effects of globalization in business ethics essay

Ethics and Globalization in Business

Introduction, business decisions and the surrounding environment, business and ethics, ethics and globalization, ethics and quality of production, solving of cultural differences, reduced conflicts, list of references.

A business will only manage to keep up its reputation if it fully recognizes the established business ethics in its environment. As such, each and every firm that aspires to grow to great heights must be prepared to follow to the letter the codes of conduct that govern its day to day operations. According to Ishikawa (2003), “A code of conduct is a set of rules adopted by transnational corporations (TNCs) to regulate working conditions and the management of contract factories.” Business ethics are an aspect that goes hand in hand with successful business management. Ethics is the moral principle which people inject in their process of decision making and which helps to temper the very last outcome in order to conform to the rules of their society. This is why these ethics have attracted international attention. This research paper will discuss the significance of a global approach to business ethics.

Increased scope of globalization has made it necessary for every firm to not only look at the relationship between it and the immediate environment, but to also consider the entire business fraternity in the whole world as well. Consequently, the interdependence of countries that differ politically, socially and legally has called for the moderation of some of the business ethics of companies to enhance peaceful co-relation and mutual understanding among international firms. An understanding of a country’s cultural norms is crucial for a meaningful business transaction with the said country. For instance, Japan as a nation is the outcome of the interrelation between Buddhism, Shintoism, Confucianism and modern Science and Technology. Therefore, anyone who deals with firms from Japan must understand its work ethic, economic culture and their views on of business thinking. This has been one cause of the development of international concern on business ethics. The outcome has been increased volume of trade among firms situated in different countries.

New trends that arise daily are another factor that makes it necessary for a firm to practice proper business ethical behavior. These trends on the other hand may serve as important burdens to business companies that do not practice proper business ethics. Therefore, proper ethical behavior in business is the only possible way to keep up with these upcoming trends and keep away from possible lawsuits. One factor that will lead us into determining whether a firm is ethically moral or not is the way it treats its employees. This is an exact representation of how the same firm will treat the customers in the market (Lockheed & Terris 2005). It can be seen from this argument that the significance of ethics to the entire business world is global and superlative.

Operation of business companies in foreign markets has left them with no other options other to conform to the established business ethics of the host country (Svara 2006). The fall of trade barriers has increased the level of international trade leading to the need for development and observance of harmonized business ethics. Global corporations have realized the need to formulate uniform codes of conduct and business ethics to avoid unpredictable behavior of different stakeholders in this field (Nish 2005). These codes have so far proved to be the only viable means of protecting a country’s citizens, their interests as a nation and the global environment as a whole.

International business ethics have not only guided managers but also employees. Furthermore, they have let them practice codes of conduct that have created and maintained public confidence and trust in their services and products. This trust is what keeps the firms in the market and enables it to maintain high sales throughout (Josephson 2002). Therefore, without practicing proper business ethics, a firm will stand lose all its customers and in the end close down no matter how large it may be. We therefore realize of what crucial significance the codes of conduct and proper business ethics are to the welfare and survival of a business company in the market.

A global approach to business ethics is what has turned the business world into a disciplined field with little or no cases of strained differences or disagreements. The formation of standard business ethics has promoted uniform business operations in each and every part of the world (Aguiler 1994). This has enhanced general growth of the economy of the world. The overall outcome has been the rise in the living standards of most large-scale businessmen and women across the globe. Without the codes of conduct and the well established business ethics, this would have been an extremely hard achievement to come by.

The benefits that have accrued to the whole world as a result of the harmonization of the hitherto diverse ethics in business are unlimited. Another such benefit is the global understanding among countries that once existed as independent and ever conflicting. This has given birth to international peace and stability among countries that carry out their trade together (Arrow 1989). Realization of the need to trade together was the main step that saw this through. It is obvious that no country can exist independently on its own without the help and support of the others. This is the exact reason why countries find it a good decision to remove all trade barriers and instead allow free trade among them.

Most of the significant changes in the business world are as a result of the adherence to business ethics by the various actors in this sector. Currently speaking, cases of black marketing and hoarding are rare to come by, signifying meaningful change in the global business ethics (Caroseli 2003). The whole business market has been made more favorable to any kind of trader unlike the case with a few years ago when these codes of conduct and business ethics were only spoken of and nothing done in their practice. For instance, nearly a century ago, black patients in America were seen as unprofitable and were often denied medical services (Anders 1996). But a more keen observation of ethics has done a way with this.

Lastly, a global approach to ethics in business has led to a fair market share of each firm. Because of the business ethics, each business organization has equal access to the market as all the other firms (Ackerman 1973). As such, no firm stands to have undue advantage over the other. This has led to the growth and development of infant industries in that they are not subjected to unfair trade practices by unscrupulous traders.

In conclusion, a global approach to ethics in the business world has done more good than bad. Major developments in the world of business today are either directly or indirectly linked to the practice of good business ethics by most business organizations across the globe. All the other firms which do not practice good business ethics are called upon to adhere to the international codes of conduct and business ethics for more success in business.

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Ethics of Globalization: Challenges and Prospects

Published: 10 April 2015
Volume 32 , pages 165–174, ( 2015 )

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Abha Singh 1

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Globalization has enormous implications. As convergence of technologies facilitated people to connect, people not only communicated but also started collaborating. A flat world that facilitates multiple forms of collaboration in sharing knowledge and work among billions of people without regard to geography, distance or language poses new challenges and problems for lawmakers and judges. When billions of people connect and collaborate and generate value in goods and services horizontally rather than vertically, complex issues are bound to arise. Such disputes emerge in the shape of challenges, which can be called global. Now global challenges demand global solutions as well. Individual countries find themselves unable to deal with such problems, and the problems are such that they cannot be ignored. Handling them together is the obvious and only way to ensure that they are properly tackled. It would be possible when the entire world’s people have a stake and all enjoy the opportunity to participate. We all share one atmosphere where overexploitation of the environment in the industrialized countries can result in ecosystem destruction. In developing a workable and effective international legal system, participation of all states is required. Lastly, we are all part of a human community. So we need to consider our actions accordingly. And to do so from a script that is written afresh every day by billions of human beings with whom we all share our planet raises demand for the formulation of a global civic ethic grounded in universally shared values and expressed in interlocking rights and responsibilities. Present paper intends to explore the possibility of such an ethics.

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effects of globalization in business ethics essay

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Globalization in Businesses and the Ethical Issues

Introduction, definition of globalization, cultural perspective of globalization, ethical dilemma from global warming, accountability and globalization, globalization and effects on the cultural makeup of a territory, risks and consequences associated with globalization.

In the quest to globalize businesses, there have been ethical issues that have emerged from it. Some ethical issues that have been brought about by globalization have become a major concern due to the negative impacts it has on the social and economic life of the people inhabiting these countries that are negatively impacted. The essay that follows will give an account of the ethical issues brought about by globalization in businesses. These ethical issues brought about by business globalization have to be addressed to prevent a thing intended for good from bringing about negative outcomes in the long run. The essay that follows will give a detailed account of the ethical issues that resulted from business globalization, it will also compare ethical perceptions across cultures in regards to the situation and finally determine the risks and consequences that are associated with the dilemma.

Globalization is a process whereby interconnections and connections are made available through wide geographical regions, which include varying societies across various varying geographical regions. Globalization is made possible by the fact that communication has been improved over time and thus resulted in an expansion in trade over the whole world. Globalization has the effect of reducing the differentiation that is brought about by cultural evolution. It, therefore, homogenizes the way of life of a whole population and it is the same thing that has been evidenced in the business world. Globalization affects three main areas of business ethics which include; culture, law and finally accountability.

The cultural perspective of looking at the ethical issues brought about by globalization is an inescapable arena. With the formation of territorial businesses, so does it come with corporations engaging in transactions that are conducted overseas. When these corporations open businesses in other areas, they are suddenly met by new as well as diverse and sometimes it might go up to cultural practices that entirely contradict with the moral values of the corporation’s mother country. The ethical values that are acceptable in a certain country might become questionable even before the corporation establishes itself in the new region. For example, the attitudes that a particular country has towards race and gender might completely differ from that of another country. The problems brought about are because as much as globalization has the outcome of deterritorializing a varied number of cultural practices and activities, the connection between culture and especially that connected to moral values still has its roots in a certain geographical area no matter what happens.

Globalization resulted in an ethical dilemma where the playboy magazine that is an adult magazine in the US and normally portrays nudity was suspended for a period of time in Indonesia. At first, the company producing the magazine in the country was suspended from production and then later on completely banned from producing the magazines following a violent demonstration by the Muslims of the country. The situation becomes even more of an ethical dilemma due to the fact that the issues produced in Indonesia already were toned down meaning that there was no nudity portrayed in them but the Muslims still had an issue with the magazine since it was conflicting with the moral values of their country (Wade, 2004, p. 574).

Legal parameters from another area that is affected by globalization. The legal constitution of a certain territory greatly differs from that of another territory. This is one of the challenges brought about by globalization. In this respect, the laws governing one territory become less effective and almost inapplicable when a business operation is established in a different geographical region. The laws of the mother territory cease to govern the activities that may be carried out by the same country in the case where the same corporation opens up a business in another country. This comes about due to the fact that the laws of a particular territory are usually confined to that specific area and they cannot govern another area. For example, the laws governing France can only be applicable and binding those businesses located in France and cannot bind the same branch of a business existing in the United Kingdom. For that reason, once a company opens one of its chains in another region, there is a complete change in the legal framework from which the business is expected to operate. Due to this difference in legal structures, the managers of a particular company cannot continue relying on the ethical practices of one region to govern another region. In this respect, the global financial markets are usually beyond the legal management of any government and this has been posing challenges to governments about the enforcement of laws in regions that have been deterritorialized.

Accountability is another issue that is raised by globalization. Corporations are seemingly the most dominant business activities that are commonly mentioned in globalization news. Multinational corporations are almost as influential in economic terms as the government. A good example of such a situation is the situation in Denmark where the gross national product of the Denmark government is almost the same as the turnover of general motors. In such an occurrence, the Danish government is accountable to the citizens of the country whereas the general motors’ responsibility weighs only on the shareholders of the company irrespective of where the chain is situated. As opposed to the responsibility the government has towards its constituents, general motors’ has little to negligible responsibility to the citizens who directly rely on the investment decisions that are made by the company. Therefore, general motors are not held responsible to these respective constituencies. This, therefore, implies that deterritorialization of trade and industry activities renders the laws of the government vague in governing the operations of these industries and therefore they escape the democratic responsibility they are supposed to have on the affected people. Due to this, people have seen the need for democratic responsibility applied by these multinational corporations and that is why people are raising voices and campaigning vigilantly for anti-globalization. Globalization, therefore, leads to the great need for accountability.

Globalization also has effects on the cultural makeup of a certain territory. Due to the fact that globalization involves the shifting of different races and individuals from one country to another and in their shifting, they carry their own cultural practices to another region. Therefore, these global businesses open ports where there is a risk for ‘imported” culture which poses a danger to the local populations’ culture. This might cause a reduction in the cultural diversities of different communities and even worse, it can lead to assimilation of cultures altogether. Another reason why global businesses pose danger to culture is that different cultures are guided by different norms. Therefore, a business has to consider the ethical practices and norms of a certain country before they even consider opening a chain in that particular country. This is due to the fact that different cultures conflict with each other. For example, to the Europeans capital punishment is a completely unacceptable mode of punishment but the Americans have no problem with using capital punishment to dispense justice. Another example is that of the playboy magazine, which is an adult magazine in the US but the editions that were normally supplied in Indonesia were suspended for a certain period, but then were later eliminated after the angry Muslims campaigned for the closing of the company in 2006 following a protest. To top it all off, the columns produced in Indonesia were already toned down so that they could have a limited display of nudity. This just serves to show how different cultures differ when it comes to multinational corporations (Fluehr-Lobban, 2000, p.43).

Numerous risks and consequences resulting from globalization. Such are the risks that are facing the dilemma behind the Indonesian issue of playboy magazine. The playboy Indonesian producers are faced with the risks of further violent demonstrations from the angry Muslims who want the company to stop producing the magazine in their country. This has followed the police to issue advice to the producers to consider a way through which they can stop producing the magazine in Jakarta so that they can avoid the incidences of more violence. The Mujahideen council in Indonesia is posing complaints to the police about the magazine of the fact that it is allegedly promoting obscenity among the youths of the country. The possible consequences of the magazine are that it has led to protests and demonstrations that have resulted in the workers of the playboy magazine working without an office. The consequence of the magazine is also that of draining away the moral behaviors of the youths of the country. Therefore, as much as globalization has its pros there are several cons that come with it such as this dilemma that is facing the playboy magazine and the Indonesians.

In conclusion, globalization has negative impacts that it has on the moral values of a foreign country. Multinational corporations must have the moral and ethical values of a particular country before it decides to establish a chain in a particular country. This should be done so as to avoid the ethical dramas that result due to misconceptions that arise from these business practices.

Fluehr-Lobban, C. (2000) Globalization of research and international standards of ethics in anthropology. 925:37–44.

Wade, R. (2004). “ Is Globalization Reducing Poverty and Inequality? ” in World Development, 32 (I 4): 567-589.

