International law, environment and multinational enterprises (MNEs) - Essay Example

?Introduction The expansion of multinational enterprises (MNEs) took the centre stage after the Second World War (Muchlinsi, 1999). Multinational companies replaced the imperialist trading companies and other mining oriented companies that exploited resources in foreign countries for colonial powers to the detriment of the natives of the colonised nations. The United Nations, formed in 1945 provided the framework for the independence of these countries and it continues to act as an intergovernmental organisation meant to promote peace, development and human rights (United Nations, 2008). In line with this, the UN continues to set the tone and broad context for the supervision of local and international law meant to protect the weak in the world as well as the voiceless, like the unborn (Dunning & Lundam, 2008). This paper examines how these two components of international and national laws affects the operations of multinational entities. The main objectives of the paper are: 1. Examine the local and international requirements of MNEs in environmental matters. 2. Assess the framework within which MNEs can operate in an environmentally responsible manner. 3. Analysis of the human rights requirements of MNEs and how this is carried out. 4. Evaluation of cases that demonstrate the way MNEs operate in environmental and human rights matters in foreign countries. Responsibilities of MNEs Multinational Enterprises (MNEs) are “enterprises which own or control value-added services in two or more countries” (Jones & Dunning, 1997). In other words, a multinational enterprise controls components of its organizational structures across two or more nations. This implies that such an organization will have to adhere to two or more legal jurisdictions. In this sense, a multinational can be viewed from the point of dealing in two countries, the home country and the host country (Morschett et al, 2010). Thus, every multinational will have to set its global standards from the perspective and requirements of the home country. This becomes the basic system of standards that it will adhere to in its drive to expand into other nations and territories. When it expands to other nations, it will have to also become sensitive to the local requirements and adhere to it. This brings up the issue of internationalisation versus nationalisation. An MNE will have to examine the right blend it will undertake in order to honour the legal and ethical requirements of a given nation. Will it have to adhere to the standards of the home country or the host country? Living by home country standards can mean loss of opportunities and potentially offending local partners. Adhering to host country standards could also lead to international condemnation and serious reputational issues if they are revealed in the home country thereby presenting the company as hypocritical. This inherent issue with MNEs are materialised strongly in environmental and human rights issues. These two major issues come with a room for potential conflict in deciding whether to internationalise or nationalise. How should a US or British firm operate in a nation where human rights are not respected? How should a European firm set its environmental reporting standards in a nation where those standards are seen as a sheer waste of money? All these are dilemmas that need to be handled in the expansion bid of an MNE. As identified in the introduction, the presence of international laws makes some of these things much easier to handle. Without them, there will be serious variances in the way MNEs behave and this will lead to double standards and serious implications for poorer countries and countries with lower human rights and environmental standards. Environmental Footprints Environmental footprint refers to the effects of an organisation's operations on the natural environment (Mares, 2007). The environmental footprints refers to the resultant effect of an business' operations on the natural environment. It involves the residual and sometimes unintended degradation of the environment which comes with the interaction of a business in on its natural environment. Environmental footprints affect different groups of people and this give them the status of stakeholders (Kline, 2010). The main components of society affected by the environmental footprints of businesses include the community, the ecosystem, natural resources (land, air and waterbodies) and future generations (the voiceless) (Sands, 2003). All these have implications on the health and rights of various people in the society including the unborn (Mares, 2007). It is therefore important for businesses to be conscious of the effects of their operations on the environment and find ways and means of reducing it and compensating stakeholders affected by them. National & International Environmental Law The UN General Assembly issued Resolution 2398 (XXIII) in 1968 which recognized the need for environmental concerns to be taken serious by communities around the globe. This resolution led to the Stockholm Conference in 1972 which proposed “the continuing and accelerating improvement of the human environment” (Sands, 2003). In the Conference, four main pointers were raised which meant that the international community is to take a proactive stand in : 1. Redefining of environmental issues. 2. Provide a rationale for co-operation. 3. Provide an approach for international responsibilities. 4. Conceptualisation of international organisations' relationships. In other words, the Stockholm conference provided the need for the world as a whole to take environmental matters more seriously than then had. This means that the conference recognized the need for members of the international community to come together to find a way of solving environmental problems and challenges. Secondly, it seeks to place some responsibility on national governments to control environmental risks and co-operate with other nations in doing this. The idea of co-operation ensures that nations around the world work together to standardise environmental systems and laws that are meant to safeguard the natural environment. Also, the national and international co-operation is meant to provide a framework for which organisations, including MNEs can work and ensure that they meet standards and expectations that is demanded of them. Article 13 of the Stockholm Conference states that: “In order to achieve a more rational management of