Dirty Diesel and Corporate Responsibility

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)


Around 500,000 premature deaths per year is the shocking cost of dirty diesel.[1] In September, a Public Eye investigation entitled Dirty Diesel, How Swiss Oil Traders Flood Africa with Toxic Fuels exposed how international oil companies, traders and port companies are involved in deliberately lowering the quality of fuels to sell to West-African countries causing damaging health effects. The study has placed this issue higher on the international agenda and complements the report released one month earlier by the International Council on Clean Transportation and UN Environment on Cleaning Up the Global On-Road Diesel Fleet – A global strategy to introduce low-sulphur fuels and cleaner diesel vehicles.

Recently, I was invited to discuss the corporate responsibility angle of the issue of Dirty Diesel. What do international standards such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles for Business and Human Rights  say about responsible business in this regard? In broad strokes, they provide a lens to discuss dirty diesel: the State duty to protect and the corporate responsibility to respect. The damaging health impacts of sulphur in diesel in West-Africa is first and foremost an issue of the state duty to protect its citizens from negative impacts on their health. Does that mean that companies, in this case Swiss oil traders and oil companies are off the hook? No. Independent of the state duty, there is a corporate responsibility to respect the human rights of citizens. In other words: companies cannot hide behind a government failure. This is a key point of departure in the discussions on corporate responsibility in the dirty diesel issue.

What are lessons learnt from the implementation of the OECD Guidelines and UN guiding principles in the system of National Contact Points (NCPs), the globally active grievance mechanism for responsible business conduct? The Environment chapter of the OECD Guidelines sets out clear expectations: enterprises should take due account of the need to protect the environment, public health and safety, and generally conduct their activities in a manner contributing to the wider goal of sustainable development. This means in practice collecting and providing the public with adequate information about the environmental, health and safety impacts of enterprise activities. They should carry out impact assessments if activities have significant environmental and health impacts. The Enterprises should also continuously seek to improve corporate environmental performance and contribute to the development of environmentally meaningful public policy.[2]

Interestingly, in 2011 the OECD reached a multilateral agreement on corporate value chain responsibility, building on the work of Professor Ruggie implementing the UN “Protect, Respect and Remedy” framework. This means that a company is not only responsible for avoiding causing or contributing to harm, but it is also expected to use its leverage in the value chain if that impact is nevertheless directly linked to its operations, products or services through a business relationship. This principle applies throughout the supply and distribution chain, in other words it concerns not only from whom you buy, but also to whom you sell, taking into account the potential end use.

Several NCPs have dealt recently with complaints concerning impacts that arise in the value chain ‘downstream’. For example in the Mylan case, the Dutch NCP dealt with the human rights impacts of pharmaceuticals that were used for the death penalty. In the Alsetex case, the French NCP considered a complaint relating to the sale of teargas to authoritarian states. In both cases: not only did the parties reach an agreement following the ‘good offices’ by the NCP, it was also pointed out that companies have their own responsibility regardless of the state duty to protect. Both NCPs made recommendations to the companies to strengthen due diligence in the value chain. According to the Guidelines, if negative impacts occur, companies are expected to use their leverage to influence the entity actually causing the harm to prevent or mitigate its impact. If – acting alone – they do not have the ability to effect change, they are expected to co-operate with other entities, for example in multi-stakeholder initiatives.

Companies have worked together to ensure responsible business conduct across sectors and industries, for example: in the textiles sector after the Rana plaza tragedy (to join the Accord on Fire and Building Safety in Bangladesh or the Alliance for Bangladesh Worker safety) and to get rid of child labour and forced labour in the cotton fields of Uzbekistan.

What does all of this this mean for addressing Dirty Diesel?

First and foremost the governments in West-Africa should raise national standards to require clean diesel. Following the roadmap set out in the UNEP report is the way forward. Dirty refineries are part of the underlying problem as governments do not want to close their own state-owned refineries and rely fully on import. Governments outside of Africa could help targeting development assistance to raise investments to upgrade the refineries in the African countries.

Second, major oil companies, such as Total, Shell and BP, and oil traders such as Vittol and Trafigura, as well as port companies should individually and collectively use their leverage on the African governments to improve the standards for diesel. How? For example, by joining forces to address relevant ministers and set up industry initiatives to initiate investment, and share knowledge and innovation for clean production practices.

Should they stop selling the diesel immediately? No. Cut and run is seldom the right answer. Other players will keep on supplying and responsible companies will lose all leverage. The companies are expected to make reasonable efforts to influence West-African governments to raise the standards. Only if they are not successful after a reasonable period of time, should they consider stopping sales. Yet prior to taking such a decision they will need to assess the socio-economic and human right impacts.

