Volkswagen Shows Need for Sustainable Corporate Governance : Boards should embed sustainability in corporate DNA

Last week news broke that Volkswagen has been involved in diesel emissions scandal in which they had rigged up to 11 million of their vehicles to pass emissions tests. The Volkswagen scandal involves cheating of consumers, cheating of taxpayers, cheating the climate, and cheating of governments. The scandal shows a failure of Volkswagen’s consumer policy, its integrity policy and its corporate responsibility policy. It also highlights a clear failure of its corporate governance. In other words, shareholders were also cheated. The loss of billions of shareholder value within just one week indicates how much the companies’ board oversight as well as it risk management systems have failed.

Board rooms of enterprises should be a driving force for change and corporate boards should practice what I like to term ‘’Sustainable Corporate Governance.’’ In other words companies should embed corporate sustainability and responsibility in their corporate DNA. This was something clearly missing in the DNA of Volkswagen.

A business case and a moral case for sustainable corporate governance

Expectations of corporations to manage environmental and social risks throughout their operations has increased with the development and recognition of international standards such as the UN Guiding Principles for Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines).  Beyond emerging global expectations, businesses, like Volkswagen, are learning that environmental and social risks, including human rights issues can pose material risks to their business operations including serious reputational damage, opportunity costs in the form of lost future opportunities and direct costs arising from lost productivity due to temporary shutdowns and senior staff time being diverted to manage grievances.

For example in the case of the Volkswagen scandal estimated costs associated with recalls as well as penalties that will have to be paid are being reported at USD 35 billion.[1]  Furthermore the case of Volkswagen is by no means an isolated one. A recent study by Vigeo[2] showed that CSR related sanctions for companies are in fact quite common.  Nearly 20% of companies in a sample of over 2,500 were found to be subject to such sanctions between 2012 and 2013, amounting to penalties upwards of EUR 95.5 billion.

What is the role of a corporate board?

Traditionally the issues of sustainability and of corporate governance have been treated as unrelated subjects and kept siloed from one another. This partly explains why a company like Volkswagen are continuing to get in trouble. Indeed in the wake of the Volkswagen scandal the New York Times released an article entitled Problems at Volkswagen Start in the Boardroom. The article described how poor corporate governance structures and hostility towards environmental regulations at Volkswagen has contributed to its current situation. [3]

 Responsibility to manage environmental, social and governance risks is increasingly considered a central element of the fiduciary duty of corporate board members, not only because these risks can also result in significant commercial impacts but also because the conception of board responsibility is being expanded beyond simply maximizing profits for shareholders to also avoiding negative impacts to stakeholders. For example the International Corporate Governance Network recently published a report recognizing that human rights issues are fundamental to good corporate governance.[4]  Reading the recommendations of the OECD Guidelines and OECD Principles for Corporate Governance in tandem likewise reveals a strong relationship between the two and suggests sustainable corporate governance is an approach that responds to the recommendations of both instruments. Thus corporate boards should play a leading role addressing risks to stakeholders and establishing and promoting a culture of corporate responsibility.

In the first instance this means establishing clear buy-in by the board or upper management on responsible business conduct (RBC) potentially through integrating RBC issues into company policies or aligning company practice with international instruments such as the UNGPs and OECD Guidelines.

In addition to having to having policies on RBC and strongly communicating them throughout an organisation the board should have a direct responsibility for the implementation and oversight of RBC issues.  Recent studies by, for example, the Conference Board and the Boston Consulting Group point to Board oversight as a top driver of a company’s attention to sustainability.

This practice is reflected in several existing standards:

• For example the Indian Companies Act makes mandatory to have a board member that is responsible for responsible business conduct.
• The Dutch Corporate governance code also integrates responsible business conduct in the tasks of the Supervisory Board and the Executive Board, explicitly making management responsible for the development of results and corporate social responsibility issues that are relevant to the enterprise.
• Under the OECD Guidelines the board is explicitly given direct responsibility for certain issues, for example for ensuring risk management, financial and operational control, and compliance with the law and relevant standards regarding taxation.

