"The industrial world's environmental debts are enormous, go back a long way, and still go mostly unaccounted for."
Aubry Meijer, Global Commons Institute: "Green Rights for All: The Earth View", in ECN Environmental Review, July 1992.
With their tremendous economic power, these corporations have enormous influence on the environment. This puts them in an undeniable position to stimulate and develop sustainable development. However, they are simultaneously a source of local and international environmental damage, along with national industries, agricultural companies and consumers.
But this raises a question: can the international corporate community, one of the perpetrators of the world's environmental problems, successfully become the saviour of the environment? Should we all follow this new international guide with its new green coat, now that international politics has come to a standstill? Can transnational corporations offer a realistic opportunity for world-wide sustainable development? Is their omnipotent economic power an obstacle or a bridge to sustainable development? These are the central questions of this book.
The second chapter discusses how the difference in positions between the North and the South hampered agreement at UNCED on binding international environmental measures and environmental control. At the end of the chapter we will see how international corporate life lobbied intensively for this conference decision. The most important argument used by the corporate lobby was that the transnational corporate community is able to draw up an effective environmental policy independent of the political community. Mandatory international laws would, they say, only hinder corporate efforts to attain sustainable development.
The following chapters discuss whether the corporations will in fact use this freedom in the interests of the environment. They look at a number of specific characteristics of transnationals that are important in their relation to the environment:
The Seveso guideline was effected in the EC in 1984, and requires that member states ensure that companies calculate risks, develop a disaster plan and actively inform the local population. Translated into the Dutch context: 74 Dutch chemical industries are now obliged to inform local people of the external risks of their activities. They had to draw up an External Safety Report which included a description of the production process, and an analysis of the risks.
Besides the risk of industrial disasters, the 1980s saw an increase in awareness of the problems of acid rain, the greenhouse effect and the consequences of the hole in the ozone layer. Renewed attention focused on the threat of extinction to many species of animals and plants and the value of "biodiversity". It became generally accepted that not only the immediate, but also the international environment was threatened. For the first time, people seriously looked at what was happening beyond their own borders and discovered that tropical rainforests - the lungs of the world - were at risk of extinction. They discovered that the levels of CO2 emissions were so high that the world had been transformed into a greenhouse, and realized that CFCs were responsible for an expanding hole in the ozone layer. People realized - as the Club of Rome and Meadows had already discovered - that there are limits not only to our raw materials, but also to other natural resources: soil, air, water, flora and fauna.
The term "sustainable development" was first introduced in 1980 in the "World Conservation Strategy",
a plan created by the IUCN and the World Wildlife Fund. It only came into wide usage, however, after publication of the so-called Brundtland
Report, which defined it as: "development which meets the needs of the present without compromising the ability of future
generations to meet their own needs".
Sustainable means no reductions to the environmental capital:
Theoretically, this implies an end to the dichotomy between economic growth and a clean (or cleaner) environment. No longer can negative
environmental effects be regarded as irrelevant. Only sustainable/clean growth is acceptable growth.
Sustainable development has become a container term. A World Bank report noted 60 different definitions. Ecologists describe it as the:
"harmonious relationship between the population and nature, the conservation of the integrity of ecology and a humane existence."
Others see "sustainable" in the light of present production and consumption. What, then, are the possibilities for keeping this intact and/or
continuing growth? Critics, particularly from the South, argue that current activities described as "sustainable" are aimed, instead, at growth
- or serve that purpose - and will remain so as long as the problem of poverty and unequal distribution remains.
Despite the diversity in definitions, there is a reasonable degree of agreement as to the necessary conditions for embarking on
"sustainable development":
It seems unlikely that a start will be made in applying these conditions (particularly the third and fourth ones) in the short term.
The three hundred scientists from forty different countries that comprise the Intergovernmental Panel on Climate Change (IPCC) wrote in their report "Climate Change: The IPCC Scientific Assessment" that the only way to avert an ecologically disastrous warming of the earth is to drastically reduce carbon dioxide emissions (60% relative to the 1990 level). In September 1994 the IPCC meeting in Maastricht reaffirmed this view. <1>
The greenhouse problem is directly caused by emissions of a number of gases including CO2, the bulk of which are due to the large quantity of emissions in highly industrialized countries. The so-called "stock effect" is important in looking at the problem of CO2 emissions. This term refers to the amount of pollution the earth can cope with before negative environmental effects are activated, a threshold that has long been crossed, so that, at present, reductions in CO2 and SO2 emissions will not immediately lead to less environmental pollution and the reversal of the greenhouse effect.
In general, drastic reductions of 70 to 95 per cent in emissions are needed to combat environmental problems caused by the present stock of polluting substances. <2> The scale on which change is needed means that whole sectors will have to change dramatically before any improvement will be seen.
Estimated cumulative industrial CO2 output by continent <3> | ||||
---|---|---|---|---|
In gigatons carbon and percentages | ||||
A | B | C | D | |
1960/1989 | % | 1980/1989 | % C of A | |
Far East | 6,903 | 3 | 3,077 | 45 |
Central economies in Asia | 12,114 | 6 | 5,385 | 44 |
Middle East | 3,586 | 2 | 1,538 | 43 |
Africa | 4,520 | 2 | 1,538 | 34 |
Eastern Europe | 47,184 | 23 | 15,385 | 33 |
Oceania and Japan | 9,932 | 5 | 3,077 | 31 |
South- and Middle-America | 7,697 | 4 | 2,308 | 30 |
Western Europe | 41,926 | 20 | 7,692 | 18 |
United States | 67,671 | 33 | 12,308 | 18 |
Northern America outside the USA | 4,877 | 2 | 769 | 16 |
Total | 206,410 | 100 | 53,077 | 26 |
"No discussion took place - in Brazil - on environment and aid, environment and trade, environment and poverty, environment and wealth and environment and patterns of consumption." <4>
While non-governmental organizations were deeply involved in the preparations, the final meeting was a meeting of states, the agencies responsible for fulfilling the agreements.
According to resolution 44/228 of the United Nations, the conference was meant to deal with:
At the preparatory meetings, the following "cross-sectoral issues", or themes, relating to all of the above points, were added to the list. Countries in the South, in particular, emphasized that in order to come to an integrated approach, these themes had to be discussed:
The goal of UNCED was to agree to an "Earth Charter", a sort of declaration of the rights of the environment, draw up an action plan for the future, called Agenda 21, and finalize two conventions, a on world-wide climate change (the greenhouse effect) and biodiversity.
"As recent reports of the World Bank, the United Nations Development Programme and others show, the poor developing countries now actually measurably subsidize the rich countries through structural adjustment and regimes of export-led growth, inequitable barriers to trade, low commodity prices and the now seemingly endless regime of debt repayments. All this adds up to a considerable net resources transfer from South to North." <5>
From the perspective of the underdeveloped and poor countries of the South, the foremost environmental problems are the major, everyday ecological problems caused by underdevelopment and poverty, such as: the lack of clean drinking water, infertile soil as a result of erosion, salinification, the decreasing level of the water table, immense air pollution in the cities and the mounds of toxic waste in their back yards. In this part of the world, it is a luxury to include ecological considerations in political-economic decision-making processes. They hold the North as first and foremost responsible for global problems such as ocean pollution and the destruction of the ozone layer. Niala Maharaj summed up this view as follows:
"It is your skin cancer. Solve the problem yourself. Our problems are the measles, whooping cough and even bubonic plague." (De Volkskrant, 9 November 1991)
Despite its raised consciousness of the global environmental problem, the North still shows no interest in the everyday problems of the Third World. The North still regards these as "their" problems. For centuries, the North has treated nature as a useful resource. Only recently has it begun to look at "Nature" as a communal area, the so-called "global-commons". Attention is given to the pollution of the oceans, the atmosphere, space and the poles, as well as to the destruction of our tropical rainforests and other areas rich in biodiversity. People in the North have recently begun to regard these areas which are essential in the natural regeneration of the global ecosystem as "communal heritage for humanity". They are less interested in local environmental problems. Political discussions on solutions therefore tend to concentrate on the global management of these areas.
Most of the commons, however, are situated on nationally controlled territory in countries in the South. Understandably, these countries regard any Northern involvement in the management of these areas as illicit meddling in home affairs.
In a declaration published in Crosscurrents, 38 NGOs from 25 countries stated that they:
"were concerned that the introduction of the concepts of 'global commons' and 'communal heritage for humanity', if they do not include the protection of the rights of rural populations, would lead to an increase in the amount of control exercised by the North and particularly by transnational corporations over the natural resources of the South." <6>
It is not surprising, against the background of economic inequality and poverty, that governments in the South demand that the North
finances the extensive, world-wide environmental measures directed toward the conservation of the commons.
During the preparatory negotiations for UNCED, Malaysian government representatives stated bluntly:
"If you do not want to discuss the development demands, we will not discuss the environment. If we die, we will all die." <7>
There are several reasons why environmental degradation hits hardest in the South:
The Bush administration openly spoke of protecting corporate interests. As "intellectual property rights" was regulated to the satisfaction of the international (Northern) business world in the GATT agreement of April 13, 1994, this argument was no longer relevant to the Clinton administration. The Bush administration also argued that the proposed measures would cost money which the US preferred to spend on combating domestic unemployment. While some funding became available for the protection of rainforests, the proposed Rainforest Convention never got off the ground. In its place came the non-binding Forest Declaration. As well-worded as the 600-plus page Agenda 21 is, unlike other conventions it does not commit its signatories to any firm course of action and cannot live up to its subtitle: "a blueprint for action".
By January 1994, of the 166 countries that had signed the climate convention, only 53 countries had ratified it (a minimum of 50 was
needed to set the convention in motion). These countries are eligible for participation in the first Conference of Parties to the Climate Convention in Berlin, which only took place in 1995 because of the slow pace of the ratification process. And ratification is only the first step in implementing the convention. Adaptation to national rules and regulations is the next step. It is not always clear what
that should involve as there are many vagaries and very few aspects are actually discussed in the convention.
Meanwhile an intergovernmental commission began negotiations for the 1995 conference. Representatives of non-governmental
organizations campaigned for the acceptance of the 20 per cent CO2 emission reduction goal set by the Toronto conference in 1988 and try to gain clarity on the concept of "Joint Implementation". They wanted to establish the level of participation of both developed countries and underdeveloped countries in the reduction goals, as well as the position of the Newly Industrialized Countries. The Conference also discussed establishing its own financing mechanism and a system of observation. In the end, the Berlin Climate Conference did not succeed in establishing reduction goals.
The corporate viewpoint was clear and totally in agreement with the results of UNCED, namely, that binding global environmental measures for international business be avoided. With the help of an extensive public relations campaign, top managers of the world's largest corporations informed UNCED participants and the general public that they had voluntarily chosen to embark on the road to "sustainability". To do this they need economic growth, free trade and open markets. Profit making and environmental protection can be combined, they argue, in a system in which the damage to natural resources is compensated in the cost price of goods, and in which nature is patented. According to the influential lobbying organization, the Business Council for Sustainable Development, this is the road to a sustainable future.
As the Indian ecologist Vandana Shiva put it:
"Governments have distanced themselves from their responsibilities. As of now, it is a fight between transnationals and citizens."
In a perfect division of roles, the task of the BCSD was to show the public the environmentally friendly face of the international corporate
community, and even to promote calculating the environmental costs in the price of goods. Meanwhile the ICC surreptitiously lobbied with
all its might against inclusion of measures in Agenda 21 which would make this possible.
The international business community also set up lobbying organizations on various subject areas to keep a finger on the UNCED pulse. An
example is the Global Climate Coalition (GCC) which worked diligently on influencing politicians who were in favour off reductions in carbon
dioxide emissions. As a result, UNCED failed to develop a Climate Convention obliging signatory countries to reduce carbon dioxide
emissions.
International corporations such as Asahi Glass, Atlantic Richfield, ICI, Swatch and 3M also influenced UNCED in indirect and subtle ways.
These corporations were the most important donors to the Ecofund, a non-profit organization working from Washington DC, set up to help
finance the UNCED. Global Forum, the alternative environmental conference for non-governmental organizations, also received money from
the business community.
By the time UNCED drew to a close, functionaries of transnational corporations breathed sighs of relief. They could now embark on a period
of free-market international environmental protection without the involvement of national governments in their business activities. With little
hindrance from environmentalists, they were now free and well equipped to continue working through their full agenda load for the GATT negotiations (on the liberalization of world trade).
Spurred on by its own successes, the Business Council for Sustainable Development, originally created as a one-off coalition of 48 captains of industry for the duration of the UNCED process, decided to continue operations. It now acts as the conscience of the international business community. Hugh Faulkner, president director of the BCSD, commented:
We will be working with other groups and sectors to try and promote the change in policy, in corporate governance and various areas which are preconditions to sustainable development. <9>
He referred emphatically to the GATT:
We have to make clear to the world and the politicians that there is a higher order of public interest in this point.
Before we discuss the actual importance of GATT for the environment, and transnational interests within this, the following chapters will firstly analyze the involvement and the role of transnational corporations in the creation of and solutions to the world's environmental problems.
These differences in position between the North and the South led to a situation where more and more governments and politicians looked to the international business community rather than governments as the redeemer. The BCSD, a one-off coalition of 48 captains of large transnational corporations, lobbied intensively to achieve this, and by the time UNCED came to a close, the transnational corporations were able to draw deep sighs of relief in the knowledge that they could embark on an era of free-market international environmental protection without the interference of international governing bodies.
influence at least a quarter of all production activities in the world, they are responsible for 70 per cent of the international trade in goods and 80 per cent of the total amount of land cultivated for export crops. <10>
Perhaps more important than the omnipotence of the transnational corporations is their active involvement in environmentally sensitive areas of industry, including mining, the chemical industry, heavy metals, wood/paper, agro-business and the petroleum industry. And much of the production is concentrated within a limited number of corporations.
CFC's, one of the most important contributors to the hole in the ozone layer, are almost exclusively produced by large chemical concerns - most of which are transnational corporations. E.I. DuPont de Nemours and Co. alone was, until very recently, responsible for 25 per cent
of the total world production of CFC's. The Treaty of Montreal agreed to slowly bring their production to a halt. (See also Chapter 7 of this book.)
The pesticide industry is strongly concentrated within a number of large transnational corporations. The 20 largest pesticide corporations
control 94 per cent of the world market. There is also a high concentration of transnationals producing the various sub-groups of
pesticides.
In the aluminium industry, the 20 largest corporations control 90 per cent of the - highly polluting - world bauxite production.
Consequently, transnational corporations are also responsible for a large number of environmental problems and not only those caused by
industrial activities.
The share of transnational corporations in the total production (through human activities) of greenhouse-gases <11>
(We refer here to emissions which transnational corporations can influence, through their own or governmental measures.)
Before we can estimate the degree of involvement, responsibility and liability of transnational corporations, we have to define what we mean by transnational corporations, and what we define as being influenced by them.
Liability is an important aspect of the relationship between the parent company and its subsidiaries. Most countries grant businesses a limited liability status. Under limited liability, shareholders are not personally liable for company debts, and the parent company is liable for the contractual obligations of the subsidiary only if the subsidiary is a fully integrated part of the corporation. OECD-memberstates recognize the liability of the parent company for the obligations of its subsidiaries. They do not recognize the corporation's general liability for environmental or other damage caused by its subsidiaries. There are many other forms of responsibility in which liability should be recognized. The parent company should be seen as liable for the damage caused by its subsidiary if, for example, it did not exercise sufficient control over the subsidiary or did not supervise it adequately, if it did not warn it of known risks, or supplied the subsidiary with defective parts or products.
An equally prevalent but wider definition of transnational corporations looks at who controls what. This fits in more closely with the present
trend of less direct ownership and more contracting out of segments of production, using a network of businesses for various forms of
cooperation. The transnational corporation is seen as a central organization controlling production in a number of
countries.
According to this definition, transnational corporations are characterized not by the relationship of ownership, but by control over production.
They control numerous business activities without actually investing in them. Such companies are practically, but not formally, subsidiaries.
If the transnational uses nationally operating subcontractors, these also become, according to this definition, part of the
transnational. The effect of the subcontractors' activities on the environment bear per definition on the
environmental practice of the transnational as a whole.
If we define transnationals in this way, the question of whether national companies cause less pollution than transnational corporations
becomes unimportant. Both transnational corporations and local producers are involved in polluting and risky activities, but
it is the transnationals who exercise control.
The specific way in which a transnational controls an operative can be various. Whatever the form, the relationship of control implicates
the transnational corporation in more environmental problems than the size or involvement of the company-specific activities would suggest.
In this study we define transnational corporations as the sum of corporately controlled industries and services. We will discuss this in more detail in the following paragraph on key positions in the production column.
Twenty large corporations dominate the world's aluminium industry, among them Alcoa, Alcan, Reynolds, Maxxam, Péchiney, Norsk Hydro, VIAG/VAW, Alusuisse, RTZ, INI and EFIM. These transnationals owe their tremendous economic power to the vertical integration of their production chain. The corporation is not, however, equally visible in every link of the chain.
The large corporations own concessions on no more than 30 to 40 per cent of the known world bauxite reserves. In absolute terms, however, the largest concerns, including Alcoa and Alcan, have very sizeable reserves. They can decide for themselves whether, and to what extent, they will mine these concessions. The bauxite reserves of these corporations are found in the countries with the largest bauxite supplies, including Australia, Guinea, Guyana and Brazil. They combine operations in a variety of ways with smaller aluminium companies, forming mining consortia. As a result, the aluminium corporations are able to negotiate very positive mining terms in each of these countries.
The corporations can not only decide for themselves when and where they mine their own bauxite concessions, but also have a large hand in the next link of the global supply chain: the production of alumina. Eighteen corporations own almost 90 per cent of the western world's alumina production. These same eighteen corporations are involved in bauxite mining.
With this scale of alumina factories and concentrated ownership, the corporation knows with every new mine it opens exactly who will buy the bauxite and how much they will buy. Conversely, in opening a new alumina factory or expanding the capacity of an old one, the corporation always knows which bauxite it will be processing.
A mere 20 corporations control almost three quarters of the world's aluminium production. Most of them are actively involved in bauxite mining and alumina production. From the late seventies and throughout the eighties, more and more smelters were constructed in Third World countries, while investments increased in Australia and Canada. Brazil, Venezuela and Indonesia became the most important countries for new investment, together with the Middle East, Qatar and Bahrain. The price paid for electricity is one of the most important determinants in the choice of where to situate a smelter. Most of the production of these smelters is for export to traditional user areas - the United States, Europe and Japan. The smelting capacity, particularly in these export countries, will continue to grow.
