Cite as: Stephens C, Hawkins B, Liverani M. Globalization and Global Health : Critical Issues and Policy: Understanding Public Health. Maidenhead: McGraw-Hill Education; 2022. Created from lshtmuk on 2024-02-26 14:45:51. # Learning objectives - Define the commercial sector and differentiate it from other global health actors. - Describe ways in which commercial actors impact on population health. - Assess the nature of commercial power in the context of globalization. - Evaluate the roles played by commercial actors in global health governance. - Critically assess the motivation behind companies' corporate social responsibility programmes. # Key terms **The commercial sector**: The body of private sector, profit-making entities such as businesses and corporations, and the organizations that support their activities such as trade associations and lobbyists. Transnational corporations [[TNCs]]: A corporation is an association of stockholders that is regarded as a ‘legal person’ under most national laws. Transnational corporations are those economically active across national boundaries, often in many countries across the globe. **Regulation**: The enforcement of norms, standards, rules and principles that govern behaviour. [[Corporate Social Responsibility (CSR)]]: Industry-supported measures whereby companies attempt to demonstrate responsible behaviour in their core business practices or to be good corporate citizens through activities such as philanthropic donations. # Defining the commercial sector > Corporations, firm, industry, business federations or trade associations, [[IFPMA]], International Chambers of Commerce (ICC). The defining feature of the commercial sector is its market orientation and the pursuit of profit. [[Question]] Why policymakers should pay attention to the role(s) of the commercial actor in [[global health governance]]? 1. Commercial actors are involved in the [[Trade liberalisation boosts adoption of behaviours such as smoking and unhealthy diets|creation of ill-health]] through selling unhealthy goods like tobacco and through environmental degradation 2. They are central to the provision of health services and treatment, through the development and manufacture of medical devices, drugs and the health system architecture, e.g., hospitals 3. The health impact of transborder flows often exceed the regulatory capacity of governments, whether acting alone or collectively through inter-governmental organizations. These challenges include: 1. The (legitimate and illicit) trade in goods and services and the movement of persons across borders. 2. The spread of antimicrobial resistance, pathogens and infectious diseases, environmental pollution and population migration 4. Commercial sector often plays a key role in the flow of people and things across borders, there have been calls to rethink how to engage commercial sectors. It means an increasing tendecy to work in partnership with the commercial sector and to draw on their expertise, resources and logistical capacity. 5. The involvement of corporations in policymaking raises questions about the effectiveness of industry self-regulation and about the potential conflicts of interest that arise from industry involvement in policymaking and delivery. 6. Corporations' economic power and their role as political actors in [[global health governance]] make them impossible to ignore # Analysing corporate power [[How does power came to be?]] It is useful to think of corporate power in the context of global health governance in terms of structure and agency (Farnsworth and Holden 2006). Structural power is derived from the privileged position capital owners occupy in the market economy. Agency power is based on direct social relations and refers to the deliberate exercise of influence. ## Structural power [[The global investment regime shows how public health concerns can be subordinated to the interests of private firms]] Structural power is based on control over investment. A state may be dependent on the revenue generated by the activities of a corporation, the foreign direct investment it provides and/or the employment it creates. An obvious example of this is the duty paid on cigarettes or alcohol, which have proved major barriers towards effective regulation of these industries as finance ministries fear the loss of revenue from lower levels of consumption of these products. Similarly, governments may be sympathetic to the case of pharmaceutical companies who provide employment, corporation tax revenues and, not least, life-saving medicines. [[capacity for exit]] is also a structural power of corporations. The effect of relocation is a loss of corporation tax revenue and potentially even more wide-reaching effects in terms of economic growth, employment, public spending and welfare costs. [[private sector are often venerated as the engine of economic growth and creators of employment and tax revenues]] In many contexts, particularly in advanced industrial economies in the Global North such as the US, the UK and Europe where many of the largest TNCs are headquartered, business leaders and the private sector are often venerated as the engine of economic growth and creators of employment and tax revenues. The result of this is that it is seen as acceptable for corporations to be present in ever-expanding areas of public life, including in the development and implementation of public policy. ## Agency power > political engagement, lobbing governments, regulatory bodies and international organisations, or through related activities such as funding of political parties or campaigns for office. However, there are less subtle and less obvious processes, such as participation in various institutions and agencies involved in the formulation or delivery of policy and through self-regulatory or co-regulatory regimes. For example, representatives of transnational pharmaceutical company, Pfizer, served in the US delegation which negotiated the formation of the [[World Trade Organization (WTO)]] and the inclusion within this of