According to the French sociologist and philosopher Dominique Méda, “The supposedly happy globalisation leads to the opposite of a global society”. Therefore, globalisation is a phenomenon that is not universally accepted and is accused by some as both harmful and responsible for unpredictable developments. Globalisation, which is a process of “greater integration of countries and people brought about by lower transport and communication costs on the one hand, and by the removal of artificial barriers to the free movement of goods, services, capital and, to a lesser extent, people on the other” (Stiglitz, Globalization and its Discontents, 2002), is said to be at the root of the new challenges facing companies today. These challenges are of various kinds: environmental and social.
1.Globalisation and the emergence of new constraints for companies
A.The environmental constraint, a challenge facing companies today
The environmental constraint can be observed first of all in climate change, which mainly takes the form of natural disasters. Secondly, we can see the overexploitation of certain resources (deforestation, oil for example). Finally, the degradation of ecosystems is a sign of this constraint (melting ice, drought, etc.). This environmental constraint is an obstacle to be overcome for globalisation and multinational companies whose activities and supply chains are, according to a study published in 2020 in Nature Climate Change, responsible for almost 20% of total CO2 emissions.
B. Social constraint, a constraint that can take several forms
The social constraint is observed in different ways depending on the country. In the developed countries with market economies, the social constraint relates on the one hand to the phenomenon of deindustrialisation, which is accelerated by globalisation. According to France’s Ministry of the Economy, it is responsible for the destruction of 45% of the 2 million industrial jobs in the country between 1980 and 2007. However, this is unevenly distributed across the country and affects the least qualified workers the most. In the case of the European Union, the free movement of production factors creates competition between territories, which is manifested by the relocation of companies to Eastern European countries. This mobility has thus accentuated the phenomenon of deindustrialisation in Western countries. Thus, 60% of the jobs lost in Europe due to relocation have potentially been “relocated” elsewhere in the Union. Furthermore, in Global Inequality (2016), B. Milanovic explains that between 1988 and 2008, while the middle classes in the DMECs saw their incomes stagnate, almost 40% of the world’s population benefited from an increase of 60 to 80% in income. The middle classes in the DMECs are therefore the losers in this globalisation, which is causing social discontent.
In the developing and least developed countries, the social issue is more about the rules imposed by the International Labour Organisation (ILO). Multinational companies have been regularly accused by the ILO of not complying with the stated standards and of overexploiting their workers, as they have a very cheap labour force in these countries.
Globalisation today raises social and environmental issues that invite companies to rethink their organisation.
2. How can companies rethink their organisation ?
A. In this context, the development of the circular economy is a solution for companies.
The circular economy is about producing goods and services in a sustainable way by limiting the consumption and waste of resources and the production of waste. This mode of organisation has been gaining momentum in recent years and has both an ecological and social impact. From an environmental point of view, it reduces the transport of materials used in the production process and therefore reduces the greenhouse gas emissions of companies. In addition, it allows companies to improve their image and to be more in line with the expectations of consumers who are increasingly attentive to environmental issues. As a result, more and more companies are developing on this model, such as the French company 1083, whose entire production process is carried out within 1,083 kilometres. It also brings the national economy back to the forefront in developed countries, offering new employment opportunities for workers who have suffered from past relocations. The circular economy is also based on the principle of recycling and thus helps to limit the overexploitation of resources, which is currently endangering the planet. For companies, the implementation of this circular economy also reflects the need to adapt their strategy to local markets.
B. Adapting to local markets means tailoring your organisation to the region and culture in which you operate.
There are many issues at stake. On the one hand, by adapting to local markets, a company can encourage the use of locally produced raw materials and thus participate in regional economic development by working with local players. For example, McDonald’s in France offers products made from Charolais meat. This adaptability also involves the diversification of the portfolio for certain multinational corporations which integrate the capital of successful foreign companies in order to be in line with the expectations and habits of consumers. This is precisely what Unilever has done with the acquisition of ‘Hindustan Unilever’ in India, a major company in the country which owes its performance to its ability to remain in line with local values and the ‘old fashion’ trend. The value of portfolio diversification also allows companies to secure their revenues by mutualising the risks associated with the economic climate.
Contact us to find out more about our programmes, to help you better understand the challenges of globalisation and to inspire your teams on the solutions implemented by innovative leaders.