The first step towards manufacturing the final product - casting (alloys), moulding, extrusion and rolling - is almost entirely in the hands of corporations which have their own smelting capacity.
In the second stage of manufacturing, from semi-manufactured product to manufactured product, the aluminium producing corporations are strongly represented only in certain business segments. The corporations are actively involved in a number of existing, highly valuable applications, such as specialized extrusion of profile mouldings, the production of aluminium plate for drinking cans, construction materials, etc. The corporations are also actively involved in new applications, such as ceramic products, aluminium-synthetic composite materials, and alloys. Market growth in this sector is primarily determined by the technological development of the products. The corporations invest tremendous amounts in research and development, and promoting the applications of the new products.
Because transnational corporations have powerful economic positions in polluting and high-risk production areas within production chains, they are important on two accounts. They are a link between economic development and underdevelopment, and between economic and ecological problems. Transnational corporations embody, as it were, in their worldwide activities, an important part of the relationship between development, underdevelopment and ecology. In other words, between wealth, poverty and environmental problems.
It will be clear that sustainable development has everything to do with the doings of international concerns. Without transnational enterprises there will be no sustainable development. That seems unquestionable. The controversy over their role concentrates on the question of whether the corporations are willing and able to take their own responsibility or whether they should be forced into acceptable environmental behaviour. Many aspects of the international activities of the corporations influence sustainable development. One of the subjects of discussion is the freedom of the international concerns in their choice of location of (environmentally polluting) investments and the international movement in the environmental problem which will result. The following chapter will deal with this in more detail.
While the liability laws relating to crimes against the environmental vary from country to country, there is a definite trend in the North
towards introducing stricter legislation. Strict liability legislation in relation to surface pollution directly influences the conduct of an
enterprise in choosing a location for its activities and investments. In the North, companies always commission an environmental surface
study, and they sometimes also require the previous owner to furnish them with a guarantee of non-liability, before deciding to purchase
land and buildings. If they do discover that the land is polluted and if they are not guaranteed protection against liability claims, they will
not purchase the property.
The fear of being pursued by damage claims is not unfounded. In the Netherlands, for example, there have been many examples of
companies causing very serious surface pollution, sometimes many years earlier. This damage totals between 126 and 180 billion guilders,
and is spread over more than 100,000 properties. The so-called New Civil Law holds the property owner responsible for all pollution, even
if the owner can in no way be blamed (risk liability). The period of limitation of 30 years is not always applicable, and a plea of ignorance
not always valid. Hundreds of civil suits are currently in preparation or under review. Those involved face severe financial threats. This has
made companies, citizens and the government decidedly more claim conscious.
Northern scientists and politicians were pleased with this vindication of their argument that stricter environmental legislation does not lead
to job and industry loss in the North. They reaffirmed that it was possible to conserve both welfare and the environment! But the matter
is not quite so simple. While few companies have actually moved, (i.e. the same enterprise closing a factory in one area and investing in
another in another area), production is being relocated. When one company decides stops the (environmentally polluting)
production of certain goods, buyers are then forced to look elsewhere. This provides new companies with new expansion possibilities,
possibly in the Third World. The end result is that production is relocated from one country to another.
It is probably more true to say that the world market has been relocated. This process of relocation is happening in a number of basic metals
industries, in the heavy - bulk - chemicals industry and in other industrial branches. Wherever these production industries go, the country
experiences rapid industrial growth - and extra environmental problems. Because these branches of industry are growing
faster in the South than they did in the North, the strain on natural resources there is greater, the local environment suffers,
and the public is exposed to high health risks.
Asian economies (excluding Japan) are growing faster than those of Europe and the United States. The textile, electronics and car industries,
in particular, are expanding in size. These types of businesses are important customers for the chemical industry - and the chemical industry
(for example plastics and other semi-manufactured products) is flourishing. In 1993 the chemical market expanded in Asia
(excluding Japan) by no less than 8 per cent, while elsewhere in the industrialized world, growth stagnated. Participants in this growth are
both Asian enterprises and transnationals from the United States, Europe and Japan, who invested huge sums in new production units. The
Asian market was not the only outlet; through the combination of low costs and modern technology it was possible to compete on the
international market despite long transportation distances. This was clearly the case with organic dyes: between 1982 and 1991 the Asian
share of world exports of organic dyes rose from 13 to 24 per cent.
The tremendous growth of the chemical industry and the shift of the fulcrum to Asia is illustrated in the following prognosis:
World market for chemical products | |||||
---|---|---|---|---|---|
In billion dollars, and in percentages | |||||
Billion dollars | Growth | Global distribution (%) | |||
1992 | 2000 | % | 1992 | 2000 | |
North America | 319 | 400 | 25 | 29 | 29 |
Western Europe | 430 | 500 | 16 | 40 | 36 |
Asia | 335 | 490 | 46 | 31 | 35 |
European transnationals find Asia attractive because of its growth potential, but there also so-called push factors. Manfred Schneider, president director of the chemical giant Bayer, described it in this way:
"The main disadvantages we face (in Europe) are higher labour costs and expensive social security systems, coupled with the wide-spread regulation of environmental affairs by the state. We have to overcome these handicaps. If we do not, many areas of our business (in Europe) will become uncompetitive and therefore in danger of being squeezed out of the market." <13>
To conclude that the geographical shift of polluting production processes is not as bad as it seems is not only short sighted, but complacent.
It assumes that environmental measures in the North are effective. Unfortunately we all know that the "stricter"
environmental policy in the North has not been able to deal with either international or local environmental problems.
It would be more logical to conclude that the badly needed tightening of environmental measures in the North will indeed lead to the exodus
of large, environmentally polluting production processes to the South. The example below shows how that possibility became reality in the
phosphoric acid industry.
Phosphate, in the form P205, is a nutrient for plants and a building bloc in food production. Modern intensive agriculture boosts natural phosphate levels in the soil through the addition of the phosphate fertilizers. The production of this chemical fertilizer is one of the many stages in the food production chain in which this nutrient continually changes shape. Many environmental problems arise throughout the entire chain, one of which is the production of phosphoric acid, which is particularly well-known for the discharge of waste gypsum into surface water and the release of the highly polluting substances, phosphorous, cadmium and radon-226, into the environment. For every ton of phosphoric acid (P205) produced, five tonnes of unclean phospho-gypsum is discharged.
In the 1980s, Western European governments exerted their authority to stop such discharges, demanding a reduction in the quantities of
free phosphorous drained because of its eutrophic interaction with surface water. Many local governments demanded a total halt (mostly
in phases) to the discharge of cadmium - an EC blacklisted substance.
At first, the Western European chemical fertilizer industry responded with delay tactics. They began researching alternative methods for
processing the gypsum. They looked into storage on land, as is done in the United States, and into reprocessing the waste into building
material. The largest chemical fertilizer producer in the world, Norsk Hydro, initiated an ostensibly serious effort to develop a new cadmium
cleansing technique at their plant in Vlaardingen, the Netherlands. The second largest, Kemira, offered to modernize its entire plant in
Rotterdam in exchange for a promise by the local authorities to freeze their stricter discharge standards for at least 20 years. In anticipation
of research results and investments in cleaner techniques, companies everywhere requested postponement of the application of the stricter
discharge standards. However, local governments took measures to progressively tighten rather than freeze the discharge standards.
At the end of the 80's, in order to meet the stricter discharge standards, many producers in Western Europe switched to a cleaner raw
material, low-cadmium phosphate rock. In three European locations producers switched to less environmentally harmful nitrophosphate
production methods. These were Norsk Hydro in Porsgrunn (Norway), BASF in Antwerp and Chemie Linz (Austria).
The Western European phosphoric acid producers were also riddled with economic problems. In 1988/89 the Moroccan state-owned
concern, OCP, started expanding its production capacity since Morocco can benefit from cheap phosphate ore mined on its own territory.
A global glut arose at the same time that Western European demand for phosphate fertilizer shrank and prices begun to dive. Cheap imports
from North Africa snatched the market from European producers and Morocco is still expanding capacity to meet export markets. In 1996,
total world phosphoric acid production capacity will have risen by 1.9 million tonnes.
Along with the continuing decline in the use of chemical fertilizers in Western Europe, this bodes ill for the European phosphate fertilizer
industry. These negative market prognoses have forced corporations to close production units. From January 1992 to April 1993 alone, 1.35 million tonnes of P205 phosphoric acid production was abandoned in Western Europe. That is more than one third of the total capacity,
a decrease far in excess of the decline in the market and the oversupply caused by the expansion of competing nitrophosphate fertilizer
production. Imports of phosphoric acid (or phosphate fertilizer) from Morocco (in particular) will have to be brought in to meet the
needs.
But the result will be a surge in pollution in Morocco. The flood of highly polluted phosphoric gypsum is being pumped, untreated, straight
into the Atlantic Ocean. Thus closures in Western Europe have only resulted in a shift of pollution to Morocco. In the end the environmental
cause has gained nothing.
This example illustrates the dubiousness of transnational corporations accepting "environmental responsibility" and choosing
not to move when confronted by tighter environmental legislation in the North. Tighter environmental measures there, combined with the
continuing absence of international legislation, only makes the South more attractive. These same transnationals claim only to be able to
take on their environmental responsibility in the continued absence of international legislation.
