Literature Review:

2.1- Introduction:
Reviewing the literature is an important part of a research as it provides the foundation, knowledge base and parameters of the study. It helps to frame previous research work done and to identify the gaps or potentially important issues to be taken to task. MNCs and their role have been quite controversial in terms of acting responsibly in third world countries. Some even argue that their presence in third world is entirely motivated by financial interest as they can exploit cheap labour and raw materials with no stress for environmental or social issues and yet no obligation due to virtually nonexistent legislative frame work, e.g. until 1990 there was no significant legal frame work in place in Pakistan for MNCs subject to environment protection. The dilemma is not the poor regulatory frame work order but the lack of political will and implementation mechanism. The industrial revolution that took place in the last couple of centuries has brought immense improvement to our lives e.g. better communication and transportation, scientific agriculture methods has improved per acre yield, automation in every aspect of our daily life has brought unprecedented ease and comfort, but all this come for a price and with the passage of time the price tag has gone up to an alarming level i.e. the environment or the natural eco system of our planet. In pursuit of material well being the civilized man damaged the environment so much that he endangered a number of species, flora and fauna and may be his own generations to come. It would be utmost uncivilized and savage attitude if we did not do our bit in individual and collective capacity to save natural environment for the generations to come. The scope of this study is limited to the role and contribution of MNCs in furtherance of environmental hazards as a result of their large scale industrial production across the globe particularly the third world countries. Every effort has been made to craft best parameters and objectives to make this research a true reflection of the ground realties. A vast literature relevant to the subject matter is scrutinised develop the literature review.

2.2- Understanding and defining Development

Development means and include planning, process and activities render enhancement of capacity, increase growth and improved life and livelihood for individual and communities as a whole. Growth encompasses all aspects and dimensions of individual and society e.g. biological, physical and cognitive. Development is increment, furtherance betterment in any capacity material and emotional or other forms of human wellbeing. Generally it can be defined as increment to existing facilities and infrastructure, living standards, life expectancy, per capita income, education and physical environment.

Development can also be studied as economic development, social development and national development etc. There is a new term in use as sustainable development which refers to the future capacity and ability of growth protected in present growth and development endeavours.

2.3- What is sustainable Development? Sustainable development is relatively new term and widely used in socio-economic and political spheres. However, yet it has no generally accepted definition, various definition can be found in literature given in the different contexts. The common meaning and understanding of sustainable development can be summarized as development that meets the needs of the present, without undermining the capacity and ability of the future generations for growth to meet their own needs. It has diversified the meaning of conventional development it urges to be responsible in seeking development to meet todays needs without hampering environment in which we live as custodians for the generations to come. The concept of sustainable development has brought whole new approach by putting the social cost element in the lime light. Sustainable development initially referred to environmental sustainability but with the passage of time it has acquired a wider approach which states that overall economic benefits must evaluated in terms of environmental and depletion of natural resources loss incurred in the process. MNCs are the business organizations operating in different geographical locations (particularly third world countries) with an objective to maximize their profits by exploiting local markets, cheap labour and raw materials. MNCs move their production facilities from their country of origin to countries where environmental regulations are either nonexistent or in a poor state of affairs. Third world countries primarily are interested in foreign direct investment (FDI) from these MNCs and in some cases deliberately overlook environmental concerns e.g. in Pakistan until 1990s there were no significant laws to regulate environmental issues for MNCs or local private and public sector organizations. 2.4- New Dimensions of Sustainable Development As it has discussed in earlier paragraphs that sustainable development has yet no single accepted definition and it is evolving both in terms of scope and content. Sustainable development now seeks sustainable social, economic development in the same way as it does for environment. In

fact it discovers that sustainable environment can be assured only if the economic and social development manifests sustainability. The UN general assembly explicitly called attention to two important ideas; The well being of environment, of economies and of people is inextricably linked. Sustainable development involves corporations on global scale.

