Fostering Regulation? Corporate Engagement in South Africa

A fostering of regulation has occurred when regulatory standards and procedural prescriptions improve: new substantive or procedural rules are introduced or tightened with regard to their precision, obligation, and substantive scope. Additionally, corporate engagement may help improve the implementation of these measures by contributing material, human, or knowledge resources and providing for monitoring and sanctioning devices of implementation. The fostering of regulation by companies can take two forms. First, firms voluntarily commit themselves to introducing regulation that goes beyond public regulation in the host country. Whether firms pursue private self-regulation unilaterally, within a business association, or through multistakeholder initiatives and public-private partnerships is an interesting question. Explaining the particular patterns of private self-regulation is, however, beyond the scope of this chapter (cf. Honke et al. 2008; Muller-Debus et al. 2009). Second, firms can seek stricter (enforcement of) public regulation in the host country. Their involvement in fostering public regulation may be the result of successful lobbying, consultations by, and negotiations with state actors in tripartite or multistakeholder arrangements. Again, explaining the form of corporate engagement lies outside the scope of this chapter. Both private self-regulation and public regulation can entail (tighter) standards on the quality of products (e.g., food or textiles) or on the production process (e.g., environmentally friendly means of production).6

Our four hypotheses specify various conditions under which we may expect companies to enter a regulatory race to the top pushing for stricter public regulation and engaging in private self-regulation, respectively. In order to explore their explanatory power, we focus on corporate engagement in regulatory governance in South Africa. South Africa is a newly industrializing country whose legal standards are fairly well developed in most policy areas, while the administrative capacity for implementing regulations and securing compliance is rather weak. If companies foster regulation in South Africa, their impact should be even bigger in developing countries whose regulatory capacities are much more limited. We will analyze the regulatory behavior of several companies in the automotive, food and beverage, and textile sectors. These three manufacturing sectors comprise a significant number of foreign as well as local companies that cater to different market segments within South Africa and that are exposed to varying pressure from NGOs and for?eign competitors. Choosing different firms of these sectors as cases allows us to systematically assess our hypotheses.

The chapter focuses on environmental product and process regulation. Over the past years, South Africa has enacted comprehensive legislation on the protection of several environmental goods, including water, biodiversity, and recently also air. While legal requirements are demanding, details pertaining to the specific behavior of firms are often not specified. Moreover, overlapping responsibilities of several government departments persist, which leads to regulatory confusion, contradictions, and implementation gaps. Most importantly, the implementation of regulations is in many cases deficient since local state agencies often lack the capacity and willingness to effectively monitor and sanction corporate malpractice. Compliance with environmental standards tends to entail significant costs, which firms are reluctant to bear. The next section will identify factors that provide incentives for firms to foster (self-) regulation despite the costs involved.

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