We may therefore conclude that while the differences in environmental policy between Northern and Southern countries is seldom a motive
for transferring production, it is the lack of environmental motivation in the closing down of company activities that indicates the inadequacy
of the environmental policy. If governments in the North will significantly tighten environmental regulations, which truly attempt to solve
environmental problems, this will result in the transference of polluting activities to the South. This underlines the need for international
environmental legislation.
Countries in the South are largely dependent on foreign capital for investment in economic enterprises. In the case of large infrastructural projects or major direct investments in mining or processing, transnational companies are always involved. This is certainly the case for huge projects which go beyond the financial capacity of the country, and is usually demanded by international lending agencies such as the World Bank, who never fully finance development projects but require additional investments by the actual operating company as well as their technical and organizational expertise. It is almost inevitably a transnational corporation that can meet these financial, technical and organizational demands. Large investment programmes in mining or basic industry is therefore always a complex structure consisting of national
governments, international banks and transnational corporations, who negotiate their contributions based on their individual interests in the
project.
The World Bank usually coordinates the search for finance, the Third World country is usually the project applicant in search of money and
expertise to stimulate economic development, while the transnational is the potential investor in search of profit. If the Third World country
has a lot to offer, for example an abundance of natural resources and favourable government subsidies, an attractive cooperation agreement
and cheap energy supplies, this will improve its bargaining position and it will be able to make far-reaching demands, for example concerning
local content in production, local employment and skills transfer and so forth.
In the past thirty years, several large hydro-electricity projects have been established in Third World countries, for example in Surinam,
Ghana, Indonesia, Venezuela and more recently Brazil. The countries involved aimed to use this type of electricity production to stimulate
long-term economic development. Because of the massive investment required for by the construction of a dam, a reservoir and power
station, this sort of project is only viable if its entire output is purchased from the very start, an impossible condition for most developing
countries where per capita electricity consumption is usually very low. The sorts of business activities that are stimulated by a hydro-electric
plant are not present and can only be built up slowly if electricity tariffs are not too high. But a modern aluminium smelter with a capacity
of 200,000 tonnes per year easily consumes 310 Megawatts of electricity and is therefore a perfect consumer. In most cases, an aluminium
industry therefore becomes a precondition for launching electricity production projects in the Third World. The two go together like Siamese
twins.
The large aluminium corporations often negotiate the establishment of one aluminium smelter in various countries at the same
time, thus creating a powerful negotiating position for themselves. In many cases they are able to force the electricity tariffs down to - or
under - the cost price by pitting countries against each other.
Often, however, the disadvantages of combined hydro/aluminium projects are greater than the advantages. The income from export and
the increased employment, which undoubtedly have repercussions on the economy, have to be weighed against the destruction of the
natural environment caused by flooding huge areas of land, salinification in downstream areas, reduction in soil fertility due to decreased
silt deposits, more water-related illnesses (such as bilharzia and malaria) and a reduction in fishing harvests. The indigenous population is
usually forced to re-settle with little or no compensation. Moreover, this sort of project usually leads to debts lasting 30 to 50 years and
capital goods and services (repairs/maintenance) usually have to be imported. Often, corporations are able to profit from tax perks and, in
many instances, they are free to repatriate their profits.
Numerous investment projects have shown that the negotiation structure involving government, international banks and transnational
corporations takes insufficient account of the interests of local population groups and the natural environment. From the economic point
of view, the value of large scale projects for economic development has been the subject of criticism for many years. In the 80's
environmental groups and interested groups of local and indigenous populations added their criticisms.
This has focused particularly at the World Bank as external financier. As a result of which the World Bank altered its project review
procedures. An examination of projected environmental consequences of the investment is now standard procedure. It is also directed at
the governments concerned. But interest in the environment and associated problems of poverty usually have to give way to economic
interests. The interests of the local population are often parallel to those of the environment. Only in unusual situations, often when there
is an environmental scandal, does the role of the transnational come under fire. The powerful position of the international companies in
tripartite negotiations with banks and governments is almost never the subject of discussion.
While systematic relocation of polluting production processes to "pollution havens" does not occur, there is a relative
transference or shift. We see an increase in the share of the South in various industry branches - including branches which are known for
their large scale environmental pollution. A faster growth of these industries in the South than in the North is combined with an increase
in the demands placed on natural resources, with large negative consequences and risks for the local environment and public health.
Transnational corporations are also involved in rapid expansion in some of the countries in the South. Through their tremendous negotiating
power, they are usually able to demand extremely favourable location and investment conditions. Almost without exception, they are
unwilling to apply the stricter environmental laws of the parent country to their location in the South, where laws are less demanding or
law-enforcement less effective. In other words transnational corporations adapt themselves to the lowest pollution standards in their
investment behaviour. They do not create an example for the surrounding business culture. There is presently no international legislation
to correct these tendencies.
The post World War Two history of pot oven technology for aluminium smelters provides a perfect example of the marriage of financial and
environmental advantages in the development of technologies.
A modern aluminium smelter is capable of producing approximately 200,000 tonnes per year and requires 300 megawatts of electric power.
The average western, coal-fired modern electric power plant has a capacity of 600 megawatts. An aluminium smelter which uses the
modern 175,000 ampere pot oven technology developed by Pechiney requires approximately 13.5 kilowatt per hour per kilogram of aluminium. Previously, pot ovens that were used (1940 to 1955) required approximately 19.4 kilowatt per hour per kilogram of aluminium. This improvement in energy-efficiency has reduced the cost price of aluminium, while other improvements in pot oven design have decreased costs of construction.
They have also resulted in considerable reductions in fluor and fluoride emissions, which were 15-25 grams per kilo of aluminium produced in 1940 - 1955 and are now 0.5-1 gram. By introducing purification technology, sulphur dioxide emissions were also reduced. Only CO2
emissions remain high. But none of these changes would have been made if they didn't reduce the cost price.
The inherent economic limitations to production-integrated environmental technology, developed and applied by the industrial community, ensure that it will not provide solutions leading to pollution prevention or reduction. The aluminium smelter example demonstrates that business economics do provide openings for progress from an environmental point of view, but these improvements have not, as yet, been able to reduce CO2 emissions, and fail to solve global and many national and local environmental problems.
Fundamental and far-reaching intervention is required for solving present day environmental problems. It is unrealistic to assume that the business community will voluntarily develop the necessary environment-technical solutions.
There are three major phases in the development and application of production technology:
A licence is the right to use a specific technology. Licenses are widely used in the world of chemical production, where corporations sell, not only their knowledge of production in the form of licences, but also calculate the cost of the licence into their own costs of production. The general practice is that the company using that particular technology pays the owner of the technology, a sister company, for the licence. In this way licences do not interfere with competition or inhibit technology transfer, and provide a flow of income into the company that owns the licence.
This process of developing, introducing and spreading technology has two important consequences. First, per definition, existing production
installations (especially in the South) are always outdated, due to the continual development and introduction of new technology in the
North. Older and outdated production installations cause more pollution than can be justified by the state of technology. Secondly,
technology cannot simply be transplanted, unchanged, to the South - to countries with other socio-economic, ecological and climatological
circumstances.
These two points are frequently brought up in the debate on the transfer of (environmental) technology to the South. We will look at them
in more detail.
There are several references in Agenda 21 to the need to create identical international environmental standards within transnational enterprises, for example, Article 30-22 of the chapter on Business and Industry:
"Business and industry, including transnational corporations, should be encouraged to establish world-wide corporate policies on sustainable development, arrange for environmentally sound technologies to be available to affiliates owned substantially by their parent company in developing countries without extra charges, encourage overseas affiliates to modify procedures in order to reflect local ecological conditions and share experiences with local authorities, national Governments, and international organizations."
The Benchmark Survey carried out in 1991 by the United Nations also shows that while only a handful of transnationals intend to introduce this sort of policy, still fewer have actually done so. <15>
The concept of global environmental management is a step in the direction of sustainable development. Put differently: if the transnationals
apply the same environmental technology and practices in Third World countries as they do in the parent country, this is often a step
forward relative to the situation in which they only heeded local government laws.
But it is no more than a step. Business economics, we noted earlier, defines what the "best available environmental production
technology" for global application is. This is not the same as the best solution in terms of the environment. In practice, it also means
that a company will only introduce and apply better (production-integrated environmental) technology in its new investments
throughout the world. Existing installations will avoid having to apply the new environmental technology.
No single production process is clean. Purification technology is an environmental necessity. Because it increases the cost price of the
product, companies tend to adapt their purification technology to the demands placed of the environmental laws on emission and discharge
standards in the host country. This places high demands on the efficiency of regulatory bodies. Local standards and the way they are
enforced differs from country to country. These circumstances make it all too easy for transnationals to delay introducing a general policy
of applying the best purification technology throughout all their plants.
If one single company is allowed to pollute to the extent of the ecological level of tolerance, that company lays claim to all
of the locally available ecological usage area. In other words, no other industries can come to the area, and there is no room for economic
growth. In terms of "sustainable development" (which aims at integrating both ecological and economic ideas), it is
preferable to have globally uniform environmental standards based on the best technical solutions.
We can conclude that, as the environmental risks and repercussions of a particular technology differ according to region, new and already
known environmentally sound technological solutions have to be adapted to the local situation in order to guarantee the best results.
Phosphate rock, mined in Togo and Senegal, has the highest cadmium-holding percentage in the world (172-234 mg of cadmium per kilo).
Togo exports all the phosphate it extracts, and 20 percent of its government income comes from this source. In Senegal, some of the
phosphate ore is processed into phosphoric acid and phosphate fertilizer.