Sustainable remuneration

Many companies are quick to declare the importance of sustainability and point to corporate successes in this regard. However, unless sustainability is tied to measures of performance it often remains simply window dressing and a side show within a company. The board should play a role in establishing the right incentives for sustainability. This can include integrating sustainability experience into recruitment criteria for upper management or building RBC goals into remuneration packages.

The practice of linking remuneration to sustainability performance is only beginning to emerge but appears to be on the rise. A recent report by Ceres found that while in 2012, only 15 percent of the companies evaluated linked executive compensation to some sustainability metrics, 24 percent of the 146 companies surveyed in 2014 do so.[5] Examples of good practice in this regard are becoming more prevalent and serve to inspire the mainstream. For example Unilever was one of the first major multinationals to introduce incentive structures linked to sustainability criteria, and others have been taking heed as well.  In 2010 US managers of DSM, a global science based company, did not receive a bonus because they did not achieve their greenhouse gas emissions targets.  Likewise Xcel Energy ties a third of its CEO’s annual bonus to energy and greenhouse gas emission goals which are publically reported. Others have gotten bonuses because of a higher ranking in the Dow Jones Sustainability Index. In 2008 Intel started to link 3 percent of its employees’ annual bonuses to environmental sustainability metrics and goals.

If companies really want to embed sustainability in their corporate DNA, incentive structures based on sustainability criteria should not be limited to executive compensation but should extend to all actors which have the capacity to impact sustainability performance such as sourcing directors, designers, environmental and social managers and so on.

Furthermore, the sustainability targets linked to performance pay should be relevant, material, challenging and meaningful to the organization and its stakeholders. The metrics of such incentive structures should be transparent to allow for outside evaluation.

Sustainability reporting

Lastly the board should be involved in communicating on RBC through reporting on non-financial information such as policies and compliance with codes of conduct regarding environmental and social issues. This is something that is already becoming common practice. For example the EU non-financial reporting  directive  requires companies concerned to disclose in their management report information on policies, risks and outcomes as regards environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues, and diversity in their board of directors. Similar legislation also exists in China for SOE’s and in India. Likewise the stock exchanges of South Africa, Brazil, and in some South East Asian countries make reporting of certain non-financial information mandatory for listed companies. In this area the OECD Guidelines outlines what good practice is in their chapter on Disclosure. [6]

Boards should not only promote non-financial reporting but they  should also take responsibility for it by formally sign off on the company’s sustainability report before publication, which confirms that sustainability and transparency are priorities for the company.

Oversight and compliance

In addition to providing the right incentives for sustainability it is important to also put in place strong oversight and compliance systems to ensure that these incentives do not lead to perverse results such as in the case of Volkswagen.  In the case of Volkswagen an insular corporate board and a long chain of complicity with regard to fraudulent activities clearly demonstrated that compliance management was not functioning as it should.

In conclusion, sustainability should be embedded into the DNA of business operations and their value chains.   Although traditionally treated a separate issue, sustainability must be integrated into corporate governance with regard to board responsibilities and standards of disclosure and transparency. Strong compliance management systems must also be prioritized. Given the commercial risks and benefits at stake institutional investors should be insisting on this.  In this regard corporate boards should practice sustainable governance by ensuring that sustainability standards are upheld throughout global business operations, that incentive structures are linked to sustainability performance and that they engage in meaningful integrated reporting on sustainability issues. The new board of Volkswagen should start doing that as soon as possible.

