In recent decades, cross-border trading has increased significantly. This is a shift from policies in the past where nations kept a lid on the activities of their entities in the hope of using the resources and technology held by those entities as a bargaining chip when dealing with other countries. However, with the onset of the push towards a globalized society where trade and investment do not recognize borders, there have been changes in the economic, social and political structures of the world. The biggest gainers of this shift have been transnational corporations which have been able to use their financial muscle to gain unprecedented economic advantages especially in the emerging markets (Benn, S., Edwards, M. and Williams, 2014). This development has come at a great environment cost as these multinational exploit loopholes in the structural policies that are implemented in most developing economies. This has created concerns among different stakeholders especially at a time when the world is working towards a sustainable business environment where entities are encouraged to adopt and implement policies that are favorable to both the environment and the society. However, it is becoming clear that it is in the very nature of transnational corporations that they can never be truly sustainable in their environmental practices. The paper evaluates how the above statement is relevant in the global business environment. It seeks to show that even though there is a consensus on the need for sustainable business practices, multinational still pose the greatest opposition towards ensuring sustainable environmental practices in the global business environment.
Before evaluating ways in which transnational corporations hinder sustainable environmental practice it is essential first to understand the context under which these multinational comes into play. The need for an integrated global trading system became important in the wake of the second world war as less affected nations tried to find ways of helping those most affected to rebuild (Crane and Matten, 2016). However, the entities and their influence kept growing significantly. To put this in perspective, from 1970 to early 2000s the numbers of transnational corporation increased from a mere 7000 to over 65000 while their transactional amount around the same time rose from $150 billion to $1.14 trillion. This expansion in activities meant that the transnational entities were at the heart of global trade. However, during the same period, there was increased demand especially from the more developed nations for the entities operating within their borders to be more environmentally accountable. The measures were put in place after the realization that environmental degradation due to industrialization could no longer be pushed aside or disregarded as the effects were apparent (Savitz, 2013). The decision by the developed nation pushed the multinational to seek ways that would ensure that they were not on the receiving end of their governments and this explains the expansion of the entities during the period. The sections below evaluate why transnational corporations are not in favor of implementing environmentally sustainable practices.
Transnational corporations’ environmental practices
Multinational entities are widely known for their savvy business practices which are aimed at reducing the cost of doing business and maximizing profits. All other factors come in second after this goals. This founding principle is fundamental to understanding why It is in the very nature of transnational corporations to never be truly sustainable in their environmental practices (Schaltegger and Burritt, 2017). Adopting environmentally sustainable practices come at a cost that they entities have to incur. More importantly, the organizations are not allowed to transfer such costs to the consumers of their products. This means that implementing environmentally sustainable practices will eat away into the profits of the organization. This explains the exodus of these multinationals from their countries of incorporation to countries in the geopolitical defined region of the global south. The exodus was necessitated by increasing accountability measures being implemented in the global north which threatened to enforce penalties if the entities refused to meet the set environmental standards. In their analysis, it was easier to abandon entire assembly lines in their country or market if it meant that they could not be required to incur the cost of improving their activities to ensure that they are sustainable in the long run (Welford, 2013). The preference of these entities to set up shop in the south was motivated by the fact that most of the nations in this region either did not have environment enforcement policies or they were poorly enforced making it easy for offenders to go unpunished.
The other reason why transnational corporations are not over-enthusiastic when it comes to environmentally sustainable practices is that most believe that consumers do not factor in sustainability practices when making purchases (Carroll and Buchholtz, 2014). The aim of every policy is to ensure that they gain an edge over other competing firms and when such an edge is guaranteed, such entities will be more than willing to pay for it. However, sustainability is not factored by most consumers when they are choosing their preferences from the shelf. This means that sustainability derived costs are investments with no benefits to the organization. This significantly deters the management of organizations to make significant investments toward ensuring that the entity makes provision for sustainable environmental practices. This reality makes the entities favor policies that are relaxed in regards to their environmental protection provisions. Additionally, there are very little avenues that the entities can use to advertise their sustainability deed without being accused of greenwashing (Zadek, 2012). Though entities are required to provide an environmental audit report, such reports are used by a limited audience, and it does not include the consumers.
The other reason that makes multinational fail to be sustainable in their environmental practices is the ability to use their economic muscle to have favorable policies adopted in their countries of operations mainly in the developing world. These entities control a significant part of global investments, and most of the investments have been directed towards the developing nations (Grayson and Hodges, 2017). These entities use the threat of pulling such investment from the host nations to ensure that the movements of the affected nations do not implement environmentally sustainable programs that pose a threat to the operations of such multinationals. The resulting effect is that even though most governments in the developing world are aware of the adverse and harmful effects that result from the operations of the entities, they take very little actions to ensure that they curb them as it may result in losing the revenues they get from the multinationals and job loss for the workers who work in the entities (Milne and Gray, 2013). In addition, multinational adopt a unified approach to coercing the government, and this stresses the implementations of international standards. Moreover, the entities play a vital role in ensuring that international environmental laws are watered down to make them essentially toothless for the purpose for which they were created (Fuad-Luke, 2013).
In areas where the governments have been able to implement laws that will hold the transnational corporation to account for their environmental costs, the entities have found a way to evade accountability by using proxy companies. Here, the entities get locals to register companies, and these entities operate with little or no regards for the environment and when such entities are held to account, the multinational distance themselves (Blackburn, 2012). This means that even when the entities are at fault, they get to walk away without paying for the damages that result from their action. They also get to keep the reputation of the companies clean as they get to distance themselves from the unsustainable actions of their proxies.
There is also a failure by authorities to streamline and clearly state what sustainable practices entail. The language used by the laws that seek to ensure that the corporations adhere to sustainability requirement are mostly vague and hence open to interpretation (Hart, 2013). This means that the way one corporation interprets a provision is very different from the way another entity interprets the same provisions. This is especially true in regards to the treatment of indigenous populations who are most impacted by the exploitive nature in which the multinational conduct their activities. The vagueness of the legal principle means that the entities can fail to be held accountable for their actions if they can prove that they acted in accordance with the provisions to the best of their knowledge (Meadows and Randers, 2012). The lack of clearly laid directive that provides measures that indicate what is sustainable practice and what is unsustainable makes it difficult for the entities to uphold the standards and this leaves the environment and the societies that benefit from the societies as the greatest losers of the misgivings of the multinationals (Joy et al., 2012).
In addition to having vaguely worded laws that are open to interpretation, the entities also lack mechanisms to help teach their workers on what sustainability entails and what actions they should take to ensure that the entity they are working for conforms to sustainability requirements. The workers are trained to evaluate all factors in terms of their benefits or impact to the company’s performance (Fairhead, Leach and Scoones, 2012). This is a concern as most are not able to identify the opportunities that exist, but they are unable to identify the threat that their policies pose to society. This mean that the workers who will be motivated to ensure that the entity performs well without knowing that they are destroying the environment with the same enthusiasm (Czinkota and Ronkainen, 2013). This is particularly true in areas where there exists an extractive industry where entities try to come up with the best ways of extracting resources and t the best costs. This approach gives little considerations to the impact of their activities on the environment and all those who depend on it. The impact of this disregard is bone by these communities, and they can have catastrophic for future generation (Wapner and Kantel, 2017).
Lastly, the transnational entities are concerned by the belief among industry players that the entities that lead the sustainability frontier end up losing in the end. Though there are many possible benefits to be enjoyed by the entities that are in the frontline in the push towards sustainable practice, there is also an equal risk of backlash and failure that can have unimagined consequences (Lang et al., 2012). The possibility of unforeseen consequences that would result in economic concerns makes it difficult for major industrial players to come out and clearly state their position on sustainable practices.
The discussion about sustainable business practices is one that will not go away anytime soon. This is because it goes to the core of society and the responsibility of each member. When an entity is incorporated, it becomes a juristic person, and it is conferred with the same rights and responsibilities like other members of the society (Tietenberg and Lewis, 2016). It is true that sustainability practices may not be profitable, but entities need to shift the discussion away from the bottom line and start evaluating their responsibility as members of society. Sustainability entails having consideration for the needs and rights of other members and remembering that disregard for the environment is unsustainable as the available resources are limited. The transnational entities need to be guided by this knowledge that sustainability is in their best interest as overexploitation means there will be nothing to use for their future operation, and this will open up the discussion over and above the bottom line approach (Hawken, Lovins and Lovins, 2013).
From the above discussion., it is evident that transnational corporation will continue to pose as a hindrance in the global towards the adoption of global environmental sustainable practices. This is because the entities view the issue as an attempt to reduce their profit and yet they do not see any tangible results. However, it is essential to understand that environmental concerns go beyond the bottom line of these entities and the possible impact can be catastrophic and beyond the comprehension of these entities. It is only in having this understanding that the society can start to move towards global and mandatory environmental sustainable business strategy that will ensure that there will be enough resource for humanity’s use and have the resources for use by future generations.
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