Wednesday, April 18, 2007

Globalization’s offspring: a race to the top or the bottom?

In last week’s Economist an interesting lead article ran: “Globalization’s offspring: How the new multinationals are remaking the old.” The rise of Brazilian, Indian, Chinese, and Russian (BRIC) companies as global powerhouses is happening fast and furious. Here in Amsterdam headlines were made a few weeks ago when Tata Steel of India bought Dutch steel giant Corus – the first time an emerging market company bought out a large company in this country - and a foreshadowing of what many feel the future holds.

Many are worried that the multinationals in emerging markets run lower cost enterprises because, in part, they turn a blind eye to social and environmental conditions, and this results in competitive advantage. But the author of this article claimed that the evidence is overwhelmingly opposite to this assumption due to the fact that price alone does not make a successful multinational – quality is equally as important.

The Economist claimed that in terms of ethics, companies seem to “harmonize up, not down” – meaning there is evidence that BRIC companies do indeed spread better working practices and environmental conditions in their home countries, and also adopt local norms when expanding into Western markets. Thus, the gap in sustainability performance seems to be on track to narrow.

In terms of transparency about performance, we are beginning to see a growth curve in reporting from companies in BRIC nations - most seem to be keen to show their international customers, competitors, clients, and potential business partners that they have earned a license to operate in their home communities and that regardless of slack national laws on human rights and environment these companies meet higher standards.

What is your experience?

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