From 1986, phosphate export to Germany, Belgium, the Netherlands and other European countries declined, after the introduction of tighter
European and national environmental laws. These countries gradually lowered the permitted levels of cadmium in production wastes and
produced goods. Fertilizer and feed-phosphate producers switched to the "cleaner phosphate ores".
The governments of Togo and Senegal applied for an EC grant (from the Sysmin fund) to research the purification of phosphate ore. Without
success: at present, while it is technically possible to remove the cadmium, it was not economically viable. A Danish engineering company
reviewed the technology. <16> At a pilot plant in Taba, Senegal, they were able to remove 80
per cent of the
cadmium from the ore. The Togolese government failed to interest foreign investors in a 500-million-dollar phosphoric acid / phosphate
fertilizer plant. <17>
As we can see from the above example, much of the end-of-chain purification technology becomes redundant if purification occurs earlier. Corporations are not necessarily interested in this principle. No government regulations require companies to use pure or purified raw materials. Most government regulations merely aim to limit damage. There is no environmental policy based on "integral chain management" and companies are completely free to choose where they buy their raw materials. Pure raw materials are usually more expensive than impure ones. Thus, only large, vertically-integrated transnational corporations, or those with a key position in the production chain are able to shift the application of environmental technology to the first stages in the production chain.
To embark on the road to sustainable development, therefore, the expansion in production has to be accompanied by an absolute reduction in environmental pollution in the entire production chain. Very few large concerns have set themselves the task of reducing their absolute levels of emission and risk. The majority continue to measure the success of their environmental policy by the relative efficiency of applied purification technology.
If the initiative for sustainable development is to be left to the transnationals, then their environmental management policies will have to
reflect their alleged good intentions. These policies should be so strong that they transform company activities in the direction of sustainable
development.
Company environmental policy is changing fast. In recent years, transnationals have become increasingly aware of the negative
environmental effects of their activities. There are two main reasons for this:
"The business community, including transnational corporations, should recognize that environmental management is one of the highest priorities and a decisive factor in sustainable development."
Can and will the transnational corporations come through on this?
The United Nations published a study in 1993 entitled "Environmental
Management in Transnational Corporations." <18> This report, better known as the Benchmark Survey, brings to light the present state of
environmental
management in 210 transnational corporations with an annual turnover of more than 1 million dollars per year. The research was carried
out in 1991. Almost 800 corporations were approached. While this study is the most detailed of its sort, the low response may indicate
that it does not reflect the average situation, but more likely the best that transnationals achieve in the area of environmental management.
Analysis of the questionnaire responses identified four levels of corporate environmental management based on compliance with
environmental interests:
For each sort of corporate environmental management there are corresponding company activities (environmental measures) and specific governmental measures (see the following table). We will not go into the relationship between the two.
The authors report an inseparable link between company activities and governmental policy and regulations. They assume that, in order to introduce more far-reaching forms of environmental management within the entire transnational corporation, matching governmental management must be established, and that a legal framework, tough monitoring and a stable government policy in the corporation's 'home' country are the most important inducements to voluntary initiatives for environmental management. (Benchmark Survey, page 169). Chapter 7 discusses international environmental laws and regulations
The four levels of corporate environmental management | ||
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Management type | Corporate activities | Supporting government activities |
1. Compliance-oriented management (The reactive corporation) |
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2. Preventive management (The lean and precautionary corporation) |
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3. Strategic environmental management (The opportunityseeking corporation) |
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4. Sustainable development management (The responsive corporation) |
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In the seventies and eighties, large chemical concerns were able to undermine the tighter emission permits by linking them to new research
into environmental and cleaner production technology which progressed particularly slowly causing time limits to be constantly extended
and delaying the deadline for the application of standards.
A 1989 SOMO study of the environmental practices of Royal Dutch Shell Chemicals in Pernis, Holland, concluded:
"Using the delay tactic of conducting research into improving hazardous waste discharges, Royal Dutch Shell Chemicals was able
to continue dumping unlimited quantities of organic chloride substances and maximum amounts of drins and fine ash into the surface
water.
It was difficult for people in the neighbourhood and environmental pressure groups to get a grasp on and have a say in the procedures
surrounding the issuance of a new discharge permit for extra environmentally toxic substances into the surface water (these substances
were not included in the 1987 permit). Shell-Pernis claimed all the time and space it needed to decide whether and when it would convert
to reducing or stopping emissions of environmentally toxic substances into the surface water.
It has also given itself as much time as it needs to determine the speed at which it will stops drins, organic chloride substances and light
ash emissions." <19>
In developing countries, it is usually difficult to develop, introduce and enforce an entire set of standards and rules. The relative scarcity
of scientific personnel and financial resources often leads to dependence on the expertise of the transnational corporations themselves,
certainly in the area of technical training. This makes it quite difficult to independently enforce legislation.
Environmental rules and regulations in the industrialized North have steadily improved over the past decades. In a previous chapter we saw
that companies have scored striking successes in reducing pollution, at the local level. The above example, however, illustrates that
environmental management solely aimed at conforming to the rules and regulations has little value. The company was able to undermine
the emission permits for new productions units. Its true purpose was to create as much room for manoeuvre as it could.
It is, however, vitally important for transnational corporations to explicitly develop company-wide policies to comply with national and local
environmental rules and regulations. All the more so for their operations in developing countries, where governments don't always have
the resources to monitor and enforce their own national laws. Unfortunately, few transnational corporations actually have such a
company-wide policy. The authors of the Benchmark Survey noted a
"disappointing number of examples of transnational corporations which explicitly referred to international conformity in their environmental aims, although more than half of the companies researched have activities in developing countries." <20>
The claim that transnational corporations will voluntarily develop environmental initiatives, to adhere to international environmental rules
and regulations, can be treated, it would seem, with a grain of salt.
The Benchmark Survey observed that corporate environmental management used six policy instruments in complying with regulations:
end-of-the-pipe solutions, reduction measures, the monitoring of emissions, issuing reports on levels of conformity, training and the
development of disaster plans. Most corporations in the Survey applied at least one of these measures, which are aimed solely at controlling
and managing the releases of polluting substances to conform to standards and regulations, within a given level of pollution in the production
technology and a given organization of the labour process. They are all measures taken once the damage has been done to confine the
environmental damage to the legally prescribed proportions.
The disasters at Union Carbide in Bhopal, at Seveso and at Sandoz in Basel have had an enormous influence on the safety policy of
corporations as well as corporate an governmental disaster plans and projections in Europe. If they had not already done so, most concerns
appointed general safety coordinators to coordinate factory safety, the flow of information to the local population and disaster planning.
These personnel coordinated safety activities world-wide, and their contact with the corporate head was consolidated. Many companies
improved and intensified safety, health and environmental auditing, and responsibilities were defined more carefully. More alarm and
detection systems were installed. These measures strengthened the involvement of the head office in the coordination of safety problems,
in particular in the higher risk branches of the company, and heralded a shift in emphasis towards anticipation and prevention.
The 1985 Seveso Guideline, which prescribes disaster planning and risk analyses for European companies, is a clear example
of mandatory environmental measures at the European level.
In recent years, modern electronic information technology has provided many new opportunities for monitoring and quantifying
environmental effects. "Green accounting" became available to corporations. This is the weighing of environmental effects
against the costs of environmental management. This link to financial accounting does, however, have its drawbacks. When a company
activity is contracted out to another firm, this activity is no longer the responsibility of the first company and no longer part of the process
of weighing green priorities. If a company decides to contract out transportation, it will need less energy (diesel fuel). If it contracts an
administration firm for salary administration, it will use less paper. Green accounting does not show that this is simply a diversion of
activities from one company to another and that no gain has been made in terms of the environment.
The Benchmark Survey found that one third of the companies interviewed use some form of green accounting. United States companies
in particular tend to apply preventive environmental management, using internal audits, risk analysis and related preventive activities, since
when they are found liable for damage, the penalties are high. The Superfund legislation has been a particular impetus to change company
policy on environment, safety and health.
The Superfund was introduced in the United States at the beginning of the seventies to finance surface clean-ups for damage done where
no culprit can be found or when the risks cannot be insured, is the case with nuclear power plants. The fund is fed by levies, the yield of
environmental penalties and damage compensation.
In the spring of 1994 the Clinton administration opened negotiations with representatives of employers and environmental organizations
to change the Superfund law. The intention is to alter the following parts:
Another important impetus to the widespread application of preventive environmental management in the United States is legislation on the availability of information on corporate pollution, the so-called "Right to Know"-law.
In 1986, the US Congress passed the "Emergency Planning and Community Right-to-Know"-Act, or EPCRA. An important
aspect of the EPCRA is prevention of chemical accidents and the promotion of disaster plans. Part of the law - the Toxics Release Inventory,
also known as TRI, aims to inventize data on daily emissions of toxic chemicals into the air, water and land and of the flow of wastes to
waste reprocessing plants. This national information bank has a uniform system of data input, and its output is publicly available.
While it is a relatively new programme, it has greatly influenced the way companies treat the environment, largely due to the public
availability of the pollution data. Environmental organizations analyze the data and publish regular reports on companies and branches of
industry. Everyone now knows how much pollution is caused by which company.
Once a step in the direction of preventive environmental management has been taken, the largest corporations don't hesitate to exploit it
in their PR, advertising and marketing policies. The public is flooded with information on company environmental policy and products are
promoted as "green" or "natural".
