Friday, March 18, 2011

Inter-Systemic Regulatory Coherence: GRI and the Operationalization of the OECD's Guidelines for Multinational Enterprises Framing Governance for Business and Human Rights

I have been writing recently about the move to formalize the U.N.'s three pillar Protect, Respect and Remedy Framework for business and Human Rights under the direction of John Ruggie as Special Representative of the U.N. Secretary General for Business and Human Rights.  See, Larry Catá Backer, An Introduction to and Analysis of the Draft Guiding Principles for the United Nations 'Protect, Respect, and Remedy' Framework, Law at the End of the Day, March 1, 2011.  

One of Professor Ruggie's most useful insights has centered on the notion of policy coherence.  See, e.g., John Ruggie, Report to the 14th session of UN Human Rights Council: "Business and Human Rights: Further steps toward the operationalization of the 'protect, respect and remedy' framework"  (The 2010 Report).  He has described policy coherence as one of the “five priority areas through which States should strive to achieve greater policy coherence and effectiveness as part of their duty to protect: (a) safeguarding their own ability to meet their human rights obligations; (b) considering human rights when they do business with business; (c) fostering corporate cultures respectful of rights at home and abroad; (d) devising innovative policies to guide companies operating in conflict-affected areas; and (e) examining the cross-cutting issue of extraterritorial jurisdiction.” (d., at ¶ 19).  Professor Ruggie emphasized the importance of policy coherence  both in the development and implementation of the rules of a state's domestic legal order.  
My work on investment is part of examining the role of states in regulating and adjudicating corporate activities vis-à-vis human rights, as requested in my initial mandate.  All throughout this examination I have found a lack of policy coherence within and among states in dealing with business and human rights issues. The domain of human rights policy tends to be segregated within its own conceptual and (typically weak) institutional box—kept apart from, or heavily discounted in, other policy domains that shape business practices, including commercial policy, corporate law and securities regulation.  Investment policy also fits into that list.
As we’ve seen in a number of recent cases, the investment regime can have a significant impact on human rights issues. Our drawing attention to this nexus has engaged constituencies that have not generally been active in business and human rights before—such as private law firms, international organisations like UN Commission on International Trade Law, the International Finance Corporation, and even civil society organizations like IISD itself. (From An interview with Professor John Ruggie, United Nations Special Representative of the Secretary General on Business & Human Rights, Investment Treaty News, October 1, 2008).
The Guiding Principles that distilled the Three Pillar "Protect, Respect and Remedy" Framework emphasized coherence issues.  General Principle 3 touches on issues of horizontal policy coherence within states ("States need to take abroad approach to managing the business and human rights agenda aimed at ensuring both vertical and horizontal domestic policy coherence--Commentary to GP 3) and General Principle 4 touches on vertical coherence between state policy and international norms (States should retain their policy and regulatory ability to protect human rights in their relationships with other states and with international bodies-Commentary GP 4).  (Draft report by Special Representative Ruggie with full text of Guiding Principles & commentaries [PDF]).   General Principle 13 applies a similar coherence standard on the internal governance of corporations as well, which speaks to embedding a policy to respect human rights  throughout the enterprise.  (Id.). 

But substantially less attention is paid to the critically important aspect of coherence--inter-systemic coherence. Inter-systemic harmonization, and the coherence notions underlying it, suggests that as multiple centers of governance become more established, and develop their own normative frameworks for governance, it will become increasingly important to develop frameworks for communication (structural coupling) among these systems.  The object is to seek functionally equivalent outcomes through the operations of diverse governance frameworks.   On the rising importance of inter-systemic harmonization, see, Larry Catá Backer, "Inter-Systemic Harmonization and Its Challenges for the Legal-State," in The Law of the Future and the Future of Law (HiiL Law of the Future Series, The Law of the Future and the Future of Law, Sam Muller, Stavros Zouridis, Laura Kistemaker and Morly Frishman, eds., The Hague, Netherlands: Torkel Opsahi Academic Editor, forthcoming 2011). In the case of the governance of business and human rights, it is critically important to develop a mechanics for the coordination of state-centered human rights law regimes with corporate systematization and opereationalization of a human rights sensitive governance regime grounded in their autonomous obligations.   

Recently the Organization for Economic Cooperation and Development (OECD) and the Global Reporting Initiative (GRI) moved to bring a measure of coherence between the private governance forms of reporting and disclosure and public governance values of international public soft law frameworks is what may become a useful template for other soft law systems.  

OECD-GRI announce partnership to help multinational companies operate responsibly Companies worldwide will be given greater guidance and support on how to conduct their business responsibly and report on their sustainability performance thanks to a partnership

between the Global Reporting Initiative (GRI) and the OECD. griok
This partnership will help companies make greater use of the OECD Guidelines for Multinational Enterprises
and the GRI Sustainability Reporting Framework
, bringing increased coherence and consistency to their efforts to act more responsibly and be more transparent about their sustainability. The GRI Framework provides guidance on how to measure sustainability performance, and the OECD Guidelines provide a benchmark to assess such performance. Both are based on and promote the same internationally agreed standards and principles for responsible business conduct, including social and human rights and economic and environmental matters. 

