The International Chamber Of Commerce Commerce Essay

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The International Chamber of Commerce has stated that the industry needs to integrate environmentally sound policies, programmes, and practices for conducting operations fully into each business as an essential element of management in all its functions.On a similar note a group of international banks has also made a statement that,

"We . . . recognize that ecological protection and sustainable development are collective responsibilities and must rank among the highest priorities of all business activities, including banking. We will endeavour to ensure that our policies and business actions promote sustainable development; meeting the needs of the present without compromising those of the future." [2] 

The link between TNCs and environmental protection was first inspected in the build-up to the 1992 Rio United Nations Conference on Environment and Development (UNCED). [3] Statements such as the above are just indicative of the many voices, which are on the rise, that believe that the protection of the environment is inextricably linked to the behaviour of Transnational Corporations (TNCs).

In the present times given the worsening environmental crisis with climate change, loss of biodiversity, water pollution, air pollution, deforestation, damaged aquatic ecosystems and so on, maximum compliance by TNCs with minimum environmental norms is warranted in order to ensure sustainable development. Partly recognising this need themselves and partly being persuaded by external factors such as public demand or legal obligations, TNCs have slowly begun to incorporate environmentally sustainable practices into their management. Whether such action is sufficient and whether the legal framework needs further improvement are the questions that the author shall attempt to answer in this paper.

The author shall first discuss the relationship between the environment and TNCs. The author shall then delve into the existing legal framework on the obligations of TNCs with respect to the environment.

Relationship between TNCs and the Environment

The widespread public belief is that businesses and industries are the chief cause of environmental concerns. While TNCs deny the same, there is no doubt that their large networks and technological resources means that their decisions carry international consequences. Greater than fifty per cent of global greenhouse gas emissions are due to the operation of TNCs. Thus, it can be safely said that if all TNCs were to recognise this fact and voluntarily adopt sound environmentally safe practices at the least, twenty five per cent of the world's assets would benefit from better environmental management. [4] 

However, the state of denial has gradually undergone transformation as most corporations today acknowledge the role they have to play in the protection of the environment thereby ensuring sustainable development. This is evidenced by statements like those given at the beginning of this paper. [5] The radical shift is also evident from the inclusion of environmental concerns in corporate policy statements, the rise of markets for pollution control machinery, the growth of environmental management as a profession, the undertaking of environmental impact assessments and hazardous waste disposal appraisals by TNCs for their projects and the setting of targets by TNCs for the control of emissions and the use of natural resources. [6] This radical shift gained momentum during the period building up to the Rio Conference wherein there was a realisation that the protection of the environment and business excellence can go hand in hand. For instance, recycling produces both environmentally and economically beneficial implications. Some of the positive outcomes of environmentally friendly practices for companies are

Cost savings generated through improved efficiencies; 

Building of corporate and brand reputation;

Improving employee and community health; 

Helping to create sustainable societies and markets. [7] 

While the acknowledgement of the need to address environmental concerns and the taking of positive steps thereon has gained momentum, greater and more comprehensive strategies are the need of the hour in order for the idea of sustainable development to reach its full potential. Mere compliance and narrow risk assessments will be insufficient if concerns such as climate change, water scarcity and so on are to be addressed completely. [8] 

It is in the attempt to prepare companies for this challenge that the UN Global compact incorporates three core environmental principles which are discussed subsequently in greater detail:

Business should support a precautionary approach to environmental challenges; [9] 

Undertake initiatives to promote greater environmental responsibility [10] , and;

Encourage the development and diffusion of environmentally friendly technologies. [11] 

Further the UN Global Compact Office in association with the Duke University also developed the Environmental Stewardship Strategy. This strategy is designed to assist companies in the development of a holistic and comprehensive strategy that better helps attain the goal of sustainable development. Further, it also incorporates the 'Caring for Climate' [12] and 'CEO Water Mandate' [13] initiatives.

