Are workers' rights and environmental protection compatible with profit? Or must companies produce their goods as cheaply as possible to survive? These issues were discussed at the Global Media Forum in Bonn.
Manufacturers of sports shoes and textiles don't have the best reputation: they're often accused of producing their goods cheaply in Asian sweatshops, factories where workers' rights and environmental protection aren't a priority. These products are then marked up and sold with much hype in Europe, the US and elsewhere.
Nike, Adidas, Puma and other manufacturers regularly produce reports in which they aim to show that these accusations are no longer valid, at least not entirely. Reiner Hengstmann is Puma's global supply chain director, and is responsible for building a supply chain which fulfills environmental standards. He admits that, 20 years ago, his company had no idea about the conditions under which global suppliers made their products. After the first environmental cost-benefit analysis of the entire supply chain in 2010, Puma saw the situation more clearly: "We came up with a huge amount of money that we would have had to pay, if nature had a bank account," said Hengstmann.
Interventions against market failure
Hengstmann admits that companies are not charged for the environmental damage caused by production, not to mention the social aspects. Economists call these "externalities" - economically, they are a form of failure in the market that can make government intervention necessary.
"Many European companies source from Bangladesh. Why do we source from Bangladesh?" asked John Morrison, director of the Institute for Human Rights and Business in London, before providing the answer himself: "Because it's cheap. Why is it cheap? Lots of reasons, but externalization of the true social costs of production means that buildings fall down and kill people. That is unsustainable und unethical." Morrison believes that only strong regulation can improve the situation. "Philanthropy on its own will not answer the problem," he said.
A simple test
But many entrepreneurs reject strong regulations. For example: the International Labor Organization (ILO), part of the United Nations, has been developing standards for the protection of workers since 1919. But to this day, they are not internationally binding, according to Jakob von Uexküll, founder of the World Future Council and the Right Livelihood Award, widely known as the Alternative Nobel Prize.
"If somebody tells you: 'We are a socially responsible company,' then there is a very simple question: 'Would you agree that the rules of the ILO get the same legal status as the rules of the World Trade Organization?'" said von Uexküll. "The answer to that question will tell you everything you need to know about the social responsibility of the company."
Ibrahim Abouleish, an Egyptian who established the Sekem Group of Companies in 1977, would answer this question with a resounding yes. ""I try to integrate the four dimensions of life: economy, ecology, culture - that means education - and human rights. All the four have to be balanced," he said.
Education for an alternative future
Sekem transforms parts of the Egyptian desert into arable land, using the space for organic farming. Thousands of people live from the production of food, textiles and herbal medications. Abouleish was awarded the 2003 Right Livelihood Award for his initiative.
With its profits, Sekem funds kindergartens, schools and now a university. The latter will be a counterweight to traditional educational institutions. "Our universities are still subscribing to a very old world view," said Abouleish.
Von Uexküll also thinks that the opinion of many recognized experts, including economics professors, should not to be trusted. "In the Middle Ages, the church ruled all aspects of life [in Europe]. If you wanted to debate the powers of the church, those debates were only held in Latin. So you had to learn Latin," he said.
"Today, finance and economics rule the world. And if you want to debate them, understand and challenge them, you have to learn financial Latin. Once you've done that, you realize that much of what you've been told is not just wrong, it's actually quite mad."