The way the global economic system has evolved, combined with a lack of rules and their enforcement, creates a permissive environment, or even an incentive structure, in which harmful corporate strategies can be played out.

The lack of rules coupled with the lack of enforcement is commonly identified as a ‘governance gap’ between corporate power and corporate accountability.[1]

When national governance is weak

Competition for resources and profit maximisation drives companies to resource-rich countries, many of which have a weak rule of law or are being ruled by an oppressive authoritarian regime. In contexts where government oversight is weak, absent or not attuned to community or workers’ interests, these communities and workers are particularly vulnerable to social and environmental harm and have greater difficulty holding companies to account for any harmful impacts.

… and international regulation is non-existent

As it currently stands at the international level, there are no direct human rights obligations for corporations, while states lack clear legal obligations to regulate the transnational activities of their corporate nationals. On the other hand, the limited liability regime combined with economic treaties like trade, investment and tax treaties grant companies protection and privileges beyond those granted to individuals.

Compared to normative corporate accountability frameworks, treaties protecting corporate interests are generally more enforceable. On the other hand, environmental and human rights treaties lack the kind of international enforcement mechanisms put in place for corporate investment protection.

Overall, economic liberalisation and globalisation policies combined with existing governance gaps and other systemic barriers to justice have produced an environment that is conducive to corporate misconduct and impunity for environmental damage and human rights abuses. In turn, such misconduct and impunity continues to hinder the efforts of states to achieve sustainable and fair policy outcomes, such as the Sustainable Development Goals.

Harmful corporate strategies reinforce the status quo

The use of harmful corporate strategies revealed here is not limited to a select group of malicious corporations that seeks to harm people or the environment. Rather, they are used by companies acting within a system that expects them to generate profit with the lowest possible cost.[2] In many cases, it is not in the interest of individual companies to avoid or repair the harms they have caused in the process, at least as long as competitors are not doing the same. On the contrary, it is mostly in a company’s interest to sustain the status quo and disregard responsibility for any harms they have caused. An international level playing field that rewards respect for people and the planet is lacking.

The evidence gathered on corporate strategies aimed at avoiding accountability for negative impacts shows that multinational corporations have multiple options to construct deniability for the harms they have caused or contributed to; this gap could be closed by legislation. When ending up in court, multinational corporations resort to an array of judicial strategies to avoid liability. These strategies could partly be countered by improved material and procedural laws.

However, by distracting and obfuscating stakeholders, by undermining or attacking defenders and communities that stand up against corporate interests, and by utilising state power, companies actively and effectively thwart efforts and processes towards accountability: doubt is spread about the need for regulatory measures, advocates of such measures are silenced, and government policy is aligned with business interests.

Measures are urgently needed to counter all of these harmful strategies. Governments, citizens, CSOs and businesses all have a role to play in helping to close the governance gaps.

[1] Ruggie, John. Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Cultural Rights, Including the Right to Development, United Nations Human Rights Council, p. 28, 2008 (accessed November 14, 2019).

[1] Guiliani, Elisa, “Regulating global capitalism amid rampant corporate wrongdoing-Reply to Three frames for innovation policy”, Research Policy 47 (2018), p. 1577-1582.