The concept of sustainable development is strongly associated with society, economy and the environment. 2.5- where do MNCs stand; fixing responsibility Lets start with start with some very interesting figures revealed by (Subramanian. 2001) in his article about the 100 largest economies of the world, 51 are corporations and only 49 are the nations. Further, it is an established fact that the real power in western industrialized nations including US vested with corporate and with the governments. These corporations and financial institutions dictate their terms to the governments in their own interests. The combine sales of worlds 200 top corporation equal to the 28% of the worlds GDP, they employee nearly 19 million people. Alone Mitsubishi has bigger economy than Indonesia the worlds fourth populous country. These figures can give a clue of the scale of production and consumption with these corporation are involve with and consequently for their contribution to climate change as a result of green house gas emissions, industrial waste and depletion of natural resources. it would not be a difficult thing to determine who is the real culprit and who owe most to environmental sustainability. Climate change and other environmental issues has brought serious challenges for the future the planet and the life on it needs serious actions and responsibility for everybody but the share would be decided on the basis of contribution to the problem and the amount of benefit received. MNCs environmental sensitivity is different at various geographical locations e.g. they tend to maintain high standards for environmental protection in developed countries by adhering to local and international convention and obligations. Whereas in third world countries MNCs approach is not a rigorous one instead they tend take advantage of weak and lethargic environmental laws,

even corporate social responsibility (CSR) systems seems to be ineffective and in most cases CSR is limited to marketing stunts and slogans. Current Role of MNCs The ever growing international business operations and economic dominance of the MNCs drawing attention from various groups concerned about their environmental ignorance and resulting environmental degradation globally in general and particularly the third world countries as concentrated places of business activities and production operations of MNCS. According to figure there are 70,000 multinational corporations doing business and controlling assets in more than one country (world Resources 2007). MNCs controls over 60 percent of total world trade. It would be interesting to note that out of 15 worlds largest budgets, six are governmental and nine are corporate. Further, each of the top 15 MNC has budgets and resources greater than the GDP of at least 120 countries (Morgera 2004). There is another measure of MNCs influence and control over world resources in terms of trillions of dollars of direct foreign investment (FDI) in cross border mergers and acquisitions aimed to more take control over domestic firms (world resources 2007). It has a profound impact on developing countries which primarily has FDI as a crucial source of finance but as a result these countries and their domestic firms gradually rendering their economic controls into the hands of the MNCS. It is where problems start to emerge from all directions. MNCs with effective control on FDI and greater share in domestic firms through mergers and acquisitions, MNCs starts pushing and influencing governments to deregulate markets for increased international competitiveness which is off course their strength results in surrendering of more and more local firms either being merged or vanishing from the market altogether. Another important reason of dependency or helplessness of the local governments is bad governance and large scale corruption practices resulted in privatization of public services giving MNCs more access and control over public decision making. Research indicates that more than 50% green house gas emission is contributed by the MNCs. They are the main sources of new technology and innovation, high tech expertise etc. hence, they possess all the resources required to deploy for environmental safety and protection. MNCs run huge R&D programs providing key innovations for sustainable business process and product ensuring sustainable development and environment. Hence, MNCs hold the key for sustainability which put extra burden and responsibility on MNCs, in the words of (Stuart Hart 1997) environmental burden is function of three factors; Population, Affluence and technology and to achieve requires minimum one of these factors. MNCs has control over the two out of three stated factors which means if MNCs just focus on technology factor to link with sustainability it can make huge contribution for sustainable development and environment. MNCs can focus on creating environmental friendly technologies and products for impact mitigation and impact reduction will play a significant role for a sustainable future. MNCs are a significant means by which technology innovation can feasibly be converted into practice.

