Tough environment policy needed<\/p>\n
By Anies Rasyid Baswedan<\/p>\n
HYATSVILLE, Maryland, United States (JP): Multinational
\ncorporations (MNCs) are the latest version of the modern
\ncorporation. Since the middle ages, modern corporations have gone
\nthrough various stages with regard to corporate values evolution.
\nThe history of corporate management shows how corporations
\nbehaved toward labor in the early days of modern business.<\/p>\n
Labor was simply considered a \"resource\", and very little care
\nand few benefits went to them. There was no social security nor
\nconcern for a healthy working environment. In most industrialized
\ncountries, this kind of labor treatment could only be found in
\nhistory textbooks. Labor is now considered an important component
\nof economic activity.<\/p>\n
The same kind of treatment was used toward the environment.
\nCorporations previously simply considered the environment an
\nunlimited economic resource. But this viewpoint has also changed.
\nThe environment has come to be recognized as an integrated part
\nof economic activities that needs to be preserved. This is a
\nresult of the evolution of modern corporate values that took
\ndecades or even centuries to develop in countries that are now
\nindustrialized nations.<\/p>\n
On the other side of the globe, in many developing countries,
\nincluding Indonesia, the understanding of environmental issues
\nhas not changed and the exploitative treatment of labor itself
\nhas not yet become part of history. Throughout Indonesia, bad
\nlabor conditions, low wages and an unhealthy working environment,
\nare still common. Compared to corporations in industrialized
\ncountries, Indonesian businesses have not yet undergone this
\nevolution of corporate values and culture regarding labor and a
\nmodern understanding of the environment. In this older paradigm,
\ncorporations consider environmental issues a threat to their
\nbusiness since these issues often increase their costs, although
\nonly in the short run.<\/p>\n
These two different views toward the environment represent the
\ngap between corporations in the industrialized and in the
\ndeveloping countries. This difference should no longer exist
\nsince today's reality shows that the world is facing one and the
\nsame problem, regardless of geographic location: that is, the
\ndegradation of the ability of nature to support the life of all
\nGod's creatures on earth. This degradation is acknowledged as an
\noutcome of the current technological revolution and economic
\nbehavior.<\/p>\n
As the world becomes \"smaller\", interestingly enough,
\ncorporations expand their operations in the search for new
\nmarkets or resources. These corporations are mostly based in
\nindustrialized countries, but they have expanded their operations
\nto developing countries. Therefore, they face the two different
\ncorporate values that are described above.<\/p>\n
The industrialized-country-based and developing-country-hosted
\nMNCs are a unique case. This is interesting because MNCs in many
\nways have the same character as the environmental problem: both
\nare borderless. The MNCs operate across nation-state boundaries
\nas do environmental problems. Many environmental problems, such
\nas global warming and air pollution, are international problems.
\nBut they both also face the same constraints, that is,
\nenvironmental policies and standards that vary from one country
\nto another.<\/p>\n
MNCs respond in two ways toward this variation of
\nenvironmental standards, the passive method, where they operate
\naccording to local environmental laws or policies and the active
\nmethod, where they operate according to the standards of their
\nhome country (Hopfenbeck, 1993). But environmental policy
\nvariation often creates an incentive for MNCs to apply the
\npassive method where they operate according to the host country's
\nenvironmental standards.<\/p>\n
According to Porter, an expert of strategic management from
\nHarvard Business School, private corporations started recognizing
\nthe benefits of being environmentally friendly in the mid 1980s.
\nPrivate corporations began taking advantage of environmental
\nissues as an opportunity for their business.<\/p>\n
While Porter's analysis may be true for corporations in
\nindustrialized countries where environmental awareness has
\ngreatly increased over the past 15 years, this opportunity may
\nnot exist when private corporations are operating in less
\nenvironmentalistic societies.<\/p>\n
Theoretically and ethically, MNCs should be an agent of
\nenvironmental awareness all over the world. Baumgartl (1995)
\nmentioned eight potential roles that could be played by MNCs. Two
\nof those roles are to become a model for environmentally friendly
\nproduction methods and to transfer environmentally related
\ntechnologies.<\/p>\n
But in most cases, as economic players, MNCs will behave
\naccording to economic values, not moral or social values.
