Corporate Responsibility and the Environment
In recent decades, large corporations have grown to become amongst the most powerful entities in the world. Of the world’s 100 largest economies, just 49 of them are countries - the others are corporations. General Motors’ economy, for example, is larger than Denmark. While governments are directly responsible to their citizens for social issues such as the environment, corporations are responsible only to their shareholders. Those shareholders' main, and normally sole interest is profit.
The profit motive has a terrible impact on social issues like human rights and the environment. Corporations are required by law to always act in the best interests of their shareholders, and that is almost always interpreted as keeping profits and the share price high. The issue of corporate responsibility is a relatively new one and companies are now clambering over themselves to prove their green credentials. A lot of their energy is going into ‘greenwash’. ‘Greenwash’ or ‘green wash’ is defined as disinformation disseminated by an organization so as to present an environmentally responsible public image. Many corporations spend more money on environmental public relations than the actual act of building sustainability.
Corporate responsibility has always been voluntary but voluntary mechanisms do not work well in a market based system. Corporations are not working to protect the environment. It is against their interest to take initiatives to reduce consumption and most corporations oppose laws designed to protect the environment because they hurt their business. Corporations have caused environmental destruction globally for many years and the scale of the problem is increasing.
Of the world’s wealthiest and largest corporations, the largest number are tied up in oil, petrol and car manufacturing. Retail and financial services are some of the other major players. Environmental sustainability is clearly contrary to their short-term interests. What’s more, their lobby is one of the most powerful in many world governments. Sheer financial wealth allows them to support politics and expect paybacks in return. The major 82 American corporations made political donations in 2000 totalling over US$34 million. Corporate lobby influence in Brussels and Washington is massive.
In particular, many corporations push governments to ease environmental regulations. Large corporations stand to save millions from shortcuts in environmental care. The failure of the American government to sign the Kyoto treaty came as no surprise to those who know the petrol and car lobbies’ power in Washington. But while a corporation has few legal limits on what it can do, what are its moral responsibilities? In market terms, the answer is obvious. For a business to continue, it must have healthy consumers and plenty of resources to use, both of which come about through environmental sustainability. But does short-term greed override this long-term pragmatism?
Pollution is a major concern to environmentalists who worry that corporations are reluctant to cutback on greenhouse gas emissions in their industries. Similarly, noise pollution and waste production are major by-products of large industries, particularly toxic waste. To get around this, some corporations shift their operations to third world countries with less rigid environmental and employment laws.
Recognising these problems, social groups have pressured corporations into an agenda of social responsibility. Because of globalisation, many corporations work under the legislation of many different countries making legal restrictions very difficult, and so the power of the consumer is being called on to make these corporations act responsibly.
Corporations do not have a deliberate intent to harm the environment. Greed and laziness are behind their destructiveness. Some corporations are now starting to realise their moral obligations. Millions of dollars are being poured into promoting many companies’ green image, but these are often little more than exercises in public relations. In May 2002, the United Nations Environment Program released an extensive report saying that “only a small number of companies in each industry are actively integrating social and environmental factors into business decisions.”
What you can do
Be an informed consumer. Most important of all is to reward those companies that are doing what they can. Use responsibleshopper.org which lists the success stories. Congratulate those businesses and let them know you have noticed.
Buy your food from local producers or from a co-op and help reduce the amount of fossil fuel used to transport food around the world. By purchasing organically grown food produced locally you will be supporting local farmers. When you purchase imported food you do not know if you have contributed to habitat destruction or over-farming, both of which are commonly practiced by corporations in developing countries.
Boycott those who aren’t changing their ways. Write a letter or email the company and tell them why you are boycotting their products.
Investigate companies and be wary of their claims, especially when investing money. Socially Responsible Investing (SRI) and ethical fund management are now relatively easy to find. Money is invested by brokers into projects and companies that fulfil certain criteria to show that they are responsible.
If you are a shareholder, be sure to attend the annual general meeting, read your investment-related mail and keep track of resolutions that affect the environment. If you cannot attend the annual meeting, send someone else in your place to speak up on the issues that are important to you. You will need to give authority for the person to be your proxy. Express your views on resolutions that affect corporate, social and environmental performance. Write or email company management and communicate your concerns. Support shareholder campaigns for corporate reform. Request corporations disclose their voting records and make their decisions transparent. Encourage fund managers to vote for social and environmental resolutions. Be a share holder activist.
If the company you have investments with is unresponsive to your concerns and continues to harm the environment, consider changing to funds that better reflect your values. Let the fund's investor relations department know why you are withdrawing from their fund.
Do your banking with a community development bank or credit union. These institutions focus on funding low to medium size economic community developments.
Check out the websites of groups which monitor and judge corporations’ behaviour. Beware of groups that are not really independent but which are biased in favour of their corporate sponsors. Business and Ethics, for example has five major sponsors, all of whom appear in the top 20 of its most ethical business list.
Support Information for Action and other activist groups which aim to bring a change of thinking in the community about corporations and their impact on the environment and society. Also support organisations which are working with corporations to develop policies and practices which are environmentally and socially responsible. A list of these groups can be found in our database. They include corpwatch.com, ethicalcorp.com, mallenbaker.net, accalliance.asn.au, coopamerica.org and bitc.org.uk
Write a letter or email to the editor of your local newspaper; urge him or her to publish your concerns about ‘green washing’ and corporate responsibility.
Make corporate lobbying an election issue. Make politicians aware that you know that corporations’ votes count more than yours does.