To understand the links between corporate responsibility and the SDGs, it is important first to understand how companies, corporate responsibility and development in general are connected to each other. In this sub-chapter, I discuss some of the recent theories related to that.
In the global market economy, business operations that create most value to the product or service are typically conducted in the West and operations that require low-cost labour tend to be conducted in developing countries. Thus, despite of the increase in trade volumes, developing countries have benefited less from globalization than industrialized countries (Koponen et al., 2007, pp. 124–128).
A shift is ongoing to channel more development funds to companies, away from traditional
development-NGOs (Adelman, 2003; Wilkins & Enghel, 2013). This means that companies become more and more important actors of development policy – but they have the freedom to choose what activities and for whom they wish to advance and do that with a very different logic than NGOs.
Companies themselves do not often even recognize themselves as development actors (The Finnish Committee for UNICEF, 2017).
Newell and Frynas (2007) estimate that a clear majority of the developmental footprint of
businesses come through daily business operations. According to Utting (2007), income inequality in the world has risen sharply due to the capitalist market economy. Most companies focus their corporate responsibility efforts on external activities such as philanthropy while they
simultaneously create other, even contradicting, impacts on social protection through their corporate operations (ibid.). According to Nelson (2006), companies contribute to development through a combination of their core business processes at the workplace, in the market place and through the value chain; through social investment and strategic philanthropy; and through engagement to public policy dialogue. However, according to Idemudia (2008), development initiatives with long-term impact are few and even when partnerships between companies and development
organizations is established, they are uncoordinated and too few to contribute to a global transformation.
Jenkins (2005) is sceptical about the possibilities of companies to play a significant role in poverty reduction. Foreign direct investment (FDI) is often claimed to have positive development impacts, but Jenkins (ibid.) says that the results vary much depending on the local context. Another often used justification for being responsible by doing business in developing countries is job creation. It is however not in the interest of the companies to provide higher wages or to create more jobs than is necessary from a business perspective. In developing countries, investments may not lead to reduced inequalities, but may instead benefit only a small elite. Also, in poor countries, products of international companies are typically sold to the high-income consumers, not the poor or vulnerable people, which is one reason why referring to consumers as beneficiaries of the companies’ presence is misleading (ibid.).
According to Banerjee (2014), corporate responsibility as a concept has limited power to create social change because it is a phenomenon that was born within the capitalist agenda itself and cannot exceed its frames (ibid.; see also Jenkins, 2005). Corporations are designed to provide shareholder value, and therefore shareholder value overrules other values. Thus, most companies are not able to take the role of a development actor that is offered to them. A large proportion of decisions that affect the societies of the world are done for business reasons by companies that are not – by their nature – democratic and publicly accountable actors (Banerjee, 2014).
Fasterling and Demuijnck (2013) claim that without remarkable changes to the international law and national legislations, corporations continue to have the possibility to act deliberately against human rights if they choose to do so, and thus the development impacts of any company depend more on individual leaders than any governance initiatives. At the same time, they are concerned with the new skills that corporate managers would need in order to evaluate the actual and potential impacts on human rights in their jurisdiction. They argue that the effectiveness of corporate
responsibility in fact relies rather on the executive management’s commitment than on any set of guidelines or regulation (ibid.).
According Jenkins (2005), expectations on the developmental impacts of corporate responsibility as a concept are high in development organizations and among public authorities in the West. The idea that companies can and should progress global development with their corporate responsibility initiatives has spread to international organizations such as the World Bank and the United Nations (ibid.).
Corporate responsibility is not designed to generate development as such, but it can in the best case help companies see and act on development issues that they otherwise would maybe not consider because it operates also with development agendas. The SDGs is currently one topic of interest in companies, but it is not the only one initiative that companies commit to. Companies express their engagements to many international declarations and guidelines as well as industry-specific
frameworks, and these together with the internal and external stakeholders’ expectations form the operational environment of the corporate responsibility function.
Overall, social scientists and critical corporate responsibility scholars do not seem to share the optimism of economists and international development organizations when it comes to companies advancing development. In Agenda 2030, a lot of hope is put on companies to finance, innovate and collaborate for sustainable development. Still, in practice, the corporate responsibility function that typically drives the company’s development-related activities does not have the power to make company-wide decisions that affect the company’s developmental footprint as a whole.
2.6.2 Whose development? Absences in corporate responsibility agendas