In the past two decades, the drive to maintain competitive advantage and increase profitability has led many multinational corporations (MNCs) to extend their supply chains ever deeper into the developing world. As these supply networks have reached countries with less developed political and economic institutions, MNCs have found themselves working in environments with little respect for the rule of law, weak property rights, and endemic corruption. This has created new challenges for making supply chain management economically and ethically sound – but also new opportunities for good corporate citizenship.
In this Feature Service article, Eric Hontz, Program Officer for Global programs at CIPE makes the business case for corporate citizenship as it relates to multinational corporations and their dealings with local subsidiaries. He points out that a key goal of good corporate citizenship should be the development of institutions that improve local governance and markets. “Creating business-friendly climates that provide incentives for entrepreneurship and opportunities for wealth creation in a formal economy is key to sustainable development,” he says. “This can be accomplished through empowering and engaging local businesses in reforms. The most effective contribution the private sector can make to help countries create functional institutional systems is through local business associations that act as a voice of business.”
Article at a Glance
- Multinational corporations have an inherent interest in improving the institutional environment of emerging markets.
- A better institutional environment leads to lower costs of conducting business, a higher return on investment, increased sustainability, and enhanced brand image for companies.
- By becoming more engaged corporate citizens at the local level, MNCs can reduce supply chain management problems and facilitate sustainable economic growth.
Published Date: March 02, 2009