This document discusses topics related to globalization, sustainable development, and corporate social responsibility. It provides definitions of sustainable development from the Brundtland Report and lists several sustainable development goals. It also discusses whether global corporations can be considered bad global citizens due to environmental and social impacts. Finally, it examines issues like corruption, climate change, human rights, and financial malpractice in relation to globalization and corporate responsibility.
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“Development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs”
What is Sustainable Development
Brundtland Report, United Nations World Commission on Environment and Development (1987).
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Agriculture, hunger
and food security
Climate change
Energy
Industrialization and
infrastructure
Natural resources
Oceans
Sustainable consumption
and production
Terrestrial biodiversity
Water and sanitation
Cities and human
settlement
Economic growth
and employment
Education
Gender equality
Health
Peaceful and
inclusive societies
Poverty
eradication
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Are Global Corporations Bad Global Citizens ?
• Destruction of the Global Ozone Layer (50% of greenhouse gas emissions )
• Persistent Organic Pollutants
• Pollution- intensive mining, refining and smelting of metals
• Unsustainable Agriculture practises
• Deforestation
• Over-fishing
• Associated with Human Rights repression
• Noncomplicance with accepted labor practices
• Corruption
• Political backing of repressive regimes
• Dual Standards
Sources: Various NGOs (Corpwatch, Transparency International, Greenpeace..)
Often blamed for:
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Total GHG Emissions Including Land-Use Change and Forestry
30000
32000
34000
36000
38000
40000
42000
44000
46000
48000
50000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Million Tons
of
Emissions
Source : Data from CAIT Climate Data Explorer. 2015
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Source: Data from United States Environmental Agency’s Climate Change Indicators, 2017
Temperature change worldwide 1990-2014: Earth surface (land
and oceans)
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The EU Emissions Trading Scheme (EU ETS)
Variation in spot prices for CO2 during 2011
Source: French Regulatory Commission of Energy
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CORRUPTION
‘The abuse of entrusted power for private gain’
Transparency Internatonal
“The cost of corruption equals more than 5% of global
GDP (US$ 2.6 trillion) with over US$ 1 trillion paid in
bribes each year”.
OECD (2014)
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Sources: Transparency International
:https://www.transparency.org/research/cpi/overview
Index refers to corruption in the public sector.
Lowest Corruption Highest Corruption
Corruption Perception Index (CPI)
(From 0= High Level of Corruption to 10= Highly Clean)
1 Denmark 9.1
2 Finland 9.0
3 Sweden 8.9
4 New Zealand 8.8
5 Netherlands 8.7
5 Norway 8.7
7 Switzerland 8.6
8 Singapore 8.5
9 Canada 8.3
10 Germany 8.1
10 Luxembourg 8.1
154 Yemen 1.8
158 Haiti 1.7
158 Guinea-Bissau 1.7
158 Venezuela 1.7
161 Iraq 1.6
161 Libya 1.6
163 Angola 1.5
163 South Sudan 1.5
165 Sudan 1.2
166 Afghanistan 1.1
167 North Korea 0.8
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Source: Transparency International: http:///www.transparency.org
Low propensity to bribe High propensity to bribe
Bribe Payers Index (BPI)
0= High levels of bribery; 10= Low level of bribery
19 Taiwan 7.5
19 India 7.5
19 Turkey 7.5
22 Saudi Arabia 7.4
23 Argentina 7.3
23 UAE 7.3
25 Indonesia 7.1
26 Mexico 7
27 China 6.5
28 Russia 6.1
1 Netherlands 8.8
1 Switzerland 8.8
3 Belgium 8.7
4 Germany 8.6
4 Japan 8.6
6 Australia 8.5
6 Canada 8.5
8 Singapore 8.3
8 UK 8.3
10 USA 8.3
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Causes of Corruption
Administrative resource allocation
Lack of institutional checks and balances and information
Insufficient funding of public services
Social and cultural factors
Abundant Natural resources
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Effects of Corruption
DIRECT EFFECTS
• Discourages domestic and foreign indirect investment
• Skews public capital expenditure
• Reduces the productivity of public investments and reduces the collection of taxes.
INDIRECT EFFECTS
• Reduction in work productivity as a result of demotivation
• Dislocation of social fabric.
• Loss of integrity inside the bribe-giving companies: employees
• Corruption money is often linked to criminal and terrorist activities
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What is Corporate Social Responsibility ?
