THE GLOBALIZATION OF CORPORATE SOCIAL RESPONSIBILITY: REALITY ...Document Transcript
GLOBALIZATION OF SUSTAINABLE DEVELOPMENT?:
PRINCIPLES AND PRACTICES IN TRANSNATIONAL
Dennis A. Rondinelli
Georgia Tech Center for International Business Education and Research
Working Paper Series 2007-2008
Working Paper 023-07/08
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GLOBALIZATION OF SUSTAINABLE DEVELOPMENT?: PRINCIPLES AND
PRACTICES IN TRANSNATIONAL CORPORATIONS
Dennis A. Rondinelli
International Research Colloquium
Multinational Enterprise and Sustainable Development: Strategic Tool for Competitiveness
Center for International Business Education and Research
October 19-20, 2006
Dennis A. Rondinelli is Senior Research Scholar at the Duke Center for International
Development, Sanford Institute of Public Policy, Duke University, Durham, North Carolina and
Director of the Pacific Basin Research Center, Soka University of America, Aliso Viejo,
California. He is also the Glaxo Distinguished International Professor of Management Emeritus
at the University of North Carolina-Chapel Hill.
The growing public concern that private corporations should not only earn reasonable
profits and provide fair returns to shareholders but also operate as good corporate citizens and
socially responsible organizations has spread to the largest transnational corporations (TNCs)
and seems to have been taken up by companies in both richer and poorer countries. Sustainable
development -- a concept that has been widely adopted by international organizations, national
and local governments, and businesses -- calls for people and organizations “to meet the needs of
the present without compromising the ability of future generations to meet their own needs.” 1
The concept of sustainable development includes the simultaneous consideration of economic
growth, environmental protection, and social equity in business planning and decision-making. 2
As part of their corporate citizenship or social responsibility strategies many TNCs are creating
voluntary environmental programs to manage more effectively the environmental impacts of
their plants, facilities, and operations. 3 These sustainable development initiatives are especially
important in transitional and developing countries around the world where environmental
conditions are already hazardous, where social conditions often lag far behind those in richer
countries, and where regulatory protection for people and the environment either may not now
exist or is ineffectively implemented.
A study undertaken by the Organization for Economic Cooperation and Development
claims that corporate social responsibility initiatives are now “a broad international business
trend,” both in OECD countries and emerging market countries. 4 Over the past decade an
increasing number of TNCs have adopted corporate social responsibility (CSR) strategies, issued
sustainability or corporate responsibility reports, and implemented and monitored the impacts of
their CSR programs. The study found increasing corporate engagement on social responsibility
issues as measured by membership in the Dow Jones Sustainability Index, registration with the
Global Reporting Initiative, responses to the Carbon Disclosure Project, and ISO 14001
certifications. The number of voluntary ISO 14001 Environmental Management Systems
certifications, for example, has increased steadily from a little more than 36,000 in 2001 to more
than 111,000 in 2005. 5
The KPMG International Survey of Corporate Responsibility Reporting 2005 that
included more than 1600 companies, including 250 companies of the Fortune 500 (Global 250)
and the top 100 companies in 16 countries (National 100) found that corporate responsibility
reporting has been steadily increasing since 1993. KPMG found that in 2005 “52 percent of the
G250 companies and 33 percent of the N100 companies issued separate corporate responsibility
reports, compared to 45 percent and 23 percent, respectively, in 2002.” 6 The most dramatic
change that KPMG found was that many of the companies have moved from simply reporting
environmental data to reporting sustainability information on social, environmental and
Corporate social responsibility programs of most large TNCs in the past were often
defined narrowly as environmental regulatory compliance, environmental management practices,
philanthropy, or developing external relationships with stakeholders to address social and
environmental problems. 7 Increasingly companies have included incentives for employees to
work with community groups on natural resource conservation and protection projects and
making donations and gifts for environmental programs. Many companies now include
assessing the quality of local environmental conditions and local environmental sustainability
and carrying capacity, contributing to environmental infrastructure development or
improvement, sponsoring education and training programs for employees, funding community-
initiated social development initiatives, and creating formal stakeholder relationships with social
and environmental interest groups, nonprofit organizations, and local governments to prevent or
solve crucial social and environmental problems. 8 Other companies include in their sustainable
development programs the adoption of internal management practices that prevent pollution at its
Despite the fact that an increasing number of TNCs seem to be adopting sustainable
development strategies, critics contend that their corporate social responsibility reports may
misleading, incomplete, and self-serving, that is, simply public relations gimmicks that are not a
true reflection of their business practices. Skeptics argue that transnational corporations often
use their sustainability or corporate social responsibility reports as “green wash,” to cover over
or divert public attention from business practices that continue to endanger the environment and
create risks for the communities in which they operate. Indeed some critics argue that TNCs are
“incompatible with sustainable development,” because they have no long-term commitment to
community or place, future generations, democractic governance, equity and social justice, and
that they simply “seek to create greater wants, focusing on ‘excessities’ more than necessities.” 10
Questions remain about how large multinational companies conceive of sustainable
development, how comprehensive and integrated their sustainable development policies are with
their business models, strategies, and practices, how far TNCs go beyond required regulatory
controls in attempting to achieve sustainable development goals, how they implement their
social responsibility and sustainable development programs, how their sustainable development
strategies are monitored and evaluated, and how effective their sustainable development
practices really are.
