Global Corporate Citizenship Global Corporate Citizenship EDITED BY Anuradha Dayal-Gulati and Mark W. Finn Introduction by Daniel Diermeier Northwestern University Press Evanston, Illinois Evanston, Illinois Copyright © 2007 by Global Initiatives in Management, Kellogg School of Management. Published 2007 by Northwestern University Press. All rights reserved. Printed in The United States of America 10 9 8 7 6 5 4 3 2 1 ISBN-13: 978-0-8101-2383-0 Library of Congress Cataloging-in-Publication Data Global corporate citizenship : edited by Anuradha Dayal-Gulati and Mark W. Finn. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-8101-2383-0 (pbk : alk. paper) ISBN-10: 0-8101-2383-5 (pbk : alk. paper) 1. Social responsibility of business. 2. Social responsibility of business—Developing countries. 3. Business enterprises—Developing countries. 4. International business enterprises—Moral and ethical aspects. I. Dayal-Gulati, Anuradha. II. Finn, Mark W. HD60.G557 2007 658.408—dc22 2007019572 The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1992. CONTENTS Foreword, ix Preface, xi 1 Introduction: From Corporate Social Responsibility to Values-Based Management 1 Daniel Diermeier PART 1 ACCOUNTING, TRANSPARENCY, AND MONITORING 25 2 Labor Standards in Thailand: The Players and Their Impacts 27 Julie Boris, Kaya Davis, Michael Gross, Jessica Keintz, and Jami Totten 3 The Impact of Labor Audits in Vietnam 41 Janice Farrel, Gregory Merchant, Andrew Sofield, and Mareike Willimsky 4 Preventing Labor-Standards “Explosions” in Thailand and Vietnam 57 Jared Cluff, Andrew Knuckle, Carlo Libaridian, R. David Smith, and Wonita Williams PART 2 ECONOMIC EMPOWERMENT AND GLOBAL CITIZENSHIP 75 5 The Impact of Foreign Direct Investment on Chinese Women 77 Alison Curd, Amelia Julian, Adam Sabow, and Leigh Seligman 6 Avon in Brazil: Direct Selling and Economic Empowerment 89 Helen Cha, Polly Cline, Lilly Liu, Carrie Meek, and Michelle Villagomez 7 Corporate Social Responsibility: A Case Study of Multinational Corporations Investing in India 97 Scott Benigni, Brandon Davito, Adam Kaufman, Andy Noble, and Risa Sparks PART 3 PARTNERING FOR CHANGE IN SOUTH AFRICA 119 8 Education for Change in South Africa’s Auto Industry 121 Kannan Arumugam, Akeshia Craven, and Jackie Statum 9 Black Economic Empowerment in the South African Wine Industry 133 Liliahn Johnson, Laura Koepke, and Amie Wang 10 Venture Capital and Black Economic Empowerment in South Africa 151 Stephanie Davis, Marene Jennings, Srikanth Reddy, Yuji Sadaoka, and Guhan Selvaretnam 11 Closing the Skills Gap in Post-Apartheid South Africa 165 Piotr Pikul, Kathy Wang, and Craig Wynn PART 4 MEETING THE AIDS CHALLENGE 175 12 Sustainable Foundations for HIV/AIDS Care: Treatment and Delivery in South Africa 177 Stephanie Chan, Deepa Gupta, Kara Palamountain, and Aparna Saha 13 Meeting the HIV/AIDS Challenge in Brazil 189 Joshua Bennett, Nageswara Pobbathi, Andy Zhilei Qiu, and Ryan Takeuchi PART 5 CORPORATIONS AND THE ENVIRONMENT 203 14 Green Management in the European Union 205 Lamtiurida Hutabarat, Marc Major, and Doug Stein 15 Ecoefficiency in Chile and Peru 217 Stacy Gibbons, Maren Lau, Stacy McAuliffe, and Jessica Watson 16 Flex-Fuel Technology in Brazil 233 Henry Lai, Matt Lippert, Guilherme Silva, Avi Steinberg, Pratish Sthankiya, and Justin Twitchell 17 Environmentally Friendly Technologies in China’s Auto Industry 251 John Eisel, Jonathan Glick, Adrienne Kardosh, Coleman Long, David Mayer, and Doug Roth Acronyms, 263 Index, 267 FOREWORD n 2003, the Ford Motor Company Center for Global Citizenship Iof the Kellogg School of Management announced two $1,500 Best Paper Awards for graduate student papers from the Global Initiatives in Management (GIM) classes of 2003. One of the awards was for papers on social corporate engagement, the second for those concerned with environmental sustainability. “The Impact of Labor Audits in Vietnam,” included as a chapter in this book, was the paper awarded the first of these prizes. The paper on which the chapter “Green Management in the European Union” is based won the other award. The other papers in this volume were among the nearly two dozen submitted to this competition. They ably doc- ument the range and diversity of management challenges associated with the increasing globalization of business. The Ford Center, like the Kellogg School of which it is a part, is committed to the idea that in a global context, basic management skills such as accounting, finance, strategy, and marketing are nec- essary but not sufficient conditions for business success. Global leaders of the current century must also recognize that businesses thrive where people and societies thrive. Thus, an essential part of building successful businesses is enabling successful societies—soci- eties that are educated, healthy, and rich in opportunities for all cit- izens. Societies that allocate education only to elites fail the first test; societies that pollute or destroy their natural resources fail the sec- ond; and societies burdened by corruption