National Action Plans on Business and Human Rights: Strong support for OECD’s Responsible Business Grievance Mechanism

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct and Froukje Boele, Policy Analyst Responsible Business Conduct, OECD

The year 2017 got off to a good start for business and human rights with a number of prominent National Action Plans (NAPs) finalised last December right in time for Christmas. The fresh German, Italian, Swiss and US NAPs resemble each other by placing the OECD Guidelines and the attached grievance mechanism at the forefront of efforts to promote responsible business conduct for enterprises operating at home and abroad. They also acknowledge the alignment between its Human Rights Chapter and the UN Guiding Principles on Business and Human Rights. Moreover the NAPs uphold and strengthen the National Contact Point (NCP) system of the OECD Guidelines as a means for effective problem solving, thereby supporting the OECD’s globally active grievance mechanism for responsible business as a de facto complaints mechanism for the UN Guiding Principles.

Some highlights:

Responsible Supply Chains and Due Diligence

The concept of adequate due diligence – to identify, prevent and mitigate actual and potential adverse impacts of business operations – centres at the heart of the NAPs with action-oriented language on the different OECD sectoral guidelines. Yet Governments emphasize different aspects, for example the German NAP on Business and Human Rights and the Swiss NAP on Business and Human Rights include a particular focus on helping small and medium-sized enterprises.

The US Government’s National Action Plan on Responsible Business Conduct recognises the OECD Due Diligence Guidance for Responsible Minerals Supply Chains from Conflict and High Risk Areas as a key tool for businesses to help them “respect human rights and avoiding contributing to conflict through their mineral sourcing practices.” In this regard, the German and the Italian NAP on Business and Human Rights also point to their involvement in the process of the elaboration of an EU Regulation for supply chain due diligence in this field. If adopted, the Swiss Government also commits to consider the formulation of similar legislative proposals adapted to the Swiss context.

For agriculture, both Switzerland and Italy commit to active implementation of the OECD-FAO Guidance for Responsible Agricultural Supply Chains.

Moreover, in line with Italy’s active involvement to improve standards in the textile sector, its NAP emphasizes the OECD’s work on the Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, which will be launched next 8 February.

Sensible to the risks involved in the banking industry, Switzerland has included its support for the OECD work on a guide for due diligence in the financial sector in the NAP.

Not only do the NAPs on the whole indicate a high level of support for implementing the outcomes of the proactive sector projects, they also signal a political commitment to engage in their multi-stakeholder advisory groups going forward.

National Contact Points

The role of the NCPs to promote corporate responsibility and deal with issues relating to business and human rights is prevalent throughout the recent NAPs. Delivering on the G 7 Leaders’ Summit Declaration of June 2016, Italy, Germany and the United States recall their commitments to undergo an NCP peer review in 2017.* The plan for Germany also announces the repositioning and further strengthening of its NCP. Interestingly, the US announces it will implement procedures to ensure that stakeholders outside the US and using other languages than English can engage in the NCP process. The NAPs for Germany and Switzerland also make an operational link between the work of the NCPs and national export credits and guarantees. As such, the German NCP is upgraded as a central complaint mechanism for projects for foreign trade promotion and the Swiss Export Risk Insurance Agency is reported to have to take account of the results and evaluations by the NCP.

Policy coherence on responsible business conduct

At the same time, the national action plans send a clear message on policy coherence on corporate responsibility issues and set an example for other countries in the process of developing a NAP. They are comprehensive efforts to ensure alignment between all policies relevant to responsible business with Governments leading by example on issues such as procurement, exports credits but also responsible retirement plans (US NAP). Beyond the national level, the NAPs make a point about international policy coherence by including corporate responsibility commitments in trade and investment agreements, as well as development finance. These are complemented on an operational level with measures to train German and US diplomats abroad.

Conclusion

The high level of commitment to the OECD Guidelines, the NCP system and the OECD sector due diligence instruments will greatly contribute to their visibility and implementation worldwide. They also present promising building blocks for the 2017 German G20 efforts to address RBC and sustainable global supply chains and the Italian G7 Initiative on sustainable global supply chain management. Finally, these 2016 Christmas gifts are full of inspiration for Governments that are in the process of developing a national action plan, for example in Latin America.

