OECD’s new guidelines for multinationals will prove challenging
Does the adoption of new corporate responsibility guidelines in June reflect a new level of commitment by OECD governments? It certainly would seem so.
While the Guidelines for Multinational Enterprises remain voluntary and non-binding for business, they contain a renewed commitment by governments to promote them through their respective National Contact Points. In addition, what OECD describes as new and tougher processes for complaints and mediation have been put in place.
OECD commentators say there are three main reasons why the adoption of new guidelines is significant.
First, it is a high level recognition of the responsibility of governments to refresh and reiterate their expectations of private sector social and environmental performance. They provide the most comprehensive guidance on what constitutes good business practice, and are the only ones that governments have cooperated on and undertaken to promote.
Second, the revised guidelines contain a number of new elements that reflect the changes in the business environment since the previous revisions in 2000. These include a section on human rights(largely reflecting work by the UN secretary-general’s special representative John Ruggie), the need to exercise due diligence in supply chains, and references to reducing and reporting on greenhouse gas emissions.
Third, the guidelines are important because they were the product of a multi-stakeholder process, involving inputs from representatives of government, business, unions and NGOs. Given the difficulties some other intergovernmental processes have had in recent years – look at the UN climate negotiations for example – the outcome for the OECD guidelines is most welcome.
OECD insiders are pleased about the updated guidelines as good sustainable business practices and corporate responsibility are linked to support for open markets. The guidelines are important in that they complement trade and investment negotiations.
Dr Roel Nieuwenkamp, managing director for trade policy and globalisation at the ministry of economic affairs, agriculture and innovation in the Netherlands, chaired the negotiations. He says the most important challenge for companies is that they “now have to work on credible due diligence systems to identify and manage the risks of causing or contributing to adverse impacts”. This, he argues, will require some serious effort.
Nieuwenkamp believes that even leading multinationals “in the vanguard of corporate responsibility” are not yet ready with “good risk-based due diligence systems”. Beyond the leaders, he says the mainstream has a lot to do “to implement the basics of responsible supply chain management”.
The OECD Watch network has welcomed the changes to the guidelines, but says the implementation procedures “fall short of what is needed” to ensure that the guidelines are effective. Rather, the updated guidelines should have contained “investigative powers and the ability to impose some kind of sanction when the guidelines are breached”. OECD Watch says the National Contact Points will need to commit to resolve disputes and help those adversely affected by company misconduct.
Underlining this, Joris Oldenziel, a negotiator on behalf of OECD Watch, says he is going to wait and see “whether the update will make a real difference”.