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The Oxford Handbook of Corporate Social Responsibility

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18 Globalization and Corporate Social Responsibility

Andreas Georg Scherer, Chair of Foundations of Business Administration and Theories of the Firm, University of Zurich

Guido Palazzo is Professor at the Faculty of Management and Economics at the University of Lausanne. Guido holds a doctorate in philosophy from the University of Bamberg in Germany. His research interests are in the area of CSR, ethical decision‐making, political theory, and branding. Key publications include: • Guido Palazzo and Andreas Scherer (2006), ‘Corporate Legitimacy as Deliberation. A Communicative Framework’, Journal of Business Ethics, 66: 71–88. • Andreas Scherer, Guido Palazzo, and Dorothée Baumann (2006), ‘Global Rules and Private Actors—Towards a New Role of the TNC in Global Governance’, Business Ethics Quarterly, 16(4): 505–32. • Kunal Basu and Guido Palazzo, ‘Corporate Social Responsibility: A Process Model of Sensemaking’, Academy of Management Review (forthcoming).

Published: 02 September 2009
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This article analyzes the advent of globalization and delineates its impact on the corporation and its social responsibilities. It begins with an explanation of the concept of globalization. Next, it describes the traditional paradigm of corporate social responsibility (CSR) where the responsibilities of businesses are discussed vis-à-vis a more or less properly working nation-state system and a homogeneous moral. It describes the new situation of regulatory gaps in global regulation, an erosion of national governance, and a loss of moral and cultural homogeneity in the corporate environment. It also discusses the consequences of the post-national constellation with the help of two recent observations of business firms' behavior which call for a fresh view of the concept of CSR. Finally, it describes the necessary paradigm shifts toward a new politically enlarged concept of CSR in a globalized world.

Globalization and Corporate Social Responsibility—Anything New?

In the present chapter we will focus on the problem of globalization and its consequences for theorizing on corporate social responsibility (CSR). The social responsibilities of business in a market society have been discussed for decades, long before globalization became a catchword (see, e.g., Baumhart, 1961 ; Bowen, 1953 ; Donham, 1927 ). The capitalist system, i.e. voluntary exchange on free and open markets, is widely considered the best societal coordination measure for contributing to individual freedom and the well‐being of society ( Friedman, 1962 ; Hayek, 1996 ). Though the functions of the state system have always been a matter of debate (see, e.g., Block, 1994) , it is generally acknowledged that in capitalist societies it is the task of the state to establish the preconditions for the proper working of markets, i.e. to define legal rules such as property rights and contractual rights, to erect an enforcement body, to provide public goods, and to reduce or avoid the consequences of externalities. At the same time, private firms are entitled to own means of production and to run a business, i.e. to supply goods and services in return for private profits, as it is the ‘invisible hand’ of the market which directs the behavior of firm owners towards the common good. The state, it was assumed, is capable of setting the rules in such a way that the consequences of market exchange contribute to (or at least do not harm) the well‐being of society.

Business firms have to obey the law—this has always been a precondition and has been accepted as a minimum social responsibility of businesses, even by the harshest critics of CSR (see, e.g., Friedman, 1970 ; Levitt, 1970 ). However, as the system of law and the enforcement apparatus of the state are incomplete there is a high possibility of regulation gaps and implementation deficits which have to be filled and balanced by diligent managers with pro‐social behavior and an aspiration to the common good (e.g. Stone, 1975). In as much as the state apparatus does not work perfectly, there is a demand for business to be socially responsible, i.e. corporations are asked to comply with the law when the enforcement body is weak and even to go beyond what is required by law, when the legal system is imperfect or legal rules are incomplete.

With globalization, it seems, the negative consequences of businesses have intensified (see, e.g., Mokhiber and Weissman, 1999 ; Korten, 2001 ), as has the public call for corporate responsibility (Parker, 1998) . Several scholarly journals have dedicated special issues to the relationship between globalization and CSR (see, e.g., Business Ethics Quarterly , 2004 , 2006 ; Journal of Business Ethics , 2005 ). Paradoxically, today, business firms are not just considered the ‘bad guys’, causing environmental disasters, financial scandals, and social ills. They are at the same time considered the solution to global regulation and public goods problems (e.g. Margolis and Walsh, 2003 ; Matten and Crane, 2005 ) as in many instances state agencies are completely overtaxed or unwilling to administer citizenship rights or contribute to the public good.

We hold that the solution to globalization problems is not just a matter of the degree of engagement in CSR, i.e. of more or less investment by business firms in CSR projects (McWilliams and Siegel, 2001) . Rather we suggest that with globalization a paradigm shift is necessary in the debate on CSR. Current discussions in CSR are based on the assumption that responsible firms operate within a more or less properly working political framework of rules and regulations which are defined by governmental authorities. With globalization, we suggest, this assumption does not hold any more. The global framework of rules is fragile and incomplete. Therefore, business firms have an additional political responsibility to contribute to the development and proper working of global governance.

This chapter will be organized as follows: First, we will explain the concept of globalization. We will describe its conceptual variants and point to some of the phenomena that are associated with this process. Next we will describe the traditional paradigm of CSR where the responsibilities of businesses are discussed vis‐à‐vis a more or less properly working nation‐state system and a homogeneous moral (cultural) community. We will argue that both these assumptions become problematic in the current ‘post‐national constellation’ (Habermas, 2001) . We describe the new situation of regulatory gaps in global regulation (Braithwaite and Drahos, 2000) , an erosion of national governance (loss of national sovereignty and the extraterritorial application of national law) ( Kobrin, 2001 ; Strange, 1996 ), and a loss of moral and cultural homogeneity in the corporate environment. We discuss the consequences of the post‐national constellation with the help of two recent observations of business firms' behavior which call for a fresh view of the concept of CSR. Finally, we describe the necessary paradigm shifts toward a new politically enlarged concept of CSR in a globalized world.

Globalization: A Social and Economic Phenomenon

What is globalization.

Globalization is one of the most cited catchwords of our time and is used to describe a process of social change at the macro level of societies. Today, many social and economic phenomena such as peace, crime, migration, production, employment, technological developments, environmental risks, distribution of income and welfare, and social cohesion and identity are considered to be affected by the process of globalization (see e.g. Brakman et al. , 2006 ; Cohen and Kennedy, 2000 ; Held et al. , 1999 ; Scholte, 2005 ). We define globalization as the process of intensification of cross‐area and cross‐border social relations between actors from very distant locations, and of growing transnational interdependence of economic and social activities (see, e.g., Beck, 2000 ; Giddens, 1990 ). Giddens (1990: 64) holds that with globalization ‘the modes of connection between different social contexts or regions become networked across the earth's surface as a whole’.

During this process the nation‐state loses much of its political steering capacity (e.g. Beck, 2000 ; Habermas, 2001 ; Strange, 1996 ). The state's enforcement power is bound to its territory while the subjects of state regulation, especially the business firms, have massively expanded their activities beyond national borders. At the same time, new social and environmental challenges emerge which are transnational in scope and cannot be regulated or governed unilaterally (e.g. global warming, crime and terrorism, diseases, etc). Also, new actors and institutions, such as international organizations, transnational corporations, non‐governmental organizations, and civil society groups, gain political influence. Their activities are not limited to a certain territory. Their influence stems from the political power they can exert inside and outside the traditional institutions of nation‐state politics, for example, by lobbying, public relations, campaigning, knowledge, and competence, offering material or symbolic support, or threatening with disinvestments or the retreat of resources. As a result we observe new forms of governance below, above, and beyond the nation‐state ( Beck, 2000 ; Zürn, 2002 ).

This definition of globalization emphasizes the process aspect of change and is related to other concepts that describe how the status quo develops vis‐à‐vis this change process (‘globality’), and the normative claims that are related to this process. The concept of ‘ globalism ’ is used to describe an ideology , i.e. a normative attitude towards the process of globalization. While globalization protesters and skeptics reject the idea that the globalization process will lead to more prosperity and social well‐being in the world (‘anti‐globalism’) (see, e.g., Klein, 2000) , the adherents of globalism are convinced that an unconstrained and borderless world economy will make everybody better off (e.g. Irwin, 2002 ; Krauss, 1997 ; Norberg, 2003 ). They advocate a primacy of market imperatives over political regulation via the nation‐state. The central idea of modernity—that nation‐state politics shall define the legal, social, and ecological framework and the restrictions within which market transactions take place—is abandoned in favor of the dominance of economic rationality (see, critically, Beck, 2000 ; Giddens, 1990 ).

What are the Causes of Globalization?

One could suggest that the globalization process was to some extent started deliberately by political decisions. However, it was also caused and/or supported by technological, social, and economic developments. The intensified cross‐border transfer of resources, such as assets, capital, and knowledge, is in part a result of the liberalization policy of many nation‐state governments after World War II. The growing cross‐area and cross‐country social exchange was also made possible through technological inventions and achievements (e.g. telecommunications, mass media, the Internet, transportation, etc.). The exchange processes are accompanied by a growing interdependence between citizens from different communities through the emergence of global risks (e.g. nuclear weapons, global warming, global diseases, etc.) which connect the destinies of peoples with each other. In the following we will describe some dimensions of globalization.

Dimensions of Globalization

Political decisions and disruptions.

The General Agreement on Tariffs and Trade (GATT) at the end of World War II was certainly an important factor in the liberalization of the world economy (see e.g. Hoekman and Kostecki, 1995) . At the end of World War II in Bretton Woods politicians from over twenty countries decided on the postwar economic order. They shared the conviction that free and open trade would lead to worldwide prosperity and would in turn reduce the possibility of war and forceful conflicts. The GATT (and later the World Trade Organization (WTO)) member states decided to reduce tariffs and decrease non‐tariff barriers to trade step by step. This process of liberalization in cross‐country trade and investments was accompanied by a policy of liberalization and privatization in many of the industrial states in the Western world. Highly regulated industries with state‐owned or controlled firms and monopolies such as telecommunications, public transport, electricity, and water were privatized. In the 1980s, the collapse of Communism in Eastern Europe, and in many other countries in the world, led to another breakdown of trade barriers and encouraged intensified cross‐border trade and investments.

Technological Developments and Achievements

The rapid technological development in the communication industry led to a significant decline in communication costs. Perraton et al. (1998: 143) reported that the cost of a three minute phone call from New York to London dropped from US$ 244.65 in 1930 to US$ 3.32 in 1990 (measured in 1990 US$). Advances in telecommunications and in computer technology, along with the invention and growth of the Internet, have made it possible for people to communicate with each other from virtually all points on the earth. Along with the decrease in communication costs there has been a dramatic drop in transportation costs (Perraton et al. , 1998: 143) .

Socio‐cultural Developments

As a result of globalization, the more or less homogeneous cultures of the pre‐globalization world were dissolved. New values and lifestyles have entered the static world of traditional cultures: values, attitudes, and social practices that were once taken for granted have lost their certainty. This process is accompanied by the various migration processes which lead to a pluralism of cultures and values and to a growing heterogeneity of social expectations.

At the same time we observe the emergence of new social movements, civil society groups, and NGOs which aggregate diverse and disparate opinions and concerns into shared interests and thus create new identities for people who lose the backing of their traditional home culture and their reliance on the capacity of official state agencies to resolve issues of public concern. These new social movements can gain political currency outside and beyond the traditional institutions of the state system (such as e.g. political parties, parliaments etc.).

Economic Developments

On the macro level, the liberalization of trade, investments, and financial transactions has led to a huge increase both in foreign direct investments and in cross‐border trade (see e.g. Brakman, et al. , 2006 ; Held et al. , 1999 ). Though some authors suggest that with regard to certain macroeconomic measures the situation today is not much different than it was a hundred years ago (see e.g. Hirst and Thompson, 1996) , we hold that we are confronted with a new situation without precedent in history. First, economic measures show that for several decades the growth rate in the volume of world merchandise exports has been much higher than the growth rate of world GDP and that intra‐firm trade has expanded dramatically (Held et al. , 1999) . Second, the unprecedented interconnectedness of the destiny of people from different social settings and distinct locations has created new challenges.

Also, at the firm level, one can observe an entirely new situation. Business firms are able to split up their value chain and to source where the production of goods and services is most efficient. By means of technology they are able to collect information about sources, qualities, and prices, and to coordinate the various value chain processes inside and outside the boundaries of the firm.

Today, large multinational corporations (MNCs) have become very powerful economic and social agents. The world's biggest corporations have revenues that equal or even exceed the gross domestic product of some developed states (Chandler and Mazlish, 2005) . The power of MNCs is not just based on the enormous amount of resources they control. Their power is further enhanced by their mobility and their capacity to shift resources to locations where they can be used most profitably and to choose among suppliers, applying criteria of efficiency. In effect this gives multinational firms the latitude to choose locations and the legal systems under which they will operate ( Roach, 2005 ; Scherer et al. , 2006 ).

