Kate O'Neill The Environment and International Relations
Chapter 8 (DRAFT)
Corporate Politics: Business Interests and International Environmental Politics
Private economic actors - firms, corporations, business lobbying groups - are perhaps the most controversial group of non-state actors in IEP. Vilified by environmental activists as ravagers of the global environment, with undue political influence and zero public accountability, corporations - particularly multinational corporations (MNCs) - are frequently viewed as the ultimate bad guys in environmental politics. Business interests, on the other hand, are anxious to promulgate another view: advocating the marriage of economy and environment (with minimal government interference), as a "win-win" situation. By greening industrial practices, and developing tools of private governance and regulation, they argue that we will be able to balance environmental and social goals with economic - to the benefit of all.
Until recently, the environmental activities and related political action by the corporate sector had been ignored or underplayed in the IR literature.[1] This changed, with the emergence of studies of the role of non-state actors in international relations, and the rise of private governance regimes.[2] The vital importance of corporations as agents of global environmental degradation led to a vibrant activist-scholar literature on their role, a theme rapidly picked up by the IEP literature.
This chapter charts the growing engagement of business actors in IEP and global governance, documenting a shift from governance of to governance with and by private sector actors. It investigates why the private sector gets involved in international environmental politics, what sources of influence it brings to bear, and the means through which it seeks to shape political outcomes. In part, this is a story of business interests and political lobbying - in particular at the international level. However, it is also the story of the privatization of global governance and regulation, in which corporate interests have played a key role. This trend has started to attract serious attention from IR theorists. This chapter analyzes new forms of private governance at the global level, and assesses their overall utility. It also assesses some of the "good guy/bad guy" arguments forwarded for or against industry, comparing two hypotheses: regulatory capture (that business interests effectively hijack global political processes) and regulatory cooperation, or partnership (that effective global governance requires participation of business interests, and that these interests act in partnership with others towards broader social goals).
To return to the leading questions asked throughout this book, we investigate:
· Who are these actors, and what are their motivations and sources of influence?
· How are they shaping international governance institutions, power relations, norms?
· How do they relate to other actors/agents in the international system?
· How do the developments charted in this chapter affect general understandings of international politics?
Defining the Private Sector in IEP: Actors and Motivations
Private economic actors have always played a crucial role in environmental politics at the domestic level, roles now being mirrored at the global level. First, industrial production has a significant impact on the global environment at all stages of the production process - from investment decisions, through resource extraction and manufacturing to marketing and waste disposal. To that extent, firms and corporations are seen as actors to be governed, in order to minimize environmental and societal harm, although, as we shall see, globalization has generated particular challenges to effective governance of private actors. Second, business interests frequently seek to influence the policy process, whether to reduce the impact of government regulation, or to improve the terms of competition. The influence of the corporate sector on domestic environmental politics is well-documented. More recently, they have sought to participate directly in and influence the process and outcomes of international environmental negotiations: this is charted in the section on governance with the private sector. Third, the growing reach of voluntary and self-governance mechanisms developed at the domestic level is being mirrored in the sphere of transnational politics. Global governance by the private sector is the subject of the third section of this chapter.
But, what exactly is the private sector? Not surprisingly, it is made up of a variety of different sorts of actors whose interests, capacities and activities vary substantially. In the course of this chapter, I will discuss a wide range of different actors under the broad umbrella of the private sector: from oil and chemicals multinationals to renewable energy firms, insurance companies, certification firms, illegal loggers, and trade associations, who represent the interests of a collection of firms or particular sectors. Creating an adequate typology of these different actors is no easy task. Here I distinguish briefly between firms and corporations on the one hand, and the actors who represent them, on the other.
At one level, firms and corporations manufacture goods and provide services for the global economy. Of particular concern to IEP are multinational corporations (MNCs): "any business corporation in which ownership, management, production and marketing extend over several national jurisdictions".[3] However, firms and corporations of all shapes and sizes may have an impact on the state and politics of the global environment, and it is important not to "black box" the corporate sector in IEP. Evidence from numerous studies show that corporate strategies, interests and influence vary from sector to sector and firm to firm, and frequently conflict (think, for instance, of a company specializing in renewable energy development versus a coal-mining company). While manufacturing enterprises are considered to have the most direct impact on the environment (and thus may be most directly targeted by regulation), firms in the service sector are important too. This chapter highlights the role of the insurance industry and certification enterprises in IEP, but other service sectors include the waste disposal and recycling industries, the financial investment industry, consulting firms, the restaurant industry and so on.
Individual corporations rarely like to engage directly in the political process. Thus, representative organizations such as trade associations and industry NGOs provide a vehicle for collective political action by corporate actors. The broadest industry association engaged in IEP is the World Business Council for Sustainable Development (WBCSD), formed in 1991 just prior to UNCED (the Rio Convention).[4] With over 170 members across multiple industrial sectors, it advocates involvement of the business sector in sustainability issues.[5] The International Chamber of Commerce (ICC), which also represents many different sectors, is also a key industry player at international negotiations.
What motivates private sector actors, especially firms and corporations, to get involved in environmental politics? Microeconomic theory, at a very simple level, depicts firms as driven by profit-maximization, where profits are defined as revenues less cots. Environmental regulations are a threat to profit levels inasmuch as they raise costs of production, and may even threaten the firm's survival. As far as that motive holds, business interests are usually assumed to be antagonistic to environmental regulation, be it domestic or international.