• Concerns how business enterprises relate to
and impact upon society’s needs and goals
• Concerned with firm’s operational behavior
and its impact on surrounding society
• Beyond philanthropy and compliance with the
law
Source : From UNCTAD, The Social Responsibility of Transnatioonal
Corporations, WIR, 1999
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Reduction in material intensity
Reduction in energy intensity
Reduction in waste dispersion
Enhancement of recyclability
Maximum use of renewables
Extension of product durability
Increase of service intensity
Eco Efficiency Actions
Source : Lehni: ‘Eco-efficiency: Creating More Value with Less Impact,’
World Business Council for Sustainable Development, Geneva, 2000
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Some arguments given by some global managers
to justify corruption
‘When In Rome…’
What is legal can be done
Competitive Forces
Unproven evidence
‘Corporations are economic agents and it is
not their duty to substitute for governments
Public Relation campaigns
Lobbying
« We do not acknowledge the notion of Social Responsibility as
defined by some NGOs…We comply with the laws of countries. »
Brian Flannery
Science Strategy and Programs Manager
Exxon Mobil, Nov 2000
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Anti Corruption Measures For the Public Sector
Issue and implement anti-corruption legislation
Adopt human resource policies for public bodies, based on
transparency of recruitment, fair remuneration and adequate education
Establish an enforceable code of conduct for public employees
Set up transparent, open and fair public procurement procedures
Simplify regulations and procedures and limit or eliminate administrative
authorizations being in the hands of single officials
Set up a system of transparent reporting and control
Do not allow tax reduction for non-transparent money transfers
Source: United Nations Convention Against Corruption
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Measures presented at the Caux Round Table Global Dialogue September 2000 in Singapore.
The Caux Round Table commends them for consideration by business corporations
Public endorsement of Anti-Corruption Measures.
Clearly articulated written policy prohibiting any paying or receiving of bribes
and ‘kickbacks’.
Implement this policy with due care and take appropriate disciplinary measures.
Provide training for employees to carry out the policy correctly.
Record all transactions fully and fairly and conduct internal audits to assure
that all payments made are properly.
Report annually on the firm’s bribery and corruption policy.
Have the annual report from the step above openly audited.
Anti-Corruption Measures For the Private Sector - 1
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• Require all agents of the firm to affirm that they have neither made nor will
make any improper payments .
• Require all suppliers of the firm to affirm that they have neither made nor
will make any improper payments.
• Establish a monitoring and auditing system to detect any improper
payments .
• Report publicly any solicitations for payments.
• Establish a system to allow any employee or agent to report any improper
payment without fear.
Anti-Corruption Measures For the Private Sector - 2
Measures from Caux Round Table Global Dialogue September 2000 . The Round Table commends them for consideration by businesses
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Child Labor
Concerns in the world around 168 million children from 7 to 17 (11% of total)
Figures from UNICEF
Mainly in:
Agriculture
Chemicals
Mining
Domestic helps (girls)
Also:
5.7 million engaged in forced labor
1.8 in prostitution
0.6 million in illicit activities
0.3 millions in armed conflicts
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Human Rights
Human rights are being abused in countries where the following are common:
No respect of legal procedures or litigation
Arbitrary detention of political opponents
Child labor
Forced labor
Ethnic, religious, sexual discrimination
Global Firms may be confronted with the prospect of working in and with such countries
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Human Rights
Principle 1: Support and respect the protection of international human rights within their sphere of influence
Principle 2: Make sure their own corporations are not complicit in human rights abuses.
Labor
Principle 3: Freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: Elimination of all forms of forced and compulsory labour;
Principle 5: Effective abolition of child labour; and
Principle 6: Elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: Support a precautionary approach to environmental challenges;
Principle 8: Undertake initiatives to promote greater environmental responsibility; and
Principle 9: Encourage the development and diffusion of environmentally friendly technologies.
The Nine Principles of the UN Global Compact
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Financial Malpractice
Tax Evasion
Exemption/deferral: not remitting profit from subsidiaries;
Transfer pricing: high price in high-tax country;
Royalties payments: overcharging in high tax country;
Intracorporate loans: manipulating interests between affiliated
companies;
Charging overheads;
Round tripping: using tax havens;
Shifting corporate office to a low-tax country using an acquired
company in that country.
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Tax Evasion – worked example
High Tax Country
Tax rate 35%
Potential profit from
Operations 100 $
Normal Tax 35$
PAT 65$
Profit after license fees
10£
Taxes 3.5$
PAT 6.5 transferred as
dividends
Profit 90$
Taxes 9$
PAT 81 transferred
as dividends
Subsidiary A
Subsidiary B
Low Tax Country
Tax rate 10%
Charges 90£ of
License fees
Pays 90£ of
License fees
Corporate
Profit 84.5 $
Instead of 65 $
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Codes of Conduct
Environmental and social information ( CRS Reports)
Enforcement of minimum environmental standards
Design of incentive systems that favor of Sustainable
Development standards
Contribute to CRS institutions
Source: points from SAM Group in Hollidays, Schmidheiny and Watts, Walking the Talk, Greeleaf Publishing, 2002
Good Practices
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‘Doing Well by Doing Good’?
Does that matter?
Annualized
Return
S&P Index
as of 31/12/2016
Dow Jones Global
Sustainable Index
(DJSI) US$
1 year 11.91% 14.32%
3 year 8.84% 8.63%
5 Years 14.60% 13.00%
10 years 6.92% 5.96%
Source: Nuvven Investment, Responsible Investing: Delivering competitive performance , July 2017
https://www.tiaa.org/public/pdf/ri_delivering_competitive_performance.pdf
Socially Responsible Investing: