Calling the corporations to account

(4 pages)
August, 2011

Helena Paul

"Presently there is no force, governmental, intergovernmental, or nongovernmental which is capable of monitoring or regulating the activities of these large corporations. In fact, recent events show a trend to give more power to TNCs [Transnational Corporations]." Treaty on Transnational Corporations: Democratic Regulation of their Conduct. 1992

The hopes and failures of the Earth Summit in Rio 1992

The first Earth Summit took place in 1992 in Rio de Janeiro, - this was the UN Conference on Environment and Development (UNCED), from which the three major environmental agreements on climate, biodiversity and desertification (UNFCCC, CBD, UNCCD) emerged. The Precautionary Principle was established as a fundamental part of the CBD. Just a few months later, in December 1992, the UN Commission on Sustainable Development (CSD) was created “to ensure effective follow-up of Rio Earth Summit”. There were high hopes that at last the international community would begin to address some of the major collective issues of planetary health: biodiversity loss, climate change and desertification. The Earth Summit was meant to set human activity on the path to achieving justice and equity within planetary limits. For many people, it was immediately obvious that this could not be done without constraining corporate power and concentration,. Many went to Rio in 1992 with a strong determination to tackle corporate power, yet this did not happen. Why did the summit fail to do this? Why is it important to think about that failure now?

We mustn’t let history repeat itself

It is vital that we think about what happened then because we are fast approaching the 20th anniversary of the Earth Summit, with the so-called Rio+20 conference to be held once more in Rio de Janeiro in 2012. At this point in time, more and more members of the public are aware of the problems connected with global corporate power, but many now seem resigned to accepting that nothing will change. Instead they think that it is inevitable that corporations will continue to do what is profitable for themselves and their shareholders and that all the public can do is to hope that they, the environment and the climate may benefit from some corporate activities in a kind of trickle-down effect.

Corporate Social Responsibility?

Even though we are still suffering the consequences of the economic crisis of 2008 and have seen clearly how the banks became greedy and out of control, as they gambled and lost billions of ordinary people’s money, it seems that governments have no real will to tackle the corporations. It appears likely that the voluntary approach to controlling corporations – defined and applied by the corporations themselves and often misleadingly called Corporate Social Responsibility1 - is still proposed as the way forward by a number of participants in the build-up to Rio+20. Among them is the Stakeholder Forum, which describes itself as having played an important role in UN conferences and Summits on environment and sustainable development since the organisation's inception in 1987. Currently, there is no proposal on the table for what we really need: global regulation of corporate activity. In 1992, there was such a proposal, but it was later lost in the negotiations. Since then corporate power has continued to expand and governments often seem to forget they are meant to represent and defend their peoples. If we have made no real progress since 1992 towards regulating corporations, what has been wrong with our approach, and what are we going to do about it this time?

Why did UNCED fail to tackle the corporations in 1992?

Corporate friends at the heart of the process

One important reason why corporate power was not tackled at UNCED is that the corporations had an advocate at the heart of the process: Maurice Strong, “a multi-millionaire Canadian businessman with interests in oil, real estate, mining and ecotourism”.2 He was also the first Executive Director of the United Nations Environment Programme (UNEP) and Secretary-General of the UN Environment Conference in Stockholm (1972). He served as the Secretary General of UNCED from 1990 to September 1992. In 1990, Strong appointed Stephan Schmidheiny, a Swiss industrialist, as his advisor for business and industry. In the same year, Schmidheiny formed the Business Council on Sustainable Development (BCSD) with 48 top executives. During the preparations for UNCED, the BCSD and the International Chamber of Commerce (ICC) worked closely together. In 1992, “ICC formed the World Industry Council for Environment (WICE) with the goal of involving industry in the Earth Summit follow-up process.”3 While the public discourse was about the need for sustainability, the International Chamber of Commerce (ICC) quietly ensured that all proposals to control corporations were removed from draft UNCED texts. Agenda 21 ended up endorsing the positive role of business in sustainable development, while corporate leaders emphasised how much they were doing voluntarily to protect the environment. Industry has continued to prefer the voluntary approach and self regulation. At the same time, another industry lobby, the Global Climate Coalition (GCC), has played a similar role in the climate discussions, undermining proposals to reduce emissions.2

Civil Society texts and treaties

At UNCED, civil society produced many alternative texts and proposals for treaties4 including the Treaty from which the quote at the top of the article comes: Transnational Corporations: Democratic Regulation of their Conduct. In this they noted:

The UNCED has abdicated its responsibility to take measures to control TNC activities, instead promoting TNCs contribution to "sustainable development" and willingness to regulate themselves. The United Nations has given up trying to develop a Code for the TNCs and the Center on Transnational Corporations has been weakened.”

The UN Centre for Transnational Corporations (UNCTC) mentioned here had already been established long before the UNCED, back in 1974. It had three main objectives: to increase understanding of the impacts of TNCs, to promote their positive and eliminate their negative impacts; and to strengthen the capacity of countries to deal with TNCs. Its role was to collect and interpret information, carry out policy analysis and research on the impacts of TNCs, and advise countries on negotiations with TNCs and policy development. Its most important task was to develop a Code of Conduct for Transnational Corporations.5 Considerable progress was made and a number of drafts still exist.6 Such an organisation was plainly a threat to the aims of BCSD, the ICC and the GCC. As noted in the alternative treaty quote at the top of this article, the UNCTC had already been weakened by the time of UNCED in 1992. In 1993, under pressure from corporate interests, it was merged into the UN Conference on Trade and Development (UNCTAD). Then, in 1995 the BCSD and the environmental arm of the ICC, the World Industry Council for Environment, merged to form the World Business Council for Sustainable Development (WBCSD).7

Corporations bigger than many countries – and growing

Yet, since the 1990s, corporations have continued to increase their power and nothing effective has been done to limit their reach. The revenue of some TNCs is now bigger than the GNP of even some industrialized countries.

If Shell, Exxon Mobil and Walmart were countries...

GNP ranking country or corporation revenue (billions USD)
22 Turkey 210,811
  Exxon Mobil 210,392
23 Denmark 185,238
  Walmart 193,295
24 Russia> 179,325
28 Colombia 429,866
  Walmart 418,952
29 Malaysia 412,302
30 Belgium 392,862
31 Nigeria 374,323
  Exxon Mobil 370,125
  Shell 368,056
32 Sweden 352,327

The IMF list of countries (referred to in the table) numbers 184 in all, which gives some perspective to the corporate ranking in the above table. Ironically, when considering the drivers of climate change, in 2000, 3 of the top ten companies were oil companies, but in 2010 that figure had increased to 7 out of 10.

Corporations continue to resist mandatory regulation of their activities and insist that voluntary measures, largely devised by the corporations/themselves, are better than regulation to address issues of corporate concentration, power and abuse. A number of voluntary codes have been developed, including the Global Compact designed by the UN with the help of the ICC. Gradually the flawed concept of voluntary corporate social responsibility instead of mandatory regulation and control has gained traction.10 The World Summit on Sustainable Development in Johannesburg in 2002 simply continued down the same path. We must ensure that history does not repeat itself at Rio+20. This Rio Conference is the opportunity to begin a process to control corporations at international level.