Magazine article European Business Forum

How Multinationals Are Responding to CSR: MNCs Face the Most Difficult Dilemmas Because They Operate in Countries with Widely Diverging Socio-Economic and Environmental Conditions. the Lesson from the Last Decade or So Is That Regulation and Self-Regulation Are Both Needed

Magazine article European Business Forum

How Multinationals Are Responding to CSR: MNCs Face the Most Difficult Dilemmas Because They Operate in Countries with Widely Diverging Socio-Economic and Environmental Conditions. the Lesson from the Last Decade or So Is That Regulation and Self-Regulation Are Both Needed

Article excerpt

In recent years the 'Janus face' of globalisation has received much attention, most notably at international meetings such as those of the World Trade Organisation in Seattle and the G7/8 summits, as well as in a number of books. Overall suspicion about corporate behaviour and accountability has been fuelled following accounting scandals, especially those at Enron, WorldCom and Ahold.

Interest in this topic first started in the 1970s, resulting at the time in attempts by international organisations such as the OECD, ILO and UN to draw up codes of conduct to regulate multinational behaviour. Some multinationals reacted by adopting codes or introducing their own 'rules of engagement'. In the US and in a few European countries, social reporting emerged, but usually with the more limited objective of disclosing information on employee matters, and sometimes also environmental and local community impacts. Overall, however, this development lasted less than a decade.

In the 1980s, mandatory international codes proved to be unfeasible, and interest in codes of conduct, social reporting and the international dimensions of corporate behaviour faded. At the same time, reduced government intervention and market liberalisation facilitated globalisation, creating a social and regulatory void in which non-governmental organisations (NGOs) started to express concerns about the negative environmental and social implications.

Current situation

In the 1990s, NGOs and international organisations renewed their efforts to increase corporate social accountability, to which companies and their business associations responded. Multinationals started to adopt codes of conduct and publish environmental, social or sustainability reports. Our research on corporate social responsibility and accountability, carried out in the past five years, shows an increasing activity of large multinationals. Currently, 65 per cent of the largest 200 industrial MNCs have a code of conduct, and almost 60 per cent publish a sustainability report on environmental and sometimes societal issues (see Table 1).

Variations can be found between sectors and countries, depending on the topic at hand. The financial sector, for example, is less active in the publication of sustainability reports, although the trend is improving. Twenty-five per cent of banking and insurance firms listed in the Global Fortune 250 Companies have published a sustainability report in the past year (against more than 50 per cent for the industrial sectors). The percentage of European and Japanese MNCs with a sustainability report is considerably higher than in the case of US MNCs (see Table 1). This is related not just to the higher degree of internationalisation of these MNCs, but also to domestic regulatory requirements, other forms of explicit government encouragement and stakeholder pressure for social accountability (Kolk, 2003; KPMG/UvA, 2002).

With regard to codes of conduct, US MNCs are much more active than their foreign counterparts, having adopted such rules of behaviour considerably earlier than European and especially Japanese MNCs (Kolk et al, 1999). In Japan, codes tend to focus on internal ethical matters rather than international societal issues. Moreover, some sectors are more 'vulnerable' to criticism than others. The issue of child labour, for example, is most controversial in labour-intensive sectors such as apparel and carpet production, and linked to the structure of multinationals' production network and their corporate visibility (Kolk & Van Tulder, 2002; Van Tulder & Kolk, 2001).

With these variations, however, it can be concluded that accountability on social and environmental issues has become rather common for many multinationals. The question is the extent to which current forms of disclosure address concerns raised about the negative implications of globalisation. In other words, what can be said about the significance

and 'sustainability' of this development? …

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