Environmental issues and its impacts on MNEs

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1.     Increased awareness of environmental issues………………………………………………… 2

2.     Impacts to business practices of MNEs………………………………………………………… 2

2.1       Pressure for high CSR standard………………………………………………………… 2

2.2       Stricter export and import requirements……………………………………………… 3

2.3       Recruitment, motivation and retention of quality employees…………………. 4

2.4       Changing consumer behaviors and shopping preference……………………….. 4

3.     Strategies adopted by MNEs………………………………………………………………………. 5

3.1       Global responsibility report……………………………………………………………….. 5

3.2       Build new facilities and production procedures…………………………………… 6

3.3       Environmental Management System (EMS)……………………………………….. 6

4.     Conclusions………………………………………………………………………………………………. 7

List of reference………………………………………………………………………………………………. 9

Environmental issues and its impacts on MNEs[1]

 

1.        Increased awareness of environmental issues

 

Environmental issues in a global scale usually include: Water scarcity and protection, Climate change, Energy concern, Carbon dioxide emission (global warming), Biodiversity, Population and Human made pollution such as noise and so on. While issues all have long term impacts on the development of the economy and society, they are increasingly concerned by the people. There are a lot of social phenomenon from which we can see that there is an increase in the awareness of the environmental issues, these phenomenon include frequent media reports about the companies’ scandals of handling environmental issue, increased public awareness about environmental problems, demonstrations by environmental pressure groups and the increasing number of international agreements to restrict waste, energy consumption and detrimental chemicals and so on (Harris 2004, p.3). And with the increased awareness of environmental issues, the business world is also undergoing changes in term of people’s mind and way the business should be done and also the products should be more “green” and environmentally friendly.

 

2.        Impacts to business practices of MNEs

 

2.1    Pressure for high CSR [2]standard

 

The table below lists the result of a survey done to investigate the motives and how important such motive for companies to adopt a CSR policy to better align the business practices to an environmentally friendly manner. As we can see, pressure to apply a CSR policy is from various stakeholders such as the society, government, the employees (potential employees) and other stakeholders. Though the shareholders they tend to have final decision regarding the companies’ strategies making are not found in the research, all the stakeholders except the shareholders seems to all have pressure for organizations to perform a better job in adopting a CSR policy and relative systems.

 

 

Table 1 CSR motives

Source: Aras, G. & Crowther, D. (2010), A handbook of corporate governance and social responsibility. Surrey: Gower Publishing Limited. p.351

 

2.2    Stricter export and import requirements

 

Though trade conflicts could be just an excuse that one economy wants to restrict important of certain goods from another economy, still there are cases in which environmental issues do matters to the people and certain governments. For example, one of the most famous trading conflicts is the Tuna-Dolphin dispute [3]in which the United States passed the law to ban the import of tuna from countries in which the number of accidental killing of dolphins is above a certain amount (Grafton, Pendleton & Nelson 2001). More than just single governments, there are increasing governments and economy entities and groups that are pay extra attention to the environmental issues and raise the bar of environment sustainability of the import of the products and whether they are produced in an environmentally friendly manner.

 

2.3    Recruitment, motivation and retention of quality employees

 

Whether forcedly or actively adopting the CSR policy, most MNEs are building up a good image in term of environment protection, and another function that building up high standard CSR practices could have is to facilitate the recruitment and retention of quality employees. As proposed by Greenaway (2009) that the CSR image could help recruit and retain highly motivated and performing employees. In another word, the environmental issues could have an impact on the companies’ traditional function of hiring and motivating employees. And numerous studies have shown that employee motivation could be strengthened with positive CSR policies and there are more and more skilled workers and experienced managers who showed preference for working with the companies that are more socially responsible than others (Hopkins 2007, p.181).

 

2.4    Changing consumer behaviors and shopping preference

 

In many industries, markets are buyer markets which means that consumers are those who have the option to buy the certain products with one supplier or the other, and actually with the increasing awareness of the environmental issues, the consumer behaviors and shopping preference have been changing to a more Green consumption way which is believed to be widely developed in both rhetoric and practice (Miller 2001, p.128). Within the phenomenon of Green consumption, various concepts had been developed such as the organic food that have been proven to be more healthier to the body of human and these green products receive more consumption preference. For example, in 2007, a story at Wine Spectator described that the biodynamic methods of making vineyards more like functioning ecosystem the research also found out that wide made under this method are more tasty and enjoy higher price in the consumer market (Russo 2010, p.57).

 

3.        Strategies adopted by MNEs

 

3.1    Global responsibility report

 

Due to the high pressure from the stakeholders especially from the governments in term of regulation and restrictions, many MNEs have adopt stricter CSR standard and the results of their effort are usually exhibited in the forms of a responsibility report, environment report and sustainability report which will be written based on the global reporting guidelines and focus on stating the companies’ facts and achievements made by the companies and also the future environmental and social strategies that the companies would like to pursue (Idowu & Filho 2009, p.157). For example, in the most recent 2011 Global Responsibility Report, the global retail leader Wal-Mart has stated the performance of all the international markets, continued progress toward key environmental initiatives and goals and new programs recently launched and also the vision and plan for the coming few years. The usages of the responsibility report, environment report and sustainability report are all similar, they play two major functions: on one hand, it sets clear environmental goals and targets for the employees to look forward to and invest their effort in the fields that need improvements as mentioned in the reports and it is generally believed that publicly stated goals have more pressure to the companies to perform and adhere to such goals because the public, the media and even the employees are watching closely; on the other hand, the usage of the reports are to communicate with the shareholders, customers, NGOs[4], governments and other stakeholders what the companies have done in the field of improving the sustainability of the business to the environment, and through such positive communications the companies could build up good reputation and images of the companies that will in return brings back business opportunities and revenue.