resources and thus to conserve the environment, states should adopt an integrated and co-ordinated approach to their development planning so as to ensure that development is compatible with the need to protect and improve the human environment for the benefit of the population.” This gives direct responsibility to the state to ensure that it has laws and arrangements that will ensure that businesses and other entities operating in the nation are made more responsible. Thus, an MNE will have to comply with the national standards required of any state in which it operates. This makes the environment an important area that multinational entities must be sensitive to. More nations are introducing environmental legislations (United Nations, 2008). Through these legislations, it important for potential polluters to improve their environmental performance and this is done through general legislations and industry specific laws (United Nations, 2008). This implies that a business that is operating in a given nation will need to be aware of and adhere to general laws about the environment as well as specific laws relating to the sector within which they operate. This will act as a guideline for them to gauge their performance periodically and try to improve their performance. Numerous laws have been formulated over the past years by the UN and the international communities which set the broad context within which companies can check pollution and environmental degradation. This includes the UNCOLS of 1982 (to check marine pollution, UNFOCC of 1992 (for Climate and Air Pollution) Kyoto Protocol of 1997 (Climate Change), Basel Convention on Toxic Waste of 1989, International Atomic Energy Authority (IAEA) Laws on proliferation and use of nuclear energy. Although these laws set the ideal framework within which nations must regulate the degradation of the environment. There are major issues relating to the setting of universal standards. In the recent Durban Conference on Climate Change, there were major disputes on how much nations must cut carbon emission to prevent global warming. This therefore leaves multinationals with the discretion of defining whether to adhere to the minimum requirements of the host nations or adhere to higher standards if the host nation has low requirements. Expectations of MNEs on Environmental Matters The UN Global Compact launched on July 26, 2000 stated the following: 7. Businesses should support a precautionary approach to environmental challenges 8. Undertake initiatives to promote greater responsibilities and 9. Encourage the development and diffusion of environmentally friendly technologies (Lane et al, 2005). This puts direct responsibility on MNEs to find ways of preventing environmental degradation. In this set of laws, international businesses will have responsibilities to gauge and control their environmental degradation levels and prevent them from harming people. Such businesses should also make a conscious effort to enhance research into environmentally friendly technologies that will cut down on their degradation of the natural environment. OECD committee of international investment tasks Multinational Enterprises to 'take due account' of the environment and 'avoid' environmentally related health problems (Sands & Tarasofsky, 1994). This means that MNEs will have a direct responsibility to take environmental matters seriously. Muchlinski (1999) states that environmental disclosure is one of the main ways through which this requirement is fulfilled. This gives an idea of the extent to which the operations of a business is affecting the natural environment and take steps to cut them. In this wise, MNEs are often required to disclose more in host countries because it is part of the stringent measures to ensure responsible behaviour in foreign countries (Bansal & Hoffman, 2012). Human Rights & MNEs International human rights is designed to achieve two main things, first of all to protect inherent human rights and freedom of people and secondly to assist and encourage states to respect and preserve human rights (Subedi, 2003). The main global bodies responsible for this are the global bodies like the United Nations with the assistance and support of national governments and organisations. In the larger context, the international community has some minimum standards and requirements that each nation needs to enhance and preserve. The public sector of a nation will need to ensure that this is running. Thus, if any nation or group of people fail to honour these standards, the international community or an appropriate regional body has the right to take reasonable steps to get them to respect and honour basic human rights. The UN Norms on the Responsibilities of Transnationational Corporation states that the primary responsibility for human rights rest on states (Dunning & Lundam, 2008). In other words, the state has the duty of setting a legal and ethical framework that will prevent groups and entities, including MNEs from violating the rights of other human beings. On the other hand, a nation that is honouring human rights and is appearing to honour human rights needs to take reasonable steps to ensure that all businesses that operate on its soil is respecting the basic human rights of people. This means that the public sector will need to ensure that private entities in the nation are operating according to acceptable human rights standards. Multinational Enterprises are drawn into this because of the nature of their business structures. First of all, when a nation fails in the larger context to secure basic human rights, it is likely to be sanctioned by the international community. It will therefore be illegal for an MNE to operate in such a nation. Examples in our times are the cases of Burma, Iran and North Korea. These nations are seen by the international community as nations that have negative human rights records. Due to this, UK and US has cut ties with these nations. It will therefore be illegal for an MNE from the UK or US to operate in any of these nations. This puts some responsibilities on MNEs. However, in nations where there are no sanctions, it is inappropriate and potentially illegal for an MNE to operate in a manner that does not respect the basic rights of locals. This is because there are requirements in the home country as well as the host country for MNEs that fail to honour human rights in foreign nations. Also, some human rights watch organizations like Amnesty International and Human Rights Watch play a significant