or regimentation fail the third. The chapters included in this volume deal with specific issues within the broad domain of corporate social responsibility. How does foreign direct investment influence economic and social ix x FOREWORD opportunities for women in China? In Vietnam, do labor audits to verify the safety and healthfulness of workplaces actually have an adverse impact on the availability of jobs or the incomes of employ- ees? What are the hurdles for providing opportunities through microfinance in Brazil? Can Avon develop strategies to sell its prod- ucts to wealthier Brazilian consumers with the same success it has had with less affluent ones, for many of whom the company also provided employment? How can South African firms compensate for a century of racial and gender discrimination to create an econ- omy and broader society in which all citizens may participate freely? Education and capital are crucial, as many of these chapters point out, but providing them is complex. In several chapters, the authors discuss the need for partnerships between corporations and non- governmental agencies. Two arenas for such partnerships are disease education/management and environmental initiatives. Healthy employees are essential for healthy enterprises, but health can be threatened by global disasters such as HIV/AIDS or pollution. Only the most shortsighted firms would fail to see the value in eliminat- ing such epidemics or sources of environmental damage. These chapters represent efforts to grapple with the problems that arise from the inevitable interaction of business and its physi- cal and social environment, an interaction that we expect to evolve into an even more varied source of challenges and opportunities in the decades ahead. We are proud to share these works with the reader. David M. Messick Morris and Alice Kaplan Professor of Ethics and Decision in Management Codirector, Ford Motor Company Center for Global Citizenship PREFACE he movement toward global outsourcing and manufacturing Tand the expansion of overseas marketing, distribution, and sales operations have had far-reaching implications for businesses and the countries in which they invest. Although multinational corpora- tions (MNCs) are motivated by the prospects of lower costs or acquiring local customers more easily by increasing their presence overseas, there are spillover benefits to the local economy, usually in terms of higher wages and overall standards of living. However, these shifts have not been without controversy. For instance, MNCs have been accused of having a negative impact on the environment, working conditions, and culture of the countries they occupy. These accusations are predicated in part on the growing belief that busi- nesses have obligations to society—both to their home countries and to the local economies they affect—that go beyond making money. Since 1990, in fact, more than 100,000 new citizens’ advo- cacy groups have emerged around the globe. In response to these pressures, there has been a rising trend toward corporate social responsibility (CSR), driven by both investors and consumer inter- est and reflected in the CSR initiatives featured prominently on the Web sites of most of the companies in the Fortune 500. Corporate social responsibility has been broadly defined as the ways in which a company’s activities affect its stakeholders and ful- fill its perceived obligations to society, including the environment. Some businesses are on the cutting edge of the movement to make corporations more socially responsible. Others are driven to join it by unfortunate disclosures or the consequences of missteps in regard to social responsibility. Nevertheless, most large companies xi xii PREFACE grapple with a broad range of CSR issues ranging from global poverty to renewable energy. This volume is a product of the class Global Initiatives in Management (GIM), a course offered by the Kellogg School of Management for the past decade. The GIM program and Kellogg’s Ford Center for Global Citizenship compiled this book based on student research related to global CSR, in part to address the increased attention to this area. Each year the GIM program offers classes that span the globe. Recent courses have focused on China, Japan, India, South Africa, Chile, Peru, Brazil, Southeast Asia, and the European Union. Kellogg students in GIM capped their class- room experiences with visits to the countries of focus over spring break. In addition to the lectures and country visits, the students undertook in-depth research on the issues included in this book. Many of the results and findings presented here are based on first- hand, in-country interviews. Corporate social responsibility is clearly a broad topic with many facets. The chapters in this book illuminate how companies may move toward CSR, along with the form it may take in differ- ent countries, encompassing issues ranging from education and health to environmental responsibility. Similarly, the impetus for CSR may vary across companies and countries.