However, the power of the MNCs and their leaders is not unlimited. Rather, top managers increasingly feel the pressure of global financial markets when they have to respond to the profitability demands of investors and protect their firms from hostile takeovers. Institutional investors direct their attention and money to profitable firms and investments. Corporations that do not earn a high enough profit are sanctioned with disinvestment. Managers who do not focus on a high stock price may become the targets of takeovers. All in all the global financial market pressures business firms to stress profit and to engage only in such projects as will lead to a satisfactory return. Altruistic managers with pro‐social attitudes may therefore be suspect in the emerging shareholder society and may be forced to adapt their behavior to the expectations of profit‐seeking investors.

The Emergence of Transnational Risks

The process of globalization is accompanied by the emergence of global risks ( Beck, 1992 , 1999 ): citizens from very different communities and countries realize that their destiny is bound together and depends on how economic and political actors in other countries behave, though they often have no influence over regulating or determining their behavior. Environmental disasters (Chernobyl, global warming, overfishing of oceans, loss of biodiversity, etc.), global diseases (bird flu, mad cow disease, etc.) and social problems (drugs, organized criminality, terrorism, etc.) do not halt at national borders but affect the lives of people, who become aware that their traditional nation‐state institutions have become incapable of protecting them from harm.

Consequences and Challenges of Globalization: A New Phenomenon

What is new about the current globalization? It is a new phenomenon that our everyday life and activities expand over national borders, that new social networks with mutual dependences are created which lead to emerging new responsibilities. Community, work, and capital are losing their home and locus and we are confronted with different cultures and lifestyles, while society is pluralized and common traditions, cultural values, and social certainties emerge into a melting pot of various values and lifestyles. At the same time, we find ourselves in a world society without a world state and without a world government (Beck, 2000) .

In this new situation the traditional division of labor between nation‐state politics and private business may not be sufficient to guarantee the efficient and peaceful integration of society. We hold that with globalization business firms become political actors that have social responsibilities beyond their economic role, and mere compliance with the law and the rules of common decency is not the appropriate response to the new challenges. Next we will describe the traditional paradigm of CSR that was implicitly based on the separation of political and economic responsibilities. Following that we will describe the new ‘post‐national constellation’ that calls for a new understanding of CSR.

The Traditional Paradigm of CSR

In 1993, Shell was confronted with a massive but non‐violent protest by the Ogoni People in Nigeria. Led by the writer Ken Saro Wiwa, the Ogoni protested against the fact that the money for the oil extracted from their land disappeared into the pockets of the corrupt Nigerian military junta while for them there was nothing left but a wasted and highly polluted territory. When Saro Wiwa was arrested as a rebellion leader, human rights groups urged Shell to use its influence on the Nigerian government to prevent them from executing him. At that time, Shell Group Chairman Herkströter argued that the corporation as an economic actor had no license to interfere with political processes and that Shell preferred to remain politically neutral (Livesey, 2001) .

Whatever the scope of corporate responsibility in management theory and practice, it implicitly builds upon the neoclassical concept of a strict division of labor between political and economic actors and domains. As the Shell anecdote suggests, this neoclassical thinking is deeply embedded in managerial perceptions of societal responsibilities. The corporation as a private actor should focus on profit seeking and public problems should be dealt with by the state and its institutions ( Friedman, 1962 ; Sundaram and Inkpen, 2004 ). While corporations act on markets, the state provides the stable contexts for these markets by making the required infrastructural investments.

Paradoxically, even in the scholarly debate on CSR, this neoclassical focus is salient. Large parts of the literature operate with an instrumentalist understanding of corporate responsibility, thereby reducing it to another success factor in the corporate pursuit of profits (see e.g. Jones, 1995) . Whether CSR pays in the long run is a key question in the debate (e.g. Aupperle et al. , 1985 ; Berman et al. , 1999 ; Cochran and Wood, 1984 ; see, for a critical viewpoint, Margolis and Walsh, 2003 ; Scherer and Palazzo, 2007 ). While normative approaches to CSR criticize the economically narrow world perception of purely instrumental research and attempt to ethically embed questions of societal responsibility (e.g. Donaldson and Dunfee, 1999 ; Solomon, 1993 ), they often leave aside political aspects of the CSR issue and do not consider the underlying institutional political order of society and the concept of democracy (see, for a critical perspective Scherer and Palazzo, 2007) . Being enmeshed in the tradition of neoclassical thinking, the theory and practice of CSR still builds upon the idea of an intact nation‐state that provides a stable context for market activities. Corporations should follow the rules of the game as established by the political system and the moral customs of a given community (see, e.g., Carroll, 1979 ; Swanson, 1999 ; Whetten et al. , 2002 , and even Friedman, 1970 ). Corporate legitimacy, understood as ‘a generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs, and definitions’ (Suchman, 1995: 574) , therefore follows from corporate compliance with societal expectations. Such an institutional isomorphistic approach (DiMaggio and Powell, 1983) understands responsibility as a kind of adaptation process in which the organization reacts to external expectations ( Palazzo and Scherer, 2006 ; Strand, 1983 ).

What is the concept of democratic institutions that forms the common starting point of many of the contemporary conceptions of societal responsibility? In the liberal model of democracy 1 (Elster, 1986) , corporations are considered private and thus non‐political actors. Whenever they step into the political arena in order to participate in processes of political deliberation or political problem solving, it is/should be either to lobby for their profit interests (Hillman et al. , 2004) or as voluntary acts of discretionary philanthropy (Carroll, 1979) that serve, however, strategic corporate goals (Porter and Kramer, 2002) . Without doubt, corporations then and now occasionally enter the political sphere and attempt to influence decision‐making by official political institutions in favor of their interests. However, seen from a liberal point of view, this does not transform them into political actors who have to justify their behavior towards the citizens of their respective communities. As private actors in the market, corporations are freed from any immediate legitimacy demands and thus are not required to expose themselves to public scrutiny and justify their behavior as long as they comply with the law (Friedman, 1962) . Only the state as a public and political actor is held accountable by the polity.

The role of the state in a liberal conception of democracy is to reduce interference in private interactions to a minimum in order to guarantee the (mainly economically understood) freedom of the citizens. The main task of the state is to guarantee the stability of the societal context in which private interaction takes place. The state system and the political actors in the administration and in parliament earn their legitimacy from ( a ) maximizing the freedom of the private actors by minimizing regulatory pressure and ( b ) by periodic elections that confirm or replace those who hold power (Elster, 1986) . While elections can hold political actors directly accountable, the legitimacy of the economic actor, due to its private character, is conceptualized in a much more indirect way. The markets themselves are regarded as ‘essentially democratic’ (Barber, 2000: 286) , because as Barber argues, ‘private power, unencumbered by law, regulation or government, is the essence of freedom’ (2000: 284). Thus, overloading the market with legal or moral prescriptions is considered a threat to democracy itself ( Friedman, 1962 ; Baumol and Blackman, 1991 ). Via the invisible hand of the market, self‐interested transactions increase the welfare of society as a whole ( Friedman, 1962 ; Jensen, 2002 ). Therefore, corporations are automatically legitimized by the output they produce (see for a critical view, Peters, 2004) as long as they consider laws and moral customs as parameters restricting their essentially economic decisions.

