Since World War II, global change has been accelerating like a Formula One car screeching out of a pit stop. The globalization of big business has been an especially powerful engine of change.
McDonald’s and Starbucks have transformed food cultures. Walmart and Amazon have altered the way people shop. Nike and Christian Dior have changed the way people dress. Apple and Microsoft have reoriented the way people work and play. And Volkswagen and Delta Air Lines have changed the way people travel. Meanwhile, Royal Dutch Shell and Glencore have mined the earth for oil and minerals, Cargill and Monsanto have reshaped global agriculture, and Dow Chemical and Dupont have greased the moving parts of the world economy.
All around the world these transnational corporations have bought up plantations, logging and mineral rights, local businesses, and factories. But, unlike in the early post-war period, today much of the power of TNCs comes through their global supply chains, which link first-tier, second-tier, and third-tier suppliers through purchasing contracts, technological support, and financing arrangements. Walmart alone has more than 100,000 suppliers. This flexible, dynamic business model, while sacrificing some of the control of direct ownership, has allowed the world’s biggest corporations to extend their influence much further and much deeper into the global processes of extraction, production, and consumption.
These corporations have gained extraordinary financial power. America’s top 500 corporations now account for two-thirds of the country’s gross domestic product (GDP). Of the world’s top 100 revenue generators in 2015, 69 were companies and 31 were states. That year the top twenty companies alone turned over US$3.4 trillion in revenues.
The growing dominance of big business in the world economy is also enriching corporate owners and executives. Consider the number of billionaires, up fifteen-fold from 1986 to 2017 (from 140 to 2043). Together, Forbes calculates these billionaires were worth around US$7.7 trillion in 2017. Even this staggeringly high figure likely underestimates the total wealth of the super-rich, as many conceal assets in tax havens and secret accounts (the leaking of the Panama Papers in 2015 gave the public a rare glimpse into these practices). The resulting inequality even in terms of legal wealth is stunning. At the start of 2017 the top eight of these billionaires held as much wealth as the bottom half of humanity.1
With this increasing financial power has also come increasing power over political systems and cultural understandings, with waterfalls of money cascading into political parties, lobbying campaigns, advertising, and branding. How did big business come to gain so much influence over our lives?
The beginning of corporations with wealth and power as great as small states extends back to the seventeenth century when European monarchs awarded monopolies to trading firms to plunder the “New World.” Britain’s East India Company, founded in 1600, is one of the most infamous. But there were many others. There were the Dutch East India Company (founded in 1602) and the Dutch West India Company (founded in 1621). There was the French East India Company (founded in 1664). And there were Britain’s Hudson’s Bay Company (founded in 1670) and Britain’s Royal African Company (founded in 1660/1672). These companies did far more than just pillage the New World for slaves, spices, cotton, silk, tea, timber, furs, gold, silver, and opium. They also waged wars, spread pandemics (such as smallpox, measles, and influenza), and razed the ecological and social landscapes of Africa, the Asia-Pacific, and the Americas.2
The modern transnational corporation – or what some call “multinational corporations” (MNCs) and others call “multinational enterprises” (MNEs) – surfaced out of this violent exploitation of the New World. The number of firms working across multiple countries began to rise in the late nineteenth and early twentieth centuries. One example is Lever Brothers, Britain’s leading soapmaker in 1900. Over the next twenty years the company would continue to expand, mass-producing soaps, advertising heavily, buying coconut plantations in Melanesia, acquiring trading firms in Africa, and taking over competitors. By the beginning of the 1920s the company controlled nearly three-quarters of England’s soap market. In 1929, Lever Brothers would then combine with the Dutch firm Margarine Unie to form Unilever: at the time, one of the biggest mergers ever.
The roots of many of America’s iconic TNCs also extend to this period. The Coca-Cola Company goes back to an Atlanta pharmacist concocting the first Coca-Cola drink in 1886. Its main competitor, the Pepsi-Cola Company, traces its beginnings to a North Carolina pharmacist mixing the first Pepsi drink in 1893, with the company forming in 1902. American oil companies also surfaced during this time, with a signature moment being John D. Rockefeller’s founding of the Standard Oil Company in 1870 (a precursor of today’s ExxonMobil).