In general, this information and marketing activity aims to show how diligently the company is working to protect the environment, and
too claim that the consumer helps protect the environment by buying its product. This is often a misleading sales tactic to improve the
product's sales, and it clearly demonstrates that we can't leave the onus for supplying information on the environmental behaviour of
transnational corporations to their own free initiative. By contrast, the US Right-to-Know-legislation illustrates the positive
effect of binding legislation.
But it has two distinct disadvantages:
This is the same point at which other instruments of the total environmental management conflict with corporate thinking. Dialogue with the public is applied to stimulate "mutual understanding", and external auditing and data is made available to increase public control over the corporation, increasing public trust. In themselves these represent a step in the right direction, but as long as competing corporations are not forced to alter their environmental behaviour, these measures will not lead to fundamental changes. And as long as the "availability of information" is not instituted, information will be distorted and suppressed and we will continue to see a series of one-sided success stories and a lot of patting of one's own shoulder.
The Norwegian company, Norsk Hydro, provides an excellent example of how information is distorted for the purposes of publicizing the
environmental aspects of chemical fertilizers. The largest manufacturer of such products in the world, Norsk Hydro also produces aluminium,
magnesium, oil, gas, industrial gas and other products. It has production plants in virtually every part of the world, but most are in
Europe.
The European chemical fertilizer market is shrinking rapidly. This is the result of EC cutbacks in agricultural subsidies, farmers' decreasing
use of chemical fertilizers, and the increase in other forms of agriculture which use little or no chemical fertilizers. Norsk Hydro endorses
the environmental need for careful application of fertilizers but contests the notion that alternative agricultural methods using animal and
natural fertilizers is preferable, and has campaigned intensively on this theme for the past four years.
To avoid appearing biased, it commissioned an independent research into the environmental effects of both the alternative and the
established methods of agriculture. The results have been published and widely distributed in seven languages (including Russian) in a very
readable book. As could be expected, the established system of agriculture is portrayed most positively. Properly dosed, they say, chemical
fertilizer is environmentally better than the manure used in alternative agriculture, since it is cleaner and cheaper for the consumer. This
argument seems reasonable, but is not.
Norsk Hydro limits environmental considerations in its book to application, not mentioning the preceding stages of production of chemical
fertilizers. It does not mention that phosphate fertilizers are the product of a number of stages of manufacture in which
"dirty" phosphate ore is cleaned and changed into chemical phosphate fertilizer. The significant environmental damage
caused by this production process (for example through dumping cadmium and radioactive substances) are not visible after the product
exists on the market. The price of chemical fertilizers does not reflect the cost of the environmental problems caused throughout the
manufacturing process.
Neither of Norsk Hydro's conclusions, that chemical fertilizer is preferable to natural fertilizer for environmental reasons, and that the end
product is less expensive to the consumer, are really proven. Essential information is ommitted in this distorted argument that is being
spread through all sorts of agricultural organizations in Europe and beyond.
In recent years, Norsk Hydro has been awarded several prizes for its environmental PR. We are left to wonder about the quality of the
environmental PR of other transnational corporations.
Corporations employing strategic environmental management anticipate future rules and regulations in their research and development: the green R&D. They are active in consultations with civil servants, politicians and branch organizations to formulate new legislation and industrial codes of behaviour. In Northern European countries with a well-developed industrial state policy, the participation has shifted away from delaying or postponing the introduction of new environmental measures on a local or national level, to adapting these measures to the technical and economic possibilities available to the companies.
Hydro Agri Rotterdam is situated on the Nieuwe Waterweg in Vlaardingen (the Netherlands). It is a subsidiary of Norsk Hydro, the largest artificial fertilizer producer in the world. Directly opposite the plant, on the other side of a broad stretch of water, is another phosphate fertilizer producer, Kemira Pernis, subsidiary of the Finnish chemical giant, Kemira Oy. Both companies have been dumping highly contaminated phospho-gypsum into the Nieuwe Waterweg for years and environmental organizations have been at loggerheads with the two companies. The Ministry of Traffic and Water announced as early as 1988 that the amount of cadmium in the phospho-gypsum would gradually have to be reduced to nil.
Both companies negotiated with the local authorities for a delay. Hydro Agri Rotterdam announced it would rebuild two phosphoric acid
units, not only to save energy, but also to insert an experimental cadmium purification technique into the production process. The company
then applied the same delaying strategy used by Shell Pernis and described earlier. It was unclear at that point whether the experimental
purification, which was still being researched, would work on a full-scale level. Research time was needed to find out. In 1992 the
reconstruction work to achieve energy savings began.
On the other side of the water, Kemira Pernis embarked on a different strategy, declaring itself willing to invest in a cleaner installation.
Time was needed. Not for research, but simply for the assurance that the government would not tighten its discharge restrictions for the
next 20 years. Only under these circumstances would the company begin cleaning up its production technology, as this would ensure a
guaranteed period of depreciation for the new installations, and not require new, far-reaching investments. If the government did not offer
this security, Kemira Pernis threatened, it would close the phosphoric acid plant.
In 1991, it looked as though the environmental movement had achieved a victory. At a court hearing, the Council of State annulled the
discharge permits of both concerns. The whole application procedure for new permits began again. The authorities permitted the companies
to continue with their now "illegal discharges", granting a temporary permit until 1994. After this, the discharge standards
were to be tightened even further.
In the meantime, one of the two phosphoric acid units at Hydro Agri Rotterdam has been closed down, as have the chemical fertilizer (pellet)
plants at both Hydro Agri Rotterdam and Kemira. Hydro Agri has still not begun constructing its cadmium purification installation. Most of
the employees have been sacked. Kemira had to reduce its workforce considerably, but the business is still in operation. Both companies now have new permits for the period up to 2000. Because part of the phosphoric acid production has closed down, Hydro Agri has no difficulties meeting the lower discharge standards for cadmium. Without large-scale investments, Kemira will have considerable difficulties with the new permit.
According to UNCED, "environmental management directed toward sustainable development" should, in the
first place, not only be globally applicable, but also make allowances for the specific circumstances of developing countries.
This could be the development of specific policies and procedures for developing countries in the area of: training programmes, internal
emissions/discharge standards (in the absence of government standards, or where existing standards are too weak), technological
cooperation, interest in the local community and culture.
The Benchmark Survey found that only one or two corporations had referred to developing countries in their declared environmental aims.
Moreover, only a few corporations stated that they applied the same environmental auditing standards throughout the world.
A second aspect of "environmental management directed toward sustainability" is the special attention given
the role of the corporation in world-wide environmental problems such as the pollution of the oceans and atmosphere, loss of biodiversity
and destruction of tropical rainforests. These are naturally coupled to international auditing and the public availability of data.
Once again, the Survey found that only a few corporations scored points for this, except in the gradual cessation of the production and
use of CFC's which many corporations had undertaken. International agreements on banning CFC's (The Montreal-protocol)
seem to have had their impact on corporate policy. The authors concluded:
"This suggests that when given a tangible and simple course of action the business community can respond with impressive positive environmental contributions, even in the case of rather diffuse and global environmental problems." <24>
A third aspect of "environmental management directed toward sustainability" logically follows on the preceding two: international cooperation on issues which fall into the area of contact between the business community and the environment. The Survey highlights the contribution of transnational corporations to the definition of international minimum environmental standards through active participation in their local business organizations.
If we look at the figures only, we can observe tremendous progress in international cooperation. The period leading up to the UNCED
conference gave birth to the Business Council for Sustainable Development which represented member companies in the
discussions on sustainable development. The International Chamber of Commerce also devotes a lot of attention to the
discussion of the international environment. Thus, some 1,000 transnational corporations were involved in one way or another in the
preparations for UNCED.
The BCSD, which was originally established as a one-off coalition, is now a permanent entity. The international environment conference
for industrial corporations, WICEM, is now a regular occurrence. Unfortunately, none of this has ever been aimed at developing minimum
environmental standards or other forms of binding international regulations. As we saw in the second chapter, the aim of the corporations and
their organizations was to prevent the development of such regulations.
In chapter 8 we will discuss the advantages and disadvantages of establishing international minimum environmental standards in relation
to GATT.
Once the step has been taken to introduce preventive environmental management most, and particularly the larger concerns, exploit these
in their PR, marketing and advertising campaigns. A stream of industrial "environmental information" reaches the public,
promoting the product as "green", "natural" etc. The often misleading and sometimes absurd nature of
this sort of "environmental information" clearly illustrates that we cannot leave the supply of information on the
environmental behaviour of transnational corporations to the voluntary initiatives of the companies themselves. Legislation concerning the
availability of pollution statistics in the United States illustrates the positive effect of binding legislation in this area.
Strategic environmental management requires an all-round re-orientation in company planning, research and development and investment,
and the support of the corporate head. Life Cycle Analysis is a useful aid, as it estimates the environmental consequences
of all stages of the production chain, including the waste stage, but it does not force even the most polluting companies to retire from
business. At best, it leads to improving environmental management within the chain of production. This is also reflected in the PR policy
of these corporations.
Even the most far-reaching environmental policy "aimed at sustainable development", which only a handful of companies
claim to practice, does not guarantee optimal results: world-wide application of the same environmental standards or auditing is only a step
towards the application of the toughest standards. Paying attention to world-wide environmental problems is only useful if this leads to
absolute reductions in particular emissions at company level.
All these limitations lead to the conclusion that more than voluntary initiative is needed to stimulate the evolution of corporate environmental
management in the best direction from the (world) environmental perspective.
