BUSN9000 Sustainability &

Corporate Responsibility

Globalisation in Developing
Countries & Sustainability

Dr Maria Elisavet Balta

Stand for ambition

Kent.ac.uk
 Today’s Lecture

Globalisation

Developing countries and

CR

Sustainability

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Globalisation: ‘what a wonderful world’?

• Process of integration among countries around the world

• Social
• Political
• Economic
• Cultural
• Technological

• Benefits of growing global trade and investment

• Wealth
• Jobs
• Technology
• Lower prices in row materials and supplies
Wonderful world? Is globalisation the problem or the solution?

oChild labour: 218 million children (with no

safety)
oWorking conditions: 6000 workers die every
day because of work-related accidents or
diseases
o Slavery/bonded labor: affects 12.3 million
workers
o Poverty: 3 billion live on less than 2 dollars
a day
Figures sourced from Ethical Trading Initiative
Signs of Globalisation

• Global Financial Markets, Institutions and Systems

• Global Warming
• Global Jobs
• Global Strategic Alliances
• Mergers and Acquisitions (eg Kraft/Cadbury)
• Globalisation of Knowledge/Technology
• Global Intellectual Property
• Global protest and resistance to globalisation (!)
• Emerging markets
• BRIC countries….and those following
• Global/regional institutions: World Bank, ILO, G-20, EU, Nafta, OECD etc
• NGO’s – Oxfam
Globalization in reality involves…..

•International management
• The process of applying management concepts and
techniques in a multinational environment and adapting
management practices to different economic, political,
and cultural environments

•Multinational corporations (MNC)

• Operations in more than one country
• International sales,
• Nationality mix of managers and owners
MNCs

• Benefits for MNCs from developed countries doing

business in less developed countries:
o Cheap labour, favourable tax arrangements,
availability of natural resources, lower environmental
regulation
• Benefits for less developed countries doing business with
MNCs:
o Jobs (with higher salaries), transfer of advanced
technologies, economic growth, credibility

• But, of course, ‘downsides’……

Downsides?

• Location of jobs
o Are jobs created ‘offshore’ lost elsewhere? Typically
manufacturing, call centres and back-office functions
• Control and power of host country
o Control over trade; dependence on MNC; loss of political
independence?
• Lowering global standards
o “Race to the bottom” – MNCs change standards in other
countries
o Issues in terms of labour conditions (Nike, Primark supply
chain issues)
o Environmental issues
Downsides continued

Economic Benefits
o Do they really stay in the same country?

Cultural differences
o Work times, acceptable social behaviour, etc.
o Ethical relativism dilemmas (corruption and different
interpretations of ‘fair’)

Managing at distance
o Difficulty of coordination
o Risk
Ethics and Social Responsibility

• Corruption
• Government corruption pervasive element in international business
environment
• Scandals in Russia, China, Pakistan, Lesotho, South Africa, Costa
Rica, Egypt and elsewhere

• Central dilemma:
• If your competitors are paying bribes is it OK for you to do so???
CR Agenda

• Corporations receiving heavy criticism

• best known – Nike, Primark…?
• exploitation of low-wage workers
• Environmental abuses
• Intolerable workplace standards

• Response to social obligations

• Agreements and codes of conduct
• Maintenance of standards in domestic and global operations
• Cooperation with NGOs regarding certain social issues
• Fair Trade Foundation
‘Ethical Trading Initiative’

•The Ethical Trading

Initiative (ETI) is a
leading alliance of
companies, trade
unions, and NGOs
that promotes
respect for workers'
rights around the
globe.
Ethical Trading Initiative

What labor standards?