[1] Steve Dee,  Dieselgate Scandal Could Cost Volkswagen Up To $35 Billion, Forbes, September 24, 2015, http://www.forbes.com/sites#/sites/greatspeculations/2015/09/24/dieselgate-scandal-could-cost-volkswagen-up-to-35-billion/

[2] Paying the penalty: The cost of CSR misconduct, Vigeo, May 2015

[3] Problems at Volkswagen Start in the Boardroom, New York Times, September 24, 2015. http://www.nytimes.com/2015/09/25/business/international/problems-at-volkswagen-start-in-the-boardroom.html?_r=0

[4] See ICGN Viewpoint: Human Rights, International Corporate Governance Network, April 2015. Available at https://www.icgn.org/policy/viewpoints/human-rights

[5] Ceres, Gaining Ground: Corporate progress on the Ceres roadmap for sustainability, Ceres and Sustainalytics (2014)

[6] Throughout the Guidelines reporting with regard to specific substantive areas such as disclosure on greenhouse gas emissions and on how human rights impacts are addressed, is also expected. Reporting is also a key part of the five step framework for due diligence promoted by the OECD.

The road to responsible investment treaties

by Roel Nieuwenkamp and Kimmo Sinivuori

Originally published by Columbia FDI Perspectives  Perspectives on topical foreign direct investment issues, No. 134 November 10, 2014, Columbia Center for Sustainable Investment.   Available in English and Chinese.

As the OECD Guidelines for Multinational Enterprises, first adopted in 1976 and
updated for the fifth time in 2011, are approaching middle age, it is appropriate to
reflect on how the use of these far-reaching recommendations for responsible business
conduct can be promoted in international investment agreements (IIAs). During the
Guideline’s almost four decades of existence, the landscape of the global economy
has continuously evolved, and securing sustainable development has become a key
international issue.

The OECD Guidelines is a unique tool to address this issue, as they provide voluntary
principles and standards for responsible business conduct in areas such as
employment and industrial relations, human rights, environment, information
disclosure, combating bribery, consumer interests, science and technology,
competition, and taxation.

Economic growth is essential for achieving sustainable development, and private
investment — both domestic and foreign — is its engine. The fundamental question
then is how to ensure that such investment is environmentally sound, promotes labor
standards and respects human rights.

The main aim of IIAs has been, and remains, the protection of legitimate foreign
investors and their investments in the contracting parties. IIAs have so far imposed
obligations on contracting parties only, and not on investors. The rationale of this
approach has been that investors’ obligations must come from domestic legislation, be
it environment or labor-related, and that foreign investors must respect that legislation
in order to be protected by the treaties.

With this in mind, governments have so far encouraged foreign investors to do more
than they are obliged to under the law, based on instruments such as the OECD
Guidelines and the United Nations Guiding Principles on Business and Human
Rights. The question today is whether we can use IIAs to advance the same objectives
as these instruments. Our answer is that we can, if we introduce some carefully
drafted, smart clauses to new treaties.

An approach would be to introduce into an IIA a reference to the OECD Guidelines.

This can be done by preamble language where the parties to a treaty would recognize
the need to promote the Guidelines. This would most likely be the easiest solution —
but at the same time would not create binding obligations on the parties. A stronger
alternative would be to introduce a provision that would oblige the parties to promote
the Guidelines. It could also include an obligation to set up a non-judicial grievance
mechanism that would assist companies and complainants in finding a solution to
issues related to implementation of the Guidelines, through mediation or conciliation.

However, the legally non-binding nature of the Guidelines raises the question of
whether the obligation can only be placed on the contracting parties and only to the
extent that it would cover promotion and a non-binding grievance mechanism. The
legitimate concern has been that a voluntary instrument would be made mandatory
indirectly through another binding international agreement.

Nevertheless, we are in favor of exploring a solution that would stipulate that only
those investors that can demonstrate compliance with the Guidelines would be
eligible for protection under IIAs. This is easier said than done and involves many
complex procedural and substantive issues. It is, however, conceivable to exclude
protection for investments that are linked to corruption. Another option worth
exploring is to include a provision that specifies that materially relevant breaches of
the Guidelines are taken into account by a tribunal when deciding on the merits of a
claim or on potential damages awarded.

