NGOs and Corporate Power: is there a win-win solution?

In that book we found that NGOs are mostly weak players in debates over global business regulation. Yet no single actor nor any single mechanism of globalization can explain how globalization occurs. We found that changing multinational business conduct requires a whole web of controls. NGOs can enrol a credible web of controls through learning how to pull the right strands of that web at the right moment. They can trigger global change and have done so, as we have seen in cases like Ralph Nader’s impact on motor vehicle safety regulatory standards or the impact of Greenpeace and other NGOs on whaling. The internet is now supplying a more literal web of citizen control. This is also important to understanding the change manifest in the MAI and Seattle campaigns.

There is a world system dynamic that creates a competitive race to the bottom with regulatory standards over matters such as the environment. Pollution havens move to where the regulatory costs will be lowest. But there is another kind of world system dynamic that enables ratcheting up of standards, as in the Montreal Protocol. The intellectual challenge for social movements is to understand the difference between the lowest common denominator dynamic and the highest common factor dynamic. To learn how to intervene strategically through our lobbying to encourage the ratcheting up dynamic and discourage lowest common denominator ethics.

One lesson we need to learn is from Michael Porter’s influential book, The Competitive Advantage of Nations. It shows that it is not necessarily good business for firms to locate where regulatory costs are lowest. On the contrary, he concludes the following advice from a considerable amount of empirical analysis of what makes firms internationally competitive:

• Establish norms exceeding the toughest regulatory hurdles or product standards. Some localities (or user industries) will lead in terms of the stringency of product standards, pollution limits, noise guidelines, and the like. Tough regulatory standards are not a hindrance but an opportunity to move early to upgrade products and processes.
• Find the localities whose regulations foreshadow those elsewhere. Some regions and cities will typically lead others in terms of their concern with social problems such as safety, environmental quality, and the like. Instead of avoiding such areas, as some companies do, they should be sought out. A firm should define its internal goals as meeting, or exceeding, their standards. An advantage will result as other regions, and ultimately other nations, modify regulations to follow suit.
• Firms, like governments, are often prone to see the short-term cost of dealing with tough standards and not their longer-term benefits in terms of innovation. Firms point to foreign rivals without such standards as having a cost advantage. Such thinking is based on an incomplete view of how competitive advantage is created and sustained. Selling poorly performing, unsafe, or environmentally damaging products is not a route to real competitive advantage in sophisticated industry and industry segments, especially in a world where environmental sensitivity and concern for social welfare are rising in all advanced nations. Sophisticated buyers will usually appreciate safer, cleaner, quieter products before governments do. Firms with the skills to produce such products will have an important lever to enter foreign markets, and can often accelerate the process by which foreign regulations are toughened.

Firms that have upgraded their standards early because they are located in a state that is an early mover to higher standards have an interest in making Porter’s prediction come true. They will not get the predicted early mover advantage unless other states follow the lead of their home state. So the NGO analysis is to model monger among nations that might be attracted to their reformist regulatory model until they find one so convinced of the attractions of the model that they and their firms believe they may get a strategic trade advantage through being first to require it. Then it is to work with those firms to help them reap that strategic trade advantage by lobbying together for a global standard. The NGO puts the win-win proposition to them: " We are going to help make money for you by campaigning in this country, and then globally, for the standard that gives you an early mover advantage."

There are in fact many weapons of the weak in the face of globalization. The one I have developed here is to search for win-win outcomes with the strong. I have shown that the fact that what is win-win with one element of big business may be win-lose with another not only need not matter, their competitive divisions in global markets can be a strategic asset for NGOs.