Transnational corporations are now so numerous and in some cases so well capitalized that their global influence now rivals and in many cases exceeds that of governments, according to research published by the Worldwatch Institute.
Around 80,000 transnational corporations (TNCs) operate worldwide, a mere 147 of which control 40 percent of the total value of all these corporations’ value. Any vision of a sustainable future must include full recognition of the role that TNCs play in shaping the planet’s human and ecological destiny, authors argue in the Worldwatch Institute’s State of the World 2012: Moving Toward Sustainable Prosperity.
Because corporations operate with a primary purpose of increasing value for their shareholders, they have often tended to de-prioritize other fundamental concerns. In the worst instances, the pursuit of profit by corporations worldwide has led to neglect for their employees, lack of accountability in their societies, and indifference in their contribution to negative environmental effects. These failures have come under particular scrutiny since the beginning of the financial crisis in 2008 and the realization that financial corporations deemed “too big to fail” pose a serious threat for the economy.
In their chapter, “Reinventing the Corporation,” in State of the World 2012, Allen White and Monica Baraldi of the Tellus Institute outline four areas of needed transformation for the modern corporation:
Purpose. A company is not required to have a statement of purpose in countries that have common law traditions, including the United States, the United Kingdom, Australia, and Canada. The B Corp (or “benefit” corporation) is a U.S. example where participants are required to have a corporate purpose to create material positive impact on society and the environment.
Ownership. Ownership systems such as trust ownership, hybrid social enterprises, and cooperative ownership have much more potential to align their goals and values for the benefit of society and to realize that their actions form part of the larger economic system. These alternative ownership structures are flourishing around the world and provide testament to the ability of corporations to operate successfully while contributing to the benefit of society.
Capital. Historically, capital markets operated without regard to long-term social or environmental impacts or regulations. Recent efforts to embed sustainability within the investment decision-making process show that it is possible to generate significant changes in corporate sustainability behavior.
Governance. If boards can shift from a narrow focus on increasing shareholder value to a more comprehensive view of the corporation and its impacts, progress toward sustainable development can be achieved. While far from sufficient, corporate reporting is a first step in improving governance through increased transparency and long-term goal setting.
In critically thinking about corporations, it is necessary to remember that they are not islands: corporations operate within a vast economic system that includes a multitude of players and variables. Sustainable development can become a viable future when transnational corporations recognize that with their position of global influence comes responsibility to the societies and environments in which they are embedded.
The current global economic model is socially narrow and environmentally predatory, placing private interests above public ones. As such, it is unable to address the dire needs of a world burdened by a population of 7 billion people, let alone the looming threat of climate change and alarming levels of poverty. What is needed is a new economic model that draws from a new paradigm of development that is not based solely on economic growth, but rather integrates and embraces the natural limits of our planet, the need for reducing inequalities of income and opportunity, ethical principles, and the preservation of the rights of future generations.
In their State of the World 2012 chapter, “Mobilizing the Business Community in Brazil and Beyond,” authors Jorge Abrahao, Paulo Itacarambi, and Henrique Lian (all members of the governing body of the Ethos Institute) advocate for internalizing a variety of multilateral commitments to bring the world closer to the ideal global economy. These include :
Payment for Ecosystem Services. Natural resources and environmental services should come with a quantifiable, concrete price tag in order to change perceptions and the way markets function. The goal is to close the production loop—-by using renewable energy inputs and generating no waste outputs—-and to fully acknowledge the shared benefits from biodiversity.
Establishment of Minimum Operation Standards. Businesses—-domestic and international alike—-should be required to obey a certain set of standards that governs decent work, inclusion of minorities, socio-environmental practices, sustainable development, and closed-loop production.
Promotion of Sustainable Production and Consumption. Governments must take the lead in lifting the pressure off of natural resources, cutting carbon emissions, and facilitating decent work conditions through innovative strategies such as sustainable government procurement policies, research and development programs, and tax regimes. This in turn can encourage sustainable production patterns that are effectively paired with behavioral changes that start with the consumer.
Worldwatch’s State of the World 2012, released in April 2012, focuses on the themes of inclusive sustainable development discussed at Rio+20, the 20-year follow-up to the historic Earth Summit of 1992, also held in Rio de Janeiro. The report presents a selection of innovative ideas and practices to achieve global environmental sustainability while meeting human needs and providing jobs and ensuring dignity for all.