Considering the legal and moral rules of nationally bound communities as the point of reference for corporate legitimacy becomes a challenge against the background of a globally expanded corporate playing field (Palazzo and Scherer, 2006) . As Barber has argued, ‘we have managed to globalize markets in goods, labor, currencies and information, without globalizing the civic and democratic institutions that have historically comprised the free market's indispensable context’ (Barber, 2000: 275) . On the global playing field, the societal environment that grants legitimacy to corporations consists of a multiplicity of legal and moral demands that confront corporations with contradictory expectations (Young, 2004) . Outside the national box and given the rising level of societal complexity, it seems to be much more demanding to answer questions of responsibility (Kostova and Zaheer, 1999) . Obviously, there are no globally enforceable legal standards or broadly accepted moral rules that might circumscribe the legitimate activities of multinational corporations ( Huntington, 1998 ; Rawls, 1993 ). However, the debate on CSR has only begun to discuss the consequences of globalization ( Matten and Crane, 2005 ; Rondinelli, 2002 ; Spar and La Mure, 2003 ).

Post‐national Constellation

Liberal democracy has developed under a national constellation with a clear division of labor between civil society, government and business (Habermas, 2001) . Solidarity, power, and money are their respective contributions to the stability and flourishing of democracy: through their interaction, citizens create shared values, traditions, and cultural identities (solidarity). By formulating and enforcing laws, government provides a framework of peaceful conflict resolution (power). By their market activities, corporations contribute to the well‐being of society by providing goods and jobs and paying taxes (money). The interaction of individual actors and organizational actors on a national playing field is oriented to the limiting parameters of legal prescriptions and moral custom. On the global playing field the authority of both forms of regulation seems to erode. The transnationalization of political, economic, and cultural problems and activities does not only question the efficiency and legitimacy of the established division of labor between civil society, government, and business, it furthermore seems to change the dynamic between these three pillars of democratic stability. Therefore, Habermas (2001) has described the emerging ‘postnational constellation’ as a key challenge to democracy.

Globalization is weakening the power of (national) political authorities to regulate the activities of corporations that globally expand their operations. This erosion of the regulatory power of (national) hard law has two effects: it forces national governments into a race to the bottom; and it opens a regulatory vacuum for transnationally expanded corporate activities.

(a) Race to the bottom effect Corporate activities by global players take place in a transnational context inhabited by political authorities whose sovereignty remains limited nationally and who are losing their influence on corporate behavior ( Waters, 1995 ; Beck, 2000 ; Monbiot, 2000 ; Habermas, 2001 ). Multinational corporations can split their operations and shift them to those regions that promise the optimum contribution to profit maximization. In search of cost advantages, they can for instance deliberately determine the places that minimize tax burdens as well as those that minimize the costs of producing goods. Since they are able to arbitrate among alternative regulations (Ghemawat, 2003) , they can decide to produce in a country with low wages and weak unions and pay taxes in offshore countries. As a result, national governments may be forced into a race to the bottom in order to win the competition to attract corporate investments against other countries ( Roach, 2005 ; Scherer and Smid, 2000 ). In their search for cost advantages, multinational corporations thereby undermine the ability of the public authorities to set rules, regulate economic activities, and to enforce specific behaviors within their jurisdictions ( Reinicke et al. , 2000 ; Beck, 2000 ; Kobrin, 2001 ).

(b) Regulatory vacuum effect While the sovereignty of political authorities remains nationally limited, some of the key problems of today's world are transnational problems: global warming, AIDS, corruption, deforestation, and human rights are issues that have a strong transnational dimension and/or impact. They cannot be solved unilaterally by national governments within their geographically limited sphere of influence. Multinational corporations are criticized for being a principal source of these problems. They are perceived as the driving forces behind global warming (Le Menestrel et al. , 2002) , ecological problems in general (Shrivastava, 1995) , corruption (Nesbit, 1998) , poverty (Jenkins, 2005) , human rights violations (Taylor, 2004) , and cooperation with repressive regimes (Taylor, 2004) .

However, beyond the nation‐state, there are not yet sufficiently strong global governance institutions that could define and impose rules and mechanisms for coping with these challenges and penalize the deviant behavior of corporations. International law has been developed as a legal framework for the interactions of the nation‐states themselves (Kingsbury, 2003) . Its direct application to non‐state actors such as corporations is not yet broadly acknowledged in legal studies (for a critical discussion, see Kinley and Tadaki, 2004) . As a result, no specific regulations exist that could be used to hold corporations to account for human rights violations or the support of repressive regimes ( Ranald, 2002 ; Taylor, 2004 ). International conventions such as the United Nations (UN) Convention on Human Rights and the International Labour Organization (ILO) Conventions on the Fundamental Rights of Workers might provide a model for universal standards for corporations, but they cannot be enforced on them.

However, in recent years, the US government and US courts have began to develop laws or apply existing laws beyond their own national borders, punishing even non‐US companies for corruption via the Foreign Corrupt Practices Act (Avi‐Yonah, 2003) , for human rights violations via the Alien Tort Claim Act (Taylor, 2004) , and for financial fraud via the Sarbanes–Oxley Act (Vagts, 2003) . On the one hand this seems to diminish the space for deviant corporate behavior thus reducing the transnational legal vacuum. On the other hand, such a transnational application of US law weakens all other national governments (Kobrin, 2001) .

Shared values can be regarded as a second source of orientation for corporate actors within a society. The more homogeneous these values are, the less often conflicts occur and the stronger the overlap of interpretations of what should be done in a given situation. However, the pluralization of modern society (understood as the threefold process of individualization, the devaluation of tradition, and the globalization of society) results in a loss of cultural homogeneity. Industrial society in the twentieth century was characterized by relative cultural homogeneity and individuals were caught in a network of stable expectations ( Giddens, 1990 ; Beck et al. , 1995 ). In the transition from industrial to post‐industrial society, choices instead of traditions began to dominate the process of defining and shaping identities (Giddens, 1990) . Norms, values, and interests were pluralized, and the cultural background of Western societies became more heterogeneous. Globalization with its deconstruction of boundaries confronted individual actors with even more alternative ways of life, thus promoting the pluralization of national cultures even further.