(From the OECD Civil Society Newsletter March 2011). The bridge between the public law system and the private norm system  is grounded in the mechanics of reporting and monitoring at the heart of the GRI system.  
Sustainability reports based on the GRI Framework can be used to demonstrate organizational commitment to sustainable development, to compare organizational performance over time, and to measure organizational performance with respect to laws, norms, standards and voluntary initiatives.
GRI promotes a standardized approach to reporting to stimulate demand for sustainability information – benefitting both reporting organizations and report users. (From GRI, About GRI, Benefits of GRI Reporting)
These notions are at the heart of the "Protect, Respect and Remedy" Framework's human rights due diligence principles as well, though, like the GRI program, embedded within the autonomous corporate social-norm system. (General Principles 15-19). On the value of reporting as a mechanism for enforcing corporate social-norm obligations, see, generally,  Larry Catá Backer, From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations. Georgetown Journal of International Law, Vol. 39(4): 591-653, 2008.

"The Global Reporting Initiative's (GRI) vision is that disclosure on economic, environmental, and social performance become as commonplace and comparable as financial reporting, and as important to organizational success." (From GRI, What is GRI, Vision). The GRI system is drawn from the social norm governance framework beyond the state and conventional law based rules.  It is developed to serve as an autonomous but effective form of corporate compliance with norms beyond those created through law. GRI describes its reporting Framework as
developed through a process of systematic, consensus-seeking dialogue with a large network of individuals from over 60 countries, representing stakeholder groups including business, civil society, academia, labor and other professional institutions. The process is open, inclusive and takes a global perspective on the growing understanding of good reporting on key sustainability issues.

The Framework is continuously improved and expanded as knowledge of sustainability issues evolve and the needs of report makers and users change.

The Guidelines should be used as the basis for all reporting. They are the foundation upon which all other reporting guidance is based, and outline core content for reporting that is broadly relevant to all organizations regardless of size, sector, or location. The Guidelines contain principles and guidance as well as standard disclosures (including indicators) to outline a framework that organizations can voluntarily, flexibly, and incrementally, adopt.

Protocols are the "recipe" behind each indicator in the Guidelines and include definitions for key terms in the indicator, compilation methodologies, intended scope of the indicator, and other technical references.

Sector Supplements respond to the limits of a one-size-fits-all approach and capture the relevant issues essential to sustainability reporting in a specific sector, which may not appear in the GRI Guidelines.

Sector Supplements are a version of the GRI Guidelines tailored for a sector. A Sector Supplement contains integrated commentary and new Performance Indicators for the sector, ensuring that sustainability reports cover the sector’s key issues.

Like all GRI products, the Reporting Framework is continuously improved as experience evolves and better practices emerge.

The core Guidelines are in their third generation (“G3”) and were released in October 2006 following a three year, innovative development period that engaged more than three thousand individuals from diverse sectors, worldwide. (From GRI, What is the GRI Reporting Framework?, How is the Framework Developed?).

The GRI framework operates in parallel, to some extent at least, with the objectives of institutionalizing systems of human rights due diligence developed in the "Protect, Respect and Remedy" General Principles Framework (General Principles 15-19).  But like the GRI framework, the  principles of Human rights due diligence produces a measure of coherence within the normative framework of corporate supra-state governance with little enhanced connection with the domestic legal orders of states in which corporations operate or within which they are domesticated.

The OECD brings in public sector soft law.  It is a limited multilateral effort to construct a rules system that, if adopted and enforced by each of its members can be transformed from international soft law to a harmonized system of functionally equivalent  domestic law.   Yet, as soft law, it also serves as a bridge  and a contributor to the social-norm system that makes up the rules governing business conduct outside the law of states.  A principle element of this governance framework is embodied in the OECD's Guidelines for Multinational Enterprises. "The Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide voluntary principles and standards for responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation." (From OECD Directorate for Financial and Enterprise Affairs, Guidelines for Multinational Enterprises).  The OECD system is grounded in the idea that adherence to the framework will eventually produce effective haerd law within states from the application of soft law frameworks developed among adhering states.  "The OECD Guidelines for Multinational Enterprises are the most comprehensive instrument in existence today for corporate responsibility multilaterally agreed by governments. Adhering governments - representing all regions of the world and accounting for 85% of foreign direct investment – are committed to encouraging enterprises operating in their territory to observe a set of widely recognised principles and standards for responsible business conduct wherever they operate."  (From OECD Guidelines for Multinational Enterprises).
But while the current new arrangement should be viewed as a substantial step forward, more than partnership is likely required. The ability of governance regime systems to penetrate each other, in the sense of acknowledging the legitimacy of actions undertaken within each governance regime and providing a measure of recognition and perhaps even of incorporation within the systems, can further strengthen the functional objectives of each in the regulation of behavior with human rights impacts.  That, in turn, can serve as a useful template for inter-systemic relations in other areas.  That movement, though, will also require some restraint.  States, and the international public law system created to serve it, tends to succumb to the temptation to absorb governance systems and to subordinate such systems within their legal orders.  Inter-systemic harmonization is grounded in the recognition that multiple systems may exist simultaneously and autonomously within their respective jurisdictions (sometimes great, in the case of states, and sometimes more modest, in the case of enterprises).  The movement for cooperation between the OECD and GRI speaks positively to such development.

No comments: