There are over 65,000 transnational corporations (TNCs) with about 842,000 foreign affiliates (UNCTAD, 2002) that have an impact on a substantial part of the world’s population. This is a significant number if we also consider that of the 100 largest economies in the world, 51 are corporations and only 49 are countries (Anderson, Cavanagh, 2000).
Source of the picture: http://www.humanosphere.org/tag/gdp/
Transnational corporations (TNCs) are one of the most important non-state actors in our global governance system. Although they are not formally elected institutions (and as such are not granted a right to vote), their role and involvement is particularly relevant in international environmental politics. For instance, when they outsource their production to countries that do not have strict environmental regulations.
Big corporations usually lobby towards their preferred (more flexible) regulations at the national and international level to benefit economically from the outcomes of international negotiations or simply to improve their corporate image. In this sense, Georg Henrik von Wright had a point when he claimed that “transnational, gigantic industrial companies no longer operate within political systems, but rather above them”. It is indeed no surprise that there is a “pressing need to dominate such powerful actors” and a truly global debate surrounding the accountability and transparency of TNCs. However, the question then becomes: Should states limit the power of TNCs? Or should they let corporations participate in international negotiations as non-state actors?
Perhaps I should start by saying that there is no simple answer to this question. However, there are certainly positive impacts of the inclusion of TNCs in the realm of global environmental governance. On the one hand, if their business operations have a direct impact on the environment, involving them is a way of controlling them through binding regulations they explicitly agree to. Furthermore, in certain situations in which TNCs exercise some sort of public power by affecting the availability or distribution of resources in a given territory, involving them in the regulatory process would make them more responsive to their actions. On the other hand, although they inherently lack the legitimacy of a formally elected body, they also gain it due to the amount of resources they invest and the technological know-how they provide, essential to finding marketable products. These would be commercially viable as well as compliant with international regulations.
The chemical firm DuPont, for instance, actively participated in the international negotiations that led to the international treaty of the Montréal Protocol, as well as in its design and implementation. Although the company was a leader producer of chlorofluorocarbons (CFCs), which the Montréal Protocol aimed to phase-out and ban, it not only ceased to produce them, but also cooperated with governments during the implementation phase of the treaty. More specifically, DuPont was able to monitor these regulatory changes ahead of time, invested a significant amount of resources in research and development to find alternatives to CFCs, and therefore was able to find marketable substitutes to CFCs. The ability to innovate and create potential solutions gave DuPont the opportunity to engage with governments in the actual negotiations. In other words, the company transitioned from being part of the problem to part of the solution to an environmental issue.
Source of the picture: http://www.eoearth.org/view/article/150838/
There is a wide range of TNCs that have an impact on the environment in one way or another; they vary in size, economic clout and corporate strategies, so in reality they cannot influence the regulatory system in the same way. In other words: size matters. Technological innovation, industry specific know-how, the use of normative discourses, the creation of business coalitions, market competitiveness and corporate strategies are all significant factors that account for the degree of input and influence of TNCs. However, it is only the most profitable corporations which can lobby or informally engage in the negotiation process, as well as deploy their newly acquired legitimacy to achieve their objectives.
Thus, if firms have indeed become political actors performing numerous functions that shape industries and consumer preferences, then the political process of negotiating and constructing systems of environmental governance needs to be revisited. Ultimately, it is unsustainable to maintain the division between states and markets if TNCs are relevant actors in the international system, and particularly in international regime. In a multi-stakeholder and multi-level governance system, the inclusion of TNCs not only offers innovative and marketable solutions to environmental issues faced by states, but can also enhance the legitimacy of global environmental politics by making corporations more responsive to their actions. The downside is that it inevitably makes both the process and outcome more uncertain, because of the interaction among the different actors and the unpredictable nature of business itself.
This article is an extract from Elena Magriña’s MSc Dissertation, available at: https://www.academia.edu/4976131/Desciphering_the_Challenge_of_Legitimacy_TNCs_in_Global_Environmental_Governance