Legal Framework

The role of TNCs in the protection of the environment falling outside the domain of political influence has always received inadequate attention in intergovernmental meetings. For instance, at the Stockholm Conference, 1972 the only attention given to this topic was by the International Chamber of Commerce(ICC) which gave a presentation on the same topic. Later in 1989, the General Assembly decided to hold a second international conference in 1992 to integrate the themes of the environment and development. In the build up to the conference, the United Nations Economic and Social Council (ECOSOC) requested the United Nations Centre on Transnational Corporations (UNCTC) [14] to draft a set of recommendations on the role of large industrial enterprises, including TNCs, in sustainable development that might be used by the governments in the drafting of Agenda 21. [15] The set of recommendations was titled Transnational Corporations and Sustainable Development: Recommendations of the Executive Director [16] and sought to convert a mere conceptual theory into an agenda that was practically workable. The recommendations sought to achieve changes in global corporate environmental management, the minimization of risk and hazard in operations, the encouragement of environmentally sound consumption patterns, the use of full-cost environmental accounting, and compliance with environmental conventions, standards, and guidelines. [17] In 1989, some TNCs took the leadership position on this rising issue and sought to spread awareness about the same amongst TNCs. By incorporating environmental concerns into the language of business, they were able to persuade a large number of TNCs to transform their business practices into environmentally-friendly ones.

In 1992, for the first time, the ICC made a reference to environmental standards in its revision of the Guidelines on Multinational Enterprises. [18] This was a welcome shift as the ICC had for a long time taken the stand that environmental standards must only be accepted if they apply across the board to all the industry as they otherwise tend to hamper the market. [19] Further, in light of the Valdez principles [20] formulated in light of the Exxon/Valdez oil-spill, the ICC Commission on the Environment prepared a voluntary statement on sustainable development titled the 'Business Charter of Sustainable Development'. [21] This document is however extremely vague and ambiguous given that many TNCs resisted the adoption of texts that would force them to change their current practices. In 1992, the ICC also published From Ideas to Action [22] which contained case studies of environmentally good practices from various industries. Further subsequent to the Rio summit, the ICC re-fashioned the International Environmental Bureau into the World Industry Council for the Environment (WICE) which was envisioned to be more pro-active in spreading concern for the environment amongst businesses, national chambers of commerce, international organisations and government delegations. [23] Aside from the ICC which represents business and industry as a whole, several trade associations such as the International Federation on Metals and the Environment, address environmental concerns from a sectoral perspective. These associations have actively issues environmental statements on diverse topics. [24] However, given the lack of any binding value of such instruments, the practical implementation of these statements is yet to see the complete light of the day.

Another body called the Business Council on Sustainable Development (BCSD) was established by the corporate advisor to the United Nations Conference on environment and Development (UNCED). The BCSD consists of fifty chief executive officers acting in their personal capacities and not representing their firms. The BCSD engaged in providing assistance to the UNCED on its manuscripts and draft conference proposals in addition to attempting to influence ministers and heads of government. The primary focus of the BCSD has been the issue of 'transfer of environmentally sound technologies to developing countries on favourable terms'. [25] Further, the fifty CEOs having chosen to take the lead on sustainable development, they also bear the burden of persuading their colleagues - senior executives at other corporations, to work towards the goal of sustainable development. The report by the BCSD titled 'Changing Course' [26] in stark contrasts to all other recommendations is a progressive long term strategy. Subsequently, in 1995, the BCSD merged with the WICE to form the World Business Council for Environmental Development which promoted the role of businesses in achieving sustainable development. [27] 

At the Rio conference, Agenda 21 was adopted. This document undoubtedly has the strongest text as against any other dealing with the responsibility of TNCs with respect to the environment. For instance, the General Assembly agreed that TNCs should adopt equivalent standards of operation as in the country of their origin and must further, through research, devise new processes to phase out those that pose environmental risks due to the generation of hazardous waste. [28] Agenda 21 also called for steps to move towards a greater reliance on pricing systems that internalise environmental costs. [29] Further, it also encouraged TNCs to adopt, on a voluntary basis, community right-to-know programmes based on international guidelines, including sharing information on the causes of accidental releases or potential releases and the means to prevent them. [30] Thus, there is no doubt that the Rio conference is where there began a serious consideration about the meaning of a sustainable corporation and how the behaviour of TNCs could be made compatible with global environmental requirements.

The 1992 Earth Summit was instrumental in identifying strategies for the industry to mitigate environmental damage. The foundation for this was laid by the 1987 Bruntland Report [31] produced by the World Commission on Environment and Development which highlighted the urgent need for a change in business practices in order to safeguard people from unacceptable environmental damage. Inspired by the 1992 Earth Summit the United Nations Global Compact incorporated three principles mentioned above encouraging businesses to align their operations with universally accepted environment-friendly norms.