International environment protection instruments for MNCs It is a fact that there is a lack of a coherent structure of international regulations and standards for environmental governance for MNCs. In absence of clear environmental regulations and compliance mechanism it is very much up to the multinational corporations how they set minimum compliance standards. The picture is pretty gloomy and caustic and even gets worse when the host third world countries unable devise domestic environmental regulations and the worsening climate crises globally and in third world countries testifying the realities. MNCs are reluctant to take responsibility for environmental protection for the local communities and continue to add to the social cost which will have serious repercussions for the future generations. In the following paragraphs an overview of the international instruments created to reduce the gap for environmental governance for MNCs in international perspective. These include: y y Voluntary instruments (Soft Laws) International treaties (Hard Laws)

Organization for Economic Co-operation and Development Guidelines The principles laid down by (OECD) for MNCs are inter governmentally agreed voluntary instruments on corporate responsibility. There are 30 countries having direct membership and 12 non member states adhering to the frame work of OECD encouraging MNCs operating on their territories or wherever they operate globally to observe the guidelines while taking into account the host country rules and requirements. OECD provides comprehensive frame work by incorporating other conventions and treaties. The prominent issues it deal with are summarized below: y y y y Public participation in decision making Access to Justice in environmental matters Access to environmental information Encourages improving environmental management

However, unfortunately it does not provide a clear and effective compliance or implementation mechanism. Apparently the burden is put on the non member states (developing countries) to develop a parallel legal frame work to ensure legal proceedings. The UN Global Compact It is relatively more effective when it comes to compliance, developed by experts and seeks direct participation from MNCs. it requires and encourages the development and diffusion of environmentally friendly technologies. Participating business are expected to take these

principles into board decision making as part of the strategic policy matters and a disclosure in annual reports will be made about the organizational compliance to the principles. ISO Standards It is a popular instrument within the industrial arena for environmental management in international arena e.g. ISO 14000 series of environmental management standards. It is a certification which is based on individual industrial sites by requiring them to comply with certain environmental standards and practices. Every certified site must have to achieve predefined standards and requirements relating to the environment and product life cycle assessment. Practically these standards has done a little like other voluntary instruments and mostly been used an advertising rather than for environmental safety and betterment. Multilateral Environmental Agreements (MEAs) There are several MEAs providing governance on environmental protection in a multifaceted approach e.g. Trans boundary movement of hazardous waste, environmental impacts and water conservation etc. however, the discussion on MEAs will be limited to the scope of the research as they encompass variety of environmental issues. The striking feature among MEAs is empowering citizens and environmental organization by giving access on procedural rights but it may not extend such rights to developing countries who are not party to the proceedings. Corporate Social Responsibility (CSR) CSR will be discussed in accordance with scope of this research and focus will stay how CSR can help in sustainable development. CSR has been studies in relation to different social issues pertinent to MNCs business operations. CSR and Environment Being socially responsible is something that has been debated for a long time particularly in the context of environment. CSR is a voluntary initiative adopted by any organization and hence the scope of CSR has to be defined by that organization. Environment is one of the most important factors for being socially responsible of an organization. The literature on CSR and environmental considerations is not very rich but yet significant aspects have been explored by the researchers and the starting point would be the product lifecycle including development, procurement, production, sale, use and disposal (Sisto. 2006). The nature of the business would be an important determinant for the priority to be set e.g. chemical industries with extremely toxic waste have to be more proactive about waste management to mitigate direct impact on soil and water and contamination of the local communities. MNCs should commit more setting up a transparent system of compliance with all international and domestic laws and may go beyond where needed. (David. 2001)