This paper explores these questions by examining the corporate responsibility and
sustainable development strategies of what the United Nations Centre for Trade and
Development (UNCTAD) has designated as the 25 most globalized TNCs, that is, those
companies with largest foreign assets, sales, and employment in the world. UNCTAD’s 2004
ranking of the most globalized TNCs provides a sample of corporate CSR reports that can be
used to examine their social responsibility and sustainable development activities.
The adoption of corporate responsibility strategies by TNCs with the largest foreign
assets is significant because of their worldwide economic and social influence. Their foreign
assets, sales, and employment have strong global impacts. (See Table 1.) According to
UNCTAD, the 25 most globalizaed TNCs had more than $3.4 trillion in assets, more than $1.9
trillion of which were held outside of their home countries. The 25 conglomerates had total sales
of more $2 trillion. They employed more than 4.2 million people and created employment for
millions more working for suppliers, service firms, contractors, and their overseas affiliates.
They represented a wide variety of industries including telecommunications, motor vehicles,
electrical and electronic equipment, petroleum products, energy and utilities, media,
pharmaceuticals, and diversified mixes of products.
The sheer economic power of these companies is enormous. BP, the British based
petroleum and energy-resources company, for example, alone had total sales in 2003 of more
$180 billion, more than the gross domestic income of 106 countries the previous year. The seven
automobile makers among the 25 most globalized TNCs—General Motors, Ford, Toyota,
Volkswagen, Honda, BMW, and Fiat—had revenues from sales ($652 billion) in 2003 that
exceeded the gross national income a year earlier of every country in the world except nine --
India, Canada, China, France, Germany, Italy, Japan, the United Kingdom, and the United States.
The total sales revenue of the 25 companies exceeded the Gross Domestic Product of all of the
Table 1. 2004 UNCTAD Ranking of Most Globalized Nonfinancial Transnational
Foreign Total Total
Ranking Corporation Assets Assets Sales Employment
1 General Electric 229,001 575,244 131,698 315,000
2 Vodafone Group Plc 207,622 232,870 42,312 66,667
3 Ford Motor Company 165,024 295,222 163,420 350,321
4 British Petroleum Plc 126,109 159,125 180,186 116,300
5 General Motors 107,926 370,782 186,763 350,000
6 Royal Dutch/Shell 94,402 145,392 179,431 110,000
7 Toyota Motor Corp. 79,433 167,270 127,113 264,096
8 Total 79,032 89,450 96,993 121,469
9 France Telecom 73,454 111,735 44,107 243,573
10 ExxonMobile Corp. 60,802 94,940 200,949 92,000
11 Volkswagen Group 57,133 114,156 82,244 324,892
12 E.On 52,294 118,526 35,054 107,856
13 RWE Group 50,699 105,116 44,110 131,765
14 Vivendi Universal 49,667 72,682 55,004 61,815
15 ChevronTexaco Corp. 48,489 77,359 98,691 66,038
16 Hutchison Whampoa 48,014 63,248 14,247 154,813
17 Siemens AG 47,511 76,474 77,244 426,000
18 Electricité de France 47,385 151,835 45,743 171,995
19 Fiat SPA 46,150 96,990 52,638 186,492
20 Honda Motor Company 43,641 63,167 65,366 63,310
21 News Corporation 40,331 45,214 17,421 35,000
22 Roche Group 40,152 46,160 19,173 69,659
23 Suez 38,739 44,805 43,596 198,750
24 BMW AG 37,604 58,192 39,995 96,263
25 Eni Group 36,991 68,987 45,329 80,655
Total 1,907,605 3,444,941 2,088,827 4,204,729
Source: UNCTAD, 2004.
poor and middle income countries combined in each of six regions of the world -- East Asia and
the Pacific, South Asia, Europe and Central Asia, Latin America and the Caribbean, and the
Middle East and North Africa, and Sub-Saharan Africa.
Presumably, corporate practices and behavior of the 25 most globalized TNCs can
influence, for good or ill, stakeholders around the world more directly and more powerfully than
even the governments of the countries in which they operate. 11 They often set the example for
other TNCs and for domestic firms in both their home and host countries. 12 How the largest
global TNCs perceive corporate social responsibility, define the activities that constitute socially
responsible corporate behavior, and implement their sustainable development plans and monitor
impacts can profoundly affect the people and places where they operate.
This paper reviews the contents of the social responsibility reports published on the
Internet websites of the 25 TNCs with the largest foreign assets. 13 The content analysis used
public information provided by the companies with no independent attempt to verify the
accuracy of their reports, other than accepting the certification of external auditors engaged by
the companies. The attempt here was not to prove or disprove that the companies consistently
lived up to the claims they made in their public documents, but to discern how they define and
seek to implement their strategies.
WHAT IS SUSTAINABLE DEVELOPMENT STRATEGY?
The concepts of corporate social responsibility and sustainable development are defined
broadly and often used interchangeably. In general, however, corporate social responsibility is
often seen as a means of attaining sustainable development goals. The World Business Council
for Sustainable Development defines corporate social responsibility as “the ethical behavior of a
company toward society,” that is, management “acting responsibly in its relationships with other
stakeholders who have a legitimate interest in the business—not just the shareholders.” 14 Others
point out that corporate citizenship is “about understanding and managing an organization’s
influences on and relationships with the rest of society in a way that minimizes the negative and
maximizes the positive.” 15 Business for Social Responsibility, an environmental interest group,
considers corporate social responsibility to be “operating a business in a manner that meets or
exceeds the ethical, legal, commercial, and public expectations that society has of business.” 16
Logan, Roy and Regelbrugge point out that corporations exhibit good citizenship through
at least four levels of activities: 17 1) commercial self-interest -- in which they adhere to all laws
and regulations and select those activities benefiting stakeholders and communities that also
directly contribute to their profitability and competitiveness in the market; 2) expanded self-
interest with immediate benefits -- in which they undertake activities that go beyond normal
business concerns to benefit stakeholders and communities in ways that also provide measurable
short- and medium-term benefits to the company; 3) expanded self-interest with long-term
benefits -- in which they support community activities, such as education and training, that will
have important impacts on continuing business success; and 4) promoting the common good -- in
which they support or participate in activities that improve conditions in the community or for
stakeholders with no expectation of direct tangible benefits to the company.
