How global pressures keep companies on their toes

By Sim Shuzhen

SMU Office of Research & Tech Transfer – When the structurally unsound, over-built Rana Plaza building in Bangladesh collapsed in April 2013, more than 1,100 factory workers were killed, many of whom manufactured clothing for major US and European retailers. The tragedy sparked widespread condemnation of unsafe labour practices in the garment industry, goading retailers into action to improve working conditions in factories.

As commerce goes global and companies extend their international reach, the Rana Plaza aftermath is just one example of the increasing pressure on companies to take responsibility for the social and environmental impacts of their business activities. But to what extent do globalisation and global pressures influence organisational actions? Delving into these complex questions is Assistant Professor Alwyn Lim, a sociologist at the Singapore Management University (SMU) School of Social Sciences.

“After the fall of the Soviet Union in 1991, everybody thought this would usher in a new era of globalisation—the world would improve, people would get richer, and there would be peace and fewer conflicts… but I think people have since realised that a lot of the early promises of globalisation have not really worked out too well,” explains Professor Lim, who, among other topics, studies how businesses respond to global pressures for improved corporate social responsibility (CSR).

Corporations in the larger context

Most research on CSR has focused on how companies’ individual characteristics—how large or profitable a company is, for example—affect sustainability practices, says Professor Lim.

His own research, however, takes a wider perspective, examining country-level characteristics that could impact CSR. For example, companies in a country that is well connected to international society, whether through governmental or non-governmental links, may be more likely to adopt sustainability practices than a poorly connected country, says Professor Lim.

Hence, together with Professor Kiyoteru Tsutsui of the University of Michigan, Ann Arbor, Professor Lim carried out a cross-national quantitative analysis of companies in nearly 100 countries to understand country-level factors influencing firms’ approaches to CSR. “Looking [at CSR] at the level of the firm is fine, but businesses often operate in larger contexts. So we might expect a business in one country to have a very different way of engaging with sustainability as compared to a business in a different country,” he explains.

As an indicator of CSR engagement, the researchers looked at the extent to which firms participated in the United Nations Global Compact, a non-binding framework aimed at encouraging businesses to adopt sustainable, socially responsible practices. Initiated by then UN secretary-general Kofi Annan in 1999, the Global Compact consists of ten principles stating a commitment to human rights, labour standards, the environment and anti-corruption.   

Pacts and pressures

After controlling for domestic factors, the researchers identified two major country-level factors that pushed corporations to engage with the Global Compact, says Professor Lim.

First, companies that exported goods to countries with more Global Compact participants were themselves more likely to engage in CSR frameworks like the Global Compact, says Professor Lim. “Trade is really pushing a lot of companies to be very attentive to sustainability issues. We think this is because companies want to use sustainability to signal to their trading partners that they are in fact responsible corporations,” he explains.

Second, companies in countries with more connections to international non-governmental organisations (NGOs) also engaged more strongly with the Global Compact, says Professor Lim. “We took this as evidence that international NGOs often work to try to connect some of these global principles, like human rights and the environment, to the domestic level.”

The study provides some guidance as to how the public—which now expects much more of companies when it comes to CSR practices—can keep firms on their toes, says Professor Lim. “Based on our findings, trade is definitely one avenue where we can pressure companies to be more responsible, and companies in very high-trade countries are particularly sensitive to these pressures. Also, since international NGOs are quite influential in putting pressure on companies, we can also support more international NGOs that look into [sustainability].”

The big questions

The use of cross-national studies to explore globalisation and CSR can very powerful, but comes with its own set of difficulties, says Professor Lim. “I think the main challenge is really trying to get reliable data on organisations across all of these countries,” he explains, adding that his analyses typically cover 100-120 nations.

Fortunately, while cross-national databases used to carry information mainly from developed countries such as the US and European nations, they now increasingly cover organisations in more countries around the world, says Professor Lim. This is a boon for his work on CSR’s “global dimensions”, he says; more recently, for example, he has been studying how international business associations help their members adopt sustainable practices.

In addition to businesses, Professor Lim is also interested in how globalisation affects other types of organisations, such as institutions, governments and social movements. Another of his projects, for example, examines how Asian universities respond to global pressures. “Many universities in Asia now find themselves in a unique position—on one hand, they have to serve the educational needs of the countries they’re in, but at the same time, they’re also under a lot of pressure to adopt policies that make them look more like global universities,” he explains. “There’s a bit of a tension there, and that’s what we’re exploring.”

The field of sociology, says Professor Lim, offers him the opportunity to explore complex questions concerning the global aspects of organisations, as well as the organisational aspects of globalisation. “What attracted me to sociology was the fact that sociologists really focus on how group behaviour influences the individual… I found this a very interesting way of approaching a lot of questions,” he explains. “I tend to gravitate towards is what is known as macrosociology, which looks at the big questions, such as big changes in the economy and society.”