the controversial Agreement on Trade Related Aspects of Intellectual Property ([[TRIPS Agreement]]), which enabled companies to more effectively protect their commercial patents, but may have reduced access to essential medicines (Sell 2003; see Chapter 13). Corporate presence in forums is in large part the result of their attempts to depict themselves as 'stakeholder' in the policy process, with particular expertise in a certain sector, which enables them to contribute to the formulation of good policies and the ability to oversee their effective implementation on the ground. [[TNCs]] that understand the dynamic of multi-level governance may seek to shift decision-making to the level or the arena in which they are most effectively or efficiently able to achieve their desired outcome: a process known as [[venue shifting]] (see Hawkins and Holden 2016; Holden and Hawkins 2018). ## Economic power Too big to ignore. For example, the decision of cigarette company Philip Morris International to use international trade and investment law to sue the government of Uruguay, a country of around 3 million people, over its introduction of increased cigarette packet warning labels placed significant economic pressure on the country to defend its case and its legal costs were eventually covered by the American billionaire and health campaigner, Michael Bloomberg (Lencucha 2010; Hawkins and Holden 2016). This provides a stark example of the relative economic power of corporations and even individuals compared to many countries. The economic strength of transnational corporations means they also wield formidable political strength, since this economic power affords them high degrees of access to, and potentially influence over, policymakers at the local, national and supranational levels. # Influencing [[global health governance]] > [!Box] Box 11.1 Corporate influencing strategies > - Agenda setting and issue management. Seeking to shape public discourses and policy debates to keep unfavoured issues off the policy agenda. For example, framing sugar taxes as an affront to personal freedom and choice to make them politically controversial (Dorfman et al. 2012). > - Blocking the adoption of new laws or measures. The use of political lobbying and other influencing strategies to stop new laws being adopted (see McCambridge et al. 2018). > - Influencing the content of a policy instrument. If it is impossible to stop the adoption of unfavoured measures, then seek to influence the specific form and content. For example, tobacco companies lobbied at the national and international levels to secure changes to the text of the Framework Convention on Tobacco Control (Grüning et al. 2012; see also Chapter 9). > - Challenge or delay the implementation of a policy measure. For example, the tobacco industry sought to prevent the adoption of standardized packaging measures for tobacco in Australia and Europe through a range of legal challenges (Hawkins and Holden 2016; Hawkins et al. 2018b; Jarman 2013; see also Chapter 13). > - Undermining the legitimacy and capacity of an international organization charged with negotiating an instrument. For example, it is reported that Philip Morris undertook the largest lobbying campaign ever mounted in order to ‘block, amend and delay’ the 2014 European Union (EU) Tobacco Products Directive (TPD) (Hawkins et al. 2018b; Peeters et al. 2016). > - Challenging the competence of a UN body to develop norms in a particular domain. For example, the food industry has tried to circumscribe the extent to which WHO can address obesity by proposing policies and regulations (Waxman 2004). # Delivering 'policy goods' The expertise possessed by corporations is a crucial resource of power as this is often invaluable to policymakers supporting corporations’ claims to be key stakeholders in the policy process. In the alcohol sector, for example, corporations have particular specialism in packaging design and also in advertising and marketing, which may be valuable to governments in designing health warning labels or public information campaign (Mialon and McCambridge 2018). However, the involvement of such actors in the design of policy measures comes with the risk of a conflict of interest (COI) since the objectives of the industry to sell more of a product such as alcohol – run counter to the aims of warning labels of health messaging which seek to encourage consumers to reduce their consumption to protect their health (Ralston et al. 2021; Gilmore and Fooks 2012). Consequently, industry actors may engage with government in ways that formally appear supportive of their policy goals but may do so in ways that actually seek to minimize their effectiveness. # Self-regulation > In addition to influencing global health governance, many corporations advocate the advantages of [[self-regulation]] over government legislation or compulsorily regulations. There are two principal types of self-regulation: regulating ‘market standards’ and ‘social standards’. In the case of market standards, products, process and business practice may be subject to governance to support commerce (e.g. to reduce transaction costs or increase confidence in a product). Although such self-regulation may have social impacts, the overriding purpose of market standards is to enable commerce. By contrast, self-regulation through social standards involves business and industry voluntarily adopting and observing specific practices based on public or social concern rather than to improve the functioning of the market. Self-regulatory social standards are usually developed in response to consumer concerns or boycotts, shareholder activism or the threat of impending public regulation. ==Self-regulation of social standards occurs through mechanisms including voluntary codes and reporting initiatives, statements of principles, guidelines and codes of practice, and some public–private partnerships as well as corporate social responsibility activities==. Self-regulatory initiatives often address issues that are already subject to (often