Wednesday, October 10, 2007

How globalization can help the environment

I argued in a post yesterday that Lloyd Field's condemnation of globalization in his book "Business and the Buddha" was erroneous. Here's one area where I think globalization is a big help: reducing business's harm to the environment.

Most multinational companies can't/won't choose to do business only in countries with lax environmental standards. Doing so removes large swaths of the marketplace from their reach. And in selling or producing in many countries, they also submit themselves to multiple forums of regulation and oversight. And typically, since it's difficult to change fundamental product makeup for different markets, products are architected to surmount the highest bar and then sold everywhere with surface modifications.

(Frankly, a bigger danger to the environment are smaller local or regional companies. Operating under the radar and having local political power insulates them from national or global standards.)

In the US, California frequently serves as the most difficult regulator. Thus California's environmental mandates, immediately or later, become national norms of doing business. Similarly the EU is more willing to be first with environmental standard-setting. And very, very few companies will pull out of doing business with the EU, especially since they know that their standards will migrate to Asia and the US sooner or later.

The change in the corporate dialogue about carbon emissions illustrates this. In the October Harvard Business Review, Alyson Slater of the Global Reporting Initiative talks about how publicizing carbon emissions is good for business (free link). Such an article in a business publication would have been unthinkable even five years ago. Yet it shows how rapidly corporate thinking has changed.

And we have to give globalization at least part of the credit for that.

(Photo from triffo via stock.xchng)