The OECD Guidelines: Why Global Businesses Should Take Note

Speakers

• Marie-France Houde, Senior Economist, Directorate for Financial and Enterprises Affairs, Organisation for Economic Co-operation and Development (OECD)
• Joris Oldenziel, Programme Manager, Centre for Research on Multinational Corporations (SOMO)
• Alan Yu, U.S. National Contact Point, U.S. Department of State, Bureau of Economic, Energy, and Business Affairs
• Cody Sisco, Manager, Advisory Services, BSR (Moderator)

Highlights

• The OECD Guidelines for Multinational Enterprises are the only government-backed standards for responsible business conduct today. They are based on universally shared principles and consistent with applicable laws and internationally recognized standards.

• The guidelines also include other global business standards such as the UN’s Guiding Principles for Business and Human Rights.

• Each member government designates one National Contact Point (NCP) to respond to complaints on companies’ adherence to the guidelines. The OECD is working to improve this process to help companies to take a more proactive approach to addressing problems.

Memorable Quotes

“Guidelines are voluntary, but not optional. I encourage all businesses to take the guidelines into account.” —Joris Oldenziel, SOMO

“Even if you are not causing adverse impacts, but you are associated with a business partner [that is], you should still take steps to prevent the adverse impacts from continuing.” —Joris Oldenziel, SOMO

“There has been a convergence of international baseline standards for companies to support and promote socially responsible business practices. This convergence is also broadly supported by emerging economies.” —Marie-France Houde, OECD

Overview

Sisco kicked off the session by explaining how the OECD guidelines serve as government recommendations for responsible business conduct. They are the only internationally backed standards that are endorsed by governments, and they use NCPs to help companies implement the guidelines.

After Sisco’s overview, Houde explained the guidelines in more detail, why they matter, and how they are being implemented. The guidelines provide voluntary principles and standards for responsible business conduct in areas such as human rights, disclosure, employment, the environment, and bribery. They also cover issues that other standards do not cover, such as consumer interests, science and technology, competition, and taxation. Forty-two governments subscribe to the guidelines, 34 of which are OECD members. All geographical regions are covered.

Houde explained that all signatories are obligated to establish a NCP with the mandate to promote the guidelines, engage enterprises on specific challenges, and contribute to the resolution of the issues that arise during implementation. This unique complaint mechanism allows the stakeholders of multinational enterprises to resolve issues arising from irresponsible corporate behavior through a mediation process run by government NCPs.

Houde then explained that the guidelines have been recently updated to include:

• A human rights chapter based on the UN’s Guiding Principles for Business and Human Rights
• Guidance on supply chain due diligence for suppliers, agents, and franchises
• New provisions on internet freedom

Next, Houde identified three areas of the guidelines that need improvement:

• Greater development of sector-specific guidance, particularly for the financial sector
• Better outreach to emerging economies where investments are made to gain buy-in and encourage more stakeholder engagement in the NCP process
• Improved processes for NCPs to help them properly address problems and complaints that take place anywhere along companies’ supply chains.

To further this conversation, Oldenziel discussed how the guidelines work in practice, and he described some of the challenges that companies face. At SOMO, Oldenziel researches human rights and labor rights in global supply chains. SOMO launched OECD Watch, a global network of more than 80 civil society organizations that informs the wider NGO community of the policies and activities of the OECD’s Investment Committee. OECD Watch then publishes its findings on the effectiveness of companies’ implementation strategies to garner the support of national stakeholders.

Oldenziel stressed the need for business to always exercise due diligence. The question is not whether a company contributed to adverse impacts, but rather how to exercise responsible due diligence to avoid contributing to adverse impacts in the first place. He provided the example of a company that sources T-shirts from a Chinese garment supplier that owns two factories, one that manufactures T-shirts and one that manufactures shoes. If human rights violations take place in the shoe factory, the company will still be associated with the human rights violations. More importantly, this case demonstrates that companies are responsible for incidents that occur beyond their first-tier suppliers.

Finally, Yu described how his role as the U.S. NCP is to promote the guidelines among business and other sectors, respond to inquiries and comments from stakeholders, and offer a forum for discussion to resolve issues. The panelists highlighted a case where Friends of the Earth filed a complaint with the Norwegian NCP against a Norwegian company for overfishing. As a result of this complaint, the supplier and the company developed a joint statement on sustainable aquaculture based on the guidelines.