 

3.2    Build new facilities and production procedures

 

To pursue a business that is more environmentally friend, many existing issues such as waste and pollutions need to be addressed to reach the anticipation. Take the nitrogen issue as an example which could lead to environmental issues such as eutrophication[5]. To meet the stricter guidelines from governments or NGOs, there are increasing numbers of MNEs that are focusing on the development of the efficient wastewater dealing methods (Davis 2006, p.2). Two ways are used to achieve this goal: the first method is to abandon the old production facilities and replace with them new facilities that are more environmentally friendly but this method could incur high cost which leads to the increase of production cost; the second way to deal with the waste will be to apply stricter control systems and reduce the special chemicals before releasing the waste water into the rivers or the sea. Not only in nitrogen control that these two methods could be use, in many other occasions these two methods also represent two direction that could be used to achieve the environmental goals.

 

3.3    Environmental Management System (EMS)

 

At the same time while the MNEs are trying to innovate their production procedure and facilities to improve the business performance in term of environmental protection, one more job that the MNEs management would do to ensure the adherence to the environmental policy and goals is to build up a reporting system that could help control and motivate the staffs in the right direction in their job. One method and concept in building such report system is to adopt the Environmental Management System (EMS) which is a formal framework for integrating the environmental protection concern into the whole management structure (Sheldon & Yoxon 2002, p.217). This report system could help segment the corporate environmental goals into smaller targets and missions to be finished by the managers and every employee within a period of time (usually in a financial year or a five year plan) and ensure that the targets are viable and achievable. And also by adopting this Environmental Management System (EMS), two functions could be achieved: the first function is to monitor the performance of the individuals in term of contributing to the achievement of the environmental goals for the company and find out those who are responsible for the failure of the achievement of the goals; the second function would be motivate every individual and managers to work in such a way that it could help improve the environment by reminding them time by time the process of the finishing of the targets.

 

4.        Conclusions

 

With the discussion above, we can conclude some basic facts that there is an increase in the awareness of the environmental issues together with the people’s changing consumption behaviors and social pressure toward a greener business environment, and to deal with the close scrutiny over the environmental impact of the business, most MNEs are forced to or they are willing to contribute to the vision of better environment through strategies such as building new facilities and production procedures and setting up Environmental Management System (EMS). What’s more, here there are two more recommendations that are given to the MNEs in dealing with the environment relative issues and crisis: firstly, MNEs in order to perform the business that are more environmentally friendly can integrate the environment protection awareness test into the selection procedure which could help the companies to select those who are able to perform the job while at the same time pay attention to the environmental issues; secondly to the existing employees, the companies could use environmental protection awareness training to increase the employees’ knowledge and recognition of the relative issue. What’s more, the concept of environmental protection and sustainability should be integrated into the company culture that facilitates an internal environment that support the company’s strategy in this field.

 

 

List of reference

 

Aras, G. & Crowther, D. (2010), A handbook of corporate governance and social responsibility. Surrey: Gower Publishing Limited. p.351

 

Davis, E. B. 2006, Frontiers in environmental research. New York: Nova Science Publishers, Inc, p.2

 

Grafton, R. Q., Pendleton, L. H. & Nelson, H. W. (2001). A dictionary of environmental economics, science and policy. Cheltenham Glos: Edward Elgar Publishing Limited.

 

Greenaway, D. (2009) Armed Forces Pay Review Body: Thirty-eighth Report 2009. Surrey: Office of Public Sector Information

 

Harris, F. 2004, Global environmental issues. Hoboken, New Jersey: John Wiley & Sons, Inc, p.3

 

Hopkins, M. 2007, Corporate social responsibility and international development: is business, London: Earthscan, p.181

 

Idowu, S. O. & Filho, W. L. 2009, Professionals ́ Perspectives of Corporate Social Responsibility. London: Springe-Verlag Berlin Heidelberg. p.157

 

Miller, D. 2001, The dialectics of shopping. Chicago: The University of Chicago Press, p.128

 

Russo, M. V. (2010), Companies on a Mission: Entrepreneurial Strategies for Growing Sustainably, Responsibly and Profitably, Stanford, California: Stanford University Press, p.57

 

Sheldon, C. & Yoxon, M. 2002, Installing environmental management systems: a step-by-step guide. London: Earthscan Publications, Ltd, p.217

 


[1] MNEs = Multinational Enterprises

[2] CSR = Corporate Social Responsibility

[3] Tuna is the food of dolphins, dolphin would get killed if trapped together with tuna

[4] NGOs = Non-governmental organizations

[5] A process where water bodies receive excess nutrients that stimulate excessive plant growth