Fortunately, for addressing Dirty Diesel there is hope. The Nigerian Minister of Environment Amina Mohamed, the Dutch Minister of Trade and Development Liliane Ploumen and the Government of Ghana are taking a leading role in this debate and are taking action. Companies and other governments should follow their lead.

[1]              See Preface, Cleaning Up the Global On-Road Diesel Fleet- A global strategy to introduce low-sulfur fuels and cleaner diesel vehicles.

[2]              OECD Guidelines Chapter VI Environment: Chapeau; paragraphs 1a), 2 a), 3 and 8.



Responsible Business is key for the Baltic Rim Economies

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

This article was originally published on 30 November 2011 in Baltic Rim Economies (BRE) Review 

For the Baltic Rim Economies it is important to tap into Global Value Chains, to attract investments and export to the EU and OECD countries. In order to position the economies well, responsible business conduct is key. Responsible business conduct (RBC) means that businesses should make a positive contribution to sustainable development and that businesses have a responsibility to avoid and address the negative impacts of their operations. In simple terms, RBC implies that businesses should do well by doing good and should not do harm. While the concept of corporate social responsibility (CSR) is often associated with philanthropic corporate conduct external to business operations, RBC goes beyond this to emphasise embedding responsible practices  in the ‘corporate DNA’, i.e. within internal operations and throughout business relationships and supply chains. This extends beyond philanthropy and implies that responsible business practices should be integrated in all corporate activities.

Responsible business is also good and profitable business as it allows for efficient ways to manage risks, diversify portfolios, and increase productivity. Understanding, addressing, and avoiding risks linked to business operations beyond financial risks – can often lead to a competitive advantage. Examples such as Volkswagen and BP clearly highlight the business case for corporate responsibility. Business can generate economic value by identifying and addressing human rights, labour and environmental issues that intersect with their activities. To achieve this it is important to continuously engage with key stakeholders, be it workers, local interest groups or NGOs. The consequences of irresponsible business behaviour can be significant. Beyond actual legal liabilities poor business conduct can also result in opportunity costs for companies. For example, issues as resource depletion and worker unrest can cause major delays and financial costs. Additionally, reputational costs stemming from poor business conduct can hurt and scare off investors. Today divestment campaigns from companies with poor environmental and social records are a common tool to encourage better behaviour. Responsible business practices, in addition to avoiding costs, can help to build a positive corporate culture and image. This in turn can influence the retention of employees, help increase productivity as well as boost brand appeal and thus increase market strength. However, in order to ensure that responsible business practices are embedded in all corporate activities, a move towards organisational and incentive structures prioritising long term growth over short term gains has to be made.[1]

The OECD Guidelines for Multinational Enterprises are a multilateral agreement by 46 governments setting out specific recommendations and guidelines on corporate responsibility in areas ranging from labour and human rights to environment and corruption. Each government that signs up firmly expects that its businesses will follow the Guidelines. Celebrating its 40th anniversary this year, the Guidelines are the leading instrument on RBC worldwide and have become a benchmark for respect of social and environmental standards in international trade and investment.

Observance of the Guidelines are an important tool for the Baltic States to attract responsible investment which is sustainable and comes with due consideration of its environmental and social impacts. At the same time, buyers from OECD countries nowadays often demand responsible sourcing and actively stimulating RBC will open market access opportunities for the export of its products. As adherents to the Guidelines, the Baltics have committed to promote RBC for multinational enterprises operating in or from their territories. Furthermore, the Guidelines have also been integrated in the trade and investment strategy for the European Union, which encourages “the EU’s trading partners to comply with [..] international principles and in particular the OECD Guidelines for Multinational Enterprises”[2] and as such are explicitly referenced in its trade and association agreements, see for example the EU-Georgia Association Agreement and the Association Agreement with Ukraine.

Additionally, the Guidelines are equipped with a unique problem-solving mechanism – known as the National Contact Points for responsible business (NCP). The main role of NCPs is to promote the Guidelines and to help companies to prevent getting in trouble and help them solve corporate responsibility issues. This globally active mechanism allows civil society; trade unions and other interested parties to submit complaints regarding non-observance of the Guidelines by companies. Over 360 cases, related to mostly human rights, labour and employment and the environment have been brought to the NCP mechanism since 2000 addressing impacts from businesses in over 100 countries and territories. From 2011 to 2015 about 50% of all accepted complaints resulted in an agreement between the parties and 36% resulted in an internal policy change by the company in question, contributing to potential prevention of adverse impacts in the future. This grievance mechanism covers global value chains with a link to companies from adherent territories and as a result it covers a large part of the Asian export industry as well.