While operating on a more or less homogeneous playing field, corporations can consider shared moral values and shared mental maps as taken for granted ( Strand, 1983 ; Suchman, 1995 ). In a global and pluralistic context, the taken‐for‐grantedness of shared convictions is lost (Palazzo and Scherer, 2006) . While being confronted by more and more ethical questions that arise within their business operations (e.g. child labor, fair wages, slave labor, deforestation), multinational corporations are expected to find convincing answers on their own ( Scherer et al. , 2006 ; Scherer and Palazzo, 2007 ).

Corporate Behavior on the Global Playing Field

The above‐described regulatory vacuum is abused by some multinationals who demonstrate unacceptable or unethical behavior in their global activities, especially in those areas where states are weak or almost non‐existent (e.g. Mokhiber and Weissman, 1999 ; Korten, 2001 ). As we have argued, the ongoing process of globalization creates a comparable context of transition (national to global economy) with weak governance mechanisms. Some multinational corporations are criticized for abusing the regulatory vacuum. Corporations such as De Beers have for instance been accused of profiting from the legal vacuum in African civil wars ( Roberts, 2003 ; Dunfee and Fort, 2003 ). Exxon Mobil has been accused of collaborating with the military forces of corrupt political regimes in Indonesia and elsewhere. Mass graves of Indonesians executed by the military forces of the regime were found on Exxon Mobil's property (Taylor, 2004) . Child labor and slave labor have reappeared in the modern sweatshops of the supply chains of many multinational corporations. As a consequence, some multinational companies such as Wal Mart have been described as the symbol of ‘what is wrong with twenty‐first century capitalism’ (Beaver, 2005: 159) .

However, the questionable behavior of some multinational companies has evoked a response. The post‐national constellation is propelling a new distribution of power between national governments, economic actors, and civil society (Mathews, 1997) . The smaller influence of national governments on large corporations is—at least partly—balanced by the politicization of civil society. What has been labeled ‘globalization from below’ (Beck, 2000: 68) describes the growing power of civil society actors to influence decision‐making processes in governments and corporations. ‘NGOs’ role and influence have exploded in the last half‐decade' (Mathews, 1997: 53) . With the Internet forcing an ever‐growing transparency in corporate behavior, more and more of these civil society activities are directed against corporations ( Dryzek, 1999: 44 ; Klein et al. , 2004 ) whose business practices are scrutinized suspiciously (Spar and La Mure, 2003) and who are confronted with growing demands (Walsh et al. , 2003) and changing conditions of legitimacy (Palazzo and Scherer, 2006) .

Under the pressure of changing societal expectations, some global corporations have started to intensify their CSR engagement. Many corporate initiatives intrude into domains that have traditionally belonged to the sphere of political responsibilities of state actors (Walsh et al. , 2003) . Corporations start human rights initiatives (Matten and Crane, 2005) such as the Business Leaders' Initiative on Human Rights of British Petroleum, ABB, and other companies. They engage in public health, addressing issues such as AIDS or malnutrition (Margolis and Walsh, 2003) . Furthermore, they have begun to engage in initiatives of self‐regulation in order to fill the vacuum of global governance described above (Scherer et al. , 2006) . These activities go beyond the mainstream CSR discussion with its intact division of labor between state actors and economic actors (see, critically, Scherer and Palazzo, 2007) . While the traditional understanding of CSR still builds upon the isomorphic approach that demands compliance with society's moral and legal standards, some corporations have started to set or redefine those standards, thereby assuming a politically enlarged responsibility (Scherer et al. , 2006) .

Toward a New Paradigm of CSR for the Global Economy

Current theorizing in CSR is still dominated by an economic view of the firm and an instrumental view of CSR projects (e.g. Jones, 1995) . The stakeholder management approach (e.g. Agle et al. , 1999 ; Frooman, 1999 ; Mitchell et al. , 1997 ), as well as the widely accepted attempt to justify CSR with an empirical argument that social performance contributes to financial performance (e.g. Berman et al. , 1999 ; Aupperle et al. , 1985 ; see, for a critical discussion, Vogel, 2005 ), are common expressions of the underlying economic rationality in contemporary CSR research. Seen from this perspective, a ‘business case’ for CSR is made, i.e. the engagement of business firms in social responsibility is considered similar to an investment in any other product attributes, such as quality, service, or reputation, that contribute to the profit‐making of the firm (McWilliams and Siegel, 2001) . The behavior of the business firm is directed towards profit‐making and this is justified as long as the firm complies with the rules of the game set by the state and defined by the morality of the circumscribing social community. It is assumed that it is finally the ‘invisible hand’ of the well‐functioning and well‐defined market that directs economic behavior towards the common good. However, as we have seen, in a globalized world the capacity of the state to regulate economic behavior and to set the conditions for market exchange is in decline. We observe failures by the state apparatus of all sorts (e.g. public goods in short supply, gaps in regulation, lack of enforcement, externalities of market exchange without provisions from the state, etc.). In addition, due to the individualization and pluralization of values in social communities, the moral standards for business behaviour get fuzzy and lose their restrictive power. Under these conditions, economic forces are set free without appropriate restrictions in legal or moral terms. As a consequence, the sole emphasis on economic rationality will not contribute to public welfare, but rather may worsen the situation. Therefore, we have to consider new forms of political regulation above and beyond the nation‐state in order to re‐establish the political order and circumscribe economic rationality by new means of democratic institutions and procedures ( Habermas, 1996 ; Scherer and Palazzo, 2007 ). And, in fact, with the intensified engagement of social movements and the growing activities of international institutions a new form of transnational regulation is emerging: global governance, the definition and implementation of standards of behavior with global reach ( Fung, 2003, Habermas, 2001 ). There are not only public actors such as national governments and international governmental institutions (e.g. the UN, ILO, OECD, etc.) that contribute to this new world order, but also private actors such as NGOs, civil society groups, and even business firms that play a key role (Scherer et al. , 2006) . Corporations become politicized in two ways: they operate with an enlarged understanding of responsibility and help to solve political problems in cooperation with state actors and civil society actors. Furthermore, they submit their growing power and political engagement to democratic processes of control and legitimacy. The challenge of CSR in a globalizing world is to engage in a political deliberation process that aims at setting and resetting the standards of global business behavior. While stakeholder management deals with the idea of internalizing the demands, values, and interests of those actors that affect or are affected by corporate decision‐making, we argue that political CSR can be understood as a movement of the corporation into environmental and social challenges such as human rights, global warming, or deforestation. The politicization of the corporation translates into stronger connections of the corporation with those ongoing public discourses on ‘cosmopolitan’ or ‘higher‐order’ interests (Teegen et al. , 2004: 471) and a more intensive engagement with transnational processes of policy‐making and the creation of global governance institutions such as the Forest Stewardship Council or the Marine Stewardship Council or the numerous human rights initiatives that are emerging. As we wanted to demonstrate, political solutions for societal challenges are no longer limited to the political system but have become embedded in decentralized processes that include non‐state actors such as NGOs and corporations. This new phenomenon goes beyond the mainstream understanding of corporate responsibility. On the global playing field, corporations have to be understood as economic and political actors with the consequences for the conceptualization of CSR described above (Scherer and Palazzo, 2007) .

