Corporate Social Responsibility, a concept that is widely regarded as a company’s efforts to improve and maintain the quality of livelihood of any society has been a center of focus for multinational corporations within their day-to-day operations and engagement in international trade. Earlier this year, Forbes reported that CEO of foods company KIND Snacks, Daniel Lybetzky has announced to make a difference by achieving mass distribution and making their company’s product healthier. Another example would be Microsoft’s strategy to come up with a partnership with a non-profit IT company NETHope, which aims to create IT related apprentices in Kenya. All these sorts of actions, at a glance, might indicate a sense of goodwill coming from multinational corporations in an attempt to actually achieve a better world and community. But in fact, several scholars have disputed this voluntary action and attributed this movement to the increasing demand by investors and employees for their own sake of sustainability, and most importantly, for the promotion and preservation of their public image through exhibiting their commitment in making a social impact.

However, it is quite rare that we see emerging multinationals from developing and underdeveloped countries engaging in these sort of movements. Start-up from these areas, I would like to assume, are mostly fighting for survivability to ensure their long lasting operations and their rise to the international market. Despite several startups actually engaging in CSR, Tarun Khanna, a professor at Harvard have pointed out that emerging MNCs need to be more attuned to social purposes, simply because in developing nations, governments often fail to provide effective means of a public good, and emphasizing the importance of a privately run sector entity to overcome these issues (Global Focus, 2015). With this argument in mind, it is also important to consider the importance of the sovereign of states and its changing landscapes thanks to globalization. In my other blog article, I have outlined that with globalization, there is an increasingly high risk of external shocks that could be experienced by many countries, which could turn out bad for developing/underdeveloped nations as they go through industrializing their economy. Governments are now required to pay more attention to the international realm and not just matters within their domestic border. With this, they would have to divide their attention to both sides of the fence and its diplomacy as well, which would make complete sense of why maintaining public good could be a difficult process nowadays.

Khanna further emphasized the possibility of acquiring a win-win situation for emerging MNCs. When an issue from a community is resolved through CSR, it would not only build a better livelihood for the people living in that particular community, but it also builds relations with these people which reduces the likelihood of protest coming from them and aggressive regulation from governments. Other than that, I would argue that companies should, in fact, realize the value they could put in for the company and the corporate benefits that would drive shareholder values and dividends. These days, I argue that public image and activity contributes to the forecast of its future prospect, and when companies indicate that they are engaging in positive activities through CSR, it would fuel up the positivity and trust they would have with many communities.

Additional sources:

Nov 12, 2015, Global Focus. “How Emerging Multinationals Are Embracing Social Responsibility.” Knowledge@Wharton, knowledge.wharton.upenn.edu/article/why-emerging-multinationals-are-embracing-social-responsibility/.

The surge of globalization has without a doubt paved ways for international enterprises to flourish and grow. Globalization has created new possibilities for firms to operate and control higher numbers of assets beyond their country of origin and acquire further market share by capturing potential consumers through tapping on untouched markets for new demand, which would certainly define their competitive advantage and sustainability of its future forecast. In a reflective journal article “Big Business and State”, scholar Susan Strange has underlined that the concept of economic power nowadays has evolved, and has begun to undermine the political power of the state – as an economic power is without any borders and/or limit, and thus a global phenomenon while political power and its jurisdiction are limited to the nation’s borders. And because of this, according to Peter Evans, there are many scholars who began to believe that international enterprises such as Amazon, Apple, and Nokia have undermined the power of the ‘sovereign’ hold by many states and governments.  With this, international enterprises and their substantial economic power seems to have changed the degree of importance of governments and their fundamental purpose as a ‘sovereign’

When we talk about globalization, the phenomena of international free trade becomes relevant. It goes without saying that firms engaging in international trade would benefit by achieving specialization and an increase in their competitive advantages relative with other enterprises. But with that being said, I would like to think that despite the advantage gained by some people through international trade, the movement of the phenomena itself could, in fact, induce too much pressure and constraint on governments and firms who lack the resources and competitiveness when compared to big states such as the USA and China. While some countries might be advantaging as economic powers are providing jobs and income to certain people from multiple demographics of countries, some are just not capable. As a result of international trade, deregulation would usually commence for many reasons (Gebelhoff, 2016). One would be to attract FDI to acquire growth and to provide employment to the people, and second, driven by the possibility to acquire world market shares, countries deregulate its market laws to promote the likability of domesticated firms to ‘freely’ conduct their business without much supervision. But ultimately, what would usually occur is that this would leave much of its workforce and industries unprotected and placed in a position high in volatility of markets, and risk of their individual freedom.

As a result of this, governments face a dilemma in understanding its new role as a sovereign. I would like to argue, that despite the capabilities of economic powers to eclipse the sovereign of the state, it shouldn’t undermine the responsibilities and power of the state to maintain the functionality of its domestic market that is filled with the infant and domestic industries, the protection of private and individual property, and most importantly individual freedom as it comprises as an important aspect for economic growth. With that in mind, I would say that it is important for the government to maintain its function as a sovereign to protect its constituents from external shocks and economic forces, should they choose to engage in the international market. An ideology that best describes the governments’ role in conjunction with a strong economic background is Ordoliberalism. An example of this ideology taking place would be Germany, where they have shaped economy based on policies stemmed from an ideology that acknowledges the importance of a sovereign state to maintain the efficiency and competitiveness of economic powers by keeping a check on competition and market shares of its firms within multiple industries to avoid any of them acquiring too much power. An example of such would be their policy of the German Competition Act, which prohibits cartels and the concentration of power. And it is with their responsibility that governments supervise the limits of the ordering principles of the mechanism of its free market and the relation of individuals and firms according to their business of ethics and cooperation in their respective societies.

International enterprises undermining the sovereignty of states is an overstatement. The function and purpose of states remain with only a change of higher responsibility and awareness to protect the people and firms who aren’t engaged in trade in the international market.

Additional sources:

Gebelhoff, Robert. “Are Multinational Corporations Undermining Freedom in Poor Countries?” The Washington Post, WP Company, 13 Sept. 2016, www.washingtonpost.com/news/in-theory/wp/2016/09/13/are-multinational-corporations-undermining-freedom-in-poor-countries/?utm_term=.a8fe8108e6f4.