As signatories to the Guidelines, the Baltic States are under an obligation to set up a NCP that has the confidence of the social partners and other stakeholders; and to make human and financial resources available to their NCP to fulfil their responsibilities.[3] To this effect all three states have set up a NCP,[4] yet they have not dealt with any complaints so far. While both Estonia and Latvia are OECD Members – Latvia as recent as July 2016 -, Lithuania is currently in the process of accession to the OECD. As part of this procedure, the Government will have to show evidence of a commitment to implement the Guidelines and in particular the existence of a credible well-functioning NCP.

[1]                  See also: Can Companies Really Do Well By Doing Good? The Business Case for Corporate Responsibility, by Roel Nieuwenkamp https://friendsoftheoecdguidelines.wordpress.com/2015/11/02/can-companies-really-do-well-by-doing-good-the-business-case-for-corporate-responsibility/

[2]                  European Commission (2015), Trade for All: Towards a more responsible Trade and investment policy, European Commission Publishing 2015, accessible at http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf .

[3]                  Decision of the Council on the OECD Guidelines for Multinational Enterprises (2011).

[4]                  Estonia NCP: https://www.mkm.ee/en/objectives-activities/economic-development

Latvia NCP: http://www.mfa.gov.lv/en/policy/economic-affairs/oecd/latvian-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises

Lithuania NCP: http://ukmin.lrv.lt/lt/veiklos-sritys/investiciju-veiklos-sritis/nacionalinis-koordinacinis-centras-nkc


OECD Guidelines for Multinational Enterprises

Baltic Rim Economies (BRE) Review 

Landmark human rights cases show value of OECD grievance mechanism for responsible business

Landmark human rights cases show value of OECD grievance mechanism for responsible business

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

This article was originally published on OECD Insights on 11 November 2016.

Compensation for indigenous people for adverse impacts of business activities, companies agreeing to carry out human rights due diligence concerning products in their value chain, authoritative statements that set the standard for the garment industry worldwide in the aftermath of Rana plaza – these are just some examples of achievements by the National Contact Points (NCPs) for responsible business in recent months.

In the run up to the 2016 UN Forum on Business and Human Rights it is good to highlight the importance of the NCP mechanism for business and human rights. Five years ago the OECD Guidelines for Multinational Enterprises were revised and the UN Guiding Principles were embedded in its human rights chapter. This way the OECD’s globally active grievance mechanism for responsible business became a de facto grievance mechanism for the UN Guiding Principles on Business and Human Rights.

The complaints mechanism is globally active as it covers global value chains with a link to companies from the 46 adherent territories. Over 360 cases have been brought to the NCP mechanism since 2000 addressing impacts from business operations in over 100 countries and territories.

What has been the experience thus far?

Since the 2011 addition of a human rights chapter 54% of all complaints brought to the NCP mechanism concern human rights and business.

From 2011 to 2015 about half of all complaints brought which were accepted for mediation, resulted in a mediated agreement between the parties.

Concrete results were for example ending forced and child labour in supply chains, improved health and safety for agricultural workers and better human rights due diligence for mega sport events. I would like to highlight a couple of landmark business and human rights cases that are worth looking at.

Value chain responsibility concerning the death penalty

Most attention has been paid to supply chain responsibility of business. Yet it is largely unknown that with the 2011 revision, the scope of the OECD Guidelines was extended to cover the entire value chain, meaning that they apply to the supply and distribution chains, or in simple words: it matters from whom you buy and to whom you sell taking into account the potential end use. The far reach of the Guidelines has been illustrated in a number of instances.

Last year a case was brought to the Dutch NCP involving Mylan, a pharmaceutical company, for possible human rights abuses associated with the production and sales of rocuronium bromide to prisons in the United States for use in lethal injections. The Dutch NCP concluded that the Guidelines are applicable to the value chain and in particular to the distribution chain. The case is also noteworthy as it demonstrated the force of finance used by the shareholders to exert their influence to hold the company accountable for responsible business conduct. In parallel to the specific instance proceeding, several investors entered into dialogue with Mylan to persuade the company to ensure that its products are not used to carry out lethal injection executions. One pension fund even decided to sell its shares in the company, whereas others continued the dialogue. The parties in the case concluded a mediated agreement and Mylan has taken active steps to prevent rocuronium bromide from being used in US prisons for executions.

Value chain responsibility concerning sales of teargas

In another case the French NCP also considered the distribution chain. The complaint concerned the sale of tear gas by Alsetex to the government of Bahrain allegedly used by security forces in the pro-democracy protests in 2011 and thereafter to violate human rights. The consideration of the case demonstrated that the Guidelines go beyond enterprise compliance with the export control regulations for strategic goods and require companies to take risk-based due diligence measures. With due consideration to the State duty to protect human rights, the French NCP concluded that Alsetex complied with the Guidelines, however recommending the company to formalise in-house due diligence procedures particularly in order to increase the traceability of its exports. The parties agreed with the conclusions of the NCP.

