Should You Stay or Should You Go? What’s the ‘Right’ Decision on Entering or Leaving a Market?

February 23, 2010
  • Aron Cramer portrait

    Aron Cramer

    President and CEO, BSR

  • Dunstan Allison-Hope portrait

    Dunstan Allison-Hope

    Senior Advisor, BSR

Google’s recent announcement to reconsider its business in China has won considerable praise from organizations concerned about the country’s human rights record. This approval stands in stark contrast to the condemnation the company received when first entering the country in 2006. The Financial Times cartoonist Ingram Pinn captured these contrasting perspectives perfectly, depicting Google as the speech-suppressing “Great Firewall of China” in 2006, then casting the company as the lone protestor stopping the tanks in their tracks in 2010.

Google is not alone in being praised for exiting a market on human rights grounds. In the 1980s, many companies agreed to divest from apartheid-era South Africa, and today there is a high-profile campaign to encourage companies such as Chevron and Total to follow the lead of Pepsi, which left Burma in 1997 based on human rights concerns.

It will be some time before we know whether Google’s approach has a positive or negative impact on freedom of expression, and, of course China, South Africa, and Burma are three very different places. But the company’s decision to cite human rights as a reason for potentially leaving China raises much broader ethical questions about the role of human rights in corporate decisions to enter or exit a market.

Is it always right to cut ties and leave a country on human rights grounds? Why is it that companies receive criticism when entering markets and praise when they leave? While leaving can sometimes be the right approach, there is also a case for companies to stay and engage, seeking to make a positive impact on human rights while they are there. Leaving may look and feel great to those of us in the West, but exiting a market may not always have the desired impact.

Consider the case of the consumer electronics companies that are increasingly under fire about whether the metals they source from the Democratic Republic of the Congo (DRC)—such as tin, tantalum, and tungsten—may be helping fund the purchase of weapons and exacerbating human rights abuses such as forced and child labor and gender-based violence in one of the world’s toughest conflict zones. There is a consensus among companies and campaigners that “conflict minerals” should be eliminated from the electronics industry, and it is perhaps unsurprising that the tempting next step is to cut out all minerals sourced from the DRC.

But the decision to stop sourcing from that market isn’t as simple as it may seem: Mineral mining is the first stage in the supply chain and is many layers removed from the final product. The smelting and refining of minerals often combines ore from multiple sources—various mines in various regions—making it extremely difficult to trace their origins. So in this case, it might not even be practical to “leave” the country.

By contrast, what if companies were to leverage their purchasing power to drive positive change in the DRC? Perhaps there is a role for companies to bring “development-orientated metals” to market by identifying specific mines where the benefits of mining are shared locally and production upholds human rights. As an alternative to leaving, companies could also explore diplomatic channels to encourage a sustainable trade in minerals in the DRC and the surrounding region. Leading minds in the electronics industry are already working with stakeholders to explore just such an approach.

GE is taking a related approach in China and Vietnam, where the issues are very different than those in the DRC. Among the company’s top corporate responsibility priorities are “rule of law” and “capacity building.” GE’s leadership believes that effective government in emerging markets is critical for both business success and human rights, and the company therefore works with government and civil society to establish transparent legal systems, encouraging open law-drafting processes, and developing well-trained judges and lawyers. For example, GE attorneys teach classes at law schools in both countries, and the company’s foundation also invests in rule-of-law initiatives by providing grants such as one in China to an organization focused on commercial law, intellectual property rights protection, and citizens’ rights, and another in Vietnam to a program that aims to strengthen courts and enhance legal transparency.

It would be easy to respond with the objection that these cases—Google, GE, Pepsi, electronics companies in the DRC, and the rest—are all different. But that is exactly the point: When it comes to determining whether a company’s decision to enter or exit a market is good or bad for human rights, there’s no one-size-fits-all rule, and the ethics of the decision will vary considerably with the context—including the types of products and services the company has on offer, the relationships the company has in the country concerned, and the ability of the company to influence human rights in a positive direction.

As such, “are you in or are you out” may be the wrong question. No company automatically advances human rights by leaving a country, and, likewise, no company automatically improves the situation by staying. In all but the worst cases, it’s how business participates in challenging markets that is the ultimate test. Does the company have a clear understanding of how its products, services, and market presence will impact human rights? Has the company identified its most significant human rights risks, and does it understand how to mitigate them? Is it working with sympathetic government partners to advance human rights?

Let’s also remember the opinions of the people these decisions are designed to support: the local population. Many companies left South Africa and Burma because democratically legitimized local movements called for mass divestments, which is not the case in China today.

It is also perfectly reasonable to expect that two companies may look at the same set of facts and reach different conclusions about which approach will be most effective in advancing human rights: Just as one company may decide that leaving is the best route to advance human rights, so another may decide that staying and engaging is the more impactful route. And maybe we need both.

We don’t know yet whether Google’s decision to take a new approach in China will increase freedom of expression, privacy, and security. Some argue that the company should distance itself from censorship by leaving; others argue that the company should stay with a search engine that filters less (and more transparently) than the local competition. Whatever one’s opinion, the fact that an increasing number of companies are weighing these decisions demonstrates that human rights considerations are reaching senior business leaders like never before.

The time has come for us to applaud those companies that seek to integrate human rights into their decision-making, to criticize those that don’t—and to be open to the fact that this could mean praising both companies that seek to make an impact by staying in difficult markets as well as those that decide to leave.

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