Environmental Audit MNCs are strongly recommended to have an environmental audit in order to identify the priorities to kick start environmental safety program, it would be even more effective to develop an understanding of the local environmental problems and needs. An environmental audit would also help to get maximum rate of return of the investment and efforts made (Yu, Zhihao. 2005). Reporting Sustainability It important to note that sustainability is not an entirely new concept specifically in the context of developing world and the role of MNCs as an environmental and social impact. In 1970s first time non-financial social reports were published by American and west European firms. However, reports with environmental reports were published in late 1980s (Berthelot et al., 2003). Since then the practice has grown and broadened in scope also by including other social and economic impacts. The label or title of such reporting varied from sustainability or sustainable development to corporate (social) responsibility and corporate citizenship (KPMG, 2005). Realistically these reporting practices received generic attention in international business because MNCs in automobile and oil business (environment sensitive) monitor their competitors with purely financial or reputational motives. The significance of reporting sustainability has been undermined by the lack of intention to act for environment rather than as a potential competitor advantage (Kolk & Levy, 2004).
Why should developing countries care about climate change? Studies show that some of the most adverse effects of climate change will be in developing countries, where populations are most vulnerable and least likely to easily adapt to climate change. Changes in temperature, water supply and quality will impact on agricultural production, human settlement and health, biodiversity and animal migratory patterns (IPCC, 2001a,b). Understandably, vulnerability to the adverse impacts of climate change is one of the most crucial concerns of developing countries engaged in climate policy discussions. It is also a critical element in planning any long term climate and development strategy. A survey of studies undertaken since the IPCC Second Assessment Report (SAR) showed aggregate monetised impact estimates, based on current economic conditions and populations, for a 1.52.5 C temperature increase (Tol et al., 2000). These studies indicate a greater economic vulnerability of developing countries to climate change. At lower levels of climate change, damages might be mixed across regions; for example, poorer countries are likely to be net losers, and richer countries might gain from moderate warming. In tropical and subtropical regionswhere some crops are near their maximum temperature tolerance and where dryland, non-irrigated agriculture dominatesyields are likely to decrease for even small changes in climate. This is especially true in Africa and Latin America, where decreases in overall agricultural productivity of up to 30% are projected during the next century (Watson, 2000). At higher levels of change (more than 23 C), net damages occur in almost all regions (IPCC, 2001a,b). Developing nations face greater vulnerability because of their reliance on agriculture, their lower tolerance to coastal and water resource changes, and lower nancial, technical, and institutional capacity to

adapt (causing higher health impacts, for example). While sustainable development might reduce this vulnerability, uncertainties about the rate of climate change and pattern of economic development in poorer countries raise questions about whether development could occur fast enough to make a difference. Few studies have considered dynamic responses to steadily increasing greenhouse gas (GHG) concentrations, and the implications of multiple stress factors. This issue was highlighted recently by IPCC as critical for further research (IPCC, 2001a,b). In the absence of dynamic analyses, it is hard to determine whether certain impacts are in fact best mitigated or avoided through GHG emissions reduction or through other policies, such as improved health care or infrastructure development (OECD, 2001a). The issue of vulnerability and adaptation to climate change is one of the top environmental concerns of the west African region (Denton et al., 2002). The GHG emissions of countries in the region are insigni cant in global terms; the major sources of emissions that exist are from land-use changes and deforestation. However, west African is one of the most vulnerable areas to climate change due to its propensity for drought and deserti cation, its dependence on subsistence agriculture, and its vulnerability to poor rainfall. The Sahel in particular would be hugely affected by further deserti cation, caused by a combination of the extension of arable land due to rapid by population growth, deteriorating soils, and declining run-off from major catchments areas (Denton et al., 2002). South Africa is also highly vulnerable to climate change effects. An important facet of the countrys vulnerability is expected to be impacts on human health, especially through the main vector-borne diseases of malaria and schistosomiasis (Kiker, 2000). Nevertheless, South Africa also has relatively signi cant adaptive resources to address these effects (Kiker, 2000). South Asia is extremely vulnerable to climate change impacts, given its high levels of poverty, low human development indices, inadequate legal and governance mechanisms, and vulnerability to extreme weather events (Rahman et al., in press). An Asian Development Bank (ADB, 1994) study analysed the direct impacts on the Sri Lankan economy, using estimates for loss of agricultural production (detailed in Rahman et al., in press). Estimates for losses were based on available research ndings, expert opinion and subjective judgement and resulted from changes in the production of rice, rubber, coconut, coarse grain, vegetables, and tea. The result was an adverse impact on the economy estimated to be in the range of 1.5 2.0% of GDP in 2010. In a detailed study of India, Kumar and Parikh (1997, 1998)examined the impact of temperature rises on agricultural yields, output, income and prices. With a temperature increase of 2 C and an accompanying precipitation increase of 7%, farm level total net revenue is estimated to fall by 9%, whereas, with a temperature increase of 3.5 C and precipitation increase of 15%, the fall in farm level total net revenue would be nearly 25%. Beyond the direct economic impacts, crop failure due to climate change could also increase unemployment, destabilise food security, further increase competition for scarce resources, and increase social inequity (Rahman et al., in press). In addition, there are signi cant risks associated with sea-level rise in some of the worlds poorest regions. Climate change is clearly relevant to priority development objectives such as combating poverty, food security, access to basic services such as clean water, sanitary living conditions and energy, and education. 5. Institutional issues and capacity building A key barrier to effectively addressing climate change concerns is the lack of integrated policy-making at global, national or regional and local levels of action and among different government agencies. For example, in many developing countries, road transport, road construction, energy use and vehicular pollution are each governed by separate departments and ministries (Rahman et al., in press). Similarly, in the case of adaptation, health ministries, infrastructure, and coastal zone management agencies should work together to maximise ef ciency given limited resources and ensure consistency with other policy

