Why Corporate sustainability? Corporations are the fundamental cells of modern economic life and their phenomenal success in transforming
Sustainability and business are not always looked as a good functioning pair. Businesses often struggle to implement sustainability measures, as they think that it is costing money to shareholders/investors. However, due to increasing pressure from the public, businesses are being forced to reconsidering at adopting sustainability and good business practice. In today's interconnected global economy, the long-term goals and success of business are inevitably connected by embedding the environmental, social and governance issues into corporate management, operations and supply chain. While corporate sustainability recognizes that, though the corporate growth and profitability are vital, it also requires the corporation to pursue societal goals, particularly those relating to sustainable development like; safeguarding environmental, social equality and economic development.
Numerous debates have been waging over the past few years among business elites about the whether or not a corporate entity has a responsibility to society. It’s an extremely interesting topic with real and global ramifications that impact nearly every person and animal on this planet in one form or another. Anyone who owns public shares in a company has invested hard-earned money into a corporation based upon their perception that the company will be profitable and sustainable. The corporation’s board of directors are then responsible to manage the company in such a way as to increase their share-holders’ investment. For hundreds of years, this attempt to increase a corporation’s worth was done with little or no interest in social responsibility. Until very recently this topic was not very much in the public eye. However, at the moment the global economy is rapidly changing and business transparency is increasing through the accessibility of information across the world. Social and global change is moving faster than ever and progressing through this century any business will undoubtedly need to keep up to remain profitable. More mature business students will certainly recall being bombarded with the idea that the only responsibility of a corporation was to increase the value of the company and maximize long-term shareholder wealth without regard to ethics or social obligations. Is there a correlation that occurs between large multinational corporations and their
Multinational corporations operate across many countries, and each country has its own laws and cultures and also diverse ethical practices and social norms.
One thing to be observed in case of the MNCs is that they have usually developed in a impulsive and unconscious manner. Very often they developed through "Creeping incrementalism" Many firms become multinationals by accident. Sometimes a firm established a subsidiary abroad due to wage differentials and better opportunity existing in the host country.
Multinational Corporation (MNC), sometimes called transnational corporation or international corporation, business that produces or distributes products or services in one or more foreign countries by establishing a branch or affiliate there. A branch is a part of a company that is located in another country. An affiliate is a company partially or entirely owned by another company. MNCs engage in foreign direct investment (FDI)—that is, investment in one country by citizens of another country. Sometimes such investment involves acquiring an existing company. In other cases MNCs undertake what is known as greenfieldinvestment by creating new facilities or activities.
“Researchers and theorists suggest that the skills and techniques of a MNC are very different than those of an organization without a global presence.”
One of the main objectives of any business organization includes making profits and enhancing the economic growth (Davis, 2012). Most businesses aim at discharging their economic and legal responsibilities. It is because for a business to continue as going concern, the business have to obey the law and be profitable. However, being ethically and philanthropically responsible can also affect the businesses apart from economic and legal factors.
Globalization is the establishment of economic, political, social, military, scientific or environmental interdependence that span worldwide distances (Steiner). This process has evolved for hundreds of years. However, this trend has rapidly increased over the last century, primarily due the forces of an ever changing society, government, and business environment. Corporations are expanding their business operations all over the world and are evolving into multinational corporations. Companies choose to invest capital for starting, acquiring, or expanding their enterprise to another country predominately for a few factors. Investing capital in a foreign nation can lead to growth. By entering a new market, a new segment of consumers can be reached, leading to new potential customers (Steiner). In addition, corporations can seek efficiencies in a foreign nation. With different resources located all around the world, as well as, generally less strict regulations on business in developing countries, multinational corporations can take advantage of cheaper labor, economies of scale, and other resourcing efficiencies to reduce their overall costs (Steiner).
Multinational corporations have operations in multiple countries which in turn brings together many cultures. Saying a multinational corporation has no moral or social responsibility to engage in corporate social responsibility (CSR) programs goes against what a company should strive to be. In recent years, firms have undertaken corporate social responsibility programs due to pressure from their stakeholders as well as their shareholders (McWilliams & Siegel, 2000). If a company does not believe they have to be morally and socially responsible, that company will not be around long.
Since the collapse of the Soviet Union and the onset of the “third wave” of democracy, spreading across former communist regimes, foreign direct investment (FDI) has skyrocketed to unprecedented levels. It seems now as if though engaging in foreign direct investment outweighs establishing trade relations (dependent on the formal and informal trade barriers and economies of scale). Many countries have benefited drastically to the increased investment into their economies and their labour population. Though, other countries have not been able to secure viable and long lasting investment opportunities because of the nature of their political system. Possibly one of the most surprising and interesting cases where a country has failed in this endeavor is that of Russia. Russia has always had several difficulties in attracting FDI, this paper will demonstrate how Russian difficulties in attracting FDI are a cause of the countries weak, democratic, domestic institutions, its corrupted political system, and its conflict [more recently] with the West. This paper will demonstrate which factors attract and dissuade Multi-National-Corporations (MNCs) to engage in investment abroad, and what countries can do to signal the quality of their markets to such investors. In doing so, we will be able to compare the Russian state to the theoretical framework in which is established, and see how and why Russia is lacking. Adding further to the ongoing discussion we will attempt to connect the
Multinational Organizations provide jobs to individuals all over the world, helping to expand the job market and bridge the gap between different countries. Although this sounds reputable it does have its share of issues, since all countries operate in their own way following their own laws and customs thus making it difficult to have a set standard of moral obligations for the multinational companies who operate within them. These countries however are not free from moral obligation and instead need to find creative ways to insure ethical behavior in each individual country and as a whole. Companies have an obligation towards social responsibility, which if violated may result in various costs such as fines or lawsuits. In order to effectively fulfill this obligation they need to act ethically in terms of competing fairly and paying taxes. They also need to insure that they are adhering to the laws and customs of society in terms of who they hire and how they treat both employees and individuals in general. While both of these facts are important another concern is the way a company conducts business, which reflects heavily on itself, creating its own reputation. If a company acts immorally people will hear about it and the business may find that they are no longer able to recruit ethical employees, since more often than not ethical individuals want to work for a moral company with good business practices. This behavior is important as it impacts long term relationships
Today I am here to educate and raise a very important topic of discussion that may, or may not affect your opinion within international organisations. Do you believe international business encourage firms and organisations to become socially responsible and ethical global citizens? What I am here to tell you today is that with the correct organisational procedures, internationally renowned businesses are able to become socially responsible and ethically recognised. However when international organisations have unseemly and immoral behavioural standards, generating ethical global citizens is out of the question.
TNCs’ environmental responsibilities are becoming particularly a matter of urgent concerns, heavy emphasis and worthy research. All corporates should be theoretically obligated to fullfil their social accountabilities including the environmental ones because their manufacturing and managing activities impact on the environment, but TNCs are playing a more crucial role in their host countries’ sustainable development because of their massive sizes and powerful strength. They can cast the governments aside and have the power to move all or part of their business overseas.They should not treat the host countries as their pollution pouring zones and profit from overseas weak environment.
International business is not possible when the government of the home and host countries are not mutually interested and benefited in the trade. MNC’s always strive to build better relationship with the home and host ruling government.