The abovementioned approach needs to be complemented by actionable clauses in
treaties that would ensure compliance from a contracting party to implement specific
measures related to the environment, labor standards and human rights. A treaty could
stipulate, for example, that the contracting parties would undertake to become party to
and implement relevant international agreements or standards related to environment,
human rights and labor standards.

To conclude, we believe that, through the addition of clear and smart clauses or
preamble language, it is possible to advance responsible business practices in IIAs
while at the same time protecting the interests of responsible investors and their
investments against maltreatment.

Canada Introduces Enchanced CSR Strategy for Extractives

This week Canada announced their new CSR strategy “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad.”   This strategy reaffirms Canada’s commitment to implementation of strong ethical standards in business and makes explicit reference to OECD instruments.

For example key elements of the strategy include:

”’In situations where parties to a dispute would benefit from formal mediation, the CSR Counsellor will make a referral to Canada’s National Contact Point,  the robust and proven dispute resolution mechanism, guided by the OECD MNE Guidelines on responsible business conduct, and active in 46 countries; (…)

Inclusion of benchmark CSR guidance released since 2009, namely the United Nations’ Guiding Principles on Business and Human Rights, and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (…)”

Full text of the strategy and relevant links are available here. 

OECD’s Human Rights Grievance Mechanism as a Competitive Advantage

The link between the National Action Plans for Business and Human Rights and the OECD Guidelines

Currently the UN Working Group is seeking consultation on what substantive elements should be included in National Action Plans (NAPs) for business and human rights. NAPs are strategy documents that States are encouraged to develop as part of the State responsibility to disseminate and implement the UN Guiding Principles on Business and Human Rights (UNGPs).[1] Several states have already developed and submitted NAPs. While such plans will vary according to specific state contexts, some overview of the elements that should  be covered within the plans will be helpful in achieving coherence on principles for strengthening implementation of the UNGPs.

UN Guiding Principles for Business and Human Rights, OECD Guidelines for Multinational Enterprises and National Contact Points

The 2011 update of the OECD Guidelines for Multinational Enterprises (‘the Guidelines) included a stronger human rights chapter fully aligned with the UNGPs. Countries adhering to the Guidelines, currently comprising 46 nations, are required to set up National Contact Points (NCPs). The role of NCPs is to raise awareness on expectations covered under the Guidelines and to serve as good offices for resolution of issues, or ‘’specific instances’’, arising from the alleged non-observance of the Guidelines. Thus, through the vehicle of NCPs, the Guidelines are a de facto implementation mechanism of the UNGPs. Since 2011 the chapter on human rights of the Guidelines has been cited in 54 specific instances brought to NCPs and has been the most frequently cited chapter of the Guidelines over the last two reporting periods.[2] As such NCPs should be a principle component of NAPs.

NCPs are also valuable in that they can provide guidance on related OECD tools which promote human rights, for example the OECD Due Diligence Guidance for Responsible Mineral Supply Chains, which aims to end the financial and commercial support of armed groups and militias and stop the most egregious human rights abuses associated with mining in high-risk and conflict-affected areas. Where relevant, these types of tools should likewise be incorporated into NAPs and can be reinforced by NCP mechanisms.

National Contact Points: an effective and non-adversarial platform for dialogue

The NCP mechanism has a growing track record of agreements resulting through mediation. Just recently the UK NCP resolved a complaint brought by the World Wildlife Fund based on the activities of Soco, an oil exploration company, in Virunga National Park, a World Heritage Site located in the Democratic Republic of the Congo.  With respect to human rights the NCP recommended dialogue on whether the level of Soco’s human rights due diligence was appropriate to the context of the DRC.  The mediation resulted in agreement amongst the two parties including agreement by Soco to cease its operations, to never again jeopardize the value of any other World Heritage Site and to conduct environmental impact assessments and human rights due diligence in line with international standards.[3]

The Soco case is just one of many examples of the added value NCP procedures could have in the area of human rights and business. As a non-judicial mechanism the NCP mechanism provides a unique venue for resolution of issues related to human rights and business. This mechanism not only contributes to strengthening implementation of the UNGPs, specifically through providing access to remedy, but also serves as a useful tool for businesses themselves. Specific instances brought for mediation to NCPs are not legal procedures; likewise NCPs are not legal authorities, or a ‘CSR court’. Utilizing the NCP mechanism provides a venue for enterprises to discuss and explore issues regarding responsible business conduct in a low-cost, non-adversarial manner, which can avoid further escalation of disputes.