Principle 7 of the Global Compact provides that businesses should support a precautionary approach to environmental challenges. [32] The precautionary principle has been defined in Principle 15 of the Rio Declaration [33] which provides that States and statutory authorities must take the requisite environmental measures where there are serious threats to ecology. Further, lack of scientific certainty is not a valid justification for not taking such measures. According to this principle, the onus of proof always lies on the industry to show that its actions do not result in degradation of the environment. [34] Thus precaution includes the risk assessment (hazard identification, hazard characterization, appraisal of exposure and risk characterization), risk management and risk communication. Determining the acceptable of risk goes beyond mere scientific evaluation and economic cost-benefit analysis to taking into consideration public opinion. Form a public policy perspective, precaution is required to be applied as long as related scientific information is inconclusive and the associated risk is too high for society to bear. The level of risk herein is that related to the environment, health and safety. [35] 

The precautionary principle also makes sense from a business perspective as it is more cost-effective to take preventive than remedial measures which in case of some types of environmental damage being irreversible is not even possible. Further, irrespective of the possibility of taking remedial measures, environmental damage caused by companies can also lead to an irreversible loss in reputation of the company. Furthermore, by aligning business practices with environmental norms, TNCs also reduce their financial risk which is a crucial element of consideration for insurers. A TNC can take many steps in order to take a precautionary approach. First, it may develop a code of conduct or practice for its operations and products that confirms commitment to care for health and the environment. Second, it can establish a managerial committee that oversees the application of precaution, particularly risk management, by the company. Third, it can join industry-wide collaborative efforts to share knowledge about particular production processes and products around which high level of uncertainty and potential harm exist. Fourth, it can attempt to establish a two-way communication channel with stakeholders to ensure that any potential risks and complaints are dealt with through mechanisms such as focus groups, stakeholder meetings and so on. [36] 

Principle 8 of the Global Compact provides that businesses should undertake initiatives to promote greater environmental responsibility. [37] This is reiterated in Chapter 30 of Agenda 21 which states that,

"Business and industry should increase self regulation, guided by appropriate codes, charters and initiatives integrated into all elements of business planning and decision-making, and fostering openness and dialogue with employees and the public." [38] 

The question then is what steps can be taken by a TNC to promote environmental responsibility? Some measure that may be taken include redefining the company policy to incorporate the triple bottom line of sustainable development i.e., economic prosperity, environmental quality and social equity. Second, the company can devise sustainability targets and indicators in order to better fulfil their responsibility. Third, progress in achieving targets must be measured and reported. Fourth, TNCs must move beyond mere compliance in the long-term and also seek to work with suppliers to enhance environmental performance by involving market players along the entire product supply chain. [39] 

Principle 9 of the Global Compact provides that businesses should encourage the development and diffusion of environmentally friendly technologies. [40] Environmentally sound technologies has been defined in Agenda 21 as those that protect the environment, are less polluting, use resources in a more sustainable manner, recycle a large quantity of their wastes and lastly handle residual wastes in a more acceptable manner than the technologies for which they were substitutes. [41] It must be noted that the term technologies is not limited to equipment and includes within its ambit know-how and organisational and managerial procedures. The key benefits of environmentally friendly technologies are the reduction in the use of raw materials leading to increased efficiency, the creation of new business opportunities thereby enhancing the overall competitiveness of the company and long-term economic benefits alongside environmental benefits. [42] Some of the strategic approaches that may be taken to improve technology include refocusing research and development towards 'design for sustainability'., employment of Environmental Technology Assessments (EnTA) and co-operating with industry partners to ensure that 'best available technology' is available to other organizations. [43] 


The confrontation of economic progress and corporate responsibility to protect the environment is unlikely to see a complete resolution any time in the near future. The debate on acceptable corporate behaviour environmental disclosure norms will persist in the media, the legislature and the judiciary. This debate is likely only to intensify in the various fora where protocols to the climate and waste Conventions are being drafted. The debate will also be carried forward by NGOs involved in sustainable development campaigns. With such rising prominent debate on the issue, TNC s will be left with no option but to take voluntary pro-active steps to enhance environmental management practices and minimize risks and hazards from products, processes and services. While this may be the case, it is unlikely that the near future will see the acceptance of universally acceptable international norms on the role that TNCs must play in the protection of the environment. One can only hope that future international forums will build on the breakthrough provided by the Rio Conference and in addition to defining standards with stricter precision, also develop strict mechanisms for implementation to ensure that all TNCs are forced to make their business practices compatible with the object of safeguarding the environment.