It sounds like a win-win deal: companies boost profits and customers get bargains. But there is always a price, often paid by people working in bad conditions for producers and suppliers. It doesn't have to be that way.
It is possible for employers and employees to get along
Social responsibility, environmental awareness and sustainability are often cited as corporate goals but very few global players actually implement them. John Ruggie, the UN's Special Representative on the issue of human rights and transnational corporations and other business enterprises, says human rights should play a much more important role.
"Universal human rights are at the stage environmental issues were at 30 years ago," he said, adding that not a single firm commissioned environmental impact studies back then. By contrast, almost all companies commission such studies nowadays. But Ruggie said a change is underway in the field of human rights too.
"In 30 years' time most companies will work with studies about the impact their activity has on human rights," he explained. "Many of them have actually started already."
Hewlett-Packard is a pioneer in the field of corporate ethics. The information technology corporation recycles electronic waste, has drawn up strict corporate responsibility guidelines and examines production conditions both at its own facilities and at those of its suppliers.
Still, it is often difficult for the electronics company to track where its materials are procured. Raw materials like gold, tin, tungsten and tantalite are often illegally mined in the Democratic Republic of Congo, for example, and help finance the bloody civil war raging there.
According to Karl Daumüller, lead auditor at Hewlett Packard's German headquarters in Böblingen near Stuttgart, HP has actively pursued concrete goals like traceability, since the company wants to be able to determine the origins of its raw materials.
Hewlett-Packard has set strict ethics rules for itself
He added that the company also tries to influence politics and legislation.
Huge demands for producers
When HP, the world's biggest IT company, starts to put the pressure on, the effects can be seen.
Companies which want to become HP suppliers have to present certificates, reports and documents for inspection. HP representatives tour factories or a firm's facilities and ask employees about their working conditions.
Daumüller says these interviews with employees are an essential part of the audit. Around 260,000 people work for HP's suppliers.
"The interviews with employees are a very important part of the audit because we normally get good information from them," he said.
HP is proof that it is possible to be one of the world's largest multinational companies and still fulfil the labor standards set out by the International Labour Organization's (ILO), as well as strict environmental standards.
The International Labour Organization pushes for better working conditions globally
Many companies argue it is impossible to comply with voluntary social and environmental because it would increase costs since inspections are too expensive and complicated while labor and human rights vary from country to country.
Measures catalogue for human rights
The German Investment Corporation (DEG) does not accept such arguments.
"Our customers have to accept international social and environmental standards, including the ILO's core labour standards," Bruno Wenn, spokesman for DEG's management, said. "That's not negotiable."
Like other national development companies and banks, DEG provides funds for entrepreneurial projects in developing countries. Its success stories include firms like Celtel, a huge African mobile telephone operator, and Sekem, a model Egyptian company which produces organic food and health products.
Ibrahim Abouleish, who founded Sekem in 1977, was awarded the Right Livelihood Award for the company in 2003. Dubbed the Alternative Nobel Prize, it is awarded to people working on practical solutions to urgent problems in the world.
But UN Special Representative John Ruggie believes that as long as labor and social standards remain voluntary and mere recommendations from the ILO, companies like HP or Sekem will remain the exception.
"Is an ethical capitalism possible? Certainly," he said. "But it won't prevail until if subsidies and rules which point in the other direction."
Ruggie has developed a measures catalogue for human rights which should help to prevent companies from committing human rights abuses while at the same time offering victims effective legal protection. This is a future-orientated task which around 80,000 transnational companies and 192 UN member states need to take on board.
Author: Helle Jeppesen / mm
Editor: Kyle James