Update on the OECD Guidelines on Multinational Enterprises

The latest developments with the OECD Guidelines on Multinational Enterprises were the subject of a recent conference convened by the OECD at George Washington University Law School. The MNE Guidelines are important not least because at 40 years old, they mark one of the oldest corporate social responsibility (CSR) initiatives.

Overall, the conference provided good reasons to believe that the MNE Guidelines’ revision in 2011 has heightened their relative importance and role in the CSR field.

Among the important takeaways from the conference was the continued strengthening of the National Contact Point (NCP) systems.  Focusing particularly on the US and UK experience, speakers described how the processes have become more institutionalized. There is also evidence of greater willingness of companies and civil society groups to use NCP mechanisms. Notwithstanding some civil society criticisms of the willingness of UK authorities to open proceedings, it seems that both jurisdictions have seen greater recourse to mediation by companies and civil society actors.

The interaction of the UN Guiding Principles on Business and Human Rights with the MNE Guidelines appears to be an important factor in their strengthening. The influence of the UN Guiding Principles has been substantial in raising interest and awareness in the MNE Guidelines. Part of reason for this development was 2011 update, which incorporated the Guiding Principles’ “Protect, Respect, Remedy” framework interpreting the rights and duties of governments, corporations, and other stakeholders. In effect, this move has made the NCP system a conduit for actors to raise claims based on the Guiding Principles.

Partly as a result of the interaction of the UN Guiding Principles, new efforts are emerging to provide greater definition to legal standards for due diligence in this area. Neither the Guiding Principles nor MNE Guidelines have a clear duty of care.  In the absence of decisions by international courts or tribunals on the subjects, companies don’t have a clear standard to apply.  

At the same time, one panel described the tightening of national regulation on supply chain management. The development of laws such as the the UK Modern Slavery Act and US Trade Facilitation and Trade Enforcement Act, make it increasingly necessary for companies to exercise high levels of due diligence over their supply chain.

In this regard, one particularly interesting discussion concerned a new project developed by the OECD Secretariat in cooperation with the law firm Debevoise & Plimpton to analyze the standards of liability that could be applied to these matters. The focus seems to be on human rights law, which raises some questions about its general applicability given that MNE Guidelines cover everything from anti-corruption to labor law.

Despite focusing on supply chain management, there was no discussion of the series of handbooks developed by the OECD on supply chain management in specific sectors and issues including the extractive industry, minerals, textiles and garment, and agriculture. In an earlier blog, I discussed the recent OECD-FAO Guide on Responsible Agricultural Supply Chains. This publication reflects not only the MNE Guidelines but a broader set of instruments specific to the agricultural sector.

While the OECD-FAO Guide is helpful in applying principles from the MNE Guidelines to the agricultural sector, from my perspective, a gap in the MNE Guidelines is the failure to incorporate land and natural resource tenure issues. These issues lie at the heart of many business and human rights disputes. While the UN Guiding Principles have gained tremendous recognition in the field of responsible business conduct, the FAO Tenure Guideilnes have received relatively less attention.  The decision to revise the MNE Guidelines to reflect the UN Guiding Principles in 2011 occurred before the Tenure Guidelines’ were adopted in 2012, but it is nevertheless clear that land will need to be covered in MNE Guidelines’ next iteration.  



New Tool for Responsibility in Agricultural Supply Chains

In March 2016, the OECD-FAO Guidance for Responsible Agricultural Supply Chains (the RASC) was launched at the OECD in Paris. Developed through a multi-stakeholder advisory group and public consultation process, the RASC Guidance provides a useful framework for putting into practice the numerous voluntary norms and standards that have been developed in the past decade for the agriculture sector and businesses generally.

The RASC applies to activities throughout the entire agricultural supply chain. It relates to all types of enterprises and encompasses both upstream and downstream segments. 

When combined with such instruments as the Principles on Responsible Agricultural Investment (CFS-RAI), the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the Voluntary Guidelines on the Responsible Governance of Land, Fisheries and Forestry (VGGT), they give agribusinesses and agricultural investors a comprehensive framework for approaching responsible business conduct.

The core of the RASC Guidance is an enterprise risk management framework and model code of conduct.

Businesses should find that the basic framework is consistent with their existing risk management and compliance systems. It proposes a five step framework including (1) establish strong ERM systems, (2) identify, assess, and prioritize risks in the supply chain, (3) design and implement a strategy to respond to identified risks, (4) verify supply chain due diligence, and (5) report on supply chain due diligence.

Nothing revolutionary in that approach. That’s probably a good thing, as it should facilitate its interoperability with other management systems currently in use.

Beyond this basic process model, the RASC also contains an annex highlighting risks specific to agriculture and offering ways of mitigating them.

Examples include guidance on traceability in the supply chain, working conditions for farm laborers, safeguarding land tenure, and supporting animal welfare. 

A separate annex provides guidance on approaches to ensuring the free, prior, and informed consent (FPIC) of indigenous peoples in relation to investment or activities affecting their lands, territories, or other resources. Included is a helpful summary of existing normative guidance on FPIC and related resources.

While the RASC provides insights into particular issues in the sector, the variability of businesses to which it applies means that it is pitched at some level of generality. Take the question of verification. The RASC states that

“the verification process may include audits, on-site investigations, and consultations with government authorities, civil society, members of the affected community, and workers’ organisations at local, national and international level.” 

Unlike more prescriptive systems for responsible business conduct, this phrasing leaves firms to decide for themselves what steps are required.

In the absence of clear norms and standards this lack of specificity might be a shortcoming. Yet with the emergence of a host of authoritative instruments in the agricultural sector, it has the virtue of defining a clear process and model, while allowing a degree of flexibility needed to put those norms into practice.

Although I believe the RASC to represent progress in defining responsible agricultural standards, it is still early days. While I would not be surprised to see further iterations of the RASC over time, it seems likely to have immediate utility for firms implementing responsible agricultural practices.

Lawyer's Guide to the UN Voluntary Tenure Guidelines

Since the endorsement of the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forestry by the Committee on World Food Security in 2012, governments, the United Nations, activists, and lawyers have struggled to understand exactly what they require—if anything.  On one level the question is simple and straightforward.  Not only are the Guidelines voluntary on their face but the Committee on World Food Security (CFS) member states took pains to clarify that by voluntary they mean voluntary