*               The peer review of the Swiss NCP is ongoing.

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

 

Evolving Expectations: The role of Export Credit Agencies in promoting and exemplifying responsible business practices

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

This article was originally published on January 11th, 2016 on the website of the Institute for Human Rights and Business (IHRB).

Export Credit Agencies are a significant source of global financing and insurance, specifically with regard to financing of large scale projects and business opportunities in developing countries.

For example the Economist Intelligence Unit estimates that the nine largest foreign ECAs provided approximately $488 billion in export financing support in 2013. In 2012 the Berne Union, a union of state and private export credit insurers, covered over 10% of all global trade.

Given the prevalence of ECA financing, as well as its importance for large scale projects which are prone to significant social and environmental impacts, it is important to ensure that responsible business conduct, as recommended by the OECD Guidelines for Multinational Enterprises (‘’the OECD Guidelines”) is viewed as a priority among ECAs.

In a recent publication, Prof. John Ruggie, former U.N. special representative for business and human rights, acknowledged that “[e]xport credit is an obvious governmental source of leverage for compliance with the Guidelines.” Indeed the role of ECAs in promoting the Guidelines has been explicitly recognised in other OECD Instruments. In 2012 the OECD Council of Ministers, the governing body of the OECD, adopted the Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (“the OECD Common Approaches”). This instrument provides that “[m]embers should… [p]romote awareness of the [the Guidelines] among appropriate parties involved in applications for officially supported export credits as a tool for responsible business conduct in a global context.”

The unique grievance mechanism that is attached to the implementation of the OECD Guidelines, known as National Contact Points (NCPs), exists in 46 countries. National Contact Points are agencies tasked with promoting the Guidelines and considering issues (or ‘specific instances’) arising from alleged non-adherence to recommendations of the Guidelines. The OECD Common Approaches likewise  provide that members should “consider any statements or reports made publicly available by their NCPs at the conclusion of a specific instance procedure under the OECD Guidelines when undertaking a review.’’  This helps to reinforce the impact of NCP statements regarding company behaviour.

Some member states have taken these recommendations seriously and begun to internalise them within their domestic policy. Canada has been a leader in policy coherence by including (dis)incentives by way of withdrawal of government support in foreign markets for companies that do not embody CSR best practices and refuse to participate in the NCP dispute resolution processes. Furthermore, Canada has demonstrated that it is serious about implementing this policy. In a recent case brought to the Canadian NCP regarding a Canadian gold company’s activities in China, the company refused to engage in the process, which prompted the NCP to conclude that   “the Company’s non-participation in the NCP process will be taken into consideration in any applications by the Company for enhanced advocacy support from the Trade Commissioner Service and/or Export Development Canada (EDC) financial services, should they be made.” This was the first time that an NCP decision imposed direct economic consequences on a company for its refusal to engage in the process.

However, beyond simply promoting the OECD Guidelines through consideration of responsible business conduct as a criterion of financing decisions, ECAs have an obligation to espouse good corporate behaviour themselves. Some ECAs are commercial entities operating internationally; therefore some of them fall under the aegis of the OECD Guidelines themselves. Furthermore, the ECAs are not exempt from these expectations in spite of their being government-controlled entities. The Guidelines are clear about the fact that the ownership structure of an multi-national enterprise (public, private or mixed) has no bearing on the relevance of the applicability of the recommendations of the OECD Guidelines.

Recently there was an attempt to recognise the applicability of the OECD Guidelines to ECAs and to align the OECD Common Approaches by introducing expectations of human rights due diligence at the level of ECAs.  In the end, the proposal was not successful due to lack of consensus and some ECAs continue to maintain that the OECD Guidelines do not apply to them. However, having made the legally-binding commitment to implement the OECD Guidelines, it would be inconsistent with the objectives and purposes of the Guidelines if government or quasi-government entities were to exempt their own commercial activities from the standards.

