Transnational Politics MNCs and NGOs: market-based ethics?

Transnational Politics

MNCs and NGOs: market-based ethics?

Today

MNCs and NGOs The role of MNCs in development and policy making Are campaigns to make MNCs more ethical/green worth the effort? What types of campaigns are more successful/effective?

Reading: Argenti, Paul A.: Collaborating with Activists. How Starbucks

works with NGOs.

Wednesday, 2/20/2008Hans Peter Schmitz

MNCs and NGOs

“The only organizations now capable of global thought and action – the ones who will conduct the most important dialogues of the 21st century – are multinational corporations and the NGOs” (Peter Sunderland, Goldman Sachs and BP, p. 93)


Why NGOs target MNCs

Increasing visibility and power of MNCs MNCs are increasingly able to evade national

jurisdictions. State failures to enforce human rights and other

standards (environment, labor, etc.). Globalization pressures/competition for FDI

MNCs are vulnerable to moral pressures in a global market place (Keck/Sikkink: target vulnerability). Varies according to product and exposure. http://www.corpwatch.org/index.php


How NGOs target MNCs

NGOs are more nimble and use information/communication more effectively (p. 94)

Example of a TAN (Keck/Sikkink): Clean Clothes Campaign Structure: “The Clean Clothes Campaigns in each country

are coalitions of consumer organisations, trade unions, human rights and women rights organisations, researchers, solidarity groups and activists. Every national campaign operates autonomously.”

Let’s clean up fashion, 2007 update (next slide)


An example: living wage campaigns

The good news“It is no longer the norm for companies to deny responsibility,

to deny that there is a problem, or to hide behind the typical argument that they do not know how to define a living wage” (p. 9).

The bad news“In compiling this update, we noticed that many companies

were fixated by the grades we had awarded them last year. (…) This is a real shame, as it suggests that, although they claim to be interested in what we have to say, many companies are actually only interested in managing any criticism we might make of them” (p. 14).


Minimum and living wages

Minimum wages are set by governments Reflect compromise between perceptions of international

competitiveness and local needs. Example, Bangladesh: $24 per month

Living wages, NGOs demand from MNCs Actual cost of living as basis for wages Example, Bangladesh: $80 per month


Demands by NGOs

Develop estimates of a local living wage Approach suppliers to discuss living wage

arrangements Factor living wage into prices paid for products Empower local unions to enforce/monitor

minimum wage


The argument against a living wage

Living wages undercut the ability of the (amoral) market in setting prices for labor.

Increased costs of labor will lead to job losses, unpaid overtime, etc. But: lower turnover/training costs and greater loyalty

Undermines investment in education/training Better options: ‘after’ market interventions, such as

progressive tax system, redistribution, etc.


From Living Wage to Fair Trade

What about efforts which work within the logic of markets?


The Coffee Industry: $ 80bn annually

The problem Drop in coffee prices during the 1990s Small-scale farmers’ structural disadvantage (p. 97)

Enter Starbucks: a company with ethical ambitions

Enter the Fair Trade movement: pushing for better lives with a market based-approach


Starbucks: selling more than coffee First step: tax-deductible donations from profits (p. 98) Second step: partnership with Conservation International

to protect premium coffee production (shade-grown). Third step: Developing a CSR policy

Becoming a target of opportunity for NGOs National brand and visibility Corporate image Track record of ethical claims Power over prices paid to farmers


Corporate response

Starbucks’ initial claims Fair trade coffee not available at the quality standards

of the brand (p. 101/2). Higher transaction costs in finding new suppliers.

Balancing accountabilities: staff, customers, suppliers, shareholders.

Compromise: selling FairTrade coffee.


Beyond fair trade

Global Exchange: the campaign today. Oxfam against Starbucks: Make Trade Fair. Starbucks: CSR policies.

The limits of the fair trade idea.


Limits of fair trade

Depended on consumer demand; limited consumer base.

Fair trade campaigns create only alternative niche products and do not necessarily affect the underlying logic of trade/supply chains.

Focus on products and companies, rather than markets and global inequalities.

Does not address the issue of overconsumption.


Argenti: Lessons learned1. Rhetoric matters: Being socially responsible makes

companies more likely targets of NGO mobilization.2. Don’t wait for a crisis: Corporations are in a position of

strength if they are proactive on CSR. 3. Choose your partners: What type of cooperation/NGO is

most likely to increase legitimacy for the corporation?4. Mea culpa: Be willing to admit mistakes and compromise. 5. Respect independence: Do not undermine your partner. 6. NGO collaboration is long-term: Think of work with NGOs

as a long-term relationship. 7. Communication on CSR is strategic: Develop expertise in

communicating with NGOs as well as on CSR (with public).


Classifying NGO strategies towards MNCs Campaign target

Campaign strategy

Collaboration

Market/Industry level

Nike - sweatshops

Confrontation

Company level

Kimberley process

Greenpeace – Brent Spar

Forest certification

2/20/2008Hans Peter Schmitz

TransFair/Green Mountain Coffee

Living wageFair trade

Documents

Transnational Politics MNCs and NGOs: market-based ethics?