University of Greenwich – BUSI1602 – Global Business and Sustainability – DI 73.5/100

  1. Introduction

            1.1. The globalization trend

Globalization is an increase in integration and interdependence among nations that leads to a modern flow of people, trade, finance and ideas from one country to another (Bishop, Reinke & Adams, 2011). The development of globalization trend has brought about its own set of pros and cons. With various forms of international business models, the globalization trend creates countless opportunities for business settings to expand beyond its regions and achieve outstanding results in financial aspects, while providing commodities for consumers around the world with better prices. On the other hand, the trend of globalization has exposed a threat to the ecological system due to mass production, industrial development or irresponsible after-production handling. This results in a severe ecological crisis happening around the world.

            1.2. Environmental responsibility in business settings

Environmental responsibility is used to be seen as excessive activities that require additional cost, and their implementation of environmental action was solely to comply with governments’ standard and avoid possible fines (Vikhanskiy, Churkina and Zaverskiy, 2012). Within the last three decades, companies and organizations gradually perceive more about the essence of the ecological system and perform beyond the governments’ initiatives thanks to the widespread ecological modernization. This theory states that environmental responsibility is a function of economic development and social modernization, therefore requires a change in the views of managers to consider environmental responsibility as one of the top priority (Fisher & Freudenburg 2001; Mol & Sonnenfeld 2000).

            1.3. The significant of study

Perceiving a rapid increase of the globalization trend and the attention of international businesses to address environmental issues, this study is written to analyze the extent to which cross-border organizations make a positive influence in the overall ecological crisis. The structure of this study consists of three main parts. First, it provides a brief review of the international concept and the current situation of the ecological crisis. Second, the study evaluates the actions and impacts made by international business to address the ecological and environmental issues. Finally, recommendations will be generated based on the analysis to suggest more appropriate options for international businesses to deal with ecological threats.

2. Literature Review

            2.1. International Business

The term of international business indicates a transition of raw materials, technology, finance and other resources from one country to another whereas all the participants including companies and countries are beneficial from the privileged flow of goods, employments and other offers (Aithal, 2017). International business might come under various forms such as joint venture, multinational enterprises, or foreign direct investment. The development of international business does not solely involve the profit generation of the corporation itself but also has a direct impact on the prosperity of the host country in terms of environmental and ecological system, people and natural resources. This characteristic of international trade has made the concept of corporate social responsibility gain ground in the international business arena, in which international business should take the responsibility to act ethically and contribute to the welfare and ecological system of the host nation and the society at large (Buckley & Ghauri, 2004; Cave, 2014).

            2.2. Ecological Crisis

Besides the environmental issues, which is widely conceived by the society namely global warming, serious pollution from production, over-consumption of natural resources, and the exposure of carbon and greenhouse gas, ecological crisis also refers to the decrease in population and mass distinction of various species that leads to the ecological imbalance. Regarding environmental problems in business settings, the ecological crisis is mainly caused by the increasing development of agriculture, forestry, fishing, transport, as well as in “heavy” industry sectors such as mining, metallurgy and “heavy” chemical production. Otherwise, livestock sector, especially ruminant production such as beef or mutton, is one of the major contributors to the ecological system due to 80% of total greenhouse gas and 75% of ammonia (NH3) emissions after the production process (Ripple et al., 2014). The severity of the ecological imbalance might be varied among countries and regions. This is partly due to the economy transition caused by international business.

            2.3. The relationship between international business and ecological system

Environmental norms and standards plays an essential role in determining the competitiveness
of commodities in the international market (Wysokińska & Witkowska, 2005). Due to the overwhelmed environmental degradation and rising concerns about ecological issues, customers these days pay attention to the environmental impact of the products they consume (Dong, Gong & Zhao, 2012). Products and companies that are more environment-oriented are considered having more competitive advantage, while reducing operations cost by saving energy and resources. As a result, international businesses have paid various efforts to address ecological issues as an essential aspect of their businesses to contribute to a sustainable development of the organization in particular and of the society as a whole.

