The Hindu Business Line : Globalisation requires local citizenship behaviour too

THE oft repeated cliché about multinational companies thinking global but acting local is usually quoted when it comes to a choice between selling standard fare around the world or adapting the products and services to local needs. While it may be easier to enjoy scale economies by selling a standardised product around the world, ignoring local preference may lead to ignoring a large part of the market. But if acting locally goes beyond listening to local product preferences and crosses into acting in accordance with local community wishes, we enter murky waters.

As large corporations rushed to establish manufacturing sites around the world, we started hearing about sweatshops in apparel factories, chemical effluents, and pollution in the rapidly growing economies of East and South Asia. This led to environmental groups and labour unions in developed countries crying foul and raising the question of lower standards in poor countries costing them their jobs.

When the Free Trade Agreement that covered the US and Canada was expanded to include Mexico, it was held up on the question of what safeguards to include so that the companies do not exploit the cheaper conditions south of the Rio Grande. The concern was as much to protect the Mexican environment as to neutralise the cost advantage that came from lax standards. International movements have had a more noble purpose.

For instance, the `Global Compact' promoted by the United Nations Secretary-General at a World Economic Forum meeting at Davos has received some traction. The idea was not to require governments to mandate appropriate behaviour but to convince the corporations themselves to sign-up to a charter of good behaviour when it comes to labour practices, environmental standards, human rights, and so on. Moreover, the signatories were encouraged not just to write cheques for noble causes but to display good behaviour in their operations.

Another effort was promoted by the US administration in 1995, when it issued the `Model Business Principles.' Companies in the US were encouraged to adopt and implement voluntary codes of conduct for doing business around the world. The recommended principles were concerned with creating a workplace that was safe and not detrimental to health, adhering to fair labour practices, encouraging good corporate citizenship and making a positive contribution to the community. For a few years, annual awards called `Best Global Business Award' were given to companies found to be adhering to these principles.

And then there is Plachimada. It is a village in Palakkad district of Kerala (South India) where the Indian operations of Coca Cola Inc. has set up a bottling plant. During an initial honeymoon period, the villagers were thrilled to see jobs in the area, and loved the company even more when it offered them the factory sludge for use as fertiliser. But for the last three years, the local community has been fighting a battle with the company.

The villagers allege that the water table in the area has lowered dramatically, what water can be found is now contaminated, and the sludge that was passed off as fertiliser was also contaminated and quite harmful for the crops.

The people are protesting outside the plant, the courts are debating issues and issuing orders, the government officials are poring over contracts and checking laws, and international organisations such as the BBC and Greenpeace are carrying away samples for testing. And the problem is yet to be resolved.

A stage has been reached when mere shutting down of the plant (which the company is said to have offered) will not solve the problems for the question will also remain as to who will spend the funds to ensure an ecological clean-up of the area and which may be many times the amount that can be negotiated with the villagers as compensation. Surprisingly, we are not talking about oil drilling in the Arctic wilderness (about which debate is presently raging in the US) or laying a pipeline in South-East Asia (where Unocal recently agreed to compensate villagers and fund improvements to living conditions along the project route). We are talking about a factory that adds sugar, flavours, and some gas to water.

Companies such as McDonalds and Coca Cola are like a red rag to local environmentalists partly due to the way they flaunt their foreignness. Coke seems to have a particular run of bad luck. Remember the contamination of its products in Europe a few years ago and the extended state of denial by the company?

Coke publishes a `Citizenship Report' that appears on the company's web page. In the 2003 report, it takes pride that the company stands for quality and integrity, and its commitment goes beyond selling beverages to the `relationships we maintain with the communities in which we operate.' In India, the report describes working with NGOs to provide facilities in schools, support to ambulance brigades, and helping rainwater harvesting.

Even free-market conservatives who do not want a company wandering into the unchartered territory of social responsibility would advocate that the least the company should do is to undertake its operations honourably.

There is no meaning in supporting impoverished schools and funding ambulances if the nature of one's operations requires contamination of the water table.

We surely would not expect the record of any company that operates in hundreds of sites around the world to be perfect. There are going to be challenges to its practices, disgruntled customers, and law suits. Can we not at least expect a statement to the effect that the company does face these challenges and is working to resolve them? Or does honesty run afoul of publicity? Try putting `Plachimada' in the search slot on the Coca-Cola Web site. I did, and a virtual `help' asked me if I wanted to know the history of the company.

As local communities in developing countries rush to attract factories to their neighbourhoods in the name of globalisation, they seem to lack the contractual skills, regulatory savvy, or institutional frameworks to keep the corporates in line. The contractors in Indonesia who supplied goods to Nike got away with shameful practices, all under the pretext of jobs and economic development. Finally, Nike has begun to accept part of the responsibility. Would it not be a better world if companies actually believed in their codes of conduct, their rules of citizenship, and practised them in their normal business functions rather than build a false image though expensive publicity and finally end up with egg on their faces?

And in case you wondered, I went looking for those Model Business Principles on the Web site of the US Department of Commerce and could not find them. A new administration, new priorities. A fitting comment to the changing fads of business.

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