Rio plus 10 - Sustainable Business Institute (SBI)

Dialoginitiative: Umsetzungsleitlinien für Auslandsdirektinvestitionen
Business School and, through the institute, with the private sector, Government officials and
Non-Governmental Organizations in Germany. We have also learned a lot from our partners
in developing countries. Here, it is important to note that in practice the role that FDI is
making to sustainable development of many of the poorest countries is limited on account of
the fact that most FDI flows go to a relative small number of recipient countries. Thus,
attracting FDI to fill technology and financing gaps remains a priority. Transparency can
assist host countries in achieving the objectives of attracting FDI and promoting sustainable
development in a balanced manner.
Both the Rio-plus-10-Transparency Initiative as well as the above-mentioned project aim to
enhance the contribution that FDI can make to sustainable development. Put simply, an FDI
transaction involves a triangular relationship involving three main actors: an investor, usually
a transnational corporation (TNC); the capital-importing host country and the capitalexporting
home countries. The focus of the project has been on the role of TNCs from
developed countries in promoting sustainable development in host developing countries.
In general, there have been diverging views on the impact of TNCs on sustainable
development in developing countries. On one hand, they are seen as a repository of clean
technologies that facilitate sustainable development. On the other hand, TNCs have at times
been accused of relocating polluting production and inferior technologies to their
subsidiaries, exploiting technology gaps, not taking responsibility for their environmental
impacts and sustainable development objectives. It is thus important to examine how the
important potential of TNCs to contribute sustainable development in host developing
countries can be explored to the fullest.
The project has focused on the case studies carried out by Institute for Environmental
Management and Business Administration provide interesting and useful examples of best
practices. Of course, the project has a bias towards TNCs with a high level of environmental
sophistication and the case studies are too few to allow for generalized conclusions.
However, particularly when taken together with a survey of transborder environmental
management practices of TNCs conducted under a parallel UNCTAD project, in cooperation
with the Copenhagen Business School, and with financial support from the Danish
International Development Agency (DANIDA), they provide some useful insights. I am sure,
Mr. Paschen von Flotow will later elaborate on these.
In a Seminar on "Making FDI work for sustainable development, organized by UNCTAD in
November last year, there was a convergence of views that TNCs have a large, but often
insufficiently explored, potential to contribute to sustainable development in host developing
countries. The Seminar explored a number of ways to enhance this contribution, including
through measures such as best practices, host and home country measures, and
transparency through public disclosure and reporting.
"Best practices" in a sense constitute a viable "soft" alternative to binding legal and
administrative regimes influencing FDI flows. Best practices on transparency could promote
both reporting on environmental impacts and public consultations with local stakeholders.
Some argue that environmental transparency in the marketplace is capable of winning
partners among companies and motivating them to improve their environmental image. It
also helps allay concerns that more transparency necessarily means more regulations. An
added advantage of this approach is that transparency translates into more competitive
business environment. In using this information, civil society may often be more effective in
maintaining a spotlight on environmental performance, for instance through awards and
publicity, than more conventional regulatory approaches. This also refers to civil society in
developing countries. A study on India found that the positive role that TNCs could play in
conjunction with the Indian government in achieving higher environmental standards should
be actively encouraged. However, local community groups and NGOs also play an important
role is persuading TNCs to take greater responsibility for environmental and sustainable
development impacts of their operations.
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