Saturday, June 04, 2011

Going Transnational: The OECD Adopts Changes to Its Guidelines for Multinational Enterprises

After a several years long effort of consultations among its members, interested public and private stakeholders, and negotiations, the OECD has formally adopted some changes to its Guidelines for Multinational Enterprises.
Forty-two countries will commit to new, tougher standards of corporate behaviour in the updated Guidelines for Multinational Enterprises: the 34 OECD countries plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. The updated Guidelines include new recommendations on human rights abuse and company responsibility for their supply chains, making them the first inter-governmental agreement in this area.

The Guidelines establish that firms should respect human rights in every country in which they operate. Companies should also respect environmental and labour standards, for example, and have appropriate due diligence processes in place to ensure this happens. These include issues such as paying decent wages, combating bribe solicitation and extortion, and the promotion of sustainable consumption.

The Guidelines are a comprehensive, non-binding code of conduct that OECD member countries and others have agreed to promote among the business sector. A new, tougher process for complaints and mediation has also been put in place. (OECD, New OECD guidelines to protect human rights and social development, May 25, 2011).

The revisions strengthen the character of the Guidelines as multi-systemic,  That is, the Guidelines serve to coordinate the law systems of states with the social norm systems of large corporate actors for the purpose of harmonizing behavior standards at the international level. For over 35 years, these guidelines have occupied a unique space within the world of corporate social responsibility. They are the only ones formally endorsed by governments, 42 at last count. And they do bring together labor, civil society, and business to create the broadest possible consensus behind them. This is truly the work of a global policy network in action.” Hillary Rodham Clinton, Remarks: Commemoration of the 50th Anniversary of the OECD On Guidelines for Multinational Enterprises, Paris France May 25, 2011.

These remarks were echoed by the OECD.  “'The business community shares responsibility for restoring growth and trust in markets,' said OECD Secretary-General Angel Gurría. 'These guidelines will help the private sector grow their businesses responsibly by promoting human rights and boosting social development around the world.'” (OECD, New OECD guidelines to protect human rights and social development, May 25, 2011).

The connection between social norms, binding corporations and sourced in the expectations of investors, consumers, monitors, and corporate stakeholders, on the one hand, and the domestic legal systems of states, binding within the territories of states, on the other hand, both mediated through international norms representing consensus among public and private actors, is apparent in the Guidelines themselves.
Many multinational enterprises have demonstrated that respect for high standards of business conduct that can enhance growth.  Today's competitive forces are intense and multinational enterprises face a variety of legal, social and regulatory settings. In this context, some enterprises may be tempted to neglect appropriate principles and standards of conduct in an attempt to gain undue competitive advantage. Such practices by the few may call into question the reputation of the many and may give rise to public concerns.  (Guidelines for Multinational Enterprises, Preface, Para. 6).
As such, "The Guidelines clarify the shared expectations for business conduct of the governments adhering to them and provide a point of reference for enterprises and for other stakeholders. Thus, the Guidelines both complement and reinforce private efforts to define and implement responsible business conduct." (Id., Par. 7).  Importantly, the Guidelines now incorporate the U.N.'s Protect-Respect and Remedy framework that is becoming the basic standard for incorporating human rights standards into business behavior.  (Guidelines Chapter IV). "The chapeau and the first paragraph recognise that States have the duty to protect human rights, and that enterprises, regardless of their size, sector, operational context, ownership and structure, should respect human rights wherever they operate. Respect for human rights is the global standard of expected conduct for enterprises independently of State's ability and/or willingness to fulfil their human rights obligations, and does not diminish those obligations." (Guidelines, Chapter IV, Commentary on Human Rights).

As important, the revised Guidelines, and the effusive sentiments expressed on its revision, might promote some of the largest members of the OECD, to finally do more than pay lip service to the encouragement of the use of the procedures and mechanisms which are meant to be available to civil society actors to promote the standards set out in the Guidelines.,  For a gentle recent push in that direction, see, Bureau of Economic, Energy and Business Affairs, Report of the Investment Subcommittee of the Advisory Committee on International Economic Policy Regarding Implementation of the OECD Guidelines for Multinational Enterprises, Jan. 12, 2011.

No comments: