquino, 1996)

The act of globalization and environmental degradation has become a theme in the multinational corporate attempt to spread operations across the world. The problems with environmental concern are described by Strannegard. "Environmental concern will require the greatest fundamental strategic change in the modern industrial society. Therefore we at Multicorp have to take environmental issues into consideration in every single activity. But our environmental activities have to make business sense, and therefore they have to be business driven. Environmental concern is one of the key words in the corporation's document Vision and Vaues, and the management states that the organization shall be positioned as environmentally aware. This is to be accomplished while being as or more profitable than before. Why is this? In Multicorp's internal documents from the late 1970s and early 1980s, the environment is not an apparent business issue." (Strannegard, 2000)

Multicorp's business decision to indicate the environment is not a big deal reflects the valuation of assets during that period. Goodwill did not take into consideration the level of investment regarding environmental and social sustainability in the manner that modern accounting methods do. Under GAAP and the IFRS, Goodwill is a function of the benefit generated by the organization for the development and sustainability of the environment.

"The long-term aim of every environmental activity in Multicorp was to assess whether or not it contributed to shareholder value. An initiative that did not contribute to shareholder value was not undertaken. In this the environmental specialists conformed to a basic expectation: that the legitimacy of a business organization derives from its success in business." (Strannegard, 2000)

Environmental sustainability measures in fact do provide shareholder benefit by reinvesting into the social environment where the organization conducts its business. The generation of a positive corporate image has shown to provide economic benefits by increasing brand awareness and brand favoritism by creating the perception of social awareness on behalf of the organization, the products sold by the organization become more attractive.

Tactics used to obfuscate the level of environmental degradation however is also deployed to protect the multinational image and prevent a major expenditure on what is perceived as an expensive and somewhat needless process. "Environmental education is under assault on two fronts. First, multinational corporations are designed and distributing environmental curricula that are professionally produced, easy to use, often free, and incredibly biased in favor of industry. Second, some of the most prominent conservative think tanks in American are mounting as well -- funded attack on genuine environmental education." (Borowski, 2001)

"Although many hotels rely on the natural environment to attract guests, a survey of European hoteliers finds that environmental stewardship has taken a backseat to other operational concerns in many cases. Nevertheless, the surveyed hoteliers recognized that the hotel industry would do well to be more environmentally conscious. Managers in chain-affiliated hotels were generally more likely to pay attention to environmental issues than were independent operators, many of whom run small properties. The respondents noted that few hotel guests demand that hotels maintain environmental programs." (Bohdanowicz, 2005)

With regard to Germany, "Preserving high environmental quality, as advocated by the green movement within the hotel industry, should therefore be of the priority areas on the business agenda. In this regard, a significant difference in environmental attitudes between the independent and chain-owned hotels was reported in a 2000 German study. In the case of independently operated facilities, environmental concern and a willingness to act are strongly dependent on the hotel manager's attitude and knowledge." (Bohdanowicz, 2005)

Political Interference

Governments also facilitate the policy that promotes a lack of environmental concern for the multinational organization. "President Bush's decision to reject the Kyoto accord has the support of a group called the U.S. Council for International Business, whose more than 300 members include multinationals like Ford and Coke. Some of those companies now are targets of a guerrilla public-relations assault waged by Greenpeace and a tiny London upstart called Families Against Bush. At Ford, the groups have seized on a debate between executives at the auto maker's U.S. headquarters and its Volvo Car unit in Sweden. Volvo Car, which prides itself on Scandinavian values of environmental stewardship and attention to safety, had publicly expressed opposition to the treaty partly on the grounds that it has different standards for cutting emissions for developing and industrialized nations." (Ball, 2001)

The Kyoto Protocol or as is labeled by Ball, the Kyoto Accord is a worldwide agreement specific among a group of nations to limit the contaminants that drive environmental degradation that lead to CO2 emissions resulting in what is perceivably global warming by introducing 'greenhouse gasses' into the atmosphere and troposphere. Therefore, multinationals are not ostensibly to blame for the level of environmental degradation in developing nations as well as developed nation.

Although Ford and Coke, each a major American multinational corporation, supported George W. Bush and his anti-environmental push, there was a push by other companies within the 300 to engage in their own methodology of environmental protectionism by engaging in producing more fuel efficient and hence 'greener' automobiles. The facilitation of the greening of society by the multinational and not government is an effort taken on by an increasing number of CEO's that recognize how important the activity of preserving the environment is to future corporate sustainability.