The same situation applies to environmental legislation, where it is now possible for multinational enterprises to exploit differences in local legislation, free from the sanctions that could be imposed by international rules and regulations. A number of international organizations have been trying for years to fill this vacuum, and have proposed codes of conduct and internationally binding regulations based on agreements and conventions. Only in a few instances is this legislation specifically aimed at transnational corporations. This chapter looks at the degree to which they bind international companies.
There are a number of other international codes of conduct created by international organizations which cover either a large number of subjects (including the environment), or one specific environmental issue.
The last group are directed at the business and industry community in general rather than transnational corporations, which they mention only occasionally. The Benchmark Survey noted that in 1991 less than fifty per cent of the corporations in the study applied any of these codes to their practice. Later research indicated that one third of the companies in the Survey signed the 1992 Business Charter for Sustainable Development while seventy per cent of the Japanese companies had signed the Keidanren's Global Environmental Charter the same year.
"hazardous installations in non-OECD countries should meet a level of safety equivalent to that of similar installations in OECD countries."
The international business community subscribes increasingly, it appears, to voluntary environmental principles. However, these codes of conduct do not require companies to apply the toughest environmental standards (as applied for example in the country of origin) internationally. Even the most far-reaching, that of the Japanese Keidanren only recommends the international application of local standards.
International application of environmental principles is, in all these codes, a very voluntary, individual decision.
The Benchmark Survey identified unambiguous results: <25>
"The participating companies were all large transnational corporations. Thus they could be expected to have extended procedures
and policies for overseas subsidiaries and affiliates. However, both the statistical analysis and an evaluation of the material submitted by
individual corporations indicated surprisingly little consideration for the international aspects of corporate activities. Regulatory discrepancies
and the decentralized organization favoured by many TNCs may account for that finding.
Approximately half of the respondents had allocated Environmental Health and Safety responsibilities to their controlled affiliates; only 15
per cent had arrangements with their non-controlled affiliates. Other companies stated that they intended to observe local regulations. Some
companies gave explicit accounts of their international responsibilities in their policy statements. Other corporations stated that they were
prepared to establish their own standards if local ones were inadequate or absent. The more positive finding was that a handful of
corporations had pledged to employ the same standards world-wide, thus meeting the recommendations of UNCED. That group included
BF Goodrich, Amoco, AB Volvo, Union Carbide, Boehring, Ingelheim, and Ciba-Geigy."
The fact that active management concerning the environment, safety and health is restricted to the national level indicates the influence of national rules and regulations.
The Vienna Convention for the protection of the ozone layer (operational since September 1988) and the Montreal Protocol relating to substances which damage the ozone layer (operational since January 1989) created a policy resolution to gradually ban CFCs by 1996. Reacting to this, the world's largest producer of CFCs, Dupont, announced it would stop its production by 1994. This did not entirely solve the CFC problem, since not all the CFC product varieties fell under the original protocol, including HCFCs, a CFC group with an extra hydrogen atom which is less destructive than other CFCs but does destroy ozone.
Dupont and other producers have now switched to this HCFC to replace CFCs (for example in automobile air conditioning systems).
In 1991, the Protocol's Scientific Assessment Panel concluded that CFC alternatives, especially HCFCs, were more harmful than expected. As a result, the Montreal Protocol was amended and this amendment ratified early in 1994 and became operational on June 14 1994. It was agreed that HCFCs and the halons will be phased out, but more slowly: by 2030.
The Basel Convention
The world currently produces around 400 billion tonnes of hazardous waste (including diluted waste water) per year, of which eighty five
per cent comes from the United States and five to seven per cent from the European Union. The first agreement banning the international
trade in hazardous (meaning toxic, radioactive or other health threatening wastes) was established in the Lomé Convention, which
banned
all transport of radioactive and hazardous wastes from the European Community to ACP (Africa, Caribbean, Pacific) countries. This was
only applicable to Lomé Convention countries and left out 78 of those in the Third World.
The Basel Convention established a more detailed agreement, but with weaker content, rejecting a
UNEP draft, and leaving only clauses on the "control" and "management" of the international trade, but no ban. This effectively legalized the trade in hazardous wastes under specific conditions, such as that known as Prior Informed Consent i.e. the receiving country must be informed beforehand and agree to the shipment. It is not difficult for a large, money-weilding company to acquire a signature indicating such consent. The Basel Convention also allows plenty of room for subjective interpretation and a resourceful trader will find it is full of holes. It has been so stripped of teeth that it can be easily bypassed, which occurs on a large scale.
Yet only 64 countries ratified this convention. In the meantime, an attempt has been made to reach a new agreement within the OECD banning the export of wastes from OECD countries. On March 25, 1994 the OECD countries agreed in Vienna to a total ban on exporting toxic wastes to non-OECD countries. The 64 signatories of the Basel Convention also signed this agreement, which, while not water tight - it has such escape routes as the category "recyclables" - is expected to cut off the new markets for toxic wastes which arose in Eastern Europe and Asia in recent years.
The most far-reaching efforts to create comprehensive multilateral agreements took place at international conferences, such as UNCED in 1992. But the treaties reached at such meetings have to be ratified by a certain number of the states whose governments participated before they become operational. Ratification means that the treaty is binding in that country, and it will abide by the rules of arbitrage and sanctions. The international effectiveness of a multilateral treaty is highly dependent on the number of ratifications. The more there are, the more it can be said that the treaty truly represents international legislation for our international legislation is fact based on consensus between states, and if there is no consensus the legislation does not exist.
To answer this question, we quote from: "Advice on the environment: a world-wide problem. Towards a politic of sustainable development." National Advisory Board for Development Cooperation, No. 101, June 1993, Page 40 ff.
"Based on these treaties, state practice and internal jurisprudence we can conclude that a number of principles in international law have been developed this century which form the foundation of modern international environmental law. The following principles fall underthis category:
In modern international law a number of important principles are being created. Besides the principles of good neighbourliness and
international liability for illegal deeds, important in across the border environmental damage, these are in the main principles which flow from the duty of states to cooperate internationally and the involvement in, albeit the right of, people and nations to a healthy living environment.
Despite the positive developments, we have to conclude that the existing international body of legal instruments is inadequate. This is due to a number of factors which partly have to do with the as yet inept development of international environmental law and partly with fundamental characteristics of existing international law. The following problems can be seen:
There are a number of ways international treaties and conventions can be translated into national environmental policy. The UNCTC describes the following categories:
These instruments have been developed for the application and use of those individual nation states that have ratified treaties and
conventions. True international instruments, such as the saleability of internationally agreed national emission rights are still at the stage
of opinionated discussion. National governments often apply different instruments in introducing or enforcing international treaties and
conventions. This increases the existing diversity in the development of environmental policy in the various countries of the world.
Generally, transnational corporations find this diversity in rules and regulations difficult. The lobby for the harmonization of international
environmental regulations was more important to international business and industry than the creation of environmental codes of conduct
or treaties and conventions: 62 per cent of the transnationals researched in the Benchmark Survey want the United Nations to reform
discrepancies in environmental rules and regulations. More than half are in favour of initiatives for the international development of a
communal set of national environmental policies. The main aim of this harmonization is not so much simplification but the "levelling
of the playfield" for all players on two levels:
The World Trade Organisation (WTO), the 1995 successor to the GATT and executor of the new GATT agreement, will have increased authority to approach players who do not observe the rules. The WTO will also become involved in areas not yet clearly delineated including environmental pollution standards and possibly also social law (for example standards relating to child labour). It is still not clear what the outcome will be of the environmental standards, but the contours are being defined.
This concerned a dispute between Mexico and the United States on the import ban on tuna in the US based on the Marine Mammal
Protection Act of 1972, the Dolphin Protection Consumer Information Act of 1990 and the Fisherman's
Protective Act of 1967. US fishing boats were given permission by the US to catch yellow tuna in the eastern part of the Pacific
Ocean, on condition that the catch include no more than 20,500 dolphins per year. It was forbidden to import of tuna from fishers and
countries that do not uphold the conditions of the aforementioned legislation.
In January 1991 Mexico requested GATT to adjudicate this matter. A GATT panel reached its decision in the dispute on September 16th
1991. The US import ban was forbidden. The three most important considerations were:
The tuna-dolphin decision illustrates that the present GATT rules make a strict delineation between import restrictions based on negative environmental effects the product will cause in the importing country (in that case import restrictions are allowed, in principle), and the restrictions to import of products which were produced under circumstances which created environmental damage. This second type is also known as trade restrictions based on the environmental production standards (this trade restriction is not allowed).
The discussion has not yet crystallized. The preparatory working group Environmental Measures and International Trade is still acquainting itself with the possible discrepancies between GATT principles and national environmental measures. The negotiations are still to begin and it is not clear where they will lead. The new GATT rules, which are the result of the Uruguay Round discussions on safety and health standards, do however indicate the sorts of discussions and problems we can expect concerning environmental production standards.
Because the GATT will only recognize production standards on scientific grounds, the World Health Organization's (WHO) recognized production safety and risk standards are no longer valid. The WHO recognizes that economic and other standards are important aspects of the acceptance of a product in a country. This can be seen in the code developed by the WHO in cooperation with UNICEF against marketing products which replace breast feeding. The new GATT now explicitly refers to two institutions for developing and standardizing internationally recognized scientific product standards: the FAO "Codex Alimentari- us" and the "International Office of Epizootics". Without wishing to cast doubt on the quality of the text of the Codex Alimentarius, it is striking that various sources have accused these two institutions of being strongly influenced by multinational chemical and food corporations. <29>
Analogous to the example of "Sanitary and Phytosanitary Measures", we can expect a strong trend within the
Commission for Environmental Measures and International Trade to argue for international harmonization and scientific
grounds for pollution standards for manufacturing processes (just as safety and environmental standards for the
product required a scientific basis).
