From poverty to power - Oxfam-Québec
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From poverty to power - Oxfam-Québec

From poverty to power - Oxfam-Québec From poverty to power - Oxfam-Québec

oxfam.qc.ca
12.07.2015 Views

5 THE INTERNATIONAL SYSTEM TRADINGGLOBAL BUSINESSInternational rules and treaties governing trade, migration, and othereconomic matters are made among states, and guide the policies andpractices of national governments. The gaping hole in global governance– the elephant in the room – is the lack of rules for global business,the transnational corporations (TNCs) that exercise a central role ingrowth and development as generators of jobs, tax revenues, technology,and consumer goods, yet are subject to the disciplines of internationaltreaties only if national governments choose to make them so.The positive contribution of businesses to development throughwealth creation, innovation, and technological transfers is oftenundermined by a deeply unjust structure of global governance thataccords them vast privileges and powers but few responsibilities.Corporations must be subject to effective regulation by states as partof a renewed social contract geared to generating sustainable growthwith redistribution.Many companies have made progress, especially on environmentalissues, but also increasingly on social issues (see Box 5.2). These are oftenthe biggest firms which have the resources and capacities to addressproblems and which risk their ‘licence to operate’ if they do not meetpublic expectations. Public reporting among a handful of companieshas improved dramatically, and for many so has performance.BOX 5.2EARNING A ‘LICENCE TO OPERATE’At both national and international levels, civil society organisationssuch as trade unions, consumer movements, and NGOs can playa useful role in harnessing the benefits of foreign direct investment.In south-eastern Madagascar, the mining company Rio Tinto iscurrently developing an ilmenite mine, the raw material for theproduction of titanium dioxide pigment, mainly used in paintproduction. The company was once notorious for ignoring thehealth and safety of its workers and the surrounding communities,leaving environmental and social disaster in its wake.341

FROM POVERTY TO POWERMotivated by a combination of pressures, including judicial rulingsin Australia, concern over the damage to its reputation caused bya bad press, and NGO campaigns, the CEO of the Australian halfof the company championed an effort to rebuild its ‘social licenceto operate’ from local communities and governments. Over 20years, the company conducted preparatory research and trustbuilding with local communities and NGOs before moving forwardwith the project.Initially sceptical NGOs have been won over by Rio Tinto’s changeof approach (the Worldwide Fund for Nature and ConservationInternational among them). The transformation was alsoencouraged by pressure from investors, and by partnershipswith experienced NGOs which helped Rio Tinto to address theproject’s social and environmental impacts.Some general lessons emerge from this and other experiencesof changing corporate behaviour:• The company recognised there was a business case forsustainable development.• Communities, consumers, and NGOs put initial pressureon the company.• NGOs acted as an important bridge for the company towork with local communities.• Government regulation forced strategic change.• There was buy-in and leadership for change at the topof the company.Sources: Oxfam, based on published sources and telephone interviews with protagonists.Regrettably, there are still many companies whose operations abroadfall well short of the legal standards of their home countries. Theproblem with voluntary standards in these situations is precisely thatthey are voluntary, leaving enforcement to the companies themselvesand allowing ‘free-riders’ to ignore such standards, and so gain a costadvantage over their more scrupulous rivals. Voluntary standardsare important but they cannot replace the need for internationalstandards that prevent the abuse of power by large TNCs operating indeveloping countries.342

5 THE INTERNATIONAL SYSTEM TRADINGGLOBAL BUSINESSInternational rules and treaties governing trade, migration, and othereconomic matters are made among states, and guide the policies andpractices of national governments. The gaping hole in global governance– the elephant in the room – is the lack of rules for global business,the transnational corporations (TNCs) that exercise a central role ingrowth and development as genera<strong>to</strong>rs of jobs, tax revenues, technology,and consumer goods, yet are subject <strong>to</strong> the disciplines of internationaltreaties only if national governments choose <strong>to</strong> make them so.The positive contribution of businesses <strong>to</strong> development throughwealth creation, innovation, and technological transfers is oftenundermined by a deeply unjust structure of global governance thataccords them vast privileges and <strong>power</strong>s but few responsibilities.Corporations must be subject <strong>to</strong> effective regulation by states as par<strong>to</strong>f a renewed social contract geared <strong>to</strong> generating sustainable growthwith redistribution.Many companies have made progress, especially on environmentalissues, but also increasingly on social issues (see Box 5.2). These are oftenthe biggest firms which have the resources and capacities <strong>to</strong> addressproblems and which risk their ‘licence <strong>to</strong> operate’ if they do not meetpublic expectations. Public reporting among a handful of companieshas improved dramatically, and for many so has performance.BOX 5.2EARNING A ‘LICENCE TO OPERATE’At both national and international levels, civil society organisationssuch as trade unions, consumer movements, and NGOs can playa useful role in harnessing the benefits of foreign direct investment.In south-eastern Madagascar, the mining company Rio Tin<strong>to</strong> iscurrently developing an ilmenite mine, the raw material for theproduction of titanium dioxide pigment, mainly used in paintproduction. The company was once no<strong>to</strong>rious for ignoring thehealth and safety of its workers and the surrounding communities,leaving environmental and social disaster in its wake.341

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