3. The role of international business in addressing ecological crisis

            3.1. The approaches and strategies of international business in tackling ecological issues

International business addresses ecological issues through four main approaches, which are compliance approach, preventive approach, strategic approach and sustainable development approach (Robbins, 2001). The compliance approach is the first level of environmental responsibility that cross-border businesses use to deal with ecological issues. In this traditional approach, international companies aim to comply with the obligatory requirements and standards in terms of environment protection policy set by the governments of related parties and pay effort to reduce as much as possible the emissions treatment at the final stage of the production cycle. The preventive approach is more comprehensive than compliance approach whereas international corporations would go beyond the obligatory requirements of environmental responsibility for the purpose of preventing potential ecological risks such as over explosion of resources and energy while attempting to change the environmental protection code. In this approach, additional actions of international business in addressing ecological issues might be carrying out environmental audit and evaluation, which is concerned with the production, or adopting resources saving technologies.
The third level of environmental responsibility of international business is strategic approach, in which the ecological protection policy is embedded in the core of the multinational company’s business. Multinational businesses which adopt this approach would pay effort to develop a positive image of environmental responsibility implementation by entering the international market with green products to minimize negative impacts of their overall production, engaging environmental issues into its product development activities, and emphasizes their determination in environmental protection activities when communicating with its stakeholders.
The most dominant approach to tackle the ecological crisis of international business is sustainable development, whereas the organization not only mitigating negative impacts of its business on the ecological system, but also acts as an “environmental leader” by aligning its environmental policies with solving the global ecological crisis. This approach requires the organization to go beyond compliance, prevention, green production and take the responsibility and action to ameliorate and protect the ecological system as a whole. This dominant approach has been widely adopted by the big corporation and multinational companies in the international business arena.

These approaches might be manifested in two strategies of transnational corporations, which are “end of the pipe” strategy and a strategy oriented on production processes and product (Wysokińska & Witkowska, 2005). The “end of the pipe” strategy refers to the extent of which international organizations focus on technology adoption to address the two-fold problems of waste disposal and removal of pollutants. With the limitation of environmental treatment at the finish stage of the production, this strategy is usually chosen by firms which deal with environmental issues as a burden of its business. Meanwhile, in the strategy oriented on production processes and products, transitional firms concentrate on avoiding negative environmental effects from the very first stage of the production process. This strategy is applied by international firms, which integrate environmental issues in the core of its business. However, the chosen strategy must be suitable with the organization’s structure, economy of scale and resources.

            3.2. Specific contributions of international business to the improvement of ecological crisis

Overall, the transition of technology from developed countries to developing and under-developed nations to support green production and an improvement in waste disposal, and the international co-operation in terms of policies and raising community awareness promoted by international business has contributed a great part to address the ecological crisis and nurture global environmental sustainability.

            Technology adoption for green production and improvement of waste treatment

For transnational organizations, a common problem is that it not only has to deal with environmental effects of its own business but also have to consider the issue of environmental degradation caused by its foreign affiliates and subsidiaries. Therefore, international business has a tendency to extend their efforts to control their environmental effects caused by its business not only to host-country subsidiaries but also to local suppliers (Morrow and Rondinelli, 2002). In this case, technological improvements across the production chain will be the most effective way to mitigate both domestic and global environmental impacts (Du et al., 2018). For example, multinational enterprises have proved to bring a decrease in turbulence in European energy markets by supporting global and national reduction of energy consumption (Macharzina, 2000). A comprehensive environmental management system has been adopted to manufacturing facilities in the whole supply chain to reduce the emission and waste disposal, meanwhile technology is transferred from the parent company in the developed country to its subsidiaries in the developing country to put the environmental responsibility in practice along the overall supply chain of production. Rivera and Oh (2013) found that companies, especially those in clean and energy alternatives industries, were willing to enter under-developed and developing countries, which were suffering from heavy ecological issues but lack of conditions to make a movement to enhance the ecosystem. In order to ensure the effectiveness of the environmental protection policy, environmental effects are taken into consideration in every activity of the international business, from choosing location and partnership, utilizing resources, production management to environmental research and development. These environmental approaches of international business have motivated a “green” production which helps eliminate harmful effects to the ecosystem as a whole, and provide such favorable conditions as environmental awareness, technology and environmental management approach to support developing countries in the fight with ecological degradation (Kolk and Pinkse, 2008).

            Setting a mutual standard for ecological protection policies

The increasing awareness about environmental responsibility of international business has formed a new institutional infrastructure, which consists of governments, politicians, organizations across the public, corporate, and civil society sectors that shares a common goal in dealing with ecological crisis and protecting the ecosystem and environment in general (Waddock, 2008). The practice of environmental responsibility implemented by sustainability international business in under-developed and developing nations might set a standard for other upcoming transnational companies and be the introduction of more environmental responsibility management to the government and local business of the host nation, which might not possess them yet. Bringing together the worldwide ecological standards would help unify environmental protection policies and gather resources and innovations to solve ecological-related problems, therefore addressing the ecological crisis in a holistic approach with the most effective manner (Rugman and Verbeke, 1998b).

            Raising community awareness about ecological crisis

Transnational companies, which adopt the sustainable strategy, do much more to address the ecological crisis than just eliminating negative impacts on the ecosystem. Its contributions in sustaining the long-term development and protection of the ecosystem are manifested in its philanthropic contribution and resource accommodation to the host government, cooperating with other specialized organizations to conduct research on how ecological crisis is generated and how it can be recompensed; making it available for other contributors dedicate their works to generate the best solution to tackle ecological issues. In the meantime, sustainable organizations make effort to raise awareness about ecological issues in the community, starting from its stakeholders at multiple levels, including consumers, employees, suppliers and stockholders. By issuing sustainability reports based on the Global Reporting Initiative Guidelines, which is a set of guidelines for businesses to carry out socially-responsible corporate behavior, multinationals act as the leader of the fight against the ecological crisis and encourage its stakeholder to perceive more about the importance of the ecosystem.

