Multinational Companies Impacts on Developing Countries

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Multinational Companies Impacts on Developing
Countries

• Prague
• 20 Oct 2006
• Fiona Gooch, Traidcraft

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Overview

• Traidcraft
• Impacts Commercial Companies have on Vulnerable
  people
• International Supply chains
• Responsible Purchasing Initiative
• European Coalition for Corporate Justice

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Traidcraft Plc

• Established 1979
• Values driven Social Enterprise
• Leading UK Fair Trade organisation
• 1000 Agricultural, textiles, home interiors
  products
• Buy from 100 producer groups in Africa, Asia
  South America
• Turnover gt16m
• 1993 Initiator of corporate social reporting

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Traidcrafts Social Accounts
www.traidcraft.co.uk
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Two sides of Traidcraft
A business with development objectives Traidcraft
plc
A development NGO specialising in
business Traidcraft Exchange

• Small enterprise development
• Facilitate market access
• Policy work to improve impact of trade on the
  poorest in developing countries

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Question to YOU

• Are commercial companies
• reducing poverty in developing countries? or
• increasing poverty/vulnerability?

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European Companies Impact on Poor People in
Developing Countries

• Sell products to poor people e.g. drugs, seeds,
  baby milk
• Poor people are neighbours of EU companies e.g.
  Coca Cola in India, Shell in Nigeria
• Employ poor people e.g. Unilever (factories),
  AngloAmerican (mining)
• Poor people work/supply EU companies

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Examples

• Foreign Direct Investment in developing countries
  has increased 6-fold over 10 years.
• 6 companies dominate 70 world trade in
  agricultural commodities
• 1 company, Cargill controls 80 global grain
  distribution
• . . . . . . Clearly private sector dominance has
  development implications

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Companies Impact on Lives
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Examples of negative impacts on poverty in
international supply chains.
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Vulnerable workers - Chile
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Family Impacts of Forced overtime in Kenya
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Distribution of 1 retail value of bananas in the
supply chain
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Vulnerable workers - Morecambe Bay
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Pushing Risks Down the Supply Chain
Retailers brands push for - lower prices from
producers - fast and flexible production - high
technical quality standards - better labour
conditions but without a long-term commitment
Producers, as employers - hire women
migrants - use short-term contracts evade
benefits - put workers under excessive pressure -
undermine organising - hide labour rights
violations
Precariously employed workers - insecure on
contracts with few benefits - exhausted by long
hours high targets - undermined in organising
for their rights
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EU Food Supply Chain Bottleneck
The Supply Chain Bottleneck in EuropeSource
Grievink (2003)
Consumers 160,000,000 Customers
89,000,000 Outlets 170,000 Supermarket formats
600 Buying desks 110 Manufacturers
8,600 Semi-manufacturers 80,000 Suppliers
160,000 Farmers/producers 3,200,000
POWER
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Concentration in Banana supply chain from Latin
America Caribbean to UK
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Responsible Purchasing Project

• CTM, Italy
• IDEAS, Spain
• Oxfam Wereldwinkels, Belgium
• Traidcraft, UK
• EU funded project 2005 - now

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• Responsible Purchasing
• 4 case study sectors
• Business case
• 1st steps for companies
• Indicators to monitor Buying
• Public policy options

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Our learning?

• Power Imbalance in supply chains
• Limited safe-guards for most vulnerable
• Lack of business accountability/responsibility
  for Impact
• Gaps in norms set for business behaviour
• Existing norms (e.g. ILO) ignored
• Lack of transparency of business relations/impact
• Inability for impacted 3rd parties to hold
  companies to account
• EU Public policy response is voluntary Corporate
  Social Responsibility . But insufficient

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Why Government action needed?

• Harmful companies private companies (Top
  Shop), slow (Walmart, Lidl), sick companies
• Trends - Better, Cheaper, Faster
• Market dominance -gt Bully suppliers
• CSR/Ethical trade commitments limited/harmful
  impact

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Backfiring on social objectives ...
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Collaboration is needed

• Change needed at EU national level
• Any organisations actions ALONE are ignored

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European Coalition for Corporate Justice (ECCJ)

• civil society organisations from across Europe.
• Our vision is of a sustainable world in which
  corporations drive for profit is balanced by the
  interest of society at large and respects human,
  social and environmental rights.

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What ECCJ does

• -co-operation amongst NGOs
• -Influence Corporate Justice policies of the EU
  and its member states.
• -Inform the general public
• -Present a joint civil society vision
• -implementation of EU policies on Corporate
  Justice by the member states
• -Build capacity

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5 PRINCIPLES

• 1. References to international standards
• 2. Stakeholders rights. Companies and their
  directors can be held accountable. 
• 3. Responsibility throughout the supply chain
• 4. Reporting of environmental, social impacts
  Lobbying. Backed up with Independent monitoring
  and verification
• 5. A leading role for public authorities

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Thanks

• Any questions on presentation?

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For more information

• www.responsible-purchasing.org
• www.traidcraft.org
• fionag_at_traidcraft.org,
• www.corporatejustice.org
• Contact Virginie Giarmana, Coordinator info_at_corp
  oratejustice.org