For the first time, human rights standards that multinational corporations should observe have been spelled out in guidelines on corporate responsibility backed by governments of some of the world’s leading economies. Not only are companies large and small expected to abide by these standards in their own operations, they are expected to promote them to their suppliers.
The guidelines, developed by the Organisation for Economic Co-operation and Development (OECD), were adopted in May 2011 by 42 OECD and non-OECD countries. They revise and beef up principles of corporate social responsibility previously adopted by the OECD in 2000, and “express the shared values of the governments of countries” that are the source of much of the world’s FDI.
The 2011 guidelines cover nine areas: disclosure, human rights, employment and industrial relations, environment, bribery, consumer interests, science and technology, competition and taxation. They specify that corporations should respect human rights even in countries whose governments do not. Companies are also expected to carry out human rights due diligence, a process of identifying, preventing and mitigating the human rights impacts of their operations and those of their suppliers.
“In principle, we have a positive reaction. We think we can live with it,” says Winand Quaedvlieg, who led a committee that provided input to the OECD on behalf of the Business and Industry Advisory Committee (BIAC), an independent international business association. BIAC is now helping its members to understand and implement the new standards.
The guidelines are voluntary and not legally enforceable. Nevertheless, Mr Quaedvlieg says, breaching them could have important consequences for a company. It would provide a basis for a government or non-governmental organisation to question company operations or apply political pressure. On the other hand, he notes, a company could cite the guidelines as a defence against demands that it has gone beyond what they specify.
The fact that multinationals based in countries such as China, Russia and India have not signed up to the guidelines and are therefore under no obligation to observe them does worry BIAC members, Mr Quaedvlieg says. He hopes their multinationals can be encouraged to comply.
For Farid Baddache, European director of Business for Social Responsibility, a business group with 250 member companies, the guidelines offer clarity and a framework for discussion of corporate responsibility.
However, Mr Baddache believes their effectiveness will depend partly on the quality of oversight by each national contact point (NCP) – a government office responsible for encouraging observance of the guidelines and resolving disputes. In the UK, the NCP is the Department of Business, Innovation and Skills. In the US, it is housed in the State Department. Following criticism of some NCPs, the revised guidelines strengthen their role and aim to improve their performance.
For multinationals, what is expected of them is straight-forward. Not only should they exhibit the highest standards of corporate conduct in their own operations, they should also aim to disseminate those standards to the communities and countries in which they work.