A step forward in CSR history was made in Paris on May 25.
While its exact size and significance is yet to be determined, the adoption of new CSR guidelines appears to reflect a new level of commitment by OECD governments (and eight partner countries, including Argentina, Brazil, Egypt and Morocco) to encourage more responsible business practices.
The adoption of the revised OECD Guidelines for Multinational Enterprises (MNEs) by OECD ministers (who included Hillary Clinton, who chaired the adoption ceremony) is notable for three main reasons.
First, it is significant because it is the most recent and high level official international recognition of the responsibility of governments to refresh and reiterate their expectations of the private sector in relation to its social and environmental activities and impacts.
As noted in a previous article published by Ethical Corporation (OECD guidelines: Big company rules revised, January 2011), the OECD guidelines are not only the oldest and most comprehensive guidance on what constitutes good business practice, they are the only ones which governments have developed, approved and undertaken to promote. In many respects, this makes them the equivalent of a CSR “gold standard”.
Second, because the revised guidelines contain a number of important new elements reflecting the changing business environment since they were last revised in 2000. The new elements include a section on human rights, principles on the need to exercise due diligence, including down the supply chain, and a reference to reducing and reporting on greenhouse gas emissions in the context of climate change.
And, third, the guidelines are important because they were again the product of a multi-stakeholder consultation process, which involved inputs from representatives of government, business and industry, labour and NGOs. Indeed, given the difficulties intergovernmental processes have had in reaching agreement in recent years (think Doha on trade, and Copenhagen on climate), the outcome is something of a victory for the OECD and multilateral negotiations in general.
While the guidelines remain recommendations to business, and in this sense are voluntary and non-binding in nature, they contain a renewed commitment by governments to promote them through their respective National Contact Points (NCPs). A “new, tougher process for complaints and mediation” to has been put in place, the OECD secretariat claims.
“The business community shares responsibility for restoring growth and trust in markets,” says 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.”
The update of the guidelines is seen by OECD insiders also important because corporate responsibility is linked to support for open markets. In this respect, they point out, the guidelines are an important complement to trade and investment negotiations.
Like all multi-stakeholder processes, however, no-one was fully pleased with the outcome. Glasses of champagne, half full and half empty, come to mind.
While there was a clear sense of satisfaction that important progress had been made and that a stronger and more balanced tool had been successfully developed, the issue of implementation was widely identified as the guidelines’ potential Achilles’ heel.
Describing the outcome as a “victory”, the Dutch chair of the negotiations, Dr Roel Nieuwenkamp, was quick to stress that it was now necessary for business and governments to really implement the new guidelines. This meant “putting resources in the system and make their NCPs a credible, impartial, grievance mechanism”.
Echoing this, John Evans, general-secretary of the trade union advisory committee (TUAC) to the OECD, agrees that “the work to implement the updated guidelines starts now”.
TUAC, he says, is “calling on all adhering governments to upgrade their NCP structures and procedures, including setting up oversight or review bodies and to work with the trade unions and business and other stakeholders”.
For its part, OECD Watch, a coalition of over 80 civil society organisations, has welcomed the increased scope and relevance of the guidelines, but is also critical of the failure to include “credible enforcement mechanisms”. The negotiations, in its view, had missed a “once in a decade opportunity” to provide for some kind of sanctions if the guidelines are breached.
“It remains to be seen whether the update will make a real difference to the day-to-day struggles of victims of corporate abuse,” says OECD Watch negotiator Joris Oldenziel.
A respectable number of leading companies state in their annual sustainability reports that they have been using the guidelines up to now. How widely the new guidelines are used will doubtless soon be reflected in the next round of reporting.
Paul Hohnen is an Amsterdam-based consultant who advises, speaks and writes on global sustainable development issues. He is also a member of the Ethical Corporation advisory board.