HOW DO THE MOST GLOBALIZED TNCs PERCEIVE CORPORATE SOCIAL
Of the 25 most globalized TNCs ranked by UNCTAD in 2004, all identified and
provided Internet access to reports they variously titled “corporate responsibility,” “corporate
social responsibility,” “leadership and vision,” “corporate citizenship,” “sustainability,” or
“environmental, health and safety” reports. Although all but four (Toyota, Honda, The News
Corporation, and Hutchison Wampoa) of the top 25 non-financial TNCs ranked by the United
Nations Conference on Trade and Development (UNCTAD) were US- or Western European-
based companies, between 2002 and 2005 they had all issued CSR reports or documents related
to social responsibility. 18
The CSR reports of the companies still have not reached a level of standardization that
allows easy compilation of frequency distributions of the definitions and components of
corporate social responsibility. Table 2 indicates the frequency with which companies reported
the activities they considered to be part of their corporate social responsibilities. In order to be
Table 2. Corporate Social Responsibility Activities Reported
Activity Frequency of Coverage
Corporate environmental management 21
Health and safety standards 21
Environmental protection 20
Community economic/ social development 19
Socially oriented product/service development 18
Dialogue with stakeholders 18
Code of ethics/corporate behavior 17
Maintaining/promoting diversity 17
Developing employee skills 17
Employee works standards/welfare 16
Financial accountability/transparency 16
Alternative energy use 16
Corporate governance standards 14
Human rights principles 12
Support for employee community
voluntary services 12
Supplier behavior codes 12
Concern for consumer safety 7
Fair compensation and benefits 6
Responsible marketing standards 4
Code of fair procurement 3
counted, the report had to address the issue rather than merely mention it and to explain how the
company was carrying out its CSR activities. Clearly, the most frequently reported CSR
activities were those related to legal compliance – corporate environmental management, health
and safety standards and environmental protection. Most companies also reported philanthropic
or charitable activities as part of their CSR strategies and included not only charitable donations
but also community economic and social development projects and support for employees
involved in voluntary community activities. A third most frequently reported category of CSR
activities involved the development of socially-oriented products or services.
Many of the TNCs are also developing contacts and engaging in dialogues with
stakeholders, both internally and externally, on corporate social responsibility standards and
activities. Most companies report enhancement of employee working conditions and capabilities,
diversity in the work place, and fair treatment of workers as an important part of their CSR
strategies. Finally, TNCs are adopting corporate governance, ethics, fair procurement, and
financial transparency codes both in compliance with national legal requirements and as
voluntary standards of business practice.
For many of the corporations their first CSR report was published only within the last
three to five years. The titles of their reports often indicate the focus of their strategies, but
increasingly those with more comprehensive CSR strategies are coming to define social
responsibility as the combination of governance, financial transparency, environmental
management, product impact, human and labor rights, employee safety, product innovation, and
charitable activities. Many of the companies follow guidelines for defining the scope of their
CSR strategies and reporting established by external organizations such as the Global Reporting
Initiative (GRI), the United Nations Global Compact, the Global Environmental Management
Initiative (GEMI), or others. The 25 most globalized TNCs define CSR in a variety of ways, yet
the coverage of the reports indicates some convergence in the perceptions of TNC executives
about the most important components of CSR.
HOW COMPREHENSIVE ARE TNC’s SOCIAL RESPONSIBILITY STRATEGIES?
Among the world’s 25 most globalized transnational corporations, the scope of reported
CSR activities varied greatly. The 25 firms can be categorized into three levels of coverage:
comprehensive strategies, diversified strategies, and focused on limited strategies. (See Table 3.)
Table 3: Comprehensiveness of CSR Activities
“Comprehensive” CSR ExxonMobil 17 Vodaphone 17
Activities BMW 16 General Electric 16
Ford 15 RWE Group 15
“Diversified” CSR Activities Roche Group 14 Eni Group 14
BP 13 France Telecom 13
Shell 14 Electricité de France 13
Total 13 General Motors 12
Vivendi 11 Volkswagen 11
Fiat SPA 11 Toyota 10
Chevron 10 Suez 10
“Focused” or “Limited” CSR Honda 7 E.On 6
Activities News Corp. 5 Hutchinson Wampoa 5
1. Comprehensive Strategies. Seven of the 25 companies had CSR reports that were
more comprehensive in coverage, identifying 15 or more of the 21 CSR activities reported.
ExxonMobil and Vodaphone reported the largest number of CSR activities, closely followed by
BMW, General Electric, Ford Motor Company, RWE, Ford Motor Company, and Siemens.
General Electric, the US-based diversified TNC, defines social responsibility as complying with
laws at all of its business locations, protecting the safety of employees on the job, being a “good
neighbor” in the communities in which it operates, addressing historical contamination issues
cooperatively and incorporating principles of social responsibility in processes and products. 19
Toyota’s environmental policy pledges to promote environmental measures that strengthen its
reputation as “a company trusted by the local community.” 20
ExxonMobil’s CSR strategy consists of 16 policies that form its standards of business
conduct. It includes in its CSR policies ethics, conflict of interest, directorships, political
activities, international operations and health, environment, and safety. Its standards include
policies on product safety, customer relations, alcohol and drug use, and work place
harassment. 21 The Ford Motor Company has incorporated into its CSR strategy stronger
standards for the independence of company directors, a comprehensive set of policies, directives
and standards of corporate conduct, and the use of comprehensive assessments to identify
potential legal compliance issues and take action to prevent violations. 22
The British-based TNC Vodafone also sees social responsibility broadly as developing
products and services that meet social and environmental needs, guidelines for responsible
marketing, and a code of ethical purchasing throughout its supply chain. BMW sees its work on
hydrogen cars, its research on issues of transportation mobility, the development of mobile
sensors to monitor traffic flow, and the development of clean energy for automobile
transportation as socially responsible activities. 23
2. Diversified CSR Activities. Another 14 of the top 25 most globalized TNCs had
diversified strategies for corporate social responsibility, ranging from 10 to 14 of the 21 reported
activities. The Eni Group, an Italian-based petroleum exploration, refining, and distribution
company, sees CSR as a condition for international competitiveness, arguing that “an important
factor in the long-lasting success of business activities lies in the ability to generate a sustainable
value; a goal that can be achieved only by respecting the different needs, cultures and languages
and by encouraging the short and long term trust of those who not only hold a financial state in
the company, but who also see it as a promoter of working, economic, commercial, social,
environmental or local concerns.” 24 Eni includes business ethics, respect for stakeholders,
protection of workers and equal opportunities, enhancement of professional skills, respect for
diversity, respect for human rights, cooperation, and protection of environment, health and safety
as core principles and activities in its CSR strategy.
Total sees corporate social responsibility as guaranteeing fundamental human rights of
employees and lobbying to promote international global standards, implementing good
governance and financial transparency, and promoting social equity and diversity in human
resources through gender diversity, internationalization, training and sharing knowledge and
technological skills. 25 Total also defines corporate citizenship in part as preventing and
managing industrial and work-related incidents and protecting the health of communities in
which it operates and contributing to host community development by promoting sustainable
growth and reducing poverty in developing countries, encouraging employment, and supporting
the disadvantaged; and reducing the “corporate footprint” on local communities in which the
Fiat’s CSR strategy is part of its Group Code of Conduct, which provides policies and
guidelines on business conduct -- including conflicts of interest, insider trading, bribery and
illicit payments, money laundering prevention, and export control laws; employees—including
guidelines for financial officers and standards for equal opportunity, harassment, working
environment and hiring practices; standards for external relationships with customers, suppliers,
public institutions, trade unions, communities and the media; health, safety and the environment,
and accounting and internal control. 26
Many of the other TNCs in the sample combine corporate governance standards,
financial reporting and auditing responsibility, and ethical codes. France Telecom has adopted
principles of corporate governance and financial reporting required by both the French Financial
Security Law and the Sarbanes-Oxley Act in the United States. 27 In light of recent international
corporate scandals, the France Telecom Group adopted stronger internal controls and financial
reporting standards, higher quality standards for published information, and new governance
policies and procedures.
3. Limited or Focused CSR Activities. For many of the most global TNCs, the
adherence to external and often international ethical standards and principles of corporate
governance has become a more visible social responsibility. Four companies, however, did not
specifically report corporate social responsibility, and only 5 to 7 of the 21 activities reported by
all 25 of the most globalized TNCs appeared on their websites. Among the mostly narrowly
defined reports is that The News Corporation. The company conceives of corporate social
responsibility primarily in terms of standards of business conduct. It states standards for
corporate assets and for preventing conflicts of interest, relationships with competitors, receipt
and investigation of complaints, and ethics for the corporation’s chief executive and senior
financial officers. 28 The News Corporation did not report on performance or indicators of
measurement that would indicate how effectively it carries out its standards.
HOW DO GLOBAL TNCs FORMULATE SOCIAL RESPONSIBILITY STRATEGIES?
How TNCs formulate their CSR strategies or choose social responsibility activities is not
always clear from their CSR reports. However, several of the companies indicate that they
combine internal coordination processes with external consultation in shaping their CSR
strategies and many use the guidelines developed by nonprofit organizations or international
CSR monitoring and assessment groups.
The French gas and electric TNC, Suez, created an Ethics, Values and Sustainable
Development Coordination Unit -- consisting of representatives from both management and
operational units, reporting to the Executive Management Committee and to the ethics,
environment, and sustainable development committee of the board of directors -- to develop its
sustainable development strategy. The unit provides an “internal platform” for dialogue within
the company’s international group and with external stakeholders. The unit’s mission is to
“promote the distribution of information on sound practices between the head office and
subsidiaries, propose strategic directions and encourage the development of synergies.” 29 The
company shapes its CSR strategy through partnerships with the Global Compact, World
Business Council for Sustainable Development, CSR Europe, UNESCO, and the French
committee for environment and sustainable development, Comité 21.
The German-based utilities company RWE, which serves markets throughout Europe and
other parts of the world, adopted a sustainability strategy in 2003 based on four years of internal
coordination and development. 30 The company began coordinating the strategy in 1998 between
its environmental protection department and its Group Headquarters after appointing a
permanent staff of environment officers. The coordination resulted in a set of environmental
guidelines that were discussed and disseminated in 1999 through a group-wide transfer seminar
and implemented through the adoption of the Environmental Reporting and Information System
(ERIS). RWE then developed Group-wide sustainable development guidelines, conducted pilot
studies during 2001 and performed environmental management reviews. In 2002, the company
adopted its future convention on sustainable development, began internal and external surveys
and issued its sustainability strategy in 2003, disseminating it again through an international
environmental management seminar. In 2004, RWE published its first corporate social
responsibility report and implemented its group-wide auditing practices.
The Ford Motor Company used a broad process of consultation with internal managers
and external organizations to develop a Code of Basic Working Conditions to protect human
rights in its value chain. Ford’s Code covers standards for its own divisions and for suppliers and
distributors on child labor, compensation, forced labor, freedom of association, collective
bargaining, working hours and verification, harassment and discrimination, and employee health
and safety. Ford also developed compliance and auditing processes to enforce code standards at
its own facilities and will extend the code and compliance assessments to major business partners
RWE, the German utilities TNC, follows guidelines for reporting CSR activities
established by the Global Reporting Initiative (GRI). General Motors uses stakeholder
consultations through periodic meetings of stakeholders, advisory council forums, surveys and
written correspondence. To formulate, implement and disseminate the results of its CSR
strategies, General Motors – as do the vast majority of the 25 most globalized TNCs -- uses a
combination of stakeholder consultation and alignments with organizations concerned about
social responsibility, including the GRI, the World Business Council for Sustainable
Development (WBCSD), CSR Europe, Business for Social Responsibility (BSR), and the
Coalition for Environmentally Responsible Economies (CERES). France Telecom was among
the first companies to endorse and join the UN Global Compact and is a member of international
industry associations that have adopted principles of sustainable and ethical development.
HOW DO TNC’S IMPLEMENT CSR STRATEGIES?
The 25 most globalized TNCs implement their CSR strategies through the activities
identified in Table 2. Among the most frequently featured in their CSR reports are efforts to
green the supply chain, environmental management and protection activities, philanthropic and
charitable activities, development and introduction of socially beneficial products and services,
and codes of ethics and standards of business practice.
Social Responsibility in and Greening of the Supply Chain
The most globalized TNCs often report implementation of CSR policies through greening
of their supply chains. KPMG found that 80 percent of the 1,600 CR reports it reviews mention
supply chain issues and that 70 percent require some form of supplier declaration concerning
codes of social or environmental conduct. 31 The Ford Motor Company -- as have many of the
most global TNCs -- has certified its manufacturing facilities to ISO 14001 environmental
management standards and extends environmental management standards to both its
manufacturing and product development operations. Ford, along with General Motors and other
major automobile manufacturers, has also required key input production suppliers to obtain ISO
14001 certification for their facilities. General Motors created a “GM Suppliers Environmental
Advisory Team” in 1997 to improve mutual understanding of environmental programs and
efficiency and evaluate new ideas to promote eco-efficiency throughout its supply chain. Like
its competitors in the automotive industry, Toyota is attempting to develop a “green supply
chain,” requiring suppliers to comply with its list of banned substances and to become certified
or registered for the international standards for environmental management systems.
Environmental Management and Protection
The 25 most globalized TNCs, like the 1,600 companies surveyed by KPMG, report
environmental, health and safety performance as the leading component of their CSR strategies.
Toyota North America, for example, adopted an “Earth Charter” that guides its environmental
management activities and corporate citizenship practices around the world. 33 Ford also uses
performance reviews of products that cover fuel economy, tailpipe emissions, materials, energy
use, water use, waste generation and land use in order to reduce negative environmental impacts.
Total pursues environmental protection by helping to reduce the global economy’s
dependence on carbon, making the energy system more secure, and preventing negative impacts
from growth of transportation through improving automotive fuel quality and making land and
maritime transportation safer. Total reports that it practices social responsibility by curbing
emissions, conserving water, reducing odor and reducing the risk of accidental pollution and by
maintaining biodiversity in areas where its plants are located. General Motors is adapting its
materials accounting systems, its material safety data sheet management systems, and its
materials inventory control systems to generate environmental regulatory reports and to support
pollution prevention initiatives.
Philanthropic and Charitable Activities
All of the most globalized TNCs, to some degree, use charitable contributions as a
cornerstone of their CSR strategies. About 74 percent of the companies in the KPMG survey
reported philanthropic activities as part of their corporate social responsibility and sustainable
development strategies. In 2002, for example, the Ford Motor Company made philanthropic
contributions of $84 million and between 1998 and 2002 it made charitable contributions of
more than $373 million in the United States alone. 34 In 2003 the Ford Motor Company Fund
and the corporation together made more than $120 million in grants for community investment
and engagement in the locations where it operated and supported volunteerism by employees in
General Motors entered a partnership with the Nature Conservancy to provide $5 million
over five years to help the environmental group preserve land and water ecosystems in North
America, Latin America, the Caribbean, and the Asia-Pacific Region. Chevron has supported
more than 1,000 employees’ volunteer efforts since 1987 to restore portions of Yosemite
National Park damaged by overuse by contributing more than $600,000 to their efforts. Chevron
also helps finance employee programs in Alberta, Canada to replant more than 100,000
evergreens on land cleared for oil and gas production, and to educate teachers and students in
Mississippi about wildlife and habitat preservation.
Socially Beneficial Products and Services
An increasing number of the most globalized TNCs are also developing socially-
responsive products and services and assessing the social impacts of their existing products.
Responding to increasing interest in non-carbon based energy, BP the British petroleum
company combines new business development and socially responsible activities by diversifying
into solar and wind energy generation and pursuing innovations in alternative and renewable
energy technology. 35
Ford is developing hybrid, alternative fuel, and electric vehicles and helping to develop
fuel cell programs. Ford also uses performance reviews of products that cover fuel economy,
tailpipe emissions, materials, energy use, water use, waste generation and land use in order to
reduce negative environmental impacts.
Vodafone is developing new digital radio systems in Germany for police, fire and rescue
services and designing other products and services with “high social value.” Vodafone also
assesses the social impacts of mobile phones, including accessibility in developing countries and
to lower income groups in rural areas, analyzes the value added in economies and undertakes
research on the health impacts of electromagnetic fields exposure on human health. ExxonMobil
reports on programs to develop advanced fuels and vehicle systems to improve fuel efficiency
and to improve hydrogen production distribution for automotive fuel cell
Codes of Ethics and Standards of Business Practice
An increasing number of global corporations are adopting codes of conduct for a wide
variety of activities that have a social impact. The Swiss pharmaceutical TNC, Roche, in addition
to its commitment to comply with all local, national and international legislation in its operations
around the world, adopted a set of corporate principles providing guidelines on topics such as
bribery, granting of advantages, dealing with third parties, receipt of gifts, conflicts of interest
and remuneration of intermediaries. 36 The BMW Group’s social responsibility strategy includes
development of targeted human resource improvement programs, guidelines for work safety and
health protection, the use of efficient work structures with flexible working hours, applying
internationally applicable criteria and systems for employee assessment, and paying above
average “success-oriented” remuneration and benefits.
Suez, the French gas and electric TNC, has adopted a strong set of procurement
principles that focus on making purchasing a shared activity involving users in the definition of
needs, making procurement decisions transparent, and coordinating decisions between the group
headquarters and its entities and branches. The procurement standards seek fairness and
impartiality with suppliers and to avoid of conflicts of interest, ensure compliance with laws and
regulations, and act consistently with the Group’s commitments to sustainable development.
HOW DO TNCs REPORT, MONITOR, AND CONTROL?
The corporate social responsibility and sustainable development reports of the 25 most
global companies reveal some information on how these TNCs report, monitor and control the
activities they claim as contributing to the public good. Companies use a combination of internal
monitoring and reporting and external “social auditing” organizations.
Internal Monitoring and Reporting
General Motors focuses its monitoring and reporting on a set of key economic,
environmental and social indicators. Economic indicators include revenue, earnings, dividends,
vehicle sales, and global vehicle market share. Its environmental indicators include global energy
use, global carbon dioxide emissions, global non-recycled waste, global water consumption, and
GM sites certified to ISO 14001 (international environmental management systems standards).
Social indicators include community donations and sponsorships, employees, diversity (5 of
female and minority workforce in the United States), discrimination charges in the United States,
employee satisfaction surveys, recordable injury rates, and lost time accident rates.
One of the most comprehensive social responsibility reporting systems was developed by
the French energy TNC, Suez, through a two-year design, testing and application process. It
includes a detailed set of environmental and social performance measures. The environmental
measures include 17 indicators of overall environmental management performance, 12 indictors
of energy use and capacity measures, 12 indicators of air emissions, 17 indicators of water
consumption and conveyance and sanitation capacity and treatment, 9 indicators of waste
production, 3 indicators of vehicle use, and 10 eco-efficiency indicators. An equally detailed set
of social performance measures include characteristics of staffing by geographical area,
distribution of staffing by categories of employees, proportion of women among employees,
distribution of staffing by type of contract, age distribution of permanent staff, turnover rates,
distribution of compensation categories, occupational safety indicators, and statistics on training
General Electric uses extensive monitoring and auditing tools in its 500 manufacturing
and assembly facilities around the world including compliance checklists, self-assessment
procedures, and audits, focused operating reviews, web-based results tracking, training, and
incentives for employee involvement in external community activities. In addition, GE certifies
its facilities by ISO 14001 environmental management system standards, has adopted
occupational health and safety voluntary protection programs, and does extensive supply chain
reviews to ensure that suppliers meet environmental regulatory requirements.
External Audit and Oversight
The most globalized TNCs are also increasingly using external audits, evaluations, and
certifications of their operations by international standards in order to monitor the
implementation of their CSR strategies and obtain independent assurance of their activities. The
most popular international standards of operations are the International Organization for
Standardization (ISO) 14001 environmental management systems standards and ISO 9000 series
total quality management standards.
The German utilities company, RWE, has its performance assessed by the Sustainable
Asset Management rating agency and evaluated by WestLB and the London-based consultancy
SustainAbility. The French petroleum giant Total, in addition to certifying many of its facilities
by ISO 14001 standards, signed external audit contracts with a British-based NGO
GoodCorporation to evaluate the application of its code of conduct using 76 evidence points.
GoodCorporation together with external auditors such as KPMG, Pricewaterhouse Coopers and
Bureau Veritas conduct ethical profiling programs at selected Total subsidiaries.
The British petroleum company BP has signed the UN Global Compact and uses
professional auditors, Ernst & Young, to verify its social responsibility claims and data against
the Global Reporting Initiative principles and AccountAbility’s AA1000 Assurance Standards
for materiality, completeness, and responsiveness. The French TNC, Suez, has its social
responsibility performance rated by Vigeo, a European social and environmental rating agency,
and provides its declarative rating to investors. Vigeo rates the company on its performance in
human resources, environment, client relations, corporate governance and commitment.
