Research project Regulating Multinational Enterprises:

How have Multi-National Enterprises (MNEs) sought to influence democratic regulatory processes within and beyond the European Union (EU)? Under what conditions have they resisted or accepted stronger external controls? In the recent past, a new wave of regulations has emerged with the goal of governing international business towards sustainability. The EU and its member states have taken a pioneering role in this innovative regulatory movement. For instance, the EU has recently reached an agreement on its regulation regarding deforestation-free products, and it is on the verge of adopting a directive on Corporate Sustainability Due Diligence and a Carbon Border Adjustment Mechanism. These regulations have the potential to significantly reduce companies’ autonomy, which is why we might anticipate opposition from businesses to such regulations. 

MNEs are, by definition, profit-seeking organizations that work to preserve their autonomy while expanding their markets. Their goals frequently conflict with democratic decisions to restrict or channel markets to promote the safety and well-being of citizens. A long line of scholarship demonstrates that if firms perceive their core business activities to be threatened, they mobilize a range of material and symbolic resources to bend the regulatory processes in their favour. This includes both traditional lobbying and the funding of industry-friendly expertise, faux grassroots activism and staged deliberative exercises, and the adoption of voluntary standards which could pre-empt or prefigure mandatory regulation. Yet, in some circumstances, large scale companies and MNEs may shift from resisting to preferring external control such as democratically developed mandatory regulations. This is particularly likely if a proposed regulation would level the playing field—i.e., would force the MNE’s competitors to align with the focal firm to reduce the competitive advantage of less regulated firms. Studies of organizational levelling show that some companies that have adopted Corporate Social Responsibility (CSR)/sustainability programs prefer regulations that raise the costs for the laggards in their industries.  However, it remains unclear whether and when opportunities for levelling outweigh the firm’s interests in autonomy and control.

This project contributes to this new stream of research by providing novel insights on cross-national levelling processes. We expect that companies in highly regulated countries, already operating under strong constraints, will choose to support EU-level regulation in order to reduce the competitive advantage of firms from less-strictly regulated countries. Empirically, we examine levelling in two recent EU policy initiatives that seek in various ways to regulate global supply chains—the regulation establishing a Carbon Border Adjustment Mechanism and the Corporate Sustainability Due Diligence Directive. Through interviews and the construction of a database of business positions on these initiatives, we seek to understand how businesses have shaped these policy domains and the conditions under which businesses are more or less supportive of regulatory expansion.

This project is part of the larger REBALANCE project (Rebalancing Disruptive Business of Multinational Corporations and Global Value Chains), funded by the EU Horizon Europe program. While globalization, financialization and monopolies increasingly weaken democracies, large companies are having an ever-greater influence on how democracy is enacted in Europe, leading to a ‘market-conforming capitalism’. Firms are eluding regulation, lobbying for their own rather than citizens’ interest, abusing human rights and push the abused to withdraw from democratic processes, fuelling populism. Some economic actors are experimenting with alternative models and demonstrating more interest in sustainability and tentative routes toward an alternative “democracy conforming capitalism”. In this debate, the application of political-science lenses has black-boxed large companies, while the viewpoint of management scholars has usually considered firms’ economic gains rather than impact on society and democracy. This has left a gap in our understanding of the mutual influence among large companies and democracies.

The REBALANCE project fills this gap by investigating how large companies (1) have contributed to past and present threats to democracy; (2) can promote future democracy-enhancing business models and alternative organizational forms. The project aims to identify:

- the most effective regulatory control of economic actors, which avoids anti-democratic distortions and reveals human rights violators, and what makes large firms accept or resist such control

- ways to tackle (self-)exclusion from the democratic participation of victims of business-related human rights infringements and other marginalized categories, relying on empowerment-centered partnerships between firms and other entities (e.g.. NGOs)

- whether and how companies respond to populisms, and how alternative organizational forms such as social enterprises might embed and foster democracy. The expected project outcomes are in line with the call for: ‘Theoretically and empirically robust recommendations aiming to instill greater democratic accountability and inclusion in economic processes'.

Project members
Tim Bartley (project manager), Maria-Therese Gustafsson, Simon Pierre Boulanger Martel, John Murray

Financier
EU Horizon Europe

Possible collaborations with e.g. other institutions/organizations

The REBALANCE consortium consists of:

UNIVERSITA DI PISA

UNIVERSITA CA' FOSCARI VENEZIA

HERTIE SCHOOL GEMMEINNUTZIGE

WAGENINGEN UNIVERSITY

YAROSLAV MUDRYI NATIONAL LAW UNIVERSITY

UNIVERSITY OF BATH

SOURCE INTERNATIONAL (NGO)