Responsible Competitiveness: Making Sustainability Count in Global Markets
Zadek, Simon, Mcgillivray, Alex, Harvard International Review
The need for a more responsible basis on which businesses and economies compete in international markets has never been greater. Global corporations with global strategies contribute to rising inequality and falling economic opportunities for lower-income communities across the developed world. Low wages and poor working conditions are sources of international competitiveness for businesses from Dhaka to Johannesburg, and weak environmental regulatory enforcement continues to deliver profitable opportunities to many firms, whether they are mining copper, shipping oil, or cutting down forests. Such markets that reward poor social and environmental behavior will impede our collective efforts to address today's greatest challenges, from water scarcity and food insecurity to civil unrest and the rise of fundamentalism. Economic protectionism, underpinned by xenophobia and racism, is the consequence of diminished confidence that open international markets can deliver the goods.
A generation of innovative business strategies and practices are emerging that deliver profits from more responsible behavior. At their minimum, they protect companies' reputations and brands, reducing the risks of consumer boycotts, recruitment bottlenecks in the face of bad press, or restricted or more expensive access to capital. Beyond this, companies have enhanced productivity through improved working conditions and driven product innovations by engaging with communities and understanding their issues and needs. Global leaders like General Electric have built multibillion dollar businesses offering energy-efficient products, and last year UK consumers alone purchased around US$60 billion worth of goods and services marketed with ethical virtues such as child labor, human rights, and arms control.
The challenge is to move beyond the exceptional and exemplary cases of responsible behavior to establish new norms of "responsible competitiveness" in global markets. Exceptional cases of responsible business behavior are important sources of insight and inspiration but will only deliver significant impact if they serve to reshape how markets more systematically reward and penalize all businesses' social and environmental impacts. Nike and Levi's, as premium brands appealing to socially and environmentally-conscious consumers, may successfully secure a competitive edge through improved labor standards. But achieving such standards across the whole apparel and footwear sector, including cheaper brands selling to more price-conscious consumers, requires accepted and enforced market rules. Ikea or Home Depot, similarly, might ensure that their wood products are made from sustainable forest reserves, but this will have little impact unless such practices are scaled up across all wood products.
Achieving responsible competitiveness across global markets requires the right combination of business, government and civil society policy and action. Since 2002, AccountAbility has built a framework enabling the measurement and analysis of factors that advance the responsible competitiveness of nations. Pascal Lamy, Director-General of the World Trade Organization, summarizes the key drivers in his overview of this work in identifying the need for "forward looking corporate strategies, innovative public policies and engaged and vibrant civil societies."
Innovative means of combining these three drivers of responsible competitiveness have emerged over the last decade. In particular, a host of collaborative initiatives, involving businesses, NGOs, and public institutions including governments and international agencies like the UN's International Labour Organization (ILO), have emerged to set voluntary rules, providing codes of conduct and standards for reporting and consumers labels. For example, factory conditions for millions of people working in the global supply chains of apparel and textiles sectors have improved over the last decade through several such initiatives, including the Fair Labor Association, the Ethical Trading Initiative, and Social Accountability International. …