Indigenous people’s rights

Indigenous people’s rights have also been addressed by the NCP mechanism in the context of a complaint by the Saami village alleging that Statkraft AS, a Norwegian multinational enterprise, had breached human rights chapter of the Guidelines by planning to build a wind power plant on reindeer herding ground in Sweden. The case reveals the possible tensions between environmental concerns for sustainable energy production and the indigenous peoples’ rights for their community’s economic and cultural survival. The Swedish and Norwegian NCPs applied the principle that enterprises are expected to carry out consultations with a view to obtaining from the parties Free, Prior and Informed Consent (FPIC consultations) based on the UN Declaration on the Rights of Indigenous Peoples. While the NCPs found that the company had not failed to comply with the OECD Guidelines, some areas for improvement were identified. Following the conclusion of the NCP case, the parties have subsequently themselves reached an agreement last August on compensation for the impact and negative effects of the windmills.

Supply chain responsibility regarding the Rana Plaza tragedy

In practice a lot of human rights cases under the NCP system concern labour rights issues. The collapse of the Rana plaza factory has symbolised poor working conditions in global textile supply chains. The responsibility of global brands has also been brought to the attention of the NCPs. The Danish NCP for example recently concluded its consideration of a case involving PWT Group, a Danish retailer, for failing to carry out due diligence in relation to its textile manufacturer which was located in the Rana Plaza building. The case confirms the importance of the Bangladesh Accord on Fire and Building Safety which includes inspection of building structures as part of occupational safety and health. Under the OECD Guidelines, companies cannot hide behind the industry practice that risk-based analyses did not include the inspection of building safety. Following the Rana Plaza tragedy, the OECD has convened governments, business, civil society and trade unions to develop a Due Diligence Guidance on Responsible Garment and Footwear Supply Chains, which provides specific recommendations to support a common understanding of due diligence and responsible supply chain management in the sector. This Guidance is expected to be finalised soon. Both the Guidance and the conclusions of the Danish NCP in this case are significant for the future of human rights due diligence in the textile sector globally.

Delivering important results

This year marks the 40 years anniversary of the OECD Guidelines. Five years ago the Guidelines were dramatically revised, increasing the scope to global value chains and embedding the UN Guiding Principles into the human rights chapter. Five years down the road the OECD’s globally active grievance mechanism for responsible business has proven its potential added value for reinforcing the UN Guiding Principles on business and human rights, delivering important results.

Useful links

OECD Guidelines for Multinational Enterprises

Implementing the OECD Guidelines for Multinational Enterprises: The National Contact Points from 2000 to 2015

2016 UN Forum on Business and Human Rights

Breaking the link between exploitative recruitment and modern slavery

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

This article was originally published on OECD Insights on 3 October 2016.

Ahmed, from India, paid over 1,300 USD to a recruiter to accept a position as a driver in Saudi Arabia. However, upon arrival his employer confiscated his passport and refused to pay him although Ahmed worked 12 to 14 hour days. Benny, from the Philippines, invested over 2,000 USD in recruitment fees in exchange for the promise of a well-paid factory job in Taiwan. Upon arrival Benny’s wages were half of what was originally promised to him and after three years of working 12 to 17 hour days he barely managed to save enough to pay off his initial investment, returning home with no savings. These men’s stories are not unique. A quick scan of the website of Verité, an organization committed to promoting fair labour standards and combating exploitative recruitment practices, reveals many shocking histories of migrant workers who have been subject to abuse and fraud.

Exploitative recruitment of migrant workers often results in situations of de facto modern slavery. Recruitment can involve up to seven different middle men all charging a fee which means workers incur debts in the thousands of dollars before they even take up employment. Even in situations where employment is provided as promised, these upfront debts can mean that any wages a worker manages to save simply go back to paying off their debt to the recruiter.

Issues around recruitment of migrant workers have received particular attention in the context of the Gulf countries. In this region use of the Kafala system, a sponsorship-based employment system for migrant workers, is common. Under the Kafala system migrant worker’s legal residency is tied to their employer, giving employers power over working conditions and whether workers can change jobs, quit jobs, or leave the country. This system paired with exploitative recruitment practices leads to situations where workers, thousands of miles from home and severely indebted, are at the mercy of their employers.

However de facto modern slavery is by no means an issue limited to the Gulf region. Recent research produced by Verisk Maplecroft found that almost 60 percent of countries are at high risk of using slave labour.