The shift toward mass production would help many American companies grow quickly during the first quarter of the twentieth century. After forming in 1903 the Ford Motor Company, for instance, would mass produce over fifteen million Model T’s from 1908 to 1927. Over this time Goodyear Tire and Rubber Company, after starting up in Ohio in 1898, would emerge as the world’s biggest rubber corporation. Its crosstown rival Firestone Tire and Rubber Company (founded in 1900) also grew into a global powerhouse as a tire supplier for Henry Ford’s Model T’s, in 1926 acquiring a vast rubber plantation in Liberia (notorious for human rights violations since then).3
The growth in the size and number of TNCs began to pick up speed after 1945. There were many reasons. The American economy was booming and global markets were expanding. Technological innovation began to accelerate. And transnational production costs began to fall, as American, European, and later Japanese and Chinese firms became more efficient at extracting natural resources and exploiting workers in developing countries.
The 1950s saw the emergence of restaurant franchising and fast-food chains. The McDonald’s Corporation under Ray Kroc led the way after opening its first franchise restaurant in Illinois in 1955 (although Dick and Mac McDonald opened the first McDonald’s restaurant in 1940). When the McDonald’s Corporation went public in 1965, the company had 700 restaurants across the United States. By the end of the 1970s there were 5,000 restaurants around the world; by the mid-1990s, there were 20,000. Today, there are around 36,000 restaurants across more than one hundred countries. Other American fast-food chains also grew at record rates during this time, including Subway (now around 45,000 outlets), Starbucks (around 25,000), KFC (around 20,000), Burger King (around 15,000), and Pizza Hut (around 13,000).
The American Sam Walton would also revolutionize retailing after opening the first Walmart in 1962 in Arkansas. In retrospect, his core idea seems rather simple: maximize profits by maximizing sales (rather than by trying to maximize profits per sale). To propel sales, he slashed his prices, cutting his costs to the bone to still retain a tiny profit margin on each sale. He set up in no-frills, large warehouses in low-rent areas, buying in bulk, and lining his shelves with discounted goods. And he hired part-time, non-unionized workers, paying low wages and minimizing benefits. He then reinvested his profits to expand, driving other retailers out of business and further enhancing his power to squeeze out even better deals on his bulk orders.4
Walmart’s sales soared under this business model. Annual revenues hit US$1 billion by the late 1970s. Before long, other retailers were building upon his idea, such as Costco (1976, beginning as Price Club) and Home Depot (1979). During the 1980s and 1990s, however, Walmart’s revenues climbed far above any other big-box retailer. Today, the company employs over 2.3 million people across more than 11,500 stores and retail clubs. Revenues in 2016 (or, what Walmart calls fiscal year 2017, ending January 31) were US$486 billion, making Walmart yet again the world’s biggest company by annual revenue turnover – also true in the previous three years. And the company has no plans to slow down expansion.
Already in 2016, Walmart’s revenues were equal to what the top sixty-five American firms together turned over in 1975. No other company has come close to Walmart’s revenues in recent years. Its revenues in 2016 were more than US$170 billion ahead of the world’s second biggest company, China’s utility firm, State Grid. Its revenues far surpassed America’s second biggest company, Berkshire Hathaway – by a tidy US$262 billion. And impressively, that year it turned over US$350 billion more in revenue than its nearest retailing competitor, Amazon, US$367 billion more in revenue than Costco, and US$391 billion more in revenue than Home Depot.
Even with the rise of Walmart, however, companies dealing in oil and gas still remain at the core of big business. China’s State Grid, Sinopec Group (an oil company), and China National Petroleum ranked second, third, and fourth respectively on Fortune’s list of the 500 biggest companies in 2016, while Royal Dutch Shell, ExxonMobil, and BP ranked seventh, tenth, and twelfth respectively. Automakers also remain powerful revenue generators. Toyota sat atop the automakers in 2016, ranking as the fifth biggest company, one place ahead of Volkswagen (Daimler was 17th, General Motors was 18th, and Ford was 21st).
Over the past half-century, however, tens of thousands of other TNCs have joined these oil and auto companies on the world stage. American companies such as Apple, Amazon, Hewlett-Packard, Microsoft, and Nike became well-known global brands. So too did many European TNCs, such as Britain’s Tesco and France’s Christian Dior. And so, too, did Japanese TNCs, such as Hitachi, Sony, and Panasonic, as well as Korean TNCs, such as Samsung. The spectacular rise of Chinese companies since 2000 has brought yet another wave of powerful corporations, with Chinese firms accounting for more than one-fifth of the world’s top 500 biggest companies in 2015. That year only the United States had more companies in the top 500, with 134 (Japan was third, with 52 firms).
These 500 leading companies have prodigious sway over the global economy, with their investment increasingly essential for economic and political stability in most of the world. We can see this in the sheer size of their annual revenue turnover, which in 2016 was US$27.7 trillion, with profits of US$1.5 trillion. The financial power of big business dominates even the US economy. The 500 largest companies headquartered in the USA, for instance, turned over US$12 trillion in revenues in 2015, accounting for two-thirds of America’s GDP, employing nearly twenty-eight million people, and hauling in US$840 billion in profits. That year, Apple was the world’s most profitable company, raking in US$53 billion (a record for Apple). The following year the top five hundred US companies were even more profitable, pulling in US$890 billion, although Apple’s profits were lower (US$46 billion).5
The spectacular increase since World War II in the sales and profits of the world’s biggest companies partly reflects their increasing capacity to extend their reach through global supply chains. It also reflects, however, their growing capacity to expand markets through branding and advertising, at first in developed countries, and since 2000 increasingly across emerging and developing economies.
Branding and advertising not only aim to sell products, but also mold cultural values, desires, and frames. “Everything we do at Porter Novelli,” the international advertising agency pitches to prospective clients on its website, “is designed to achieve one goal: to transform the opinions, beliefs and behaviors of those who matter most to our clients.”
Advertisers bombard TV viewers, social media users, and radio listeners; they slip messages into songs, museum displays, and video games; they embed subliminal images into movies, teenage fiction, and cartoons. Of course, the re-engineering of consumer cultures to increase demand for a particular brand goes back hundreds of years. In 1906, for instance, Lever Brothers was advertising the power of its “Lifebuoy Soap” to “clean” and “disinfect” the world to “Save Lives”. Yet since World War II advertising and branding have gained an influence far greater than ever before in history.
Worldwide, companies with global brands are spending around US$500 billion a year on advertising.6 The financial value of today’s brands reveals some of the payback from this investment. Forbes ranks Apple as the world’s most valuable brand – worth more than US$154 billion in 2016 – far ahead of the next four, Google, Microsoft, Coca-Cola, and Facebook.
One sign of the influence of advertising and branding is the increasing similarity of consumerism across cultures. Every culture now offers a greater variety of food, clothes, and consumer products. Yet the options have become increasingly homogenous: an abundance of sushi, tacos, pizza, and hamburgers for all. The great rise in per capita consumption of salt and sugar is one indication of the growing homogeneity. Another is the steady rise in the global consumption of processed food ingredients, such as corn, wheat, soy, and palm oil.7
A glance at the McDonald’s Corporation reveals the power of fast-food chains to reshape diets. Every second McDonald’s sells around 75 burgers: for a grand total of well over 100 billion since 1970. Americans still eat the most McDonald’s burgers. But Japan is now the second biggest consumer, with around 3,000 McDonald’s restaurants, followed by China with around 2,000 outlets. Such expansion helps explain the global rise in per capita meat consumption since World War II, with residents in places like the United States now consuming on average more than 200 pounds a year. And such expansion helps explain the steady increase in the number of farmed cattle (1.5 billion), pigs (1 billion), goats (1 billion), and chickens (20 billion), as well as the surge in demand for animal feed made from soy and corn.
The case of Procter & Gamble, the world’s biggest consumer goods company, further reveals the power of retailers and brands to reshape consumption. P&G, which spends US$9 to US$10 billion a year on advertising, had twenty brands worth more than US$1 billion in 2016 – including Pampers, Tide, Crest, Gillette, and Duracell. Advertising does not come cheaply: a thirty-second slot during the 2017 Super Bowl cost around US$5 million, about twice as much as during the 2007 Super Bowl and ten times as much as in 1985. But this price tag did not deter P&G’s Mr. Clean, Febreze, or Tide brands from running ads.
Nor did the cost of a 2017 Super Bowl advertisement deter automakers. Ford, Audi, and Fiat ran ads. So did Chrysler, Mercedes, and Buick. And so did Honda, Lexus, Hyundai, and Kia. Over the past half-century no product has come to re-engineer physical landscapes and cultures quite like the automobile. Most simply, we can see this in the sharp rise in the number of cars, sport utility vehicles (SUVs), and trucks on the world’s roads: from 250 million in 1970 to one billion in 2010 to around 1.5 billion today. And industry analysts are expecting the number of motor vehicles to double by 2050 as demand continues to soar in countries such as China and India.
Of course, the billionaires of business have long wielded great political power, as we see in the United States with Cornelius Vanderbilt (1794–1877), Andrew Carnegie (1835–1919), John D. Rockefeller (1839–1937), and Henry Ford (1863–1947). What is different today, however, is the proliferation of billionaires and the deepening of the economic and societal power of big business across just about every culture. The coming to power of Donald Trump as President of the United States in 2017 is symbolic of the rising political power of the world’s billionaires. Yet the power of big business goes far deeper than the rise of right-wing billionaire populism.