ineffective) statutory regulation. For example, the International Labour Organization (ILO) has issued standards governing maternity leave and breastfeeding at work. However, not all countries have adopted the standards, while implementation is often partial even in those states that have formally adopted the measures. Self-regulation and voluntary codes are used to gain bigger market share. It can be argued that self-regulation and voluntary codes of practice can bring new stakeholders into the regulatory process. For example, ==temporary and informal labourers, often women, have participated in developing workplace codes==, having not typically been represented in comparable ILO processes (Agarwala 2007; Jones 2012). Second, ==codes may generate better compliance than public regulation==. Experience with many international conventions governing social and economic issues suggests that ratifying governments often fail to implement them but cannot be held accountable by the international community for such failure. In theory, companies adopt codes to gain market share and comply with them to retain the confidence of their consumers/shareholders. Third, codes are less costly to the public sector than statutory regulation. There are many reasons for scepticism regarding the ability of voluntary codes to adequately govern many global health issues. ==The codes often comprise lofty statements of intent but lack the means to ensure delivery on their commitment or sufficient transparency to allow effective monitoring.== Consequently, such patchwork self-regulation may result in ‘enclave’ social policy, governing select issues and groups of workers at specific points in their working lives. Since codes of practice are voluntary, they are not traceable to public authority and cannot be legally enforced. Thus, they may erode societal commitment to universal, legally enforceable rights and entitlements. [[Question]] Why might a company commit itself to adhering to a voluntary code? While serving social purposes, codes can serve important business functions and ultimately increase profits. Your answer should also include some of the following reasons why voluntary codes may be adopted by a company: - To demonstrate responsiveness to societal concerns. - To provide material for public relations. - To differentiate itself from competitors to increase sales. - To respond to concerns of consumers to increase sales. - To respond to concerns of shareholders and encourage greater investment. - To decrease costs. The British mining conglomerate, Anglo American PLC, estimates that 30,000 of its employees in South Africa are infected with HIV. It has voluntarily adopted a code in relation to treatment of 3000 employees, costs being reportedly offset by sharp declines in mortality and absenteeism due to illness. - To stave off or delay statutory regulation. The tobacco, pharmaceutical and food safety codes mentioned above were advanced to pre-empt more onerous international obligations. - To provide flexible tools tailored to specific problems instead of blanket regulations covering all contingencies. # Co-regulation In other areas of policy, the aims and objectives of commercial actors may not be to influence the content of particular laws or policies, but to position themselves as partners in the delivery of certain policy measures. This amounts to a deal between public authorities and private sector organizations, often involving civil society as well as corporate actors. While examples of co-regulator regimes are common at the national level, the most obvious example of this type of governance structure at the global level is the UN Global Compact. > [!Box] Box 11.2 Case study: The UN Global Compact > The UN Global Compact is the first attempt to regulate the activities of transnational corporations at the global level via the UN. It set out a number of principles to guide the conduct of corporations and ensure they act in compliance with a set of ethical standards relating to human rights, labour standards, environmental protection and the fight against corruption. These include commitments to do the following: > - Support and respect the protection of internationally proclaimed human rights. > - Ensure they are not complicit in human rights abuses. > - Uphold the freedom of association and the effective recognition of the right to collective bargaining. > - Eliminate all forms of forced and compulsory labour. > - Abolish child labour. > - Eliminate discrimination in employment. > - Support a precautionary approach to environmental challenges. > - Undertake initiatives to promote greater environmental responsibility. > - Encourage the development and diffusion of environmentally friendly technologies. > - Ensure businesses work against all forms of corruption, including extortion and bribery. > > Supporters of the Compact argue that, in the context of globalization, in which national governments and inter-governmental organizations struggle to effectively regulate the cross-border activities of [[TNCs]], it offers an innovative form of governance that attempts to create new accountability mechanisms. While these may be weaker than more robust forms of regulation and enforcement at the national level, this reflects the ‘[[Global health governance now is more about informal mechanisms between state and non-state negotiations. The governance space is now accessible by states and non-state actors, a condition Fidler called "open-source anarchy"|anarchic]]’ nature of the global sphere and the absence of an effective world government able to police transnational corporate activity. > > The Compact has been criticized for being voluntary and largely unenforceable, while offering the mark of respectability to companies. These include corporations active in controversial industries, such as the oil and tobacco industries, although in the case of British American Tobacco, their overtures have to date been rebuffed. > > In addition, the Compact has been criticized as undermining more robust forms of