Source: Modern Slavery Index, Verisk Maplecroft

In previous articles, I have highlighted some of regulatory approaches that nations are taking to combat modern slavery at home and throughout global supply chains, including through the UK Modern Slavery Act, trade regulations in the US prohibiting imports made with forced labour, and more generally regulations promoting increased due diligence and reporting across global supply chains to promote responsible business conduct including the EU Directive on non-financial disclosure. Additionally, earlier this year an executive order was a finalised by the Obama administration which prohibits companies from receiving US federal contracts if they recently violated labour laws. This regulation has provided even more impetus to companies to ensure that they are not linked to exploitative labour practices.

In addition, tools and standards are also being developed to target the issue of exploitative recruitment practices specifically. For example the Dhaka Principles for Migration With Dignity were launched in 2012 and provide a set of human rights based principles to enhance respect for the rights of migrant workers from the point of recruitment, during employment and through to further employment or safe return. The principles align with the UN Guiding Principles for Business and Human Rights and thus also with the OECD Guidelines for Multinational Enterprises.

Verité has developed a Fair Hiring Toolkit which provides targeted guidance around recruitment issues for various actors along the supply chain including for brands, suppliers, governments, advocates, auditors, and investors. This tool kit includes a list of red flags with regard to recruiter-induced hiring traps. For example one red flag is long ‘’supply chains’’ between the worker and employer in terms of intermediaries used in the hiring process and degrees of separation such as language barriers, cultural and social differences, and geographical distances.

Brands are also taking initiative to combat exploitative recruitment processes. Earlier this year five of the world’s largest multinationals, the Coca-Cola Company, HP Inc., Hewlett Packard Enterprise, IKEA and Unilever, launched the Leadership Group for Responsible Recruitment. This initiative focuses on promoting ethical recruitment, specifically through recognizing the employer pays principle. Under the employer pays principle, workers are never responsible for their own recruitment fees.

According to the Ethical Trading Initiative 71% of companies suspect the presence of modern slavery in their supply chains. Thus it is important to promote human rights due diligence that addresses recruitment issues throughout supply chains. In this regard the OECD has developed detailed guidance on carrying out supply chain due diligence in several sectors based off of the general principles of the OECD Guidelines for Multinational Enterprises. For example the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the global standard on mineral supply chain responsibility, provides a 5 step framework for due diligence to manage risks in supply chains of minerals including forced labour in the context of artisanal mining. This Guidance is now the leading standard for avoiding child and forced labour in mineral supply chains and has been integrated as an operating requirement in the DRC, Rwanda and Burundi.

The FAO and OECD recently jointly developed a Due Diligence Guidance for Responsible Agricultural Supply Chains which also provides due diligence recommendations to manage risks related to forced labour in high risk agriculture sectors including palm oil and cocoa. Such approaches could be applied in the context of the Thai shrimping industry as well. Additionally, the OECD is also developing a Due Diligence Guidance on Responsible Garment and Footwear Supply Chains, which provides specific recommendations for addressing risks of forced labour. This Guidance will be launched later this year and will be relevant to migrant workers in textiles factories.

Resources to help businesses identify responsible recruitment agencies are also needed. This has been one of the objectives behind the International Recruitment Integrity System (IRIS) an initiative of the International Organization for Migration. As part of its principle activities IRIS is planning to develop an accreditation framework under which members can be recognized as fair recruiters. This will be based, among other criteria, on the fact that no fee is charged to job seekers, worker’s passports of identity documents are not retained and there is transparency in labour supply chains.

A strong relationship exists between exploitative recruitment practices and forced labour. Breaking this link through promoting ethical recruitment will be very important given the vast scope of the issue as well as increasing regulation seeking to prevent these practices.  The initiatives discussed in this article provide promising ways forward. In order to effectively eradicate abusive recruitment practices companies should engage in supply chain due diligence processes which take into account these risks. Commitments to the ‘’employer pays’’ principle must be scaled up. Companies faced with significant risks with regard to these issues should follow the recommendations of the Leadership group for Responsible Recruitment and use the resources being developed through the IRIS initiative.

Useful links

OECD Guidelines for Multinational Enterprises

OECD CleanGovBiz initiative

The Global Construction Sector Needs a Big Push on Corporate Responsibility

The Global Construction Sector Needs a Big Push on Corporate Responsibility

This article was originally published by OECD Insights on 22 August, 2016

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

The construction industry employs approximately 7% of the global work force and it is predicted to account for approximately 13% of GDP by 2020. The sector is a major positive force for development. However, large scale construction projects, such as those involving development of infrastructure, can come with significant impacts on local communities such as displacement and environmental damage.  Furthermore, labour rights issues are particularly salient in this sector as it relies strongly on migrant labour and workers are predominantly unskilled and earn low-wages.

