The OECD Guidelines for Multinational Enterprises: Time for a serious upgrade

The task ahead for the OECD is to address the shortcomings of the OECD Guidelines, most notably in the area of human rights, supply chain coverage and effectiveness of National Contact Points in resolving conflicts, argues Joris Oldenziel

The task ahead for the OECD is to address the shortcomings of the OECD Guidelines, most notably in the area of human rights, supply chain coverage and effectiveness of National Contact Points in resolving conflicts, argues Joris Oldenziel In June this year, the OECD started the long-awaited revision process of the OECD Guidelines for Multinational Enterprises.

Ten years after their last revision, it’s about time the instrument gains relevance and makes a more meaningful contribution to global responsible business conduct. OECD Watch, a global network of civil society organisations, would like to see a major overhaul of the instrument to increase its effectiveness.

There is no doubt that in the last decade, an increasing number of corporations accept they have a responsibility to respect human rights and the environment throughout their operations and supply chains.

Company use of and reference to international principles and guidelines, such as Global Compact, ILO Declarations and the OECD MNE Guidelines, has grown. Many governments too, such as the Dutch and Norwegian, have shaped their policies related to corporate responsibility around these standards.

Yet, recent years has also witnessed some of the worst violations of these same standards principles, with scandals such as Trafigura’s dumping of toxic waste in Ivory Coast and BP’s oil spill in the Gulf of Mexico.

Such blatant lack of proper human rights and environmental impact assessments of large multinational corporations, in combination with the greedy and speculative business behaviour exposed by the financial crisis, has plummeted trust in business. Few still believe that corporations will act in the interest of society at large on a purely voluntary basis.

Beef them up

A more robust and enforceable global framework seems to be needed to set a minimum level of responsible business behaviour worldwide. Apart from ensuring businesses do no harm, the business community should be challenged and rewarded to do better and contribute to the overall objectives of sustainable development.

The OECD Guidelines, despite inherent weaknesses such as global coverage (being a standard of the OECD adhering governments) and their voluntary nature, can be a meaningful tool with the potential to make a significant contribution to better business conduct and sustainability.

Their normative framework includes mandatory aspects regarding fundamental and universally recognised rights, as well as voluntary recommendations to contribute to sustainable development.

Their broad coverage of issues, government backing and grievance mechanism where stakeholders can file complaints at National Contact Points (NCPs), make them rather unique in the plethora of existing codes, guidelines and principles. But so far governments have failed to realize this potential.

OECD Watch has analyzed the contribution of the OECD Guidelines to responsible business conduct, and concluded that they have not delivered on their promises.

While there may be increased reference of the OECD Guidelines in company codes, there is little evidence that the OECD Guidelines have had a particularly strong influence on the way businesses have behaved in the last decade in their global operations.

Their added value to other available corporate responsibility instruments must therefore be sought in its conflict resolution mechanism, when stakeholders allege corporations have violated the OECD Guidelines in specific cases.

NCP’s simply don’t work

OECD Watch has kept track of all cases filed by NGOs since 2000 with NCPs, and analysed the way they were handled and their outcomes in terms of real improvements of the situation. By June 2010, almost one hundred cases were filed by NGOs.

In only a handful of these cases these efforts have resulted in real improvements in corporate behaviour. In another 10 cases, NCPs have made useful recommendation to improve business conduct, but they ultimately have not materialised in concrete improvements.

The key reasons for this bad track record seems to be lack of political will and lack of teeth of NCPs to ensure companies take the NCP process serious and have a real incentive to find a resolution, given the possibility of consequences if found to be in breach.

As OECD Watch has asserted for many years, there has been a longstanding failure on the part of government to ensure effective corporate accountability and redress for the adverse impacts of corporate behavior.

The task ahead for the OECD and adhering governments is now to address the shortcomings of the OECD Guidelines, most notably in the area of human rights, supply chain coverage and effectiveness of NCPs in resolving conflicts.

Only when these issues are adequately addresses in the revision, the OECD Guidelines can become a credible, legitimate and enforceable standard to resolve corporate abuses and promote sustainable development in the 21st century. Joris Oldenziel is senior researcher at SOMO, the centre for research on multinational corporations, and coordinator of OECD Watch.

Source: Ethical Corporation Datum: 26 juli 2010