Session 8: Sustainability in international business strategy

Corporate social responsibility

The consideration of and response to issues beyond the narrow economic, technical and legal
requirements of the firm to accomplish social benefits

Global sustainability
A key goal for CSR is global sustainability, which is defined as the ability to meet the needs of the
present without compromising the ability of future generations to meet their needs.

ESG sustainability
 E, environmental criteria, includes the energy your company takes in and the waste it discharges, the
resources it needs and the consequences for living beings as a result
E encompasses carbon emissions, climate change, pollution and waste

 S, social criteria addresses the relationship your company has and the reputation it fosters with
people and institutions in the communication where you do business
S includes labor relations and diversity and inclusion

 G, governance, is the internal system of practices, controls, and procedures your company adopts in
order to govern itself, make effective decisions, comply with the law and meet the needs of external
stakeholders.

The business case for sustainability

Sustainable practices are those that:

- At minimum do not harm people or the planet and the planet and at best create value for stakeholders
- focus on improving environmental, social, and governance (ESG) performance in the areas in which
the company has an environmental or social impact (such as in their operations, value chain, or
customers).

 Designingbusinessmodelsthatcreatevalueforallstakeholders and benefit the society at large.

 Improvingriskmanagement
 Fosteringinnovation
 Improvingfinancialperformance
 Buildingcustomerloyalty
 Attractingandengagingemployees

SDG integration and SDG washing

• Majority of companies engage with SDGs, but typically for PR and reporting purposes.
• “SDG washing”: Claiming high positive societal contribution often to all 17 SDGs (without concrete
evidence) while hiding negative impact.

The impact of MNEs

 International businesses, with their global reach and scale, have a greater impact on the environment
than their domestic counterparts.
 By extracting resources in one location, manufacturing products in another, and selling them in yet
another, international businesses create and dispose of waste along their supply chain.
 Unfortunately, at present there is little economic incentive for these companies to address their
environmental impact beyond the bare minimum required by local regulations.
What MNEs can do to reduce their impact on the environment
• Reducing the use of natural resources
• Using natural resources more efficiently by extracting fewer natural resources or by decreasing waste for
the volume of products produced or sold.
• Replacing natural resources
 Using with more abundant, regenerative, less toxic, or persistent
alternatives.
 Eg, Syngenta and the search for alternative resources through the Thought for Food (TFF)
initiative.
• Regenerating natural resources
• Ensures that the natural resource extraction rate is within the dynamic range of the natural environment
and waste is absorbed through circularity.

Sustainable supply chains

MNEs sometimes get away with behaving irresponsibly
• At home versus abroad effect.
• CSI (coporate social irresponsibility) located abroad
may be less penalized than CSI located at home.. • Ethnocentric biases.
• When it comes to risk or harm, responses are often stronger when such risks are situated within people’s
immediate environment – in this case, the home market, rather than elsewhere in international host markets.
Where some of the problems are
 MNCs place orders that exceed suppliers’ capacity or impose unrealistic deadlines.
 First-tier suppliers rarely concern themselves with their own suppliers’ sustainability practices.
 For MNCs, there are special challenges in governing lower-tier suppliers: There’s often no direct
contractual relationship.
 Most lower-tier suppliers are not well known, so they receive relatively little attention and pressure
from the media, NGOs, and other stakeholders.
 Lower-tier suppliers are also the least equipped to handle sustainability requirements.
 MNCs frequently don’t even know who their lower-tier suppliers are let alone where they’re located
or what capabilities they have (or don’t have).

Some best practices

 Maptheconnectionsandinterdependenciesintheir supply networksàto identify potentially risky lower-
tier suppliers
 Takingahands-onapproachwithsuppliers:Evaluate first-tier suppliers by using sustainability
performance indicators that capture their requirements for lower- tier suppliers.
 Offertrainingtosuppliersandprovidesome incentives for implementing sustainability practices
(sustainability awards, certificates...)
 Collectiveapproach:collaboratewithcompetitors and major suppliers to develop and disseminate
industrywide sustainability standards.
 CollaboratewithinternationalNGOsthatsharethe same goals.