ASSESSMENT: GLOBALIZATION OF PRINCIPLES -- GAPS IN PRACTICE
Although international organizations and nongovernmental rating and monitoring
organizations claim an increase in corporate attention around the world to sustainable
development and social responsibility reporting, serious questions remain about how significant
the growing number of corporate citizenship reports is compared to the large number of
enterprises doing business globally. Critics of TNC business practices and skeptics of CSR
reporting continue to question whether or not the information reported by transnational
corporations accurately reflects their actual business practices, how effective the sustainable
development programs of corporations are in addressing important social and environmental
problems, how seriously investors, shareholders, and consumers consider the social
responsibilities of international corporations in their financial and purchasing decisions, and how
committed senior executives in TNCs are to implementing sustainable development policies
beyond mere compliance with legal and regulatory mandates.
One of the most frequent criticisms of what have become increasingly slick, glossy
reports on corporate social responsibility and sustainable development is that they are simply
public relations tools that often do not reflect what companies really do and that have little
impact on how firms operate, especially when faced with competitive or financial challenges.
Many of the CSR reports of the 25 most globalized TNCs remain broad statements of intention
but lack specifics that would engender trust in their commitment to implementing them. In this
sense, they mirror the CSR reports of 1,600 companies surveyed by KPMG. That survey found
for example, that “almost two-thirds of CR reports include a section on corporate governance,
although most reports lack specifics on how CR is structured and information on how
governance policies are implemented within the organization. 37 KPMG also found that although
about 60 percent of the CSR reports they reviewed addressed social issues such as labor
standards, working conditions and community involvement, “reporting performance remains
sketchy, possibly due to the lack of clear social indicators.”
Public trust in CSR and sustainable development reports may also be undermined by the
fact that only about 30 percent of the 1,600 companies surveyed by KPMG included formal
independent “assurance” statements, only one-third of the companies invite feedback on the
reports from users, and only 8 percent report on the feedback they receive.
Deborah Doane, a leading skeptic, calls corporate social responsibility a “myth,” arguing
that market forces make it difficult or impossible for companies to deliver both short-term
financial returns and long-term social benefits. She argues that ethical consumerism is simply not
strong or widespread enough to drive change, that CSR is not a competitive advantage for global
corporations, and that in a global economy countries will simply not compete to have the best
ethical practices. 38
Continuing reports about many of the 25 most globalized companies profiled in this
paper of business practices that are antithetical to their CSR objectives may reinforce critics’
skepticism. Vivendi nearly went bankrupt following the company’s accounting scandals in 2003
and both the company and its chief executive were fined heavily by European regulators for
issuing inaccurate and deliberately misleading financial information. 39 Both Siemens and
Daimler Chrysler AG were found to have taken part in bribing officials in Iraq’s oil for-for-food
program. Vodaphone’s reputation was compromised by a phone tapping scandal of political and
military leaders by its subsidiary in Greece during the 2004 Olympics. 40 Total’s reputation was
sullied in Europe by a major oil spill that devastated part of the French coastline.
Major institutional investors holding more than $6.75 billion worth of shares in
ExxonMobil severely criticized the company in 2006 for failing “to acknowledge the potential
for climate change to have a profound impact on global energy markets, and which lags far
behind its competitors in developing a strategy to plan for and manage these impacts.” Both
Shell’s and Chevron’s business practices in Nigeria have come under continuing criticism and
Chevron’s oil terminal in Escravos, Nigeria, was seized several years ago by 600 women
villagers protesting the company’s negative impacts on the local environment. 42
The advertising executive who helped create BP’s publicity campaigns touting its
strategies for diversifying into alternative energy and re-branding BP as “Beyond Petroleum”
turned skeptical after learning in 2006 of charges against the oil giant of price fixing and
collusion in England and of its failure to maintain pipelines in Prudhoe Bay in Alaska, leading to
corrosion and leaking and the shutdown of facilities producing 400,000 barrels of oil a day.
“Think of it. Going beyond petroleum. The best and the brightest, at a company that can provide
practically unlimited resources, trying to find newer, smarter, cleaner ways of powering the
world,” he wrote in a New York Times op-ed article. “Only they didn’t go beyond petroleum.
They are petroleum.” 43
Such skepticism of corporate social responsibility and sustainable development claims is
sometimes reinforced by corporate executives themselves. The McKinsey Company’s 2006
“Global Survey of Business Executives,” based on responses from 4,238 corporate CEOs and
CFOs in 116 countries found strong evidence of a continuing gap between the recognition of
corporate responsibility principles and business practices. (See Table 4.) “Business executives
across the world overwhelmingly [84%] believe that corporations should balance their
obligations to shareholders with explicit contributions to the broader public good,” the McKinsey
survey found. However, most of the executives saw corporate social activities “as a risk, not
an opportunity, and frankly admit that they are ineffective at managing this wider social and
Few of the global executives surveyed by McKinsey believe that environmental and
social responsibility issues will have the most impact, positive or negative, on shareholder value
for the companies in their industries over the next five years. Only 28 percent chose
environmental issues or climate change, 23 percent health care and employee benefits, 17
percent demand for healthier or safer products and affordability of products for poorer
customers, 14 percent ethical standards for advertising and marketing, 12 percent workplace
conditions and safety, 11 percent demand for more ethically produced products, and 3 percent
human rights standards as significant competitive factors. On all of these socially-oriented
issues, only a minority of global executives saw only or mostly opportunity and limited risk for
shareholder value for companies in their industries over the next five years. Most saw either a
balance between risk and opportunity or mostly risk and limited opportunity.