Many companies are still somewhat wary of the NCP procedure. Their hesitance reminds me of former US President Ronald Reagan’s famous quote: “The most terrifying words in the English language are: ‘’I am from the government and I am here to help”. On the other hand, a growing number of companies appreciate the assistance NCP’s can provide. [4]

Furthermore avoiding NCP procedures by refusing to come to the table can be harmful to a business. A refusal to cooperate will not make existing issues or campaigns disappear, rather it can harm relationships between the company and parties seeking mediation and result in a lost opportunity to discuss disagreements in a neutral and proactive environment.  Thus, businesses should take advantage of the good offices of NCPs and engage in mediation when issues arise. Experience shows that a problem solving approach to conflict works much better than a legalistic and defensive approach; when it comes to dispute resolution private sector representatives have communicated that it is important to keep lawyers away from the issue for as long as possible.

National Contact Points, an integral component of National Action Plans

The unique role of NCPs as an implementation mechanism of the UNGPs coupled with their ability to provide a neutral and effective platform for dialogue and dispute resolution makes them an important tool for business as well as government.  A good NCP can provide a competitive advantage in the business climate. It contributes in levelling the playing field for business, it raises awareness of expectation and assist when problems arise. However NCPs only represent a competitive advantage if they are sufficiently resourced and active. Governments adhering to the Guidelines that neglect to set up well-functioning and accessible NCPs or that are overly restrictive in accepting cases for mediation are denying an important service to industry and related stakeholders. They are also denying themselves of an effective mechanism for implementation of expectations under the UNGPs and the Guidelines.

Thus the role of NCPs should be a central feature of NAPs of countries adhering to the Guidelines. Countries that do not adhere to the OECD Guidelines are recommended to set up a similar mechanism, for example one linked to their National Human Rights Institute (NHRI).[5] As more countries developed their NAPs in the coming months I look forward to seeing this feature adequately integrated into national strategies.

This article was originally published on the website of the Institute for Human Rights and Business.

 

[1] For more information see: http://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspx

[2] The last two reporting periods comprise 06/2012-06/2013 and 06/2013-06/2014.

[3] See Final Statement following  agreement reached in complaint  from WWF International against  SOCO International plc, July 2014

[4] In a recent survey MNEs indicated that the NCP procedure has in a number of cases led to a meaningful stakeholder dialogue and a solution of the disagreement. See Second BIAC Survey of Member Companies’ Experiences in NCP Specific Instance Procedures Recommendations for Notifying Parties Discussion Paper for the 2013 Annual Meeting of NCPs, June 2013

[5] For information on relationship between NHRIs and the OECD Guidelines see Memorandum of Understanding between the OECD and the Association International Coordinating Committee of National Human Rights Institutions (ICC) and  Fact Sheet on National Human Rights Institutions  and the OECD Guidelines for  Multinational Enterprises

Speech by Prof. Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct, 8th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains

Roel Nieuwenkamp opening remarks

8^th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains

3 November 2014

Son Excellence Monsieur le vice Premier Ministre de la RDC, Excellence Ministre de Mines de la RDC, Excellence Minister of Natural Resources from Rwanda, Excellence Executive Secretary of the ICGLR, Ambassador of Canada, Ambassadors, ladies and gentlemen, good morning.

