Environmental Practices of Transnational Corporations in Brazil: Cases in the Chemical and Pharmaceutical Sectors
Total Page:16
File Type:pdf, Size:1020Kb
ENVIRONMENTAL PRACTICES OF TRANSNATIONAL CORPORATIONS IN BRAZIL: CASES IN THE CHEMICAL AND PHARMACEUTICAL SECTORS Ana Lucia Malheiros Guedes A thesis submitted to the Department of International Relations in fulfilment of the requirements for the Ph.D. degree, at the London School of Economics and Political Science, University of London. London, July 1998 UMI Number: U113748 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U113748 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 I H£S<£S 6999iZ Abstract Following the case study research strategy, this thesis has investigated the implementation of corporate environmental policies in subsidiaries of transnational corporations in Brazil. More specifically, it investigated six subsidiaries from three countries of origin - the United Kingdom, the United States and Germany - operating in the chemical and pharmaceutical sectors. This comparative study has resulted in a theoretical framework to explain transnational corporations’ environmental practices. This framework follows an interdisciplinary approach, consisting of four levels. First, at the international level, an overview of the constraints regarding transnational corporations and environmental issues is addressed. The second level is represented by the environmental regulatory policies in the home and host countries. The third level accessed the influences from the industry’s structure (in both international and Brazilian contexts). Finally, the fourth level is centred on the companies, which specifically discusses the home-host dilemma in the management of transnational corporations. The most important conclusion is that the main source of pressure over subsidiaries’ practices is the environmental regulation of the host country. Nevertheless, there are cases of non-compliance and cases of overcompliance regarding Brazilian environmental legislation. However, these contradictory results are explained by the headquarters-subsidiary relationship. That is, poor environmental performance was explained by lack of control from the headquarters. Otherwise, good performance was explained by tight control from headquarters over subsidiaries’ practices in Brazil. Additionally, there is indication that regulation is the main driving force in the home countries. However, attempts at self-regulation are in progress in the chemical industry in order to balance these external pressures for environmental improvements. Finally, there is evidence that the nationality of the selected companies is a relevant aspect of their environmental policies and practices. This is mainly because the legal requirements and management approach of the home countries are incorporated into their environmental management. Table of Contents Abstract ii Table of Contents iii List of Tables and Figures vii Abbreviations x Acknowledgments xv Chapter I - Introduction 01 1.1- Objective of the study 01 1.2 - Empirical focus 06 1.3 - Importance of the study - a review of the literature on corporate environmental policies and practices 11 1.4 - The need for interdisciplinarity 22 1.5- Limitations of the method 25 Chapter II - An interdisciplinary framework for the study of corporate environmental policies and practices 28 2.1- Theoretical framework 29 2.1.1- Research question and propositions 29 2.1.2- Overview of the analytical framework 31 2.2 - International context 32 2.2.1 - International politics of the environment 33 2.2.2 - Nation-states and transnational corporations - from individual to collective actions 38 2.3 - Home country context and its implications 43 2.3.1 - Nationality of the firm 43 2.4 - Host country context and its implications 51 2.4.1 - Environmental regulatory policy 51 2.5 - Industry’s structure versus environmental challenges 56 2.6 - Corporate strategic decisions and subsidiaries’ environmental management 63 iii Chapter III - Business and environmental issues in Brazil 70 3.1- Overview of foreign direct investment 70 3.2 - Environmental politics 79 3.2.1- International environmental pressures 80 3.2.2 - National environmental awareness 83 3.3- Environmental regulatory policy 88 3.3.1- Federal level 88 3.3.2 - State level 92 3.3.2.1 - Sao Paulo state 92 3.3.2.2 - Rio de Janeiro state 97 3.4- Non-regulatory environmental initiatives 101 3.4.1- Governmental environmental initiatives 101 3.4.2 - Business environmental initiatives 103 3.5 - Conclusions 105 Chapter IV - Case studies analysis - chemical sector 110 4.1- Profile of the industry 111 4.1.1 - World chemical industry 112 4.1.1.1 - Overview and trends 112 4.1.1.2 - Overview of selected segments 121 4.1.2 - Brazilian chemical industry 125 4.2 - Profile of the companies 131 4.2.1 - Corporate overview 131 4.2.2 - Brazilian subsidiaries 136 4.3 - Industry-specific explanations 141 4.3.1 - Environmental impacts and liabilities 142 4.3.1.1 - Environmental impacts caused by the chemical industry 142 4.3.1.2 - Environmental impacts generated by the selected cases 146 4.3.1.3- Environmental commitment from the chemical industry 154 4.3.2 - Economic and competitive aspects 164 4.3.2.1 - Technology-based explanations 164 iv 4.3.2.2 - Cost-based explanations 167 4.3.2.3 - Competitive aspects 169 4.3.2.4 - Market-related explanations 171 4.4 - Conclusions 173 Chapter V - Case studies analysis - pharmaceutical sector 178 5.1- Profile of the industry 178 5.1.1 - World pharmaceutical industry 179 5.1.2 - Brazilian pharmaceutical industry 188 5.2 - Profile of the companies 196 5.2.1 - Corporate overview 196 5.2.2 - Brazilian subsidiaries 203 5.3 - Industry-specific explanations 208 5.3.1 - Environmental impacts and liabilities 208 5.3.1.1- Environmental impacts caused by the pharmaceutical industry 208 5.3.1.2 - Environmental commitment from the pharmaceutical industry 215 5.3.2 - Economic and competitive aspects 220 5.3.2.1 - Technology-based explanations 220 5.3.2.2 - Cost-based explanations 225 5.3.2.3 - Competitive aspects 227 5.3.2.4 - Market-related explanations 230 5.4 - Conclusions 232 Chapter VI - Case studies analysis based on the interdisciplinary model 237 6.1 - Comparative analysis 237 6.1.1- Explanations grounded in the home countries 238 6.1.1.1 - British origin 243 6.1.1.2 - American origin 246 6.1.1.3 - German origin 250 6.1.1.4 - Cross-country comparison 254 6.1.2 - Explanations grounded in corporate management 258 6.1.2.1 - British origin 265 V 6.1.2.2 - American origin 269 6.1.2.3 - German origin 275 6.1.2.4 - Cross-country comparison 280 6.2 - Re-evaluation of the research design and methodological implications 281 6.2.1 - Cross-case analysis and verification of propositions 282 6.2.2 - Methodological implications 288 6.2.3 - Critical appraisal of the dichotomy between home - host countries 291 6.3 - Conclusions 295 6.3.1- Summary of findings 304 6.3.2 - Directions for further research 306 Bibliography 309 Appendices 341 A .l - Further methodological aspects 341 A. 1.1 - Criteria for judging the quality of research design 341 A. 1.2 - Data collection and case studies description procedures 341 A. 1.3 - Data analysis 343 A.2 - Case study protocol 347 A.2.1 - Summary of attempts to collect data 347 A.2.2 - Summary of the data sources 349 A.2.3 - Guideline for interviews 351 vi List of Tables and Figures Tables 1.1- Brazil - foreign direct investment stock - 1995 (US$ million) 07 1.2 - The location of the private-owned enterprises in Brazil (%) 10 1.3- Stratified sample 11 2.1- Selected multilateral agreements 35 2.2 - Selected environmental legislation - United States 45 2.3 - Selected environmental legislation - United Kingdom 46 2.4 - Selected environmental legislation - Germany 46 3.1- Participation of Brazil as recipient of FDI worldwide 71 3.2- Brazil - FDI stock as percentage of GNP (1970-1996) 71 3.3 - Participation of state, foreign and domestic owned enterprises per industrial sector in Brazil 73 3.4 - Origin of foreign capital in Brazil - selected years (%) 74 3.5 - United States - direct investment abroad (US$ million) 75 3.6 - Germany - direct investment abroad (DM million) 75 3.7 - United Kingdom - direct investment abroad (£ million) 76 3.8 - Brazil - budget of the federal environmental agency 90 3.9 - Selected business environmental initiatives in Brazil 104 4.1 - World’s top ten chemical companies - 1994 118 4.2 - Geographic breakdown of world turnover on chemicals - 1994 121 4.3 - Agrochemicals - world sale by area and product - 1994 122 4.4 - Brazilian petrochemical and chemical industry - participation per origin of capital 126 4.5 - Foreign direct investment in Brazil per segments of the chemical industry - 1994 (US$ million) 128 4.6 - Ranking of the top twenty companies in the Brazilian chemical industry - 1996 129 4.7 - Sales at the chemical sector - selected group of products - 1994 130 4.8 - Corporate worldwide overview - Zeneca 131 vii 4.9- Worldwide sales per business division - Zeneca - 1996 132 4.10- Worldwide sales per geographical area - Zeneca -1996 132 4.11 - Corporate worldwide overview - DuPont 133