• Employment is freely chosen
• Freedom of association and the right to collective bargaining
• Working conditions are safe and hygienic
• Child labor shall not be used
• Living wages are paid
• Working hours are non-excessive
• No discrimination in practices
• Regular employment is provided
• No harsh or inhumane treatment is provided
‘Ethical Trading Initiative’

Is there a BUSINESS CASE?? It is but very much it:

• Risk/brand management
• Maintain sales/share price
• Productivity and quality improvements
• Retain customer and employee trust
• Pressure from investors and customers (PR)
• Because it’s the right thing to do!
E.T.I. continued

Company responsibilities
• Adopt the ETI Base Code
• Communicate the code throughout the company and
suppliers
• Monitor their supply chain against the Base Code
• Support independent verification
• Establish improvement plans with suppliers
• Inform workers about the Code
• Provide a means for confidential reporting of breaches
• Report annually to ETI on progress made
• Participate in projects to develop good practice
OECD Guidelines for Multinationals (2001) - extract

• General Policies: contains the first specific recommendations, including

provisions on human rights, sustainable development, supply chain
responsibility, and local capacity building, and more generally calls on
enterprises to take full account of established policies in the countries in
which they operate.
• Disclosure: recommends disclosure on all material matters regarding the
enterprise such as its performance and ownership, and encourages
communication in areas where reporting standards are still emerging such
as social, environmental and risk reporting
• Employment and Industrial Relations: addresses major aspects of
corporate behaviour in this area including child and forced labour, non-
discrimination and the right to bona fide employee representation and
constructive negotiations.
Continued…..

• Environment: encourages enterprises to raise their performance in protecting the

environment, including performance with respect to health and safety impacts.
• Combating Bribery: covers both public and private bribery and addresses passive
and active corruption.
• Consumer Interests: recommends that enterprises, when dealing with consumers,
act in accordance with fair business, marketing and advertising practices, respect
consumer privacy, and take all reasonable steps to ensure the safety and quality of
goods or services provided.
• Science and Technology: aims to promote the diffusion by multinational
enterprises of the fruits of research and development activities among the countries
where they operate, thereby contributing to the innovative capacities of host
countries.
• Competition: emphasises the importance of an open and competitive business
climate.
• Taxation: calls on enterprises to respect both the letter and spirit of tax laws and to
co-operate with tax authorities
Principles of the U.N.Global Compact

http://www.unglobalcompact.org/AboutTheGC/faq.html
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 CR in developing economies

• CR in developing economies
Visser, W. (2008) Corporate Social
Responsibility in Developing
Countries, In A. Crane, A.
McWilliams, D. Matten, J. Moon &
D. Siegel (eds.), The Oxford
Handbook of Corporate Social
Responsibility, Oxford: Oxford
University Press, 473-479

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CR in developing countries

• Developing countries: describes nations that have relatively lower per

capita incomes and are relatively less industrialized.

• The challenge for corporate social responsibility (CSR) in developing

countries is framed by a vision that was distilled in 2000 into the
Millennium Development Goals—‘a world with less poverty, hunger and
disease, greater survival prospects for mothers and their infants, better
educated children, equal opportunities for women, and a healthier
environment’ (UN, 2006: 3).

• Unfortunately, these global aspirations remain far from being met in many
developing countries today.
Rationale for focusing on CR in developing countries

• The rationale for focusing on CSR in developing countries (DC) as

distinct from CSR in the developed world is fourfold:
• represent the most rapidly expanding economies, and the most
lucrative growth markets for business
• are where the social and environmental crises are usually most
acutely felt in the world;
• are where globalization, economic growth, investment, and business
activity are likely to have the most dramatic social and environmental
impacts (both positive and negative); and
• present a distinctive set of CSR agenda challenges which are
collectively quite different to those faced in the developed world.
 What is the role of business in tackling the critical issues of
human development and environmental sustainability in
developing countries?

• CSR is often seen as a way to plug the ‘governance gaps’ left by weak, corrupt, or
under-resourced governments that fail to adequately provide various social services
(housing, health care, education, etc.).
• This is part of a wider trend in DC with weak institutions and poor governance, in
which responsibility is often delegated to private actors, be they family, tribe religion,
or, increasingly business.
• Furthermore, ‘as many developing country government initiatives to improve living
conditions falter, proponents of [CSR and bottom of the pyramid] strategies argue that
companies can assume this role’.
• However, there are many critics of this approach. Hamann et al. (2005) argues that
CSR is an inadequate response to these governance gaps and that more proactive
involvement in moving local governance towards accountability and inclusiveness is
necessary.
• There are also serious questions about the dependencies this governance gap
approach to CSR creates, especially where communities become reliant for their
social services on companies whose primary accountability is to their shareholders.
Drivers of CR in developing countries (Visser 2008)
Drivers of CR in developing countries (Visser 2008)