The OECD is pleased to co-organise our 8^th ICGLR-OECD Forum for the first time in the Democratic Republic of the Congo, which remains a key country in our fight to promote responsible business conduct in global mineral supply chains.  I would like to thank the Government of DRC for their support in making this Forum happen in country, but more importantly for continuing to be a partner with the OECD in our work to end conflict minerals and unleash broad based development.

This Forum provides the chance to showcase real concrete progress. In my hand I have the Fairphone, an excellent symbol of concrete progress. There is also a fair microprocessor. I would like to compliment the companies that stick out their necks to make this happen.

And I hope and expect to be able to present for example a FairPad, FairWatch and Fair wedding rings with Fair diamonds on top next year!

This Forum also provides the chance for us to focus on implementation of OECD Due Diligence Guidance for Responsible Mineral Supply Chains on the ground – and focus on implementation of the various systems and procedures that are part of the ICGLR Regional Certification Mechanism.

It has been over 3 years since the implementation programme was launched, and the focus up to now has been very much on getting things started. Judging by enormous amount of interest in this Forum, particularly from regional actors, but also from international industry, it seems we are on our way. But still, a lot of work remains to be done.

To date, this Forum has focused on encouraging uptake of responsible sourcing. And so one of the key elements of the OECD’s implementation programme is our outreach and awareness raising work. This last year we have made some significant progress in this respect:

• I am pleased to inform you that just last week, the OECD signed a Memorandum of Understanding with the China Chamber of Commerce Metals, Minerals & Chemicals, Importers & Exporters. The Chamber which goes by the acronym CCCMC has over 6,000 member companies and metal associations in China. We will work with them over the coming months to help operationalise the OECD Guidance for Chinese companies, whom as you all know are key players at all levels of the 3T and gold supply chains. We are also in initial positive talks with the Shanghai Gold Exchange, and this we hope will lead to some positive outcomes in 2015.
• We also launched a new partnership with Borsa Istanbul to enable the implementation of due diligence in Turkey. We held one workshop with them last year, and will hold another training event at the end of this month.
• As many of you know, the OECD Due Diligence Guidance applies in fact to all minerals, from any conflict-affected or high-risk area in the world. It is not a just focused on minerals from the Great Lakes Region, although most of our efforts have been in this region. In this respect, we have also made progress to ensure uptake in other mineral producing countries across the globe:
  • This year we began our implementation programme in Colombia. The Colombian Government adhered to the Council Recommendation on the OECD Due Diligence Guidance in 2012, and has further demonstrated its commitment to ensure its industry implements the OECD Due Diligence Guidance. After a series of events with the OECD in February this year, we are now undertaking baseline assessments of the Colombian gold trade in order to produce practical recommendations that will help build a responsible and conflict-free gold production and trade in the country.
  • We are also pleased to have for the first time the participation of the Government of Cote d’Ivoire in this Forum. The UN Security Council has recently lifted the ban on diamond exports from the country, following the Kimberley Process recommendations. I look forward to hearing reports from the Ivorian Government later today and more importantly, to cooperating with them as they move forward with formalising their gold sector.
• The OECD have also taken a pro-active approach to train government agents, industry and civil society leaders in the DRC this year, with Train the Trainer workshops in Bukavu in July and Kinshasa earlier this week.

This Forum over the last three years has focused on technical “nuts and bolts” of due diligence (e.g. traceability systems, mine sites qualifications, smelter audit programmes and certifications, in other words, what due diligence means, what are the steps and systems that need to be in place and how it can be implemented). Now it is time now to remind ourselves of the Human Rights element of the Guidance, and what it is we are trying to do. In a nutshell, to end the financial and commercial support of armed groups and militias and stop the most egregious human rights abuses associated with mining in high-risk and conflict-affected areas. Fundamentally, due diligence efforts are designed to ensure respect for human rights, so that mineral production and trade leads to positive impacts on the ground to improve the lives of affected communities in mining areas.

Doing no harm also means doing well. And from an investor point of view, there is a growing call for transparency in mineral supply chains, and accountability of state institutions governing the sector. Due diligence efforts of companies to source responsible minerals can not be sustained without broad-based improvements in mineral sector governance. For this reason, our last day of the Forum will examine how mining sector governance and investment climates can attract and sustain responsible investment and trade.

I would like to take the opportunity to thank all our donors, Canada, Switzerland and Sweden and notably the EU who is funding this conference and whose support this past year enables action and results.

Our work is far from over, and we need all of you to continue to stay engaged in this region and stay the course. Each actor has its role, whether it’s the local mineral traders that should be checking their suppliers and sourcing from conflict-free mines,  or the downstream industry that applies pressure, enables progressive improvements and creates a market for responsible minerals from conflict areas. The local government that should help formalise the artisanal mining sector and establish and enforce its own policies and laws on due diligence and associated reporting. And the civil society organisations as our eyes and ears on the ground, to keep us on our toes but also provide vital information and support for private sector due diligence and governance improvements.

Please, I urge you all to continue on and strengthen your work, to help us make the support of armed groups through mineral chains difficult for all those who are illegally benefiting from the vast natural resources of this region, and so that the mineral sector can truly become a source of prosperity, revenue and development.

Thank you

EU & Singapore promote Responsible Business Conduct and the OECD Guidelines in Free Trade Agreement

Reference to responsible business conduct is becoming increasingly common within investment treaty law, including within bilateral trade agreements.[1]

This trend is reflected within the latest EU-Singapore Free Trade Agreement which makes explicit reference to social responsibility practices and the OECD Guidelines for Multinational Enterprises:

”When promoting trade and investment, the Parties should make special efforts to
promote corporate social responsibility practices which are adopted on a voluntary
basis. In this regard, each Party shall refer to relevant internationally accepted
principles, standards or guidelines that it has agreed or acceded to, such as the
Organization for Economic Cooperation and Development Guidelines for
Multinational Enterprises, the UN Global Compact, and the ILO Tripartite Declaration
of Principles concerning Multinational Enterprises and Social Policy. The Parties
commit to exchanging information and cooperating on promoting corporate social
responsibility.”

Full text of the agreement can be found here.

[1]  For more information see Investment treaty law: sustainable development and responsible business conduct: A fact finding survey OECD, 2014; Information on OECD work on international investment law generally is available here.

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Responsible Business Conduct: companies need ‘business diplomats’ to implement OECD Guidelines for Multinational Enterprises

This article by  Raymond Saner and Lichia Yiu discusses the challenges of implementing the OECD Guidelines and proposes that MNEs consider appointing business diplomats, who the authors consider are best qualified to meet these complex but also increasingly important business challenges.

The full text of the article can be accessed here:

HJD_Saner Business Dipolmacy Competence

Responsible Business Conduct in Central Asia and South Caucasus

Check out the latest OECD publication on RBC in Georgia!
‘’As part of its work to implement the OECD Guidelines for Multinational Enterprises, the OECD is examining the role of responsible business conduct in building healthy business environments in Central Asia and South Caucasus.

Kazakhstan and Georgia are the first countries to be reviewed in this series of reports focused on responsible business conduct and sustainable development throughout the region. This work contributes to the OECD-Eurasia Competitiveness Programme and is supported by the Government of Austria. It was launched in May 2014 at the Astana Economic Forum in Kazakhstan.’’

Conflict translates environmental and social risk into business costs

Excellent article published by the National Academy of Sciences of the United States  investigates the business costs of company–community conflict and its role in the regulation of sustainability performance in the extractive industries. Read the full article here! 

OECD MNE Guidelines Featured in US Global Anti-Corruption Agenda

A fact sheet  on the US Global Anti-corruption Agenda was released on September 24th stating that:

”The United States will develop a National Action Plan to promote and incentivize responsible business conduct, including with respect to transparency and anticorruption, consistent with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines on Multinational Enterprises”