Recent high profile events, such as the preparations for the 2022 World Cup in Qatar, have showcased some of the most troubling labour issues related to large scale construction projects, including forced labour, dangerous working conditions, excessive overtime, and inhuman living conditions. Particularly, the kafala system, a system of sponsorship-based employment common in the construction sector in the Gulf, has been heavily documented and criticised. Under the system, migrant labourers are sponsored by employers to come and work in Gulf countries  and their legal residency is tied to their employer, giving employer’s power over working conditions and whether worker’s can change jobs, quit jobs, or leave the country. Additionally workers often arrive in the Gulf significantly indebted due to fees paid to recruitment agencies which employ various middle men.

Certain characteristics of the construction sector make it more vulnerable to abuses. The industry is very competitive and characterised by low profit margins (about 2%); it relies heavily on sub-contracting which can go nine layers deep in certain contexts; and is subject to tight fixed deadlines, such as those related to preparation of global sporting events. It is also often under-regulated by local governments and is recognised as a high-risk sector for corruption.

The construction sector is clearly an area where there is urgent need for global initiatives to promote responsible business conduct and industry actors are feeling increasing pressure in this regard. Widely documented cases of labour abuses related to global sporting events have attracted significant public scrutiny.   For example, Human Rights Watch has carried out detailed investigations of human rights issues in the construction sector in the Gulf region. In December of last year they released a report entitled Guidelines for a Better Construction Sector in GCC, which both describes the human rights impacts associated with this sector and provides recommendations on how companies can avoid and address these risks.   Beyond reputational harms there are increasing legal consequences for construction enterprises that do not behave responsibly.  Recently for example, Sherpa, a French human rights organisation, filed a complaint against Vinci, a large French infrastructure company, in regard to their operations in Qatar and associated labour abuses.[1]

Governments are making efforts to regulate these issues through stronger reporting laws. Under the recent EU Directive on non-financial disclosure, companies incorporated in the EU or listed on EU stock exchanges must report on principle risks and due diligence processes with regard to environment, labour, human rights and corruption.  Under the UK Modern Slavery Act enacted in 2015, companies registered or operating in the UK will have to report annually on their due diligence processes to manage risks of slavery and human trafficking within their operations and supply chains.  The implementation guidance to the UK Modern Slavery Act references the OECD Guidelines for Multinational Enterprises noting that “whilst not specifically focused on modern slavery, they provide principles and standards for responsible business conduct in areas such as employment and industrial relations and human rights which may help organisations when seeking to respond to or prevent modern slavery.”

The OECD Guidelines are the multilateral agreement of 46 governments defining corporate responsibility. They form the most comprehensive set of guidelines for responsible business conduct (RBC) covering all areas of corporate responsibility, ranging from labor and human rights to environment and corruption.  The Guidelines are equipped with a unique globally active grievance mechanism, known as the National Contact Points, where parties can submit complaints regarding non-observance of the Guidelines by companies.

Under the NCP mechanism there have been 12 cases reported involving the construction sector, representing approximately 3% of all cases brought to NCPs. These cases most frequently involved impacts of large scale construction projects on local communities. For example, two cases brought to the Norwegian and Austrian NCPs, respectively, dealt with human rights impacts associated with construction of a large dam in Malaysia and Laos.  Labour issues are also a common theme. A case brought to the German NCP involving labour rights issues at Heidelberg Cement Co in Indonesia ended in a mediated agreement.  Recently a case was brought to the Swiss NCP by Building and Wood Workers’ International (BWI) regarding alleged human rights violations of migrant workers by the Fédération Internationale de Football Association (FIFA) in Qatar. According to the complaint the human rights violations of migrant workers in Qatar were widely documented in 2010 when FIFA appointed Qatar as the host state for the 2022 World Cup and FIFA failed to conduct adequate and ongoing human rights due diligence after the appointment. The case was accepted for further examination and is currently under mediation at the Swiss NCP.

Several months back the UK NCP and the Institute for Human Rights and Business (IHRB) organised a workshop on responsible business conduct in the construction sector.  My take away from the event was that it is high time for the sector to come together to address ongoing issues in this sector.  Many high-impact, high-risk sectors have engaged internationally to launch initiatives to promote responsible business conduct, including development of standards or sectoral codes of conduct. While there are some promising initiatives seeking to improve conditions in the construction sector, there is currently no global corporate responsibility effort underway.  However, given the serious risks associated with this sector as well as the amount of unskilled workers it employs globally, improving standards and performance in this sector will be crucial to advancing the Sustainable Development Goals (SDGs).

A large portion of global construction projects are publically financed. As such, government agencies and public finance institutions such as the World Bank have a significant opportunity to promote better conduct in this sector. Many governments already promote the recommendations of the Guidelines through export credit agencies, which are a significant source of global financing and insurance, specifically with regard to financing of large scale infrastructure projects in developing countries. The 2016 OECD Common Approaches for Export Credit Agencies signed on to by all OECD member countries explicitly recognise the recommendations of the Guidelines, and provide that “[m]embers should… [p]romote awareness of the [the Guidelines] among appropriate parties.” Governments could also build in criteria associated with RBC into bid evaluations for construction projects and public procurement criteria generally. Public finance institutions can build in conditionality measures associated with strong due diligence systems and standards into their financing terms.