In 2012 a complaint was brought to the NCP system against major Norwegian and Dutch pension funds. The final statement of the Dutch and Norwegian NCPs made clear that in their opinions the Guidelines are applicable to government entities engaged in commercial activities.  A potentially analogous development is now unfolding in the context of ECAs.

In June of this year the NCP system received a complaint alleging that Dutch export credit agency, Atradius DSB, had failed to comply with the OECD Guidelines in the context of its financing of a dredging project in north-eastern Brazil which has resulted in severe human rights and environmental impacts.

The complaint has very recently been assessed by the Dutch NCP. The ground breaking outcome of this initial assessment is that Atradius DSB itself is considered to be a multinational enterprise and consequently is covered by the OECD Guidelines and the NCP system. The Dutch NCP has offered mediation to the parties to the complaint. This is a process to be monitored carefully as there could be important lessons to be learned. In the first place, the outcome of the complaint may serve to make clear how ECAs should promote the OECD Guidelines amongst their clients.  Additionally the complaint may elucidate how some ECAs themselves are expected to behave in the context of the OECD Guidelines.

Rather than await the outcomes of this specific instance, ECAs should be proactive and promote the OECD Guidelines with their clients, integrate the NCP statements in their policies, and internalise the recommendations of the OECD Guidelines within their own commercial activities. This will bring expectations regarding the conduct of ECAs in line with what is expected of as responsible behaviour by all companies.

Corporate Accountability and the UN Sustainable Development Goals: How Responsible Business Conduct could and should play a decisive role

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

This article was prepared as a background document for the  2015 Independent Research Forum Retreat ‘Towards a Transformative Post 2015 Development Agenda’, which took place in New York, May 17th 2015 with UN Post 2015 and SDG negotiators. and for the the UN ESCAP OECD Regional Conference on Aligning Corporate Sustainability with SDG’s, taking place in Bangkok May 20th 2015.

Currently, the UN is in the process of developing the Sustainable Development Goals, a set of 17 goals which will define the post-2015 development agenda. It is recognised that the private sector has an important role to play in economic and social development. Private sector growth can create income opportunities, contribute to human capital development and lead to technology transfers, among other positive economic and social effects. For example, in Bangladesh the apparel sector has been credited in lowering the official poverty rate from 70% to less than 40%.[1]  Today it employs tens of millions of workers globally, predominantly women, which has contributed to empowering women from poor communities.

However, as we have also witnessed in Bangladesh in the context of the apparel sector, in order to avoid other negative impacts, businesses must behave responsibly. Not just within their direct operations but throughout their supply chains and business relationships. This is particularly important in weak regulatory contexts. Given that a significant portion of global manufacturing takes place in such contexts, if multinationals would commit to promoting sustainability and responsible business conduct throughout their supply chains this would have a decisive impact on the success of the SDGs.

The OECD Guidelines on Responsible Business Conduct

The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct currently represent the most comprehensive set of government-backed recommendations on responsible business conduct. They are an important tool for promoting responsible business conduct globally, and therefore for supporting global development.

The OECD Guidelines state as an overarching objective that enterprises should contribute to economic, environmental and social progress with a view to achieving sustainable development.[2] Furthermore under the Guidelines enterprises are expected to avoid causing or contributing to adverse impacts (social, environmental, human rights, etc.), through their own activities, and address such impacts when they occur. Therefore the Guidelines promote a concept of responsible business conduct which includes both the idea that business should do no harm and that they can do well by doing good. This applies to an enterprise’s direct operations as well as products, operations and services throughout its supply chain.

Currently 46 countries adhere to the Guidelines, and therefore make a binding commitment to promote RBC amongst businesses operating in or from their territories. Adherent countries represent diverse geographies and include OECD member states as well as 12 non-OECD member countries (Argentina, Brazil, Colombia, Costa Rica, Egypt, Jordan, Latvia, Lithuania, Morocco, Peru, Romania and Tunisia). These 46 countries account for around four-fifths of outward FDI and two-thirds of inflows and are home to the majority of multinational enterprises. This means that the Guidelines are relevant even for non-adherent nations looking to attract investment or home to companies operating abroad.

