The expansion of multinationals in Africa is making a significant contribution to the loss of forest cover, the reduction of crop diversity and, in part, the rise in greenhouse gas emissions. These are the findings of a study published in Nature Climate Change and conducted by an international team of researchers that includes Tommaso Sonno, a professor at the Department of Economics at the University of Bologna.
The study addresses a question that has so far lacked systematic evidence: do multinationals promote sustainable development by transferring more advanced technologies and practices or, on the contrary, do they move the most polluting production to countries with weaker environmental rules? By analysing data on millions of companies and environmental indicators on a continental scale, the research shows that, in the case of Africa, the second effect clearly prevails.
To obtain these results, the researchers combined information on multinational and local companies with satellite data on the environment, economic activity and regulatory quality, covering the entire African continent from 2007 to 2018.
A central element of the study is the comparison with local companies. The negative environmental impact of multinationals is significantly greater: in terms of forest cover, it is between 60 and more than 160 times higher, even after accounting for differences in size between multinational and local companies.
“Overall, the findings point to a delicate balance. Multinationals are a driver of economic growth, but without effective rules they risk intensifying pressure on ecosystems, especially in the most vulnerable contexts, to the point where short-term economic gains are often outweighed by environmental costs”, says Tommaso Sonno. “Each new affiliate raises local GDP by around 0.3%, or roughly $106 million, but reduces forest cover by about 0.3%, or 10,200 hectares, with carbon losses estimated at around $693 million”.
The mechanism behind these effects is linked to differences between regulatory systems. The environmental impact of multinationals decreases in countries with stricter regulations and it increases when they operate in contexts with weak oversight. Moreover, companies headquartered in countries with stringent environmental standards tend to move their most polluting operations abroad to places where regulations are less strict (the so-called “pollution havens”).
“The data show that the environmental impact of multinationals depends strongly on the regulatory context. Where the rules are solid, multinationals cause less damage. Where they are weak, the most polluting activities tend to cluster,” Sonno explains.
The study therefore points to several possible policy measures, including the introduction of international environmental standards, which could also be verified through satellite monitoring; extending the responsibilities of multinationals’ home countries to their operations abroad; measures on international trade, such as carbon taxes; European regulations requiring companies to verify and demonstrate that their activities and supply chains have no negative environmental impact.