Many economists and sociologists ascribe more varied motivations to the complex organizational entities that comprise modern corporations. Many do recognize the problem of environmental degradation over the longer term. Whether under pressure from consumers, shareholders, or run by a particularly aware CEO, some firms do respond to environmental threats with innovation and changes in production patterns, and many are able to reap higher profits this way. Recognizing this motivation, many national systems of environmental regulation have shifted away from traditional "command and control" regulatory mechanisms to ones that rely on partnership with industry and market-based incentives to innovate and maintain competitiveness.[6] So, whether altruistic or profit-driven, firms, especially those with a longer-term perspective, do not automatically resist efforts to push them in a greener direction, and, in some cases, may be proactive.[7]
Taking the analysis a step further, why do private sector actors become involved in international politics, including environmental politics? Firms across countries have specialized in lobbying local and national political actors, developing and nurturing relationships that help them on the ground.[8] Even multinational corporations followed the same approach: alliances with or coercive leverage over local and national officials have proven to be an effective mode of expansion.[9]
More recently, corporations, especially those in Western countries, have internationalized their strategies, through pushing for international standards, including those promulgated through international environmental agreements.[10] In a globalized economy, where profit margins depend on taking rapid advantage of investment and innovation opportunities, firms have two other concerns with respect to regulation. First, they do not want to be at a competitive disadvantage against firms in other countries. To that extent, firms have often pursued international regulation over domestic, and regulatory harmonization across countries, in order to level the international playing field (though not without attempting to tip this level field in their favor, in many cases). The private sector is a strong supporter of international economic governance, especially that which it perceives as market-opening.[11] To that extent, firms strongly support the World Trade Organization, and pushed for the (failed) Multilateral Agreement on Investment (MAI).[12] Second, firms tend to value stability in regulation, and resist uncertainty. Direct engagement, to whatever extent possible, in regulatory processes enables them to minimize surprises and mitigate uncertainties across regulatory spheres, as well as provide specialized advice to regulatory and standard-setting bodies.
With respect to international environmental regulation, business actors have, since the late 1980s, been involved at every stage of the policy process, from agenda-setting through negotiations to ratification and implementation, through, finally, developing their own global environmental governance regimes. In part, this is because for several key environmental issues, such as climate change, ozone depletion and biodiversity protection, most political activity has been initiated and debated at the international level. Table 8.1 (at end) gives examples of primary and secondary industries associated with particular international environmental issues. Many industries now feel they ignore international environmental negotiations at their peril, and that they may positively benefit from them. For example, the major US manufacturer of chlorofluorcarbons (CFCs), DuPont, faced with strict domestic restrictions on CFC generation, changed its position in 1986 to favor international regulation of ozone depleting substances, thus leveling the international playing field for its products, and, given its leading position in developing substitutes for CFCs, strengthening its position against smaller competitors.[13] However, whether business sector actors are the key obstacles to international environmental protection or necessary - and sometimes willing - partners in this enterprise is a matter of some debate.
Perspectives on Corporations: Regulatory Capture or Regulatory Cooperation?
Arguments over whether the corporate sector is good or bad for the global environment are highly polarized. They focus on the environmental and social impacts of business activities, and on obstacles or opportunities for effective global governance of corporations. Activists frequently, and vocally, accuse the corporate sector of acting purely in pursuit of profit, regardless of social or environmental costs, and without accountability.[14] To give some idea of the potential political and economic clout of the corporate sector, 51 of the largest economies in the world are not countries, but corporations, dominated by US firms.[15] Sectors of particular concern to environmentalists include:
· resource-intensive industries - oil, mining, timber
· high-polluting industries - such as the energy sector, the chemicals industry, and waste management
· agriculture - including the biotechnology and pesticides industries, and corporations fostering large-scale production, or monoculture
These industries, frequently in collusion with local officials, have destroyed local communities, devastated fragile ecosystems, and removed valuable and non or slow renewable resources at far too high a rate, especially in Southern countries.[16]
On the opposite side of the debate, others argue that corporations, in particular, MNCs can be engines of environmentalism. They point to standards imported by Western MNCs when operating in poorer countries, and to efforts made by leading global corporations to "green" their activities. Activists tend to respond by calling this process "greenwashing". However, there is a growing body of evidence that demonstrates a positive impact of efforts to green industrial activities: either internally, or via a process of policy transfer from Western MNCs. Ronie Garcia-Johnson, in a study of the impact of US chemical corporations in Mexico and Brazil, argues that the US Responsible Care program
was enthusiastically imported and replicated with some adaptations by Mexican firms in order to facilitate free trade and to prosper in a free trade context. The institution was exported to Brazil by U.S. MNC subsidiaries, and it was adapted with reluctance on the part of Brazilian firms, in order to preempt stringent legislation and to survive in a global market.[17]
The largely European literature on ecological modernization theory also demonstrates diffusion of greener ideas among corporate actors and across borders: these include ideas about minimizing waste generation in the production process, and the utilization of greener technologies to minimize air and water pollution.[18]
These disparate views on the global governance of corporate actors reflect two perspectives on the political role and influence of corporate actors in environmental protection. The first view is one of regulatory capture: firms hostile to excessive environmental regulation essentially take over processes of environmental regulation to further their own interests and avoid excess scrutiny and accountability. The second is one of regulatory cooperation, or partnership. Contemporary structures of economic globalization has made traditional modes of regulation harder to carry out, and necessitates the active participation of corporate actors in order for regulation to be effective. What this means in terms of policy outcomes is ambiguous, and also depends on other factors, such as involvement of civil society actors. Partnership initiatives may water down environmental regulation - but they may also lead to more innovative, and legitimate, forms of governance.
These conflicting perspectives are readily applicable to analysis of corporate actors in international environmental negotiations, and to the rise of privatized modes of global environmental governance. Briefly, the following sections find support for both propositions.
- Corporations are not always autonomous of external influences, nor always skilled at collective action. They certainly do not always get what they want.