Environmental Engineering Reference
In-Depth Information
In terms of technological dynamism, industries and industry subsectors are subjected
to di
ering degrees of global competition and other drivers of technological change. The
mining industry, for example, is far less dynamic in terms of innovation in process tech-
nology and
ff
nal products than the informatics industry. Even within a relatively dynamic
industry, companies are not homogeneous: there are leaders and laggards in terms of both
technological and managerial innovation, including in environmental management
(Mazurek, 1999; Leighton et al., 2002). Whether FDI generates sustainable development
spillovers is thus likely to be contingent on the technological trajectory within a particu-
lar industry, as well as the innovation culture of particular companies. Second, like
cutting-edge technology more generally, MNCs have incentives to protect intellectual
property in environmentally cleaner technology and/or better management practices.
Even in technologically dynamic industries and companies, MNCs may
fi
fi
nd it cost-
e
older, lower-margin, dirtier technologies to developing countries
rather than transfer state-of-the-art production technologies.
The assumption that environmental regulation of industry generally is more stringent
in OECD than in developing countries is probably warranted. However, although they
tend to converge, government regulation and social expectations are not uniform in
OECD countries. The European Union, in particular, has in recent years adopted more
stringent standards for industry, including regulation of industrial chemicals, than North
America. European MNCs have also voluntarily adopted 'best practice' at a higher rate
than those in North America, Australasia, or Japan.
4
In addition, MNCs increasingly
are emerging from non-OECD countries, including China, Singapore and Malaysia
(UNCTAD, 2002). Environmental practices and the in
ff
ective to slough o
ff
uence of civil society are not only
generally lower but more diverse than in highly developed countries. In short, the envi-
ronmental management practices that MNCs bring to developing countries are condi-
tioned by their source country and are thus highly diverse.
Finally, the assumption that MNCs uniformly adopt and implement global standards
as a strategy for cross-border environmental management is overly optimistic. In many
developing countries, environmental regulation is non-existent, weak or not enforced. In
this context, foreign
fl
rms have a choice of four strategies: (1) follow (or set) local practice;
(2) comply with host-country regulation; (3) follow home-country standards; (4) operate
with higher standards set by the company or by an international agency (Hansen, 1999).
Which strategy they choose depends on their determination of costs and risks. Tradeo
fi
s
between costs and risks are complex and conditioned by a host of factors, including global
market dynamics within a particular sector and the size and global strategy of particular
MNCs. On the one hand, the adoption of global standards reduces transaction and infor-
mation costs entailed in producing to a myriad of di
ff
erent national environmental and
occupational health standards. Some MNCs operate in dozens of countries. High
company-wide standards may also reduce production costs by increasing eco-e
ff
ciency,
that is, reducing inputs per unit output and reducing pollution. Moreover, high company-
wide standards reduce the risk of liability and adverse publicity resulting from high-
pro
le environmental disasters and/or targeted activist campaigns.
On the other hand, two factors militate against MNC adoption of high company-wide
standards, whether based on home-country, internally set, or international standards.
First, MNC liability for environmental harm in developing countries is generally limited
to compliance with domestic law. In international law, the concept of 'environmental
fi
