An empirical examination of sustainability for multinational firms in China: Implications for cleaner production
Graphical abstract
A framework in relation to the sustainability actions of MNCs was developed in this study to help understand MNC sustainability disposition and host country discourse. This conceptual framework is based on the assumption that the contextual findings of the literature may enhance understanding of the sustainability-wide choices that influence firms. It seeks to address the key sustainability factors/antecedents as established by Collins et al. (2007). This framework is used to explore MNCs’ sustainability antecedents for firms in China.
Introduction
Environmental and economic roles in China have evolved over the last few years. It is now the largest developing country and has the world's most serious environmental pollution issues (Paillé et al., 2014). It has been argued that pollution issues are mainly caused by China's non-sustainable industrial processes, as opposed to those in Western countries. In recent years, China has recognized sustainability as a long-term priority for health and economic development and has set ambitious targets to combat this problem (DeFrancia, 2018). Unlike Western countries, its approach for addressing such environmental issues is more from an institutionalized, governance perspective (Guttman et al., 2018). Many multinational corporations (hereafter MNCs) operate in China, with different expectations from various stakeholders that are likely to increase the gravity of governance for sustainability.
MNCs operate in the host country and benefit from the lower costs of capital and labor, and in some cases, the abundant natural resources from extracted minerals, forestry and agriculture. Many MNCs take advantage of the economies of scale, commodity prices and opportunities for innovation while, at the same time, striving for competitive excellence, both in terms of the cost of the product and its operations. On the other hand, they also impart technical know-how and create jobs within their host markets. Thus, they are generally welcome in the host country and produce a good return for their investment. However, sustainability issues regarding MNCs’ adoption within the host country context have seldom been investigated. In their home country, MNCs are often proactive towards sustainability, including reporting on relevant processes and outcomes to demonstrate their commitment and accountability to a broad range of stakeholders (Kolk, 2003, 2010). In contrast, MNCs are rarely the best performers and/or are less likely to take similar sustainable actions in a host country. For example, Tan (2009) found that MNCs often use double standards in their operating policies, failing to support the institutional social practices they would perform at home. This is broadly due to the lenient regulatory systems in some countries such as China, with institutional loopholes that often provide environmental exploitation opportunities for MNCs. Thus, MNCs have been equally perceived, as both a problem and a potential solution to major sustainability concerns (Vigneau et al., 2015).
Little is known about MNCs’ sustainability behaviors in host countries such as China, more particularly in terms of the social and environmental dimensions and the internal and external pressures they encounter, both from a parent company and the host country standpoint. Their long-term perspective trajectory for implementing sustainability systems is absent in the literature. Given the lack of accountability for sustainability measures within MNCs, it was deemed necessary to undertake further research to gain a better understanding of the antecedents that influence sustainability.
First, the research examines pressure from MNCs to improve sustainability through a set of indicators extending Collins et al.’s (2007) work by addressing the key sustainability factors/antecedents. Second, it identifies the motivators for implementing sustainability practices and discusses their implications. Third, it reports the differences in sustainability performance based on the firm's size which provides insights for improving sustainability measures. Recommendations are offered in the final section based on sufficient latitude and flexibility existing within host countries. This study has sought to identify the antecedents of sustainability among MNCs in China based on the social and economic dimensions. The focus of sustainability concerns for this research lies mainly within the environmental and social domains.
This study makes the following contribution. First, the study develops a framework that is explored from a multi-faceted perspective on sustainability. Second, the research identifies motivators for implementing sustainability practices, which is critical for improving sustainability. Lastly, it empirically examines the difference in sustainability performances based on the firm's size. These developments alongside responsible management will help firms improve sustainability that will ultimately support the UN sustainable development goals. Together, the three findings make an important theoretical and practical contribution to the literature in this important realm.
The study is organized as follows. First, the literature is reviewed followed by developing the foundation and sustainability framework within MNCs. Next, the methodology is discussed, and the data analyzed. Finally, the findings, discussions, and conclusions are presented.
Section snippets
Sustainability imperatives
Establishing guidelines to help firms develop sustainability strategies and antecedents is an important investigation, particularly when considering the millennium development goals (MDGs). The UN General Assembly first recommended a set of global sustainable development goals (SDGs) consisting of 17 goals and 169 targets. Some of these incorporated the preceding MDGs while others were founded on innovative ideas (Hák et al., 2016).
Since then there have been suggestions for revising sustainable
Development of conceptual framework
As a driving force of global economic development, China has a greater responsibility in protecting the environment (Tang et al., 2018). Even though governments play a central role in governing sustainability, they are not exclusively responsible; many are often challenged and developed as the process of adhering to sustainability governance unfolds (Bulkeley and Schroeder, 2012). Relevant recent studies have shown a paradigm shift from what sustainability typically means to firms in China, to
Sustainability considerations in MNCs – analysis 1
As parent companies, MNCs are often able to control their activities in host countries. Researchers such as Johnson et al. (2001) have contended that international joint ventures with host countries involve some form of control, either direct where the parent company openly dictates and influences local operations, or indirect where there is more of a consultative business relationship. They have also suggested that motivations that drive such control include experience, strategic importance,
Methodology
This project is part of a larger one in which a scoping study was conducted with MNCs in China that has provided the foundation for this project. For this study, the questionnaire items were drawn from Collins et al. (2007) and were modified to suit the research questions. Participants were asked to rate their responses on a 5-point Likert-type scale, anchored from 1 ‘strongly unimportant’ to 5 ‘strongly important’. Since this study was conducted in China, the questionnaire was translated into
Factors likely to influence the implementation of sustainability and motivators for adoption – analysis 2
The second stage analyzed motivators to implement the conceptual framework most likely to influence sustainability. This part of the research considered dependent variable factors (see Table 3), such as improved shareholder value, investor pressure, board influence, attractiveness to employees, reputation and brand, risk management, government regulation, motivators for the adoption of sustainable practices, cost management reduction, and external pressure groups. Participants were asked to
Firm size – analysis 3
The third stage of the analysis considered the size of the firm and the mean differences among the six sustainability variables under consideration. Firm size appears to be an important factor (Gabzdylova et al., 2009), from which inferences can be drawn. As per the size of a firm, large firms have the resources to invest in sustainability resources. The size of a company and company sectors such as agriculture and manufacturing can have a significant influence on sustainability, particularly
Discussion and conclusions
This paper presents the impacts and antecedents of sustainability for MNCs in China via a conceptual framework. This framework is part of a much broader attempt to assess the sustainability practices among MNCs in China. The primary aim of this study is to examine MNCs’ sustainability in China. This research also examined the motivators for implementing sustainability and assessed the differences in sustainability performance based on firm size.
Acknowledgements
We are grateful to the generous support of the China Studies Research Centre (CSRC) seed-funding grant scheme at La Trobe University.
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