The construction sector is a critical industry: it is crucial to sustainable development and a significant source of employment globally. However, serious impacts associated with the sector can no longer go unnoticed and mounting pressure on the industry makes this an opportune time to take significant steps internationally to address ongoing problems in the sector. However, companies cannot solve these problems on their own. Governments and public finance institutions also have a critical role to play.  Governments should push construction companies to launch or participate in global corporate responsibility efforts. They should also put their money where their mouth is and condition contracts and financing for construction projects on a demonstrated commitment to international RBC standards.

Useful links

OECD Guidelines for Multinational Enterprises

OECD CleanGovBiz initiative

[1] Vinci has responded denying the allegations and filing a defamation suit against Sherpa.

Accountability mechanism for the Sustainable Development Goals

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct.

Originally published on Measure what Matters, 11 July 2016.

The private sector has an important role to play in economic and social development. Private sector growth can create jobs, contribute to human capital development and lead to innovative ways to tackle climate change, among other positive economic and social effects. Innovative businesses are needed to solve major sustainability challenges. However, businesses must also behave responsibly and avoid undermining the SDG’s by causing or contributing to negative impacts on the environment, human rights and working conditions.

This “do no harm” side of corporate responsibility is often neglected when discussing how business can contribute to the Sustainable Development Goals (SDGs) in favor of focusing on potential positive corporate impacts.  However a lack of adequate emphasis on the corporate responsibility to avoid and address harms could lead to a perception of greenwashing and undermine the contribution business stands to make to the SDG agenda.

The OECD Guidelines for Multinational Enterprises (the Guidelines), the multilateral agreement on corporate responsibility,directly support the aims of the SDGs. Some of the main complementarities amongst the OECD Guidelines and the SDGs are outlined in the annexed table. The Guidelines recognize that business have a responsibility to ‘’do no harm’’, and through due diligence guidance and a unique accountability mechanism, the OECD provides important tools to ensure that negative environmental and social impacts of business are avoided to the extent possible, and remediated where they do occur.

Risk-based due diligence related to the SDG’s

Risk-based due diligence is a process by which companies prevent and mitigate social and environmental harms throughout their operations and supply chains. This should be the first goal of companies seeking to contribute to the SDGs. Under the due diligence approach recommended by the Guidelines businesses are expected to go beyond sustainability reporting to integrate environmental and social risk management into their corporate DNA: the core internal management, operations, accounting and (financial) decision making systems.  The OECD has sector specific guidance for due diligence in the extractive, garment and footwear, agriculture and financial sectors which provide approaches to managing salient risks specific to these industries.[1]

National Contact Points: An Accountability Mechanism for the SDG’s

Countries (currently 46) that adhere to the Guidelines are legally obliged to establish a grievance mechanism, the National Contact Points (NCPs) for responsible business conduct, where parties can bring complaints about company behavior.  This globally active complaints mechanism promotes corporate sustainability and directly supports objectives under the SDGs by mediating issues regarding corporate responsibility in the context of climate change, biodiversity, slave and child labor, health and safety of work, among other issues. NCP mediations have achieved important outcomes. For example in 2014 the UK NCP resolved a complaint involving activities of Soco, an oil exploration company, in Virunga national park, a world heritage site in the Democratic Republic of the Congo (DRC). The mediation resulted in Soco agreeing to cease its operations, to never again jeopardise the value of another world heritage site and to conduct environmental impact assessments and human rights due diligence in line with international standards. In another case concerning the Tazreen factory fire in Bangladesh, Karl Rieker, a garment company, committed to improve the fire and building safety standards in its supplier factories. Measures included reducing of the number of supplier factories, establishing long-term supplier relations, close supervision by local staff, and signing the Bangladesh Accord on Fire and Building Safety. These results directly support the agenda of the SDGs.

Over 360 cases related to sustainable development have been brought to the NCP mechanism since 2000. From 2011 to 2015 about half of all complaints brought which were accepted for mediation, resulted in an agreement between the parties. Human rights, labor and employment and the environment represent the most common themes treated by the mechanism. This accountability mechanism will play a significant role in advancing the SDG’s.

