Corporate Social Responsibility - Essay Example

Environmental Responsibility of MNCs The case of Exxon Mobil Sustainable development is an approach that uses the earth’s resources without compromising on the needs of the future generations (Quazi, 1999). Thus sustainable development is a balance between economic growth and environmental protection. A number of large-scale environmental disasters have spurred global concerns. Events such as the chemical disaster in Bhopal, India, the radiation release in Chernobyl, USSR, the oil spilled by Exxon Valdez off the coast of Alaska, the fire at a warehouse of a chemical manufacturer at Basel, Switzerland, have generated global interest in preventing pollution. Specifically, changes have occurred in the way multinational corporations (MNCs) deal with environmental management issues (Rondinelli, 2004). Many MNCs have evolved from a strategy of avoidance or minimal compliance with regulations to becoming proactive in environment management, at times even exceeding the legal requirements. Various reasons have been attributed to this. Even though Environmental Interest Groups blame the MNCs for avoiding regulatory constraints at home and locating in “polluting havens” in poor developing countries, many have adopted strong environmental protection measures. The key issues that have driven the MNCs towards a conscientious growth are financial benefits of social responsibility, competitive advantages of environmental sustainability, the necessity to satisfy internal and external stakeholders, and the foresight to link environmental and quality management (Rondinelli). According to Chudnovsky (n.d.), environmental management also depends upon the age of the facilities, presence of sunk costs, host country regulations and the availability of pollution prevention technologies. In the past environmental protection was more of philanthropy or maintaining external relationship with stakeholders to address social problems. Companies assessed the local environmental conditions and local environmental sustainability. They contributed to environmental infrastructure development or improvement, sponsored education and training programs for teachers on environmental issues, funded community-initiated environmental initiatives, and created formal stakeholder relationships with environmental interest groups and nonprofit organizations. Rondinelli and Berry (1999) emphasize that such external relationships are not sufficient for sustainable development. MNCs have to adopt internal proactive environmental management practices. What they do within their plants and facilities impacts the environmental conditions in the host country. MNCs experience immediate direct business benefits like lower costs, less risks and liabilities and more efficient operations apart from a favorable corporate image. Watson and Mackay (2003) cite evidence that poor reputation on environmental issues can be damaging. Unethical behavior can cost a company its reputation, and reduce it share price. Today businesses are very conscious about environment management and prefer to use suppliers with good environmental records (Quazi). When the reputation is at stake, the worst thing that an organization can do is try to be arrogant and defensive. Exxon Mobil is an example of such a negative approach. If Exxon Mobil causes another environmental disaster, then it has not stored enough reputation to win public understanding, says Alsop (2004). Exxon Mobil’s operates in 200 countries around the globe which includes developing and least developed economies. In its 2005 Corporate Citizenship Report, the multinational emphasizes its role in promoting sustainable development by “providing support for scientific research on important environmental issues, encouraging public discussion on environmental policy, and implementing biodiversity conservation through the preservation of endangered species, their habitats, and other biologically diverse ecosystem” (CCR. 2005). Exxon Mobil recounts granting $5.3 million for worldwide environmental contributions in 2005 with $3.4 million being allocated to support environmental programs outside the United States. MNCs in the developing countries have been accused of taking advantage of lax environmental regulations. Claims are that MNCs find an escape from countries with high environmental standards but Chudnovsky strongly feels that decisions are not based on environmental criteria. On the contrary, developing nations may use lower environmental standards to attract FDI. Besides, developing countries stand to gain from the positive spill over from MNCs, who not only introduce new pollution prevention technologies, social problems like poverty, health issues and unemployment may also be met mitigated. For instance, Exxon Mobil has designed health reporting system (HRS) in developing nations to collect and assess clinical information about the employees and contractors in remote locations where that information would otherwise be unavailable (CCR, 2005). This data helps in early identification and monitoring of emergency issues. In the developing world, they are providing and improving educational and training opportunities for women and girls in the developing countries where they work (CCR, 2003). At the same time, claims from Argentina that Exxon is taking advantage of deregulation to exercise their might by introducing megaprojects like El Cerrejon coal mine to blocking measures to cut greenhouse gas emissions cannot be ignored (FOE, n.d.). Exxon Mobil may be contributing towards protection of wild life and invest in preserving wetland habitats through its association with various environmental organizations, but it has long been criticized for its environmentally degrading operations. As one of the largest and most profitable business organization in the world, Exxon Mobil is also charged as the largest producer of combustible fuels that generates greenhouse gases which in turn leads to global warming. The company has become the target of environmentalists and consumers for everything – starting from war in Iraq to the Alaskan oil spill and to its opposition to the Kyoto protocol to combat global warming (Alsop). People have not forgotten the 1989 Exxon Valdez accident that spilled 11,000,000 gallons of crude oil into the unpolluted waters of Prince William Sound, Alaska (Alsop). The anger against Exxon Mobil is truly deep-seated especially as nothing tangible proves that they are trying to recover or make changes. Instead of focusing in discovering a technology which can reduce the emission of these hazardous gases, Exxon Mobil denied the claim and funded a network of groups which challenge the existence of global warming. The company remains apathetic about climate change and maintains that their business cannot be linked to global warming. The multinational amidst posting the largest corporate profit globally last year, has not yet compensated the fishermen who lost their livelihood following the oil spill in 1989. The environmental issues faced by Exxon do not just affect developing countries but the whole world. However, it can be seen that its hazardous operation is still in place because no stringent regulation is in place. As Chudnovsky points out pollution prevention technologies play a vital role. Knowledge and expertise on such technologies among the local firms is equally important, which would enable them to take advantage of the environmental spill-over from MNCs. Most importantly, the MNCs must recognize that linking environmental responsibility with core business advantages allows them to achieve strategic corporate objectives while contributing to environmental sustainability. References: Alsop, R. J. (2004), Corporate Reputation: Anything but superficial - the deep but fragile nature of corporate reputation, Journal of Business Strategy, Vol. 25 No. 6 2004 pp. 21-29 CCR (2003), Education - Programs & Initiatives, 27 Sep 2006 CCR (2005), Exxon Mobil. 27 Sep 2006 CCR (2005), Workforce Health, 27 Sep 2006 Chudnovsky, D. (n.d.), Investing in the Environment. 27 Sep 2006 FOE (n.d.), The Exxon files, Friends of The Earth, 27 Sep 2006 Quazi, H. A. (1999), Implementation of an environmental management system: the experience of companies operating in Singapore, Industrial Management & Data Systems, Vol. 99 No. 7 1999 pp. 302-311 Rondinelli, D. A. (2004), Creating a Vision for Environmental Responsibility in Multinational Corporations: Executive Leadership and Organizational Change, Journal of International Business Education, Vol. 1 No. 1 Rondinelli, D. A. & Berry, M. A. (1999), Environmental Citizenship in Multinational Corporations: Social Responsibility and sustainable development, Greening of Industry Network Conference. Watson, M. & MacKay, J. (2003), Auditing the environment, Managerial Auditing Journal, Vol. 18 No. 8 2003. pp. 625-630 Wikipedia, Exxon Valdez Oil Spill. 27 Sep 2006 Read More