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Responsible Competitiveness

The domestic policy implications of falling trade barriers are that a country and its people must seek to be ‘competitive’ in international markets. In some countries this has created a downward pressure on environmental and social regulations, as well as on taxation, leading to reduced government provision of basic welfare services. In December the election of the left-wing Evo Morales in Bolivia illustrated a growing trend across Latin America to reject the competition-driven vision advanced by most centrist and right wing politicians. Continuing protests at intergovernmental summits, and growing attendance at the world and regional Social Forums that advance a different approach to national and international governance, suggest that those who advocate the current trajectory of globalisation are in need of a new story to convince the masses of its merits. That story may emerge with the concept of ‘Responsible Competitiveness’, advocated by AccountAbility.

Accepting that seeking international competitiveness is the dominant policy orientation of many governments, AccountAbility states that “the challenge is to evolve a responsible basis on which competitiveness is achieved.” Responsible competitiveness “means markets where businesses are systematically and comprehensively rewarded for more responsible practices, and penalised for the converse.”203 The role of government in guiding the achievement of responsible competitiveness is recognised, as “being responsible sometimes does and sometimes does not pay... While the growing significance of intangible assets has created opportunities for leveraging responsible business practices, the intensification of competition and the short-termism of investors constrain such practices.”204 The challenge they therefore identify is how governments can intervene to improve business social and environmental performance in a way that adds to rather than reducing international competitiveness.

In a report launched at the Global Compact event in Shanghai, in November, AccountAbility pointed to instances where governments are promoting corporate responsibility as an international competitiveness issue. The report highlights the challenge of the end of the textiles quota system, the Multi-Fibre Arrangement, to countries from Cambodia to Lesotho that cannot compete internationally on price with China. This challenge has led them to explore whether adherence to labour and environmental standards might offer an effective non-price competitive advantage. As a result, Cambodia has signed an agreement between producers, ‘brand’ customers, labour unions and international agencies like the World Bank to help its achievement of labour standards. Meanwhile Chile is reported as actively exploring whether raised social and environmental standards might offer their fruit and wine exports an edge in international markets. The Canadian government is aiming to make ‘brand Canada’ one of quality, including social and environmental quality, in order to develop agricultural exports.

The idea that nations have reputations that are important to market demand for products or services from their nations is not new, and illustrated by Singapore construction firms advertising their national origin at building sites across South East Asia.205 Could social responsibility be important enough a factor for reputation to influence competitiveness, and therefore, government policy? Is so, could it be important enough in enough countries to influence sustainable development? The report tackles the first question with the introduction of two indices.

The ‘National Corporate Responsibility Index (NCRI)’ is an attempt to measure the state of corporate responsibility across eighty countries, covering key factors such as levels of corruption, businesses' adoption of environmental management, and the state of corporate governance. Nordic countries rank highest, with four appearing in the top five and Finland scoring highest. South Africa is the highest-ranking emerging economy (excluding east-central Europe), followed by Korea, Chile, Malaysia, Costa Rica and Thailand. The second index, the Responsible Competitiveness Index (RCI) incorporates the NCRI as one more variable in the World Economic Forum's Growth Competitiveness Index’ (GCI).

Ranking people, organisations or countries is always a useful way of stimulating debate, and these indices also offer a way of testing the proposition that widespread corporate responsibility in a country adds to that country’s competitiveness. “There is a significant correlation between the competitiveness of a country and its corporate responsibility level. This might indicate that... corporate responsibility can fuel country competitiveness” states the report.206 Press releases on the report did not use the conditional tense, yet methodological difficulties may make this a premature claim. The validity of some of the regression analysis can be questioned, as when one index partially incorporates another there is a likely correlation between the two. This is the case with correlations between the RCI and either the NCRI or GCI, as the RCI incorporates the others, to a degree decided by the researchers.

