Andrew Crane, Director at the International Centre for Corporate Social Responsibility, Says the Roles of Corporations and Governments Are Beginning to Blur. but Can Businesses Ever Really Work for the Greater Good of Society When Their Loyalties Lie with Shareholders?
Crane, Andrew, European Business Forum
Are corporations becoming more like governments? At one level, the answer has to be a resounding "yes". After all, many of the roles, responsibilities and functions that we once considered to be the sole preserve of governments are increasingly shouldered by corporations. This is the brave new world of corporate responsibility, where firms are extolled to protect human rights, safeguard the environment, stamp out corruption, provide schools and hospitals in developing countries, rebuild communities and contribute to any number of other social initiatives. What happened to human rights being a governmental responsibility? Or health and education being a matter solely for politicians to decide on?
To see just how far this is changing the business landscape, just think about what it means to be a citizen now in various parts of the world. Consider the case of a basic social good like water: 460 million people around the world are now dependent on private water corporations, not their governments, to provide them with adequate service. While this may improve quality and value in some cases, in other cases water corporations such as the French multinational Suez have been able to simply up sticks and cut off supply to citizens because of poor profitability, even in major cities such as Buenos Aires and Manila.
Or what about the thousands of workers across the world toiling in factories making t-shirts and trainers for the global marketplace? Who do they count on to protect their basic rights? It's not the governments of China, Indonesia or Turkey that are blamed when abuses are found, but the global apparel brands such as Gap, Nike, and Adidas - even though they seldom own the factories that the workers clock in to every day.
So what has changed then? The simple way to look at it is to see this merely as a shift from the public to the private sector in the provision of social goods. But, in reality, it is a whole lot more than that. What we have seen is not just a shift in provision but a shift in governance. By governance, I mean the social goals that are set and the rules and steering mechanisms put in place to achieve them. Where once we may have expected governments to set the rules and the goals, and business simply to do the legwork, in the new global order it is corporations who also do much of the governing.
Take the sweatshops case above. Certainly, governments in Asia and South America have all sorts of regulations on working conditions but these are systematically ignored. So who is putting in place the codes of conduct and ensuring compliance? Corporations, of course. Or consider the case of corruption. For years, governments in the developing world have been helpless in the face of corruption. This has hampered development efforts, disenfranchised the populace and created a system of abuse of authority. Now it is left to multinationals such as BP and Unilever to regulate within their own spheres of authority rather than wait for governments to act. And the list goes on. Replace corruption with HIV/AIDS protection or with the preservation of indigenous communities in the face of major infrastructure projects, and it is corporations that are expected to sit down with the local communities and work out solutions, not just governments. …