Linkages amongst the OECD Guidelines and SDGs

Given the instrumental role that business has to play in sustainable development the OECD Guidelines directly support many of the aims of the SDGs. Some of the main complementarities amongst the OECD Guidelines are outlined in the table below.

 

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 are developing specific guidance for supply chains responsibility for the agricultural sector. 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)

 

National Contact Points promote corporate accountability

Perhaps the most important feature of the Guidelines is the National Contact Point mechanism, the built in grievance mechanism of the Guidelines. Countries adhering to the Guidelines are obligated to establish NCPs which are tasked with promoting the Guidelines as well as providing a platform for mediation and conciliation of alleged non-observance by the Guidelines. Given the substantive overlap between the RBC recommendations of the OECD Guidelines and the SDG’s the NCP system can serve as an important tool in advancement of the objectives under the SDGs.

Although the NCP mechanism does not have legal authority and thus cannot impose sanctions nor mandate that parties participate in the process, it has nevertheless proven to be an effective tool in promoting RBC. 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.  The OECD NCP mechanism has a growing track record of agreements resulting through mediation.  For example in 2014 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 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. Such a result directly supports the environmental agenda of the SDGs.

A complaint submitted by UNI Global Union and the International Transport Workers Federation against DHL also led to a useful agreement at the German NCP. The complainants and the company agreed to respect the rights of workers to establish and join trade unions in Turkey, India, Colombia, Indonesia and Vietnam.  In another case concerning the Tazreen factory fire in Bangladesh, the complainant, Uwe Kekeritz, member of the German Bundestag, and Karl Rieker, a garment company, reached an agreement in which Karl Rieker 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. The conclusion of these cases supports the SDG goal of protecting labour rights and promoting safe and secure working environments for all workers.

Many NCP cases tackle multiple issues and thus can contribute to several aspects of the SDGs.  For example in a complaint by several NGOs against the Cameroon palm oil giant Socapalm and its owners (France’s Bolloré) the French NCP brokered an agreement in which Socapalm agreed to improve workers’ conditions in Socapalm and its suppliers, improve stakeholders engagement with local communities, and reduce environmental damage.

Although non-binding, this soft law mechanism can have hard consequences. If mediation in the context of an NCP procedure fails an NCP may issue a statement with recommendations, sometimes including a statement on whether a company did or not act in adherence with the recommendations of OECD Guidelines. While such determinations may cause significant reputational damage to a company they can also protect a company’s reputation in instances when conduct is found to be consistent with the recommendations of the OECD Guidelines. Furthermore in some contexts governments consider NCP statements with regard to economic decisions, e.g. in the context of public procurement decisions or in providing support to international operations.  For example, export credit agencies of OECD member countries must take into account the final statements of NCPs when they make decisions on export credit guarantees. Additionally, some countries have taken NCP decisions and processes into account with regard to their commercial diplomacy.

Beyond government related commercial consequences, increasingly financial institutions are conducting human rights due diligence. This process is being conducted to avoid ethical and commercial risks associated with being linked to such operations. Likewise institutional investors have increasingly started to apply pressure in situations where human rights issues are identified and in some cases have been known to pull their investment where adverse impacts are not adequately addressed. For example in 2010, investors withdrew from mining company Vedanta following an upheld NCP complaint. All this can increase the cost of capital.

Conclusion

The private sector has an important role to play in realizing the SDGs and in this respect, the OECD Guidelines provide a strong existing framework for corporate accountability complementary to the aims of the SDGs. Specifically, where the SDG address behaviour of enterprises the NCP mechanism of the Guidelines will continue to function as a strong tool for encouraging responsible behaviour. Governments should take a whole of government approach to this tool and strengthen the NCP system with the SDG’s in mind. For countries with an existing NCP this means strengthening the mechanism and providing it with adequate resources to fulfill its tasks.  Finally, multinationals should play their role by behaving responsibly within their direct operations as well as throughout their supply chains.