As the report notes, correlation does not mean causation. Correlations can be influenced by other factors such as the cultural assumptions of researchers and the data they use. This is especially the case in an area like this, where researchers are quantifying intangible issues. Deciding what constitutes ‘corporate responsibility’ is as much a cultural and political challenge as it is a technical one. For example, the existence of a corporate sustainability report could be regarded as evidence of a negative impact on sustainable development as much as an indicator of corporate responsibility, given that companies with large-scale environmental or social impacts are more likely to publish this information. An indicator such as the number of IS014001 certifications may depend on the international connectedness of a country, and the availability of assurance services, both of which may be due to the level of economic development of a country rather than the state of its business-society relations.

Indicators of corporate performance on issues of public importance, rather than processes of voluntary engagement with those issues, is important if we are to explore any relationship between beneficial business-society relations in a country and its competitiveness, and the NCRI could be improved in this area. The NCRI includes the factors comprising the context for business-society relations, such as regulations and the vibrancy of civil society. However, a researcher’s culture influences what they consider indicative of this external context, such as the number of ‘NGOs’ in a country. This figure may be as much an indicator of a liberal political system, formalized social economy and retreating state as one of healthy community organizing, and so the number of NGOs may correlate directly with economic development, not business responsibility. In addition, the weighting given to various issues from freedom of association to carbon emissions is a subjective one. For instance, some may argue Costa Rica should not rate so highly given that trade unionism has been effectively undermined in that country. Both the issues and the way one assesses performance on them are political as much as scientific endeavours.

Aside from these methodological challenges, what potential might responsible competitiveness have for encouraging government leadership on corporate responsibility? This may depend on the relationship between country-branding and practice, and the importance to a country’s economy of those trades sensitive to responsibility issues in comparison to those that are not. On the former, there is sometimes a tenuous link between a country’s brand and its performance on related issues. Returning to the example of Costa Rica highlights this. The award winning “Costa Rica - no artificial ingredients” campaign to promote tourism occurred at a time when it was the highest per capita importer of agrochemicals in the world. If a publics’ perception is that the existence of wilderness constitutes a country’s ‘greenness’, rather than ecologically conscious forms of production and human settlement, then the potential of a country’s green branding to influence government promotion of sustainable business may be limited. Another example of the disjuncture between rhetoric and reality is the Canadian agricultural ministry marketing the country as a source of high environmental quality products, whereas unlike many countries it allows genetically modified crops to be grown and does not require product labeling of GM content. In Europe 3500 municipalities are no-grow zones for GM, with only 2 in Canada in 2005.207 This example raises the question of whether a concern for the value of a ‘responsibility brand’ in some product areas is enough to drive changes in government policy.

The answer to this question will depend on which commercial sectors have the most influence over government policy. A country’s environmental services industry could benefit immeasurably in both domestic market size and international branding from more government intervention on greenhouse gas emissions, for example, but other energy-heavy sectors can actively resist such action. This situation reminds us that as industries are so different it may not be possible to argue that a whole country’s economy can be more or less competitive due to overall corporate responsibility. The varying importance of different social responsibility issues to consumer behaviour also undermines any general claim about responsible competitiveness. An issue such as pesticide residues in food may be much more important to a consumer than social aspects of the product, due to their own health concerns. If performance on a responsibility issue has an impact on the quality of the product or service then it is likely to be a more important factor influencing market demand than those issues that do not. This also makes any generalized claims about the impact of corporate responsibility on market demand difficult to justify.

203. Accountability (2005) Responsible Competitiveness: Reshaping Global Markets Through Responsible Business Practices, Accountability, London, p. 3 and p. 4.

204. ibid p. 3

205. Bangkok Post, 3rd January 2006.

206. AccountAbility, op cit p. 9

207. Yes to GMO-Free Zones Say 58% of Canadians and 62% of PEI residents http://www.newswire.ca/en/releases/archive/March2005/30/c9910.html

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contents © Greenleaf Publishing, apart from the Introduction © jem bendell, 2006. site by waywardmedia.com

 

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