regulation. While the hope of the UN was to ‘fill a void between regulatory regimes, at one end of the spectrum, and voluntary codes of industry, at the other’ (Global Compact Office, 2002: 4), in practice, the Compact reinforces ‘the pendulum swing away from stricter forms of regulation’ (Utting 2002). Co-regulation presents a third way between traditional public, statutory regulation and private self-regulation. It can be seen as a degree of involvement of the public sector (government) in processes of business selfregulation. It has arisen due to the inadequacies of public and private regulation. ==The former, it has been argued, is inadequate in an era of globalization as state and inter-governmental capacity for regulation lags behind technological advances made by industry==. Furthermore, it can be difficult for national governments to enforce national regimes unilaterally, and global regulatory regimes are difficult to achieve and even harder to enforce. The idea is that the public and private sector negotiate on an agreed set of policy or regulatory objectives that are results oriented. Subsequently, the private sector takes responsibility for implementation of the provisions. Monitoring compliance may remain a public responsibility or otherwise be contracted out to a third party – sometimes an interested non-governmental organization. The advent of co-regulation is relatively new, and there has been more formal experimentation with it at the national and regional levels. The European Union, for example, is experimenting with co-regulation particularly with respect to the internet, journalism and e-commerce. The UN’s Global Compact with industry might be viewed as a form of co-regulation, together with many of the global public–private partnerships (PPPs). # [[Corporate Social Responsibility (CSR)]] Corporate social responsibility (CSR) is a loose umbrella term incorporating a diverse set of measures undertaken by companies to improve the impact their activities have on the social environments in which they are present. ==A more cynical interpretation of CSR may conclude that its main objective is not to change corporate behaviour or the impact of this but to change the perception of that behaviour among governments and the general public.== In broad terms, CSR may be considered as a strategy that might serve three types of company: - Those with social and environmental principles genuinely at the core of their business; examples of this type of company include the Cooperative Bank, which places a great emphasis on its ethical lending and investment policies. - Corporations aiming to create a link between their brand and social responsibility programmes via partnerships and joint marketing activities. An example here is the football team FC Barcelona, which carried the UNICEF logo on its jersey. - Controversial industries that are responding to pressure from consumers, investors or regulators. This includes the tobacco and alcohol industries, as well as other controversial industries such as those implicated in environmental degradation and climate change, for example the fossil fuel and automotive industries. There is evidence that tobacco corporations saw CSR measures focusing on environmental protection and the eradication of child labour in the field of tobacco cultivation as being important ways through which they are able to repair their image and fend off calls for still further regulation of their markets (Fooks et al. 2011). Meanwhile transnational alcohol companies, particularly in water-intensive sectors such as beer brewing, have associated themselves with initiatives to provide clean drinking water in Africa at precisely the moment they began to enter or expand their presence in African markets, with implications for local water supplies (Hanefeld et al. 2016). ## Activity 11.3 [[Question]]Imagine you are the CEO of a multinational alcoholic drinks retailer. Faced with rising levels of alcohol consumption and falling prices, the government is seeking to introduce a minimum price for alcohol to be sold, which you oppose. How might you go about opposing this? 1. Frame the policy debate and share perceptions of the problem of alcohol related harm, as well as the effectiveness of minimum pricing as an intervention to address this through media campaigns. 2. Promote studies and other evidence that supports this position or promote alternative interventions 3. Fund studies or 'evidence generation' with sympathetic researchers or think tanks 4. Keep issue of pricing more general, off the policy agenda through relationship building or lobby influential politicians or those with industry connections 5. Deflect attention from alcohol pricing by suggesting less effective alternatives that would not have such a large impact on sales, such as public education campaign or self- and co-regulatory regimes 6. Stop any new laws passing 7. If it still pass, delay or prevent the implementation through legal challenges and seek to reverse or repeal the policy even after it has been enacted, e.g., undermine the policy by influencing its evaluation and undermining perceptions of its effectiveness. # Summary In summary, this chapter has explored the role of corporations as incredibly powerful economic and political actors that play an active role in almost every aspect of global health policy. There is a wide range of mechanisms open to corporations and an equally wide range of tactics they employ to influence policy. In recent decades, their influence has increased in line with underlying ideological shifts in society and an increasingly firm commitment to neo-liberal ideas about the effectiveness of markets and private sector actors in delivering social goods. However, the move towards co-regulation and self-regulation, which this ideological shift has ushered in, raises a number of issues about accountability and effectiveness. It raises questions about whether corporate actors should be involved in setting the rules that govern them, and the consequences of this for global health.