\nTherefore, expecting MNCs to be an agent of the development of
\ninternational environmental awareness without economic incentives
\nis quite unrealistic.<\/p>\n
The MNCs' environmental policies are always related to how
\nthese MNCs prioritize various contributing factors. Table 1 shows
\nhow the MNCs consider those factors in relation to their policies
\nand concern toward the environment. This figure was drawn from a
\nsurvey of 100 corporations including 73 MNCs that are operating
\nin Indonesia. It was conducted by the Inter-University Center for
\nEconomic Study, Gadjah Mada University.<\/p>\n
The MNCs consider government programs and national laws as the
\ntwo most important factors in their decisions regarding the
\ntreatment of the environment, higher than the economic motivation
\nof reducing costs. It is also interesting that MNCs put public
\npressure as the lowest of all other contributing factors, with a
\nconsiderable gap of index points.<\/p>\n
In the case of industrialized countries such as the U.S.,
\npublic pressure is usually considered to be an important factor,
\nespecially after the U.S. developed its policy on Toxic Release
\nInventories.<\/p>\n
In addition, public pressure in the U.S. could soon translate
\ninto regulations and could be very influential in forcing
\ncorporations to work together concerning important environmental
\nissues.<\/p>\n
In Indonesia, public pressure about environmental problems is
\noften weak, especially when compared to the severity of
\nenvironmental problems in remote areas. In a broader view, this
\nexplains how corporations \"adjust\" and take advantage of a
\ncountry's political reality.<\/p>\n
In a country where political power is laid upon the people,
\npublic pressure becomes important. In contrast, in a country
\nwhere the people have only limited political power, corporations
\nare less likely to consider the voice of the people. Instead,
\nthey perceive the government as the most important factor in
\ntheir decision regarding the environment. This figure provides an
\nindirect snapshot on the Indonesian political reality.<\/p>\n
Based on Table 1, the government plays a strong role in
\ndetermining MNCs behavior while the public is relatively weak.
\nThis shows that the MNCs will generally try to obey the
\ngovernment's environmental policies. The supply oriented MNCs
\nhave limited contact with the public. For example, the mining
\nindustry, by its nature, operates in remote areas far from public
\nattention and its products are mostly shipped out of the country.
\nOnly people who have some business connections with the mining
\nindustry will likely understand the situation. Mentioning these
\nissues in newspapers and magazines is somewhat rare.<\/p>\n
The above arguments are likely to support Porter's thesis.
\nPorter (1996) said strict environmental regulations can prod
\ncorporations to produce more efficient products that will be
\nvalued highly internationally. This does not mean that
\ncorporations will be happy about tough regulations since it will
\nincrease short-term costs and they need to redesign the process
\nof production. But the benefits of tough standards will be
\nparticularly large in the industries that have international
\nmarkets and competition.<\/p>\n
The ability to adjust is a key to survival in modern business.
\nThe MNCs that are operating in Indonesia must have those
\nexperiences as well. Since MNCs consider government regulations
\nimportant in forming their strategic policies, MNCs will adjust
\nto external changes such as environmental regulations.<\/p>\n
On one hand, Indonesia should not consider environmental
\nrelaxation as a potential factor in maintaining foreign
\ninvestment. And on the other hand, the corporations including
\nMNCs are likely to comply with the government's environmental
\npolicy changes.<\/p>\n
The common assumption that tough environmental standards will
\nreduce the willingness of MNCs to operate in a foreign country
\nmight no longer be true. MNCs are willing to comply with the
\ngovernment's environmental standards. But are Indonesia's
\nstandards and enforcement good enough to protect the environment?<\/p>\n
The writer, alumni of Gadjah Mada University, is currently a
\ngraduate student at the University of Maryland, United States.<\/p>\n
Window A: According to Porter, an expert of strategic management
\nfrom Harvard Business School, private corporations started
\nrecognizing the benefits of being environmentally friendly in the
\nmid 1980s.<\/p>\n
Window B: On one hand, Indonesia should not consider
\nenvironmental relaxation as a potential factor in maintaining
\nforeign investment. And on the other hand, the corporations
\nincluding MNCs are likely to comply with the government's
\nenvironmental policy changes.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/tough-environment-policy-needed-1447893297",
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