            3.3. Practical examples of the contribution of international corporation in addressing the ecological issues

There is various evidence of measurement implemented by international companies to tackle ecological issues in real-world business. Coca Cola, the enormous corporation in the beverage industry, which has its products sold worldwide, is one of the contributors to the sustainability of the environment in the international business arena. The most outstanding environmental strategy of Coca Cola is the launch of various community water projects in India. An instance is the rainwater-harvesting project, where CocaCola’s operations partnered up with the Central Ground Water Authority, the State Ground Water Boards, NGOs and communities to tackle water scarcity and depleting groundwater levels across 17 states in India. By collecting and storing
rainwater and prevent its evaporation, the project increased the efficiency of utilization and avoided wasting large quantities of good quality water resources. As such, the company successfully returned the water used in its operations in India to the ecosystem through water harvesting technique, and made a movement to come closer to the goal of becoming a ‘net zero’ user of groundwater. Another role model of environmental responsibility implementation in the international business domain is the Aeon Group – the leading retail corporation in Japan. Aeon has successfully built up its own eco-supply chain to provide inputs for its overall supply chain within regions. In 2016, its subsidiary began full-scale shipments of cabbages grown through Aeon’s complete food recycling loop. This initiative turns food waste including uneaten food from its retail store into compost for the soil to cultivate farm products. Similar initiative is applied to save water resources. Aeon directly operates farms and grows farm products to supply back to its store. Otherwise, the Group also promotes environmental activities around the world along with its globalization of business. When opening a business, the Aeon Hometown Forests Program would join with local customers to plant trees on the site. This activity began in Malaysia in 1991 and has been expanded into 11 countries in the world. There is another tree planting activity through the AEON Environmental Foundation, which is aimed for the regeneration of forests around the world (Aeon Asean, 2017). Walmart – another leader in the retail industry has also committed to achieve three goals in its Sustainability Report, which are consuming 100% renewable energy, creating zero waste, and selling green products; and measure the progress in its sustainable goal every year. An outstanding action of Walmart to address the ecological crisis is eliminating landfill waste from US stores.

4. Recommendation and Conclusion

In conclusion, it can be said that international business should be seen as a part of the solution – and not just the problem of the ecological crisis (Kolk and Van Tulder, 2010). International businesses address the ecological crisis through four approaches, namely compliance approach, preventive approach, strategic approach and sustainable development approach, of which sustainable development approach is the most dominant measurement in the current context. These approaches would be carried out in two main strategies, which are “end of the pipe” strategy with a focus on waste disposal and after-production treatment, and a strategy oriented on production processes and product, which promotes environmental responsibility in the whole production process. The contribution of international business to tackle the ecological crisis is expressed in the widespread environmental management system and the transition of technology adoption from developed countries to under-developed and developing nations. Otherwise, international business areas also appeal to environmental responsibility of a new institutional infrastructure including governments, organizations and related parties to take action for the sustainable development of the ecosystem through such means as mutual environmental protection policies. In addition, international companies with the sustainable development approach have contributed a considerable role in generating solutions for the ecological issues by philanthropic activities in conducting environmental research, and provide resources for environmental campaigns in the host nation. The practice of environmental responsibility of Coca Cola and the Aeon Group should be considered as the role model in the international business domain.

As the global supply chain is the most essential component of international business, it is unable to avoid all the negative effects to the environment. Therefore, it is necessary for international companies to pay their best effort and investment in sustaining the development of the ecosystem. This report suggests some recommendations for environmental responsibility practice of transnational companies and related parties. Regarding the governments, since the international business supported by free trade policies has a significant influence on the stable development of the ecological system, it is necessary to integrate a standard of environment protection policies in the free trade agreement among countries to ensure a fundamental awareness of ecological responsibility for cross-border businesses. These policies should encourage international organizations to consume natural resources in a saving manner while banning or restricting the import and production of goods that are harmful to the ecological system. The implementation of appropriate environmental standards would motivate technology innovation for a cleaner production and improve the long-term competitive advantage of the company (Alpay, 1999). In terms of international companies, it is suggested that the environmental management system should be applied in the early stage of the production rather than just in the waste recycling and treatment. The 3Rs approach including reduce, reuse and recycle must be integrated in the waste management process of all businesses. Moreover, international corporations should leverage its influences and network to educate its stakeholders about environmental responsibility and continue to contribute to environmental research in order to come up with the optimal treatment for the ecological crisis.

 

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