The growing power of big business

Duncan McLaren Ian Willmore
20 February 2003

The growing power of large businesses, and particularly of multinationals, is a key fact of modern politics and economics:

  • Five hundred companies now control almost two-thirds of world trade.
  • If listed in an economic league table alongside countries, more than half of the top 100 world economies are multinational corporations.
  • The world’s five largest companies together generate annual sales greater than the combined incomes of the 46 poorest countries in the world.

Multinationals have gained such wealth and power because governments have systematically removed barriers to trade, while failing to balance these new market opportunities with global rules to prevent exploitation of the environment and local communities. This potent cocktail of greater power and weaker regulation is contributing to growing levels of environmental damage:

  • Half of the world’s forests have now been completely destroyed.
  • Half of the world’s rivers are seriously depleted and polluted.
  • Over a third of the world’s fish stocks are either depleted or over-exploited.

Meanwhile, two-thirds of the world’s population now survive on less than US$2 a day.

Some multinational companies have offered to follow voluntary guidelines about their behaviour. These guidelines are often weak, un-enforced and ignored. And many companies claiming to follow them still put profits before people and the environment.

Friends of the Earth (FoE) believes the only way to stop multinationals from being destructive is to set up an international, legally binding agreement which provides global rights for people and global rules for big business. But we can make a start by introducing new corporate accountability legislation for companies operating here in the UK.

Business associations often like to argue that action is best delivered through voluntary initiatives, and a number of these have been set up in the last ten years. But according to the United Nations Environment Programme: ‘In most industry sectors, only a small number of companies are actively striving for sustainability.’

In the UK, the voluntary approach has also failed. In October 2000, in a keynote address to the CBI, Prime Minister Tony Blair told business leaders: ‘I am issuing a challenge, today, to all of the top 350 companies to be publishing annual environmental reports by the end of 2001.’

But more than three-quarters of the top British businesses completely ignored Blair’s ‘challenge’. Government figures indicate that only 79 of the top 350 companies produced substantive reports on their environmental performance by the deadline, and that only 24 of the other companies in the FTSE 350 had indicated their intention to do so. Ten per cent of the remaining top 350 companies mentioned the environment in their annual reports, but in many cases it was given only a few short paragraphs.

Here are some good examples of corporations which have escaped proper regulation and control:

  1. Oil giant ExxonMobil, known as Esso in the UK, is one of the major players in the fossil fuel lobby, and has played a large part in preventing international action on global warming. Esso stands accused of using its money and influence to derail international negotiations on action to save the climate.
  2. Lobbying by Exxon was largely responsible for the US decision to pull out of the Kyoto Protocol, the only international treaty designed to stop global warming. Even jaded corporate analysts were shocked by revelations that Exxon had sent a memo to the White House calling for the world’s top climate scientist to be ousted as chair of the Intergovernmental Panel on Climate Change (IPCC), the body set up to monitor the impacts of global warming. And Robert Watson was indeed ousted in April 2002.

  3. Premier Oil, the British oil company, is infamous for doing business with the Burmese military regime, which has committed serious human rights violations. It was the first oil company to sign a deal with Burma’s military for the exploration of the Yetagun offshore gas field in May 1990. It is estimated that the field will produce gas for at least the next 20 years, generating US$825 million for the Burmese state.

    Premier Oil also operates in Kirthar National Park in Pakistan. When Premier Oil was submitting plans for exploration it was still illegal to undertake any industrial activities in the park. However, the law has now been changed by the military regime in Premier Oil’s favour to make gas extraction legal. The park is home to numerous threatened species such as the unique Sindh Ibex, (a mountain goat), Urial sheep, desert wolves, striped hyena and golden jackal. It is an essential source of water for the 14 million people living in nearby Karachi.

  4. Bayer, which sells pesticides, and the biotech company Aventis have a poor track record on environmental and consumer safety. Last year Bayer, a German-based agro-chemical and pharmaceutical company, announced its intention to buy Aventis Crop Science to form Bayer Crop Science. The deal, subject to EC approval, was completed in 2002.

    In the UK, Aventis GM crops being tested in farm-scale trials have been found by FoE to spread pollen far beyond the field boundary. Aventis claims a 50-metre separation distance prevents cross-pollination, but Canadian evidence shows that oilseed rape crops can be contaminated from a distance of more than four kilometres. Honey produced near Aventis sites in the UK has been found to contain GM pollen.

    Aventis’ business strategy on GM crops involves linking the seed sales to the ‘Liberty’ herbicide which crops are resistant to – so guaranteeing a market for the herbicide.

Of course, it is now hard to find any large companies that would not claim to be striving to reduce their environmental impact.

Those that are sincere about sustainability have nothing to fear from our proposals, and everything to gain. They will surely welcome action being taken against those competitors who are not concerned about their social and environmental impacts. But our experience shows many corporations are really engaged in ‘greenwash’ (i.e. PR exercises designed to boost their green image, without any change to their core activities).

The political failure to force these corporations to improve their operations, effectively rewards bad corporate behaviour and penalises good corporate behaviour.

FoE believes that corporations could represent a creative, economic force that will help to deliver sustainable development. But this will only happen if the rights that companies already have (for example, trading and access to markets) are balanced with the rights that communities should have (e.g. a clean and healthy environment and a livelihood). This can only be done through a legally binding international framework, which applies to all publicly traded companies. We have put together detailed proposals which would:

place duties on companies and directors, such as a duty to take social and environmental matters into their decision making, a duty to ensure effective prior consultation with affected communities, and a duty to report fully on social and environmental impacts.

guarantee rights for citizens and communities, such as the right to a clean and healthy environment, and the right of redress (e.g. compensation) when corporations cause social and environmental damage.

establish high standards of social, environmental, labour and human rights behaviour by corporations.

The treaty would also establish sanctions or penalties for when corporations do not come up to scratch. These might include fines, withholding access for such companies to public subsidies, guarantees or loans and, in extreme cases, suspending national stock exchange listings and withdrawing limited liability status. Find full details of our proposal here.

In the UK, we are backing a Corporate Responsibility (CORE) Bill, supported by over 250 MPs. The bill highlights the need for more transparency in company reporting in terms of economic, environmental and social impacts and the need for directors to be accountable to their customers, employees and communities as well as shareholders.

Corporate accountability is one the most important political issues facing the planet. It has wide public support. It will be the focus for a determined campaign by civil society over the next few years. We are ultimately confident of success.

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