The United Nations is continuing its series of public on-line consultations on themes related to the Post-2015 agenda, including one on the role of the private sector and markets in achieving sustainable development.
The IEF submitted the following contribution on this theme on 14 May 2013:
Establishing an international ethical and regulatory framework for business
A contribution from the International Environment Forum (http://iefworld.org)
Much of today's wealth is in the private sector; governments are stuck in their national sovereignty and have less and less control over the globalized economy. As more wealth creation escapes from national taxation, the principal mechanism for wealth redistribution to meet social needs breaks down.
In the rise of the private sector over the last two centuries, the creation of the limited liability company separated investors in the capital of a company from any moral responsibility for its use. While governments may legislate social and environmental norms, there is no legal framework beyond national jurisdictions, and multinational corporations easily escape from their fiscal, social and environmental responsibilities. While individual corporate leaders with moral scruples can make a significant difference, they are trapped in an institutional framework that leaves them little margin for manoeuvre with respect to shareholder interests in maximizing profits.
The result is an international private sector that, in the name of a strong global economy and human welfare, has created a culture of consumerism. It skilfully and ingeniously promotes a habit of consumption that seeks to satisfy the basest and most selfish desires, while encouraging the expenditure of wealth so as to prolong and exacerbate social conflict. Injustice is tolerated with indifference and disproportionate gain is regarded as the emblem of success. Business profits are built too often on the economic exploitation of others and on ignoring environmental externalities. Companies play off one government against another to push social and environmental standards to the lowest common denominator. A number of today's directors of financial markets, executives of multinational corporations, and chiefs of commerce and industry, justify any means in order to achieve their goals.
To achieve sustainable development, the private sector needs to be transformed from a principal cause of unsustainable resource consumption and pollution, to a driver for sustainable economic behaviour. Voluntary measures have largely failed to extend effective corporate social and environmental responsibility beyond a limited number of exemplary companies. In the interest of fairness and equity, governments need to agree on an international regulatory framework that would establish minimum social and environmental standards, ensure that corporations pay their fair share of taxes, and prevent companies becoming so large that they have a monopoly position and are more powerful than governments, or too big to fail.
Such measures would give businesses the level playing field they need at the international level in order to ensure fair competition. It would then be obvious that there is a competitive edge in environmental responsibility, driving innovation to meet the requirements for sustainability. There are calls for a new institutional architecture to make corporations more responsible by 2020 (Pavan Sukhdev, Corporation 2020).
An employer and employee, for example, are normally bound by the laws and conventions that regulate their work, and each is expected to carry out his or her responsibilities with honesty and integrity. At another level, however, justice requires that the prevailing norms be reassessed. For example, the relationship between minimum wage and the cost of living merits careful evaluation, especially in light of the contribution workers make to a company's success and their entitlement to a fair share of the profits. The wide margin, often unjustifiable, between the production costs of certain goods and the price at which they are sold likewise requires attention, as does the need to generate wealth through measures that enrich the generality of the people. Businesses need to avoid the exploitation of others, the monopolization and manipulation of markets, and the production of goods that promote violence and immorality.
In theory, a perfect market requires access to perfect information. In a highly competitive market situation, this is rarely the case. The market mechanism would work better if it became more cooperative and encouraged a free and fair consultation between buyers and sellers in the search for a just price. Beyond 2015, the increasing use of market mechanisms should be accompanied by the development of a global regulatory framework for the business and financial sectors to ensure planetary sustainability.