Ruling parties in democracies have become indebted to the owners and CEOs of big business. Authoritarian governments have also come to rely on the support of big business to calm dissent within the middle classes. The agendas and rules of bureaucracies, financial institutions, and banking have also come to echo the priorities of big business. International NGOs have come to rely on business charity, celebrity-business sponsorships, cobranding partnerships, and cause-marketing to fund campaigns and pay overheads. Even public universities have gradually come under the influence of big business, with corporate philanthropy now core to the funding of many leading public universities.8
And the concentration of wealth and power at the top of the business world is only increasing. The United States alone saw over US$10 trillion in mergers from 2008 to 2017, with 2015 a record year for the number of mergers. Hillary Clinton, writing in 2015, was highly critical of the increasingly monopolistic power of America’s top companies since the mid-1990s. “Rather than offering better products for lower prices,” she argued, “they are using their power to raise prices, limit choices for consumers, lower wages for workers, and hold back competition from startups and small businesses.”9
The growing concentration of corporate power is equally true globally. “Corporate power is now more concentrated and operates ever further beyond human control,” noted David Korten, after surveying the landscape twenty years after publishing his 1995 bestselling book, When Corporations Rule the World. “Its exercise is more reckless. Its political domination is more complete,” he concluded.10
Consider for a moment the increasing corporate control of global agriculture. In the 1990s around six hundred companies sold the bulk of the world’s fertilizer, pesticides, and seeds. Yet in recent years a handful of well-known TNCs – ones such as Monsanto, Bayer, Dow, DuPont, ChemChina, and Syngenta – have come to dominate these markets. In India, for instance, Monsanto’s genetically modified cotton seeds accounted for more than ninety percent of total cotton seed sales in 2015. And these companies are continuing to fight for even more control, with Dow Chemical and DuPont starting a process to merge in 2015, with Bayer beginning a process to acquire Monsanto in 2016, and with ChemChina moving to buy Syngenta in 2017 (these deals were going through regulatory approval processes in 2017).
It is increasingly common for farmers, who once could choose from hundreds of varieties of seeds for each crop, now to have just a few to choose from. Not only are these seeds generally more expensive, but often they’re genetically modified in ways that create dependencies on the company’s fertilizers and pesticides. Terry Boehm, a farmer in Canada for more than thirty-five years, has no illusions about what has been going on. “Clearly, the focus for a long time has been greater and greater control of seeds,” he said in 2016. “And if you control the seed, you control the food system. And you control people, ultimately.” Worldwide, this trend toward ever-bigger agrifood corporations is having far-reaching social and environmental consequences. “From Africa and Asia to Latin America and the EU, corporate control over markets and supply chains is displacing millions of small-scale farmers” and causing widespread hunger and poverty, explains Adrian Bebb of Friends of the Earth Europe.11
The CEOs of big business are well aware of their rising power over global governance, and many are quick to acknowledge this, perhaps reflecting what some describe as “CEO narcissism.”12 “Today, businesses have much more power and impact than fifty or a hundred years ago, when the main impact came from decisions made by countries’ leaders,” explains Feike Sijbesma, the CEO of the Dutch chemical and pharmaceutical company, Royal DSM.13
“There is not a week goes by when I am not with policy makers,” adds Unilever CEO Paul Polman. “This position gives me access to these people and then it is a responsibility to leverage that.” Polman is not shy about expressing the need for big business to govern. “Governments are coming out of office almost on a weekly basis so the onus is on companies to lead the way.”14
Many other CEOs are equally quick to accept responsibility for leading sustainability. “Companies like ours do not have the barriers that some governments have in trying to do the right thing,” explains Bob McDonald, the former CEO of Procter & Gamble. “Many large companies are bigger than countries,” adds Indra Nooyi, CEO of PepsiCo. “With our market cap, we are the thirty-seventh-largest republic in the world. And we have global governance, which many countries don’t, or many regions don’t. I think we have to do our part to bring our heft and the fact that we have global governance to find ways to improve society wherever we are.”15
In part, then, the rising influence of big business over sustainability discourses and practices comes from the growing capacity of TNCs to shape global politics, the world economy, and societies, including nonprofit organizations. However, as the next chapter discusses, part of the rising influence of big business comes from a strategy to gain more power to structure the rules and institutions of global governance by framing – and ultimately trying to control – sustainability discourses and CSR practices.