[1] Sarah Labowitz and Dorothée Baumann-Pauly, Business as Usual is Not an option, New York University Stern School of Business (April, 2014), 16 http://www.stern.nyu.edu/sites/default/files/assets/documents/con_047408.pdf

[2] OECD Guidelines for Multinational Enterprises, 2011, II A.1 General Policies

Watch list: Ongoing grievances regarding corporate conduct under the OECD Guidelines for Multinational Enterprises

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

2015 is the 15th anniversary of the National Contact Point (NCP) system and it is sure to be an exciting one. Many NCP are working to improve their structures and strengthen their capacity in order to provide added value in addressing challenging problems in RBC both through mediation and proactive prevention. The NCP system represents the most advanced non-judicial human rights and business grievance mechanism and as such it gets a lot of attention. As capacity of NCPs is strengthened and awareness of the OECD Guidelines continues to grow high profile cases are being mediated at the level of NCPs.

I would like to highlight for you a few of the most interesting ongoing cases to follow over the coming months.

Human rights impacts in international sporting events:

In May of 2014 the Americans for Democracy and Human Rights in Bahrain (ADHRB), a civil society organisation based in the United States, filed a complaint against the companies involved in the organisation of the Formula One Grand Prix in Bahrain. The complaint alleges that holding the event in Bahrain is at odds with Bahrain’s human rights record and that the event has contributed to human rights abuses associated with use of force of security against protestors against the event. The UK found that further examination was merited on issues relating to the Formula One’s due diligence management systems, human rights policy and communications with stakeholders and business partners. Currently the NCP is organizing mediated dialogue around these issues.

Depending on how this case is resolved, it could have important impacts on how expectations regarding RBC are defined in the context of sporting events. This may have important spill over effects for the FIFA games scheduled to take place in Qatar in 2022 which have already undergone serious scrutiny by labour and civil society organisations based on documented human rights impacts that have occurred due to preparation for the games.

Anti-union behaviour under the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines):

This April the United Auto Workers (UAW) and IndustriALL Global Union federation asked for mediation from the US NCP regarding alleged anti-union behaviour of the automotive company Nissan within its plants in Mississippi and Tennessee. The complaint specifies that alleged violations are based on the OECD MNE Guidelines rather than domestic labour law. Specifically the complaint alleges intimidation and aggressive tactics of management, interference with employees’ trade union rights, and failure to respect international standards on freedom of association.

In this instance, the NCP procedure is providing a platform for employees of the plant to hold their employer to account to international standards.   The case is currently under consideration and its conclusions could have important implications regarding RBC and relations with unions.

Investor responsibility in preventing and mitigating adverse impacts:

Friends of the Earth Europe and Friends of the Earth Milieudefensie, an environmental network, have filed a complaint against Rabobank, a Dutch bank, for failing to conduct due diligence in relation to loans provided to Bumitama Agri Group (BGA), an Indonesian producer of palm oil. The complaint alleges adverse environmental impacts including deforestation at an illegal palm oil plantation managed by Bumitama. Rabobank has provided around 47 million euros in loans to the company and the complaint calls for Rabobank to terminate its relationship with Bumitama, or freeze credit lines until issues identified in the complaint are resolved. Bumitama has since terminated its relationship with the plantation in question and mediation of the case is currently on-going.

In a similar case, in 2014 a complaint was filed against the Australia New Zealand Banking Group (ANZ) with regards to their investments in Phnom Penh Sugar Co. Ltd (PPS), a plantation and sugar refinery based in Cambodia. The complaint alleges forced evictions and land seizures impacting 681 families to make way for PPS. In addition, arbitrary arrest, the use of intimidation against local communities, and use of child labour and unsafe working conditions resulting in several deaths are alleged in relation to the operations of the plant.

While ANZ claims to have ended business relationships with PSS in 2014, the complaints request that they divest any profits earned from the investment as their financing of PPS contributed to the aforementioned infringements. Furthermore the complaints are requesting the ANZ develop a corporate level human rights policy and due diligence procedure to avoid similar situations in the future. An initial assessment of the case is anticipated later this year.