priorities. Focus should be on increasing the ability of the public sector to assess, design and implement appropriate policies that satisfy sustainable development objectives and, within this context, begin to address climate change. A case study of the situation in west Africa provides a number of general insights that may also be relevant elsewhere
Environmental Ethics in the Third World The Third World is different than the developed countries. It is overpopulated, but the majority of the people are poor. There is a need for development, which must be done without risking the future of the other generations. The case of India, for example is different than in the United States, where most of the people are poor and are working for the rich, a minority. They have an idea of conservation, but it is very different from the Conservation/utilitarian movement of the United States.

Vandana Shiva, an Indian theoretical physicist also includes specifically the case of Women and the Environment. She believes that each of us should concentrate on his or her country and try to effect local locally. This is an example of the saying think globally, act locally. Another case where there is also a big population, but for different reasons is the case of Chiapas, where there is also an agrarian society and where people live because of their land. In the case of Chiapas there is a long history of Colonialism which started long time ago in the 16 th and 17 th centuries. So, if Human dominion has got us into trouble is there an answer in other traditions. Should we change our world-view? Is the scientific-rational worldview the one to blame? Or is it that we take into account humans as first. If some humans disappear from the face of the Earth will we solve the problem? Is conservation just having a lot of wilderness around? It seems to be rather complicated taking into account an integrated whole. The indigenous people of Mexico, like the peoples in India respect the natural order because it is their livelihood and workplace. The land and the environment is their resource to survive, this attitude is also part of their culture And this is probably true in most of the countries of the Third World. There has been a social unrest in the state of Chiapas during the last decade; through this unrest we can give a glimpse to the relation of some of the indigenous people and Nature. This unrest is a product of poverty and Colonialism. Chiapas has been the clash between traditional values and modern commodity agriculture. They still use traditional methods to raise their crops. By the time the Chiapas unrest started the population of Chiapas was formed by different indigenous groups, such as Tetzil, Chol, Tojolobal, Tzeltal, Zoques 80 percent of them living under the poverty line. The inequitable distribution of wealth started since the 16 and 17 centuries. During the past years the selling of coffee, bananas, oil palm, cattle and lumber on international markets led the Spanish descendent people, as well as the indigenous to clear huge areas of the rainforest In the state of Chiapas the wooded area has dropped from 44.5 to 21.7 percent. The farmers are also a cause of this destruction, but greed and corruption from the government and international companies are the more to blame. The farmers owned land in Chiapas called Ejidos. This is a system emerged from the 1910 Mexican Revolution where indigenous communities held 5 percent of the total in common. This land could not

be sold, transferred or mortgaged. The slogan was La tierra es del que la trabaja so they owned their community plot to work on it, but if the land was not used for two years, it was subject to confiscation. There were some legislative changes in 1994 that changed this right allowing the small ejidos to become private property. This was the main cause of the Zapatista uprising which continues until 1997. Today they seem to be resting, but the conflict has not been solved completely. Indigenous relation to their land and their identity with it has provoked some changes so the individual is not looked as a whole but the perspective of a mysterious dynamic reciprocity, individuality and independence were really illusions. The solution does not seem simple, because in spite of being a global problem, the solution has to be local, taking into account the communities, but without forgetting the land. The land needs to rest, but people need the place and land to live.