• While many believe CSR is a Western invention (and this may be largely true in
its modern conception), there is ample evidence that CSR in developing
countries draws strongly on deep-rooted indigenous cultural traditions of
philanthropy, business ethics, and community embeddedness. Indeed, some of
these traditions go back to ancient times.
• For example, the ethical condemnation of usurious business practices in
developing countries that practice Hinduism, Buddhism, Islam, and Christianity
dates back thousands of years.
• Similarly, ‘business practices based on moral principles were advocated by the
Indian statesman and philosopher Kautilya in the 4th century BC’.
Drivers of CR in developing countries (Visser 2008)
• In a Latin American context, ‘varied traditions of community self-help
and solidarity stretch back to the region’s pre-Hispanic cultures, and
include the mutual aid societies, trade unions and professional
associations that emerged in the 19th and early 20th centuries’.
• This is consistent with myths of CSR in Mexico that need debunking:
‘One myth is that CSR in Mexico is new, another is that US firms
brought CSR to Mexico, and a third is that CSR as practised by Mexican
firms simply reflects the CSR patterns and activities of US firms’
• Looking at more modern applications of CSR, region’s religious beliefs
are one of the major motivations for CSR.
• Similarly, Buddhist traditions in Asia are aligned with CSR.
 Are current Western conceptions and models of CSR adequate for describing CSR in developing countries?

Carroll’s (1996) CSR Pyramid, comprising economic, legal, ethical, and philanthropic responsibilities
- this is almost entirely based on research in an American context.

Even so, several empirical studies suggest that culture may have an important influence on
perceived CSR priorities

Taking this approach, my contention is that the order of the CSR layers in developing countries—if
this are taken as an indicator of the relative emphasis assigned to various responsibilities—differs
from Carroll’s classic pyramid.

In DC, economic responsibilities still get the most emphasis, philanthropy is given second highest
priority, followed by legal and then ethical responsibilities.

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Carroll’s (1996) CSR Pyramid
for developing countries
CSR Pyramid
for developing countries
 Sustainability

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 Global Warming……..

Facts
• Global warming is the increase of Earth's average surface
temperature due to greenhouse gases that collect in the
atmosphere like a thickening blanket, trapping the sun's heat
and causing the planet to warm up[1]
• Greenhouse gases keep heat close to the earth’s surface
making it livable for humans and animals. However, global
warming is happening largely due to an over-emittance of
these gases and fossil fuels (natural oil, gasoline, coal).[2]
• According to the U.S. Global Change Research Program, the
temperature in the U.S. has increased by 2 degrees Celsius
in the last 50 years and precipitation has increased by 5%.
[10]
• Global warming puts coral reefs in danger as the ocean
warms, scientist fear that coral reefs will not be able to adapt
quickly enough to the resulting changing conditions, and
bleaching incidents and diseases will increase[11]

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 Global Warming
Facts
With the start of industry in the 1700's, humans
began emitting more fossil fuels from coal, oil,
and gas to run our cars, trucks, and factories.
By driving a “smarter” car, you will not only
save on gas, but help prevent global warming.
[3]
There is more carbon dioxide in the
atmosphere today than at any point in the last
800,000 years.[4]
Though Americans make up just 4 percent of
the world's population, we produce 25 percent
of the carbon dioxide pollution from fossil-fuel
burning -- by far the largest share of any
country.[5]
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 Facts

The Environmental Protection Agency (EPA) has

both the authority and responsibility to reduce
pollution from electric power plants under the
Clean Air Act, the nation's bedrock air pollution law
adopted in 1970.[6]
Since 1870, global sea levels have risen by about
8 inches.[7]
Global climate change has already had observable
effects on the environment. Glaciers have shrunk,
ice on rivers and lakes is breaking up earlier, plant
and animal ranges have shifted and trees are
flowering sooner.[8]
Heat waves caused by global warming present
greater risk of heat-related illness and death, most
frequently among people who have diabetes who
are elderly or are very young.[9]
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Sustainable Development: definition form Brundtland Report 1987

Sustainable development is development that meets the needs of the present

without compromising the ability of future generations to meet their own
needs.