These cases are reflective of increased complaints targeting financial institutions based on their direct link to impacts through a business relationship.   Ongoing OECD work focused on responsible business conduct in the financial sector will be valuable in providing banks and other financial institutions with guidance on how to avoid such impacts in the future.

Meaningful stakeholder engagement and responsible business conduct:

The Brazilian NCP through the Brazilian Ministry of Environment is currently handling a case of alleged human rights impacts of a subsidiary of the Canadian Gold company Kinross Gold. The complaint was brought by the local residents association of the city of Paracatu, alleging that the release of arsenic and other toxic substances by Kinross’ open-pit gold mining activity is causing chronic poisoning among the population of Paracatu in addition to structural damage among the community’s residences and isolation of rural populations.

The Norwegian NCP is currently considering a complaint against Statkraft, a Norwegian state owned electricity company, alleging a lack of meaningful stakeholder engagement in the planning and development of a 360 turbine wind farm which will be located on the traditional lands of the Saami Jijnjevaerie reindeer-herding collective. The construction of the wind farm will block important reindeer migration and herding areas harming the group’s ability to practice reindeer husbandry, a core element of their economic and cultural existence. Unfortunately the groups have failed to reach an agreement through mediated dialogue and the Norweigan NCP will release a final assessment of the case shortly.

Findings of these cases may have important implications for how a company should engage with stakeholders and well as prevent, mitigate and account for adverse impacts in has contributed to. An OECD User Guide on Stakeholder Engagement in Extractive Industries will be released later this year and will hopefully be applied to prevent or mitigate similar situations in the future.

Human rights impacts and security contracting:

Several complaints have been filed against G4S a UK security contractor alleging human rights violations of in connection to its business operations.

In September of last year the Human Rights Law Centre and RAID, two human rights advocacy non-profit groups, brought a complaint against G4S for alleged human rights violations with regard to the treatment of asylum seekers held at an asylum processing centre off the coast of Papua New Guinea they were contracted to operate. The complaint alleges that G4S did not maintain a minimum standard of care, and that detainees were subject to threats, aggression, physical and sexual assault by G4S staff. An outbreak of violence in which G4S staff is said to have been involved in February of 2014 led to the death of one detainee and injury of 69 other individuals at the facility. This complaint is currently undergoing review by the UK NCP.

Additionally a final assessment is anticipated to be issued in the coming months on a complaint brought to the UK NCP with regard to provision and maintenance of equipment to military checkpoints in Israel linked to human rights impacts by G4S subsidiaries. In its initial assessment the UK NCP found a lack of substantiation that equipment provided by G4S had been used to commit human rights abuses and that they had conducted human rights due diligence, however it accepted to review G4S’ due diligence processes with regard to contracted business relationships.

As security contracting represents a high-risk field for human rights impacts, a heightened level of due diligence should be applied throughout operations and business relationships.

Environmental and social impacts of large infrastructure works:

The Austrian NCP is currently considering a case filed alleging that Andritz, an Austrian engineering company is contributing to the adverse impacts that will be caused by the construction of large hydropower dam in Laos.  Andritz has been contracted to supply 300 million USD worth of key operating technology to the development of the Xayaburi dam. The dam is anticipated to have serious environmental impacts, including the extinction of the Mekong giant catfish, as well as to adversely affect fishing communities which currently rely on impacted waterways for their livelihoods. The complainant is asking Andritz to undertake impact assessment, work towards preventing and mitigating those impacts and contribute towards remedy for effected populations. The NCP released an initial assessment of the case and accepted it for further review on May of this year.

The above snapshot of ongoing cases of interest reveals that NCPs are handling issues with high stakes and dealing with complex claims with regard to human rights, labor and the environment. It also provides insights into how expectations of responsible business conduct have evolved. The bulk of NCP cases these days involve mediation with companies that are contributing or linked to adverse impacts through business relationships, rather than in which they are alleged to be wrongdoers themselves. This demonstrates the importance of due diligence processes that extend throughout supply chains and business networks.