Table 4: McKinsey Corporation Survey of Global Business Executives on Managing
Role of business in society Should focus only on Should generate high returns
profits while obeying but balance contributions to
laws and regulations broader public good
Overall contribution that large Generally or Generally or somewhat
corporations (public or private) make somewhat positive negative or neutral
to the public good
Tactics used by corporations to Tactic used most Tactic believed to be most
manage sociopolitical issues frequently effective
• Media and public relations 49% 35%
• Lobbying regulators and 48% 25%
• CEO speeches and public actions 24% 14%
• Advertising and marketing
• Publication of sustainability or 22% 12%
corporate citizenship report 16% 12%
• Philanthropy 14% 11%
• Entering new markets or exiting
Tactics believed to be more effective Tactic frequently Tactic believed to be most
• Increasing transparency about risks 12% 36%
of products or processes
• Policies on ethics and corporate 20% 35%
• Engaging stakeholders 15% 33%
• Improving compliance with laws 26% 32%
• Using industry coalitions to 29% 30%
develop joint responses to issues
• Changing product lines and
In your industry who takes the lead in Takes the lead Should take the lead
sociopolitical issues and who should?
• CEO or Board Chair 56% 74%
• Public or corporate affairs 14% 4%
• Other executive or members of 10% 7%
• Core business divisions 5% 5%
• Department of corporate social 5% 3%
• HR department 2% 1%
• Strategy department 1% 3%
Source: Adopted from McKinsey Quarterly survey of 4,238 global business executives, January
2006. All data weighted by GDP of constituent countries to adjust for differences in response
rates from various regions.
Nearly one-third of the executives did not believe that corporations made “a generally or
somewhat positive contribution to the public good.” Moreover, a majority of the executives
believed that the tactics that companies in their industries used to manage social responsibility
issues– media and public relations, lobbying, CEO speeches, and advertising and marketing—
were ineffective. Only 16 percent believed that publication of sustainability or corporate
citizenship reports were an effective tactic. Yet, they reported overwhelmingly that the tactics
believed to be most effective in their industries – increasing transparency about risks of products
or processes, policies on ethics and corporate responsibility issues, and engaging stakeholders –
were used infrequently.
Although 74 percent of the respondents said that the CEO or Board Chair should take the
lead in social responsibility issues only 56 percent thought that top executives did take the lead in
their industry. Only relatively small numbers of respondents believed that leadership should be
taken by public or corporate affairs departments, other executives, core business divisions, or
corporate social responsibility units.
Although, as the CSR reports of the 25 most globalized TNCs reflect, the principles of
corporate social responsibility and sustainable development have become more widely
recognized by corporations around the world and increasing numbers of them are publicly
discussing their activities, serious gaps still exist between recognition of the principles and actual
business practices. Assessed by the framework that Mirvis and Googins constructed on the five
stages of corporate citizenship –1) elementary, 2) engaged, 3) innovative, 4) integrated, and 5)
transforming – many transnational corporations analyzed in this paper seem to be still at stages 1
and 2. 45 They focus on legal compliance and license to operate and focus on jobs, profits and
taxes or philanthropy and environmental protection. Relatively few of the 25 most globalized
TNCs have moved to the integrated stages of addressing all elements of the “triple bottom line”
by viewing sustainable development as a value proposition and taking leadership in championing
it. Fewer still have realigned their organizations to make sustainability a driving force of their
business. Tables 2 and 3 on the coverage of CSR reports reflect that fact that relatively few of the
most globalized TNCs have reached stage 5 of seeking to “change the game” by creating new
markets and promoting social change.
The gap between the growing global recognition of the importance of sustainable
development principles and actual business practice may be due to lags in strategy
implementation, or to lack of real commitment, or simply to unrealistic expectations on the part
of sustainable development advocates. Government regulatory officials and environmental
interest groups sometimes overlook or ignore the fact that corporations are in business to earn
profits and create wealth. They are not charitable organizations or public interest groups. Their
leaders’ perceptions of how to achieve sustainable development will be influenced by their
overall business strategies and by market conditions. Neither regulatory control alone nor
interest group pressure is likely to force them to move beyond compliance with legal
requirements, unless they see sustainable development activities as competitive advantages. 46
Although many of the companies in KPMG’s survey claim that they report corporate
responsibility for ethical reasons, 74 percent list “economic considerations” as their primary
motivation for issuing CSR reports. Unless companies see the economic as well as social value
of sustainable practices and internalize those values in their business model, they are unlikely to
integrate proactive practices into their overall business strategies. And unless the market
responds more positively to corporate social responsibility and socially-beneficial products and
services, corporations cannot be expected to move more rapidly toward innovative, integrated or
transforming stages of corporate citizenship.
Understanding the broader context in which TNCs perceive of corporate citizenship and
sustainable development can give public interest groups and government regulatory agencies
new opportunities to influence their business practices, but ultimately progress on CSR depends
on strong corporate leadership and positive market response. 47 A better understanding of the
scope of activities that TNCs are willing and able to use to improve their sustainable
development performance can help external stakeholders work more effectively with
corporations to identify cutting-edge business practices, educate shareholders and consumers
about the value of sustainable development activities, and develop sustainable development
management practices that can be disseminated and adopted more widely.
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