role in exposing the failures of MNEs in foreign nations (Subedi, 2003). These groups and other NGOs act as watchdog groups that keep on examining and reporting on trends and activities. Thus, issues relating to MNEs can be potentially uncovered and pressure can be put on appropriate bodies to act. Stakeholder Approach In order to ensure that the rights of people in foreign nations are respected and honoured, businesses typically employ a stakeholder approach (Kline, 2010). This involves the identification of the effects and affects of different social groups in a foreign nation, the identification of potential right violations and the implementation of reasonable steps to avoid harming them (Kline, 2010). However, this approach comes with some complications. There is always an uncertainty about which standards are ideal and which ones are not: whether to honour standards from the home country or for the Host Country. Kline identifies that human rights violations for MNEs come about in one of three ways: 1. Direct: Where a foreign company plays a conscious role in the blatant disregard of the rights of locals in the host country. 2. Beneficiary: This is where the MNE enjoys some benefits from the local economy at the expense of the basic human rights of locals. This could be through some indirect means. 3. Silence: When a business knows that there are human rights violations in components of its operations in a foreign country but refuses to take reasonable actions against those violations. It is thus necessary for an MNE to always carry out audits about the possible human rights violations it could potentially be causing in a host nation. This will give it an idea of the various risk areas and take reasonable steps to prevent them. Legal Implications of Human Rights Violations for MNEs An MNE might be operating in a nation where the human rights standards might be low. However, it might be required by the home country to raise its ethical standards to avoid violations that are punishable in the home country. Developed nations like the UK, USA and European Union have laws and instruments that permit the trial of human rights abuses perpetrated by MNEs overseas. The UK has the Anti-Money Laundering law which is guided by the SOCA Act of 1992 which makes a multinational entity liable for human rights abuses that it perpetrates overseas. In the United States, the Alien Tort Claims Act (ATCA) allows parties who suffered violations in human rights, labour and environmental abuses to file claims against Multinational Entities that perpetrated them. This therefore means that MNEs will have to ensure that they raise the ethical standards of their international operations to prevent claims and cases. However, in some cases, it might be sufficient for these companies to work within the legal scope of the local country although this is not an absolute guarantee against future human rights claims being raised in the home country. Case Examples Shell Nigeria was always accused of using inhumane techniques and was acting irresponsibly in its environmental efforts. In the 1990s, tensions arose between some natives in the Niger Delta area. The natives protested heavily against Shell and the Nigerian government for not caring much about the human rights of its people. The natives attacked and killed government officials. Shell withdrew from the region and this provoked the military government greatly. It responded by arresting the and executing the leaders of the native communities. Although Shell maintained it was not involved in the bloodshed, there were allegations that Shell was supporting the sanctioned military government of Nigeria. Although Shell settled the case with $15.5 million they maintained they stayed away from any form of wrongdoing during the era. This shows that human rights violations by MNEs overseas are quite difficult to deal with. Under the existing law of Nigeria, the natives were wrong. However, the natives had a clear case against Shell for being irresponsible. However, the local Nigerian law meant that those natives were criminals. So this reflects one of the complicated situations in enforcing human rights in foreign nations. Another situation is about the concept of relativism amongst cultures. For instance, employing women might be a criminal offence for an MNE operating in Saudi Arabia or Afghanistan. In the case of Saudi Arabia, there is a universal law that criminalizes it and an MNE will have to comply with it. This might present the MNE as racist in the home country. On the other hand, Afghanistan, which is being rebuilt might present a challenge of the Taliban targeting the MNE because it is seen as preaching 'negative' values to the people. Conclusion Environmental law is gradually evolving around the world. MNEs are required to work within national and international standards to ensure that they gauge their performance regularly and improve them through research and cuts. Also, the expansion of MNEs come with some demands in terms of human rights. The basic rights of people must be respected in every nation that an MNE operates. However, the idea of relativism makes this a bit difficult to honour uniformly. References Bansal Pratima & Hoffman Andrew (2012) The Oxford Handbook of Business & The Natural Environment Oxford University Press Dunning John & Lundam Sarianna (2008) Multinational Enterprises & The Global Economy Edward Elgar Publishing. Jones, Geoffrey & Dunning John (1997) Transnational Corporations London: Taylor Routledge Kline John (2010) Ethics for International Business London: Taylor & Francis Group. Lane Henry, DiStefano Joseph & Maznevski Martha (2005) International Management Behavior: Text, Readings & Cases Hoboken, NJ: John Wiley & Sons Mares Radu (2007) The Dymamics of Corporate Social Responsibilities The Netherlands: Martinus Nijhoff Publishers. Morschett Dirk, Schramm-Klein Hanna & Zentes Joachim (2010) Strategic International Management: Text & Cases Berlin: Gabler Verlag Muchlinski Peter (1999) Multinational Enterprises & The Law Hoboken, NJ: John Wiley & Sons Sands Philippe & Tarasofsky Richard (1994) Documents in International Environmental Law Manchester University Press. Sands Philippe (2003) Principles of International Environmental Law Cambridge University Press. Subedi, Surya (2003) “Multinational Corporations & Human Rights” in Responding to Human Rights Deficits Ed Fortman B. D. G. The Netherlands: Martinus Nijhoff. United Nations (2008) World Investment Report – 2007 Academic Foundation Read More