The ESG Initiative at the Wharton School


Making funding flows fair: Must ESG be bad news for emerging markets?

Outlet: Financial Times
Vit Henisz on ESG investors needing thorough analyses and local knowledge when entering emerging markets

In 2000, when the world began to pay more attention to the activities of western multinationals in developing countries, troubling reports emerged of under-age workers in clothing factories in Cambodia. These revelations — along with a BBC documentary that uncovered sweatshop conditions in factories used by Nike and Gap — prompted companies to cancel their contracts with Cambodian suppliers.

Prospects for those workers left without jobs would have been dismal. Five years later, when another 20 Cambodian garment factories were shut, the UN raised its concern that the situation risked pushing thousands of women into prostitution.

In 2022, leading consumer brands would be unlikely to make such a decision. Instead of simply cutting problematic operations from a supply chain, companies focus on engaging with suppliers to improve conditions and eliminate bad practices.