How Should Multinationals Respond to the Greenpeace ‘Dirty Laundry’ Report?

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The environmental group Greenpeace issued a new report yesterday alleging that two major textile processing facilities in China are discharging hazardous chemicals into the water supply here. Moreover, these companies are linked through commercial arrangements to several multinational clothing retailers. This presents a law versus Corporate Social Responsibility (CSR) problem, and it’s a very tough one, at least in my mind.

Here’s the background from the Greenpeace press release:

The Greenpeace International “Dirty Laundry” report, launched today at press conferences in Beijing and Hong Kong, found hazardous chemicals in samples of wastewater discharges taken at two textile processing facilities, Youngor Textile City Complex and the Well Dyeing Factory Limited by the Yangtze and Pearl river deltas, both with links to a number of major international and national clothing brands (1) including Adidas, Nike and the Chinese Li Ning. The findings follow the earlier publication of “Hidden Consequences”, which highlighted the impacts of industrial pollution on rivers around the world (2).

“Greenpeace is challenging the clothing brands named in this report to eliminate releases of hazardous chemicals from their supply chain and products, and we are calling on trendsetting brands that have a major influence on their supply chains, such as Adidas and Nike, to take the lead”, said Yifang Li, Greenpeace East Asia Toxics Campaigner.

OK, so if we take all of that as given for the moment, you have foreign companies doing business with polluters. A straight CSR approach might be for the multinational to either stop doing business with the polluters or use its influence with the polluters to force changes in production or waste treatment.

If that makes sense, here’s more information from Jonathan Watts at the Guardian that makes that corporate decision more difficult:

Although the chemicals are not yet illegal in China, they are banned in the EU and many developed nations.

So now we’re dealing with pollution that is actually legal where it is occurring. (Additionally, for the Chinese companies at least, that also means that it is also legal in their home country, perhaps an important distinction for corporate policy making.)

This is your classic law versus CSR problem. The law here in China allows for this activity, yet the allegation is that this is a harmful activity. Should the companies in question merely follow the law or “do the right thing” and either sever ties with the polluter or pressure it to change its behavior?

As I’ve stated before, I’m not a big fan of the CSR solution (my students often disagree with me). I worry that it takes pressure off governments to institute tough domestic laws and puts the spotlight on a few large multinationals, while allowing many smaller firms that are engaging in the same behavior to get away with similar practices. In this case, for example, I’m sure there are many smaller Chinese (and perhaps foreign) firms who do business with these polluters and sell on the international market but were not cited in the Greenpeace report. Granted, Greenpeace is trying to put pressure on those firms with significant market power in order to change industry practice, but it still introduces an element of unfairness.

However, let’s say you disagree with my general CSR position and agree with Greenpeace that these firms should take responsibility for doing business with these polluters. Let’s take a look at one more piece of information, the response from these companies, and see if this changes your mind at all.

Several of the companies cited in the report told the Guardian that although they do business with Youngor, one of the polluters, they do not make use of the plant’s “wet processes,” which result in the chemical discharge. Several of the other multinationals also distanced themselves from the polluter(s), claiming that they only deal with a non-polluting subsidiary, only utilize non-polluting services, etc.

Are these companies therefore “off the hook” in your eyes if they only do business with a subsidiary of the polluter or do not actually make use of polluting processes? Alternatively, would you hold them accountable no matter their commercial involvement with these polluters?

I find this a tough case, and I doubt that the companies in question will be able to respond in a way that will mollify Greenpeace, particularly when their competitors are engaged in similar behavior. It would be one thing if they were utilizing goods/services that resulted in the activity in question. But when their commercial arrangements are attenuated from the polluting processes, it’s asking a lot for them to take aggressive action.

I think Greenpeace might be reaching a bit too far with this one.

3 responses on “How Should Multinationals Respond to the Greenpeace ‘Dirty Laundry’ Report?

  1. allroads

    Stan.

    As someone engaged in “CSR”, I would argue with you on one point. You see this as a “companies should b nice” vs. companies being companies… and that any improvements should come from a CSR program.

    I would argue that this is purely an economic issue, and one that should have little to do with “CSR”.

    What this report highlights is that there are negative externalities that are still exploitable .. poor enforcement of the labor law, poor enforcement of environmental standards, corruption, etc… and what one should be taking away from reports like this (as a corporate manager) is that as these externalities are minimized (enforcement improves / laws created/ consumers aware) is that the system will naturally adjust.. and that means increased costs (that one was not planning for).

    It is only a matter of time before these suppliers are brought up to benchmark, and it is only a matter of time before companies are globally forced to own their own eWaste….

    1. Stan Post author

      I don’t know, Rich. That sounds reasonable and all, but on the other hand, if I’m a mercenary prick at a MNC, I could just as easily file that information away, saying “We’re getting a good deal for the moment. We might want to explore other options on the QT for future reference if/when regulatory enforcement changes, but for the moment, this is sweet.”

      1. allroads

        Like I said, that is getting harder to do, and in 5 years it is going to be more expensive to make those moves.

        Which is why it is NOT CSR…. it is about changing economic models. As either a product cost, how your firm wants to operate, or the risk it wants to bring into the firm.

        Apple (through Foxconn) has brought together one of the finest specimen supply chains with every negative externality one could think of (including exploding factories)… Mattel had lead paint Barbie (300+ million in fines alone)… IAMS had a dog food that KILLED the market (literally) and it took Chinese authorities 2 weeks to find the factory because no one from IAMS had every visited their “sweat deal”.

        Anecdotes for now. Reasons for improved enforcement, new regulations, and increased consumer awareness… and damn expensive examples of why firms are beginning to pay attention to reports like this one.