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Note that we use the terminology of political philosophy. We use the word ‘liberal’ to refer to the historic liberal tradition in political philosophy and economics. This school of thought considers individual liberties as the main concern of social theory. This is different from the common‐sense use of the word in the United States where liberal in political terms means ‘left of center’.

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4 Effects of Globalization on the Environment

Rainforest deforestation resulting from globalization

15 Apr 2021

Globalization —defined in the online course Global Business as the increased flow of goods, services, capital, people, and ideas across international boundaries—has brought many changes in its wake.

While globalization can positively and negatively impact society, its effect on the environment is primarily negative. Here’s a breakdown of how globalization impacts society and the environment and what business leaders can do to reduce these negative consequences.

How Does Globalization Affect Society?

The world has become more connected than ever before through the increase in technological advancements and economic integrations. Advanced economies are formed as domestic businesses transform into international ones and further contribute to the spread of technology around the world.

There are several benefits of globalization , such as increased international trade and cooperation and less international aggression. Social globalization —the sharing of ideas and information between countries—has led to innovation in the medical, technological, and environmental preservation industries.

Additionally, globalization has improved the quality of life in several developing nations. This includes implementing efficient transportation systems and ensuring accessibility to services such as education and healthcare.

However, globalization can also have negative effects on society, such as increased income inequality and substandard working conditions in developing countries that produce goods for wealthier nations. Income inequality is directly related to globalization as it further increases the gap between more advanced and developing areas of a nation. As a result, it can also increase the risk of societal violence.

Along with its societal effects, globalization has a lasting impact on the environment—and typically not a positive one.

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What Are the Effects of Globalization on the Environment?

4 Effects of Globalization on the Environment

1. Increased Transport of Goods

One of the primary results of globalization is that it opens businesses up to new markets in which they can sell goods and source labor, raw materials, and components.

Both of these realities mean finished products travel farther now than ever before—potentially halfway around the globe. In the past, products were more likely to be produced, sold, and consumed locally. This increased transport of goods can impact the environment in several ways, including:

Increased emissions: The farther a product travels, the more fuel is consumed, and a greater level of greenhouse gas emissions is produced. According to a report by the International Transport Forum , CO2 emissions from transport will increase 16 percent by 2050. These emissions contribute to pollution, climate change , and ocean acidification around the world and have been shown to significantly impact biodiversity.
Habitat destruction: Transportation—especially when land-based—requires infrastructure like roads and bridges. The development of such infrastructure can lead to issues including habitat loss and pollution. The more ships that travel by sea, the greater the chances for major oil spills or leaks that damage the delicate marine environment.
Invasive species: Every shipping container and vessel presents an opportunity for a living organism—from plants to animals to fungus—to hitch a ride to a new location where it can become invasive and grow without checks and balances that might be present in its natural environment.

2. Economic Specialization

One often-overlooked side effect of globalization is that it allows nations and geographical regions to focus on their economic strengths while relying on trading partners for goods they don’t produce themselves. This economic specialization often boosts productivity and efficiency.

Unfortunately, overspecialization can threaten forest health and lead to serious environmental issues, often in the form of habitat loss, deforestation, or natural resource overuse. A few examples include:

Illegal deforestation in Brazil due to an increase in the country’s cattle ranching operations, which requires significant land for grazing
Overfishing in coastal areas that include Southeast Asia, which has significantly contributed to reduced fish populations and oceanic pollution
Overdependence on cash crops, such as coffee, cacao, and various fruits, which has contributed to habitat loss, especially in tropical climates

It’s worth considering that globalization has allowed some nations to specialize in producing various energy commodities, such as oil, natural gas, and timber. Nations that depend on energy sales to fund a large portion of their national budgets, along with those that note “energy security” as a priority, are more likely to take intervening actions in the market in the form of subsidies or laws that make transitioning to renewable energy more difficult.

The main byproduct of these energy sources comes in the form of greenhouse gas emissions, which significantly contribute to global warming and climate change.

3. Decreased Biodiversity

Increased greenhouse gas emissions, ocean acidification, deforestation (and other forms of habitat loss or destruction), climate change, and the introduction of invasive species all work to reduce biodiversity around the globe.

According to the World Wildlife Fund’s recent Living Planet Report , the population sizes of all organisms—including mammals, birds, fish, amphibians, and reptiles—have decreased 68 percent since 1970. Latin America and Africa—two rapidly developing regions important to global trade—have seen disproportionate levels of biodiversity loss, especially among environmentally sensitive fish, reptiles, and amphibians.

While this decrease in biodiversity has many causes, it’s widely believed that the issues listed above have contributed in part.

4. Increased Awareness

While many of globalization’s environmental effects have been negative, its increase has heightened environmental awareness worldwide.

Greater connectivity and higher rates of international travel have made it easier than ever for individuals to see the effects of deforestation, habitat loss, and climate change on the environment. This, in turn, has contributed to new laws, regulations, and processes that limit negative effects.

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Globalization as a Threat and an Opportunity

Globalization has allowed society to enjoy many benefits, including increased global cooperation, reduced risk of global conflict, and lower prices for goods and commodities. Unfortunately, it’s also led to serious negative effects on the environment.

Since it isn’t feasible for globalization to end or reverse, it’s likely the situation will worsen until nations, governing bodies, and other organizations are compelled to implement laws and regulations that limit negative effects.

Businesses and industries that operate globally have an incentive to take whatever voluntary actions they can to reduce the potential for negative consequences. Doing so can not only provide an organization greater control over its initiatives, but also a powerful marketing and communication tool .

Some ways businesses address climate change include:

Transitioning to renewable energy sources
Choosing greener infrastructures or equipment
Reducing energy consumption
Creating credible climate transition plans
Raising awareness among employees

In addition, investing in renewable energy and packaging, embracing responsible land-use management, and shifting goods production to move closer to the end customer are all viable options that businesses can and should consider. The challenge lies in balancing a desire to embrace corporate social responsibility with the need to turn a profit and run a successful business.

Are you interested in breaking into a global market? Sharpen your knowledge of the international business world with our four-week Global Business course. In addition, explore our Business and Climate Change course to help your organization adapt to and embrace business risks and opportunities created by climate change, as well as our other online courses related to business in society .

This post was updated on February 28, 2024. It was originally published on April 15, 2021.

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