With this approach, it will only be possible under certain circumstances for countries to prohibit the import of goods, or impose levies, if
these goods are produced under standards less strict than their own. As with product standards, the country wishing to place import
restrictions will have to prove scientifically that their own strict process standards are necessary for the protection of their national
environment.
From a global environmental perspective, there are two important points to be made on future GATT/WTO rules which will be based on
internationally standardized process-pollution standards. The first is a criticism of the content of the approach, the second highlights its
possible undesirable environmental effects:
The first criticism indicates that there is consensus in the literature that international harmonization on environmental
standards is unnecessary and even undesirable. Countries have different natural resources, environments and different environmental
capacities and every country has to balance its environmental and income issues. In formulating the scientific basis for more stringent
pollution standards, it is important to take these aspects into consideration. This is no easy task.
Even if we limit the scientific evidence to purely ecological factors, it would be highly contentious for two reasons:
This criticism of the future GATT/WTO rules is from the perspective of the global environment. There are others from the perspective of
the economic development of developing countries.
Non-governmental organizations have been campaigning for years for the introduction of global minimum standards in the interest of the
environment, social justice and health. The goal was to protect the interests of people and the environment in underdeveloped countries
where legal standards were lower or did not exist at all. Representatives of (international) employers organizations, transnational corporations
and governments in the developed North have steadily resisted this, arguing that such standards would endanger the stability of the world
market and be an unacceptable violation of the sovereignty of national governments. Southern governments which lagged behind in
establishing and applying national environmental management (or legislation concerning social justice) easily joined this campaign.
Now that Northern countries increasingly want to influence environmental management outside their own national boundaries, and the
harmonization of environmental standards is threatened, the standards in the North will not only, in all probability, be levelled down; in
countries which have as yet few regulations concerning the environment and social justice the standards will be levelled up. There is a
dichotomy of interests between the North and the South.
The Southern countries now fear trade restrictions on their products as these are being produced under lower environmental standards than
the likely world standard. This is unacceptable for these countries as it is the rich countries that are most responsible for the worldwide
environmental problem. The problem is clearly outlined in the following quote:
"Trade measures are seldom the best means of approaching an environmental problem", is the opinion of the Dutch
government. It is better to get to the core of the problem. It is preferable to transfer technology and money, to positively stimulate more
environmentally friendly production and to participate in international consultations. The government does not however exclude the
possibility of applying trade sanctions, as a last resort, to punish uncooperative countries, particularly if the interests of the international
environment are at stake.
Because it is the rich countries that contribute most to the global environmental problem, it is not right to pass the buck to the poorer
countries via trade. The Dutch government agrees with this standpoint. Ideally sanctions against a certain product are compensated through
the transfer of technology or money to the supplier. Tragically, in the period since the UNCED environmental conference, the richer countries
have kept their purse strings closed. This makes it even more difficult for the poor countries to accept "green protectionism". They will do
whatever is in their power to fight environmental demands - or social demands - which damage their competitive position on the market
being forced upon them." <30>
France and the United States are in favour of the new World Trade Organization (WTO)
exploring the issue of social justice, in particular the desirability of developing minimum rules on which trade restrictions can be based. The Third World is unequivocally opposed to this "hidden protectionism" of the rich North, saying it would cut the low-wage countries short and protect their own industry.
The ostensible issue is child labour and forced labour.
The European Union is, as usual, divided on this issue. The Netherlands belongs to the camp opposed to the French and US proposals, arguing that we ought not weigh the WTO down with non-trade, sensitive political issues. Belgium supports France. Its Minister for Foreign Affairs R. Urbain proposed in the EU context to provide extra trade advantages to countries with a "good social report".
<31>
There is less likelihood that the GATT/WTO discussion will end in a stalemate between Northern and Southern standpoints as happened at UNCED. Rich trading nations dominate negotiations within the GATT/WTO. Moreover each country is likely to be given ample time to grow toward the international harmonized minimum process standards. Whether the global environment will benefit from this depends heavily on the ability of the other countries to maintain and improve their own environmental management.
In May 1990, when it looked as though GATT would fail due to
the differences between Europe and the United States, a number of leading
companies in the US set up the Multilateral Trade Negotiation Coalition (MTN). Companies strongly dependent on
international trade such as American Express, General Motors, IBM and Cargill were among the participants. The goal of the coalition was
to influence the GATT through determined lobbying. Its success was clear during the July (1990) meeting of the G7, when, after a briefing
with the MTN, the Bush government gave the Uruguay round top priority. <32>
There are many other examples of the power of the US company lobby. For example, the US cigarette market declined in the 1980s, while
markets in other parts of the world were protected against imports either through monopolies or high imports tariffs. The US government
took several South-East Asian governments in hand, threatening unilateral trade sanctions against Japan, South Korea, Taiwan and Thailand.
Those markets were eventually opened, and this led to a tremendous growth in American exports of cigarettes from the large tobacco multinationals (Philip Morris, Reynolds), to the detriment of local producers. <33>
The pharmaceutical industry provides another example. The WHO worked for many years to
compile a list of essential medicines which
Bangladesh took seriously and banned all unnecessary medicines. The US government threatened to cut food aid if Bangladesh continued to discriminate in this way against the US pharmaceutical industry. <34>
Internationally applicable minimum process emission standards can have a positive effect on countries where standards are lower, as these countries will be threatened with trade restrictions. These, however, can have serious consequences for economic development. Countries should be given ample time to be able to meet the minimum standards. Transnational corporations can lobby for trade restrictions on the import of goods produced under polluting circumstances and can at the same time push for a GATT-panel decision against such restrictions, which will effectively put pressure on the stricter standards in the North.
Since the 1960s, transnational corporations have applied in their country of origin (Western) for patents on numerous crops, seeds and
active parts of plants and trees in the Third World. The American professor Iltis, for example, discovered two wild varieties of tomato in
Peru which could be cultivated in the United States with good results. He imported the seed, took out a copyright and sold the copyright
to a food company. There's not a pizza sold in the US without this variety of tomato in its sauce. Most patents are not however used in
food production. The American Type Culture Collection, a scientific registration organization in Maryland Virginia, houses 60,000 patented
or patent-ready organisms. Most of these are patents on parts of plants and seeds which are used in the production of environmentally
friendly fertilizers, insecticides and medicines - for which there is a fast growing market in the West and with which companies are earning
more and more money.
When the new GATT copyright law is introduced, US patenting laws will be applicable world-wide. Companies and farmers in the Third
World, which have used these seeds and live on these crops for years, will suddenly have to pay for using them if the transnational
copyright owners claim their rights.
NGO criticism of the GEF operations in the first three probation years is extensive, concentrating on two main themes:
Nature and people suffer the serious consequences of oil exploitation in Nigeria. Pollution, noise pollution and the infrastructure needed for
oil extraction, have paid their toll in the vulnerable mangrove forests, internationally recognized as a threatened ecosystem, and the provider
of the livelihoods of thousands of people. All efforts of the local population to protest against the pollution and the oil extraction by which
they barely profit are hard handedly repressed.
On April 30 and 4 May 1994 one person was killed and many were injured during a demonstration against the installation of a pipeline by
Shell, which is very active in this region. Ken Saro Wiwa, one of the leaders of the Ogoni (an indigenous people in this region) resistance
was arrested by the Nigerian authorities. The reason for his arrest was the international attention he had managed to generate for the
problems of oil extraction in this area. The global climactic effect of the enormous amount of gas released in oil extraction led to the decision
of the GEF to invest in the area. There is no mention in the plans, however, of the local environmental problems and there is no interest
whatsoever in the problems of the local community.
The NGOs conclude that the principle of 'incremental costs' can only be defended if there are other channels available for
working effectively on local and national sustainable development. Finance ministers will stop being willing to finance a GEF which continues
to be wrongfully used. The NGOs also felt the GEF should be used to intensify the effect of the regular assistance channels. The GEF should
certainly not serve to aggravate poverty situations, and should preferably contribute to the improvement of the local social situation.
NGOs also felt that the World Bank, which presently manages the GEF, should provide more and faster information on the candidate
projects, and the concerned populations and NGOs should be able to become more involved in the decision-making procedures. Key concepts
for a new GEF are transparency, accountability and participation.
The new GEF partially meets these points of criticism. The executive structure is no longer so closely linked to the World Bank. A board of directors from the 32 founding countries (18 donor countries and 14 recipient countries) will be established. Openness, consultation and participation of the relevant NGOs and local populations throughout the entire project cycle has been taken up in the agreement. The participation of NGOs in the Board of Directors has not, as yet, been agreed to.
It is expected that the GEF will decide on its first work programme in December 1994.
CIP-gegevens Koninklijke Bibliotheek, The Hague
Heerings, Hans
Elusive saviours: multinational corporations and sustainable development/Hans Heerings. - Utrecht : International Books. -Ill.
Published in cooperation with CONTRAST Advies & SOMO - With Bibliography
ISBN 90-6224-978-7
NUGI 661/684
Key words: transnational corporations and environment policy
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