Annex 1: Examples of alignment between SDGs and the Guidelines

Sustainable Development Goals

OECD Guidelines for Multinational Enterprises

Promoting sustainable business practices

Ensure sustainable consumption and production. (SDG 12)Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. (SDG 12.6)Ensure sustainability in :

·         agricultural (SDG 2.4)

·         fisheries ( SDG 14)

·         tourism ( SDG 8.9)

·         infrastructure (SDG 9)

Enterprises should contribute to economic, environmental and social progress with a view to achieving sustainable development. (OECD Guidelines, General Policies)Chapter III of the OECD Guidelines deals with Disclosure. Provisions 33 and 34 of the Commentary promote integrating sustainability information in their reporting cycle. Biodiversity and greenhouse gas emissions and other environmental impacts are mentioned as examples.OECD and FAO have developed specific guidance for supply chains responsibility for the agricultural sector.[1] OECD is developing due diligence guidance for garment and footwear supply chains.

Managing environmental impacts

Reduce the number of deaths and illnesses from hazardous chemicals and air water and soil pollution and contamination. (SDG 3.9)Improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals.  (SDG 6.3)Prevent and signi­ficantly reduce marine pollution of all kinds; sustainably manage and protect marine and coastal ecosystems to avoid significant adverse impacts. (SDG, 14.1 & 14.2)Ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems […] in line with obligations under international agreements. (SDG, 15.1)Promote the implementation of sustainable management of all types of forests. (SDG, 15.2)Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect and prevent the extinction of threatened species. (SDG, 15.5) Establish and maintain a system of environmental management (OECD Guidelines, Chapter VI. 1)Enterprises should assess, and address in decision-making, the foreseeable environmental, health, and safety-related impacts associated with the processes, goods and services of the enterprise over their full life cycle with a view to avoiding or, when unavoidable, mitigating them. (OECD Guidelines, Chapter VI. 3)Enterprises should continually seek to improve corporate environmental performance, at the level of the enterprise and, where appropriate, of its supply chain. (OECD Guidelines, Chapter VI. 6)

Contributing to resource efficiency  

Increase renewable energy and improvement of energy efficiency (SDG 7.2&3)Improve global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation. (SDG 8.4) Enterprises should encourage activities such as development and provision of products or services that have no undue environmental impacts; are safe in their intended use; reduce greenhouse gas emissions; are efficient in their consumption of energy and natural resources; can be reused, recycled, or disposed of safely. (OECD Guidelines, Chapter VI. 6(b))

Combatting discrimination and violence against women  

End all forms of discrimination against all women and girls everywhere; eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation. (SDG 5.1 and 5.2) Enterprises should respect human rights, which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved. (OECD Guidelines, Chapter IV.1)Enterprises should not discriminate against their workers with respect to employment or occupation on such grounds as race, colour, sex, religion, political opinion, national extraction or social origin, or other status. (OECD Guidelines, Chapter V.1(e)).

Promoting labor rights and employment

Achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value. (SDG 8.5)Protect labour rights and promote safe and secure working environments for all workers. (SDG 8.8). Generally:OECD Guidelines, Chapter V on Employment and Industrial Relations, aligned with the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.Specifically:Enterprises should take adequate steps to ensure occupational health and safety in their operations. (OECD Guidelines, Chapter V, 4(c)).Enterprises should encourage local capacity building through close co-operation with the local community. (OECD Guidelines, Chapter II.A.3).In their operations, to the greatest extent practicable, enterprises should employ local workers and provide training with a view to improving skills, in cooperation with worker representatives and where appropriate relevant government representatives. (OECD Guidelines, Chapter V. 5).
Take immediate and effective measures to secure the prohibition and elimination of the worst forms of child labour, eradicate forced labor.  (SDG 8.7) Enterprises should contribute to the effective abolition of child labour, and take immediate and effective measures to secure the prohibition and elimination of the worst forms of child labour as a matter of urgency. (OECD Guidelines, Chapter V.1(c)).Enterprises should contribute to the elimination of all forms of forced or compulsory labour and take adequate steps to ensure that forced or compulsory labour does not exist in their operations. (OECD Guidelines, Chapter V.1(d)).

Respecting human rights

End abuse, exploitation, trafficking and all forms of violence against and torture of children (SDG 16.2) Enterprises should respect human rights, which means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved. (OECD Guidelines, Chapter IV.1)

Combatting corruption and illicit financial flows

Substantially reduce corruption and bribery. (SDG 16.5)Reduce illicit ­financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime. (SDG 16.4) Generally:OECD Guidelines, Chapter VII on Combating Bribery, Bribe Solicitation and Extortion.Enterprises should comply with both the letter and spirit of the tax laws and regulations of the countries in which they operate. (OECD Guidelines, Chapter XI, 1)


[1]See OECD-FAO Guidance for Responsible Agricultural Supply Chains (2016), available at: http://www.oecd.org/daf/inv/investment-policy/rbc-agriculture-supply-chains.htm