Do MNEs Migrate to Green Policy only when forced by Government Regulations?

One of the persistent debates in recent years is whether business corporations should be tightly regulated to conform to environmental preservation standards. Also referred to as the green movement, some corporations have voluntarily proposed and adopted these standards as a way of showing their public responsibility. Critics argue that such moves are largely public relations exercises, with little true intent to preserve the planet. Even if such intent exists, it is incidental to the profitability of business.  Hence, as of now, there is no consensus as to the nature and scope of governmental regulation.

The rest of the essay will present views from both sides of the debate and argue that ultimately a strong regulatory framework is essential if Multinational Enterprises (MNEs) are to take green standards seriously.

In looking to answer the topic question, it is useful to peruse sociological scholarship and policy literature on the subject. Conventionally, analyses of the topic have tended to focus on corporate compliance within existing legislations.

Here, it is tacitly assumed that complying with regulations by targeted groups is essential and sufficient for meeting goals of social regulation. Another assumption is that business enterprises go out of their way and improve their green standards only when they are faced with steep penalties for failing to do so. In this analytic framework, corporations are seen as ‘amoral calculators’ of risk and reward for themselves; and their primary motive is to maximize profits while minimizing losses in the form of penalties. This used to be the traditional view on corporate compliance.

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Yet, in recent years a refreshingly new pattern of corporate behaviour has started to emerge, giving government agencies and social activists renewed hope.

“It is becoming apparent that an increasing number of companies now perform, to a greater or lesser extent, “beyond compliance” with existing regulatory requirements. This suggests that the degree of variation in, and the motivations for, corporate behaviour may be much broader than many researchers have imagined previously. This is of practical importance: some existing regulatory strategies, in focusing on compliance, have failed to facilitate, reward, or encourage beyond-compliance behaviour, or even inadvertently discourage it, while other regulatory reformers, in contrast, have argued that government-mandated self-regulation is the key to progress.”

Hence, it could be argued, that MNE’s need not always be pushed by government regulations in order to make their activities clean and green. Scholars such as Samuel Loewenberg, on the other hand, are not quite enthused by the record of major corporations (especially those based in the United States), in upholding green standards. The chemical industry in the United States, which is a major contributor to environmental pollution, has been a culprit in this regard. While the industry got away with its slack quality and safety standards in its home country, it got into controversies upon entry into the European market. The EU, worried that it does not possess health and environmental data on most of the chemical compounds currently in use, is drawing up legislation that “by 2005 will require the industry to conduct extensive safety tests on 30,000 common chemicals. At least 1,500 are expected to be banned or severely restricted in their use as a result. The industry estimates that the testing alone will cost it more than $7.5 billion.”

MNE’s based in the United States, whose present safety norms are supported by Washington, continues to put pressure on the EU to loosen up its standards. In Washington, MNEs wielding insider connections and an abundance of campaign funds are used to wooing legislators and regulators. But this tactic does not work in Europe, reflecting a basic difference in the way commerce and public safety are perceived in the two regions. For example, “Over the last few years, the European Union has put into effect a raft of far-reaching environmental and consumer-protection legislation that would be unimaginable in Washington.

A moratorium on genetically modified foods; another on beef treated with growth hormone; a requirement that automakers and electronics manufacturers pick up the tab for disposing of their products in environmentally friendly ways; and a ban on the use of such common electronics manufacturing materials as mercury, lead and brominated flame retardants. It also recently upheld a prohibition on pharmaceutical company advertising and is debating whether to prohibit television commercials directed toward children.” Since the United States is home to major MNEs in the world and since its complete access to the EU market is only a matter of time, it makes good sense to make its corporations comply with EU regulations.

In the case of the United Kingdom too, which upholds the common environmental preservation ethos of the European Union, there are a few instances of corporate indiscretion. That is, despite an elevated set of regulations to abide by, some businesses do ignore green credentials of their suppliers against government expectations. Take say the area of West Midland. A research by BT Business “could not find a single small business in the region that took the environmental values of suppliers into account, even though one in five said customers asked them about it”. Hence, in conclusion, and on balance, it is better to have comprehensive environmental regulations and strict punitive measures, as opposed to allowing MNE’s freedom in the hope that they self-regulate. Although some companies have successfully implemented green policies, most others operate purely on the profit-motive, putting the future of the planet at dire risk.

References

Cockburn, A. (1990, February 26). Greens, Gas and Capital. The Nation, 250, 262+.
Dahl, R. (2010). Green Washing: Do You Know What You’re Buying?. Environmental Health Perspectives, 118(6), 246+.
Wes Vernon, Exposing Dishonesty of the ‘Greens’. (2010, May 26). The Washington Times (Washington, DC), p. B04.
Fowler, R. J. (1995). International Environmental Standards for Transnational Corporations. Environmental Law, 25(1), 1-30.
Furniss, C. (2006, October). How Green Is Your Business. Geographical, 78, 45+.
Kagan, R. A., Gunningham, N., & Thornton, D. (2003). Explaining Corporate Environmental Performance: How Does Regulation Matter?. Law & Society Review, 37(1), 51+.
Loewenberg, S. (2003, July/August). Business Meets Its Match: U.S. Corporations Get Their Way at Home. but the Old Charm Isn’t Working in the Old World. The American Prospect, 14, 55+.
Moore, C. (1995, January/February). Green Revolution in the Making. Sierra, 80, 50+.
Pollin, R. (2009, April). Where the Jobs Are: Compared to Spending on the Military or Oil Industry, Green Investment Can Improve Both Job Quantity and Quality. but It Will Take a Massive Shift in Resources. The American Prospect, 20, 7+.
Shamir, R. (2004). Between Self-regulation and the Alien Tort Claims Act: on the Contested Concept of Corporate Social Responsibility. Law & Society Review, 38(4), 635+.
Scotney, Tom. Small Companies Ignoring ‘Green’ Suppliers, Says BT; ENTERPRISE. (2008, May 7). The Birmingham Post (England), p. 22.