It contains within it two key concepts:

1) the concept of 'needs', in particular the essential needs of the world's poor, to
which overriding priority should be given
2) the idea of limitations imposed by the state of technology and social
organization on the environment's ability to meet present and future needs.

• For example: corporate environmental responsibility & sustainable employment

Business

case for sustainability:
Cost avoidance & reduction: resource efficiencies; supply chain efficiencies
 Revenue growth: new markets
 Revenue protection: risk management
The new paradigm?
Skepticism Towards Economic Growth

• New Economics Foundation 2006 report, ‘Growth Isn't

Working’
• Between 1990-2001 for every $100 of growth in the
world’s economy per person, just 60 cents contributed to
reducing the poverty of those living on less than 1$ per
day
• Millennium Ecosystem Assessment 2005 estimated that
60% of the ecosystem resources that support life on
earth are being degraded or used unsustainably
Failings of Current Economies and what the goals should be …

Failings Goals
- Lack of education - Fulfilling
- Governance failings - Inclusive
- Short –term focus - Far-sighted
- Unfair distribution - Developing
- Human weakness - Equitable
- Inappropriate incentives - Sustainable
- Cost externalisation - Participatory
- Divided purpose - Innovative
- Unsuitable values - Diverse
- Misleading measures - Accessible
Conclusions

• Operating internationally/globally can bring enormous commercial

benefits: new markets, cheap labour etc
• These opportunities (threats) are not going to disappear
• Operating in this business context (‘the bottom of the pyramid’)
brings new ‘temptations’
• The challenge is to balance the commercial benefits with CSR
• Codes such as the E.T.I. can help
• Businesses have a major role in tackling the critical issues of
human development and environmental sustainability in
developing countries.
• Sustainability helps Cost avoidance & reduction: resource
efficiencies; supply chain efficiencies
Coursework 1 – Seminar Participation including
one Group Presentation (20%)

• The presentation groups will comprise 3 to 4 students per

group.
• Presentation groups will be asked to review and critique the
annual reports of an organisation of their choosing – reviewing
their content against the UK Corporate Governance Code; and
Transparency International’s transparency guidelines.
• Pick ONE international business from the FTSE 100 that has
not been chosen by another group. Prepare a presentation
(using power point) with your findings.
Coursework 1 – Seminar Participation including
one Group Presentation (20%)

Also, please answer the following questions:

 What worked well in the report/ strengths?
 What did not work well in the report/ weaknesses?
 What are your specific recommendations for improving the
report? How would you rewrite this report?
Think about: criteria for choosing Company and reviewing their
report(s); how/who will present; participation, division of labour
etc.!
Coursework 1 – Seminar Participation including
one Group Presentation (20%)

Each group will be allocated 20 minutes per presentation,

including 5 minutes for Q&A. Students must not plagiarize
lecturer's slide/s in their presentations.
All theoretical arguments and organisational examples in the
presentation must be supported by adequate 'in text'
references on each slide, and a detailed list of references at
the end of the presentation.
The Harvard style of referencing must be followed
consistently.
Coursework 1 –Group Presentation (20%)

Students must rehearse in advance before delivering the

presentation.
Presentations will be delivered live during the seminar time.
Each group will need to submit the presentation on moodle. Just
one group member per group.
All students must study the seminar topic or/and case study in
advance and be able to discuss and answer any relevant
questions during seminar sessions.
Presentations should:

Be timed to last within the time limit.

Include all members of the presenting group
Provide an answer to the class/case question
Integrate theory with organisational examples
Ask questions, use a case study etc. to stimulate further discussion
from the audience
Be based upon wider reading than the lecture notes
Make use of overheads and/or hand-outs
Be practiced beforehand so that presenters are fluent, confident and
above
all within the available time
Be interesting!!!
Thank You.