2003 CLAS Summer Research Report Ralph Espach Political Science "The Role of Multinational Corporations in the Diffusion of Environmental Standards and Practices in Brazil"

Critics of globalization often portray multinational corporations as self-interested predators, locating their production facilities in developing countries in order to reduce costs by avoiding the burdensome labor and environmental laws of their home countries. However, recent research suggests that in many cases multinational corporations (MNCs) face strong incentives to export their home country standards of operations to their production chains and industry partners in developing countries. Several corporate surveys recently conducted in developing countries indicate that MNCs generally outperform their local competitors in terms of environmentally sensitive practices, due largely to their superior technology and equipment, their standardized production processes, and the importance of their corporate image back in home country markets.

This argument suggests that a more liberalized international trade and investment environment not only is not bad for the environment in developing countries, but tends to improve corporate responsibility in these countries even when environmental conservation and protection is not a powerful domestic political issue. But which depiction of MNCs abroad—as cost-cutting polluters or as vehicles for cutting edge, cleaner technologies and practices—is more accurate? What conditions within the local country and the individual firm affect this outcome?

My dissertation research aims to explore these questions in two major Latin American countries, Brazil and Mexico, with a focus on their chemical industries. This industry is especially important as a benchmark for the practices of MNCs because historically it is one of the most polluting industries, it’s one of the world’s largest, and it is particularly susceptible to negative consumer and investor action within the U.S. and European markets in cases of chemical leaks or other environmental disasters. The Latin American Studies Summer Field Research Travel Grant provided me the opportunity to spend three weeks in São Paulo, Brazil during July of 2003 for a set of interviews and research into available resources that lay the foundation for the research project.

In São Paulo I was able to meet with representatives of Brazilian chemical corporations and the national chemical industry association, several officials at the São Paulo state environmental agency (known as CETESB, the preeminent state environmental agency in Latin America), NGO representatives involved with corporate standards and practices, and experts of environmental politics at the University of São Paulo. These interviews were very helpful in three ways. First, the responses of these experts to the research hypotheses and their perspectives regarding the most salient and interesting issues related to corporate environmental practice in Brazil helped me to focus my dissertation and gave me new research ideas. Second, within only three weeks I was able to compose a network of individuals and friends within the industry and the regulatory and environmental circles, who proved invaluable for recommending further contacts and other resources for information. Third, I was able to identify and explore several sources of public and private information to which I may have access that improved my understanding of Brazilian environmental regulations and corporate programs. I also gained access, under certain conditions, to a database of corporate environmental performance reports that belongs to the Brazilian National Chemical Association (ABIQUIM).

Preliminary indications gained from these contacts and resources are that indeed multinational corporations in the chemical industry tend to comply with or exceed local and national environmental regulations. However, Brazil has the region’s most diverse and developed domestic chemical industry, and there are several large Brazilian chemical manufacturers who also meet or exceed environmental laws because cleaner production is also more efficient production. The experts and regulatory officials explained that the larger challenge from the perspective of public policy is to encourage medium-sized and smaller producers to invest in the technology and training necessary to improve their practices. Corporate programs for supply chain management, undertaken by both MNCs and large Brazilian companies, are important elements in the process, and CETESB has an initiative to support such industry partnerships. The process of supply chain management or “product life cycle” management—a modern term, from the corporate administrative perspective, for Albert Hirschman’s well-known concept of backward and forward linkages—could provide a fascinating focus for the research project.

From this stage, the project must consider how the patterns uncovered in the chemical industry and among environmental regulatory agencies and NGOs within São Paulo compare across other states within Brazil, especially those with less economic development and fewer government resources, and between Brazil and Mexico. Brazil’s case is outstanding in terms of the complexity and size of its chemical industry, which includes powerful and competitive local companies as well as MNCs, and the level of societal support and non-governmental activism for environmental protection. Since Mexico’s industry is relatively small and more dominated by U.S.-based companies, and its domestic environmental movement is less established, it could be that MNCs are likely to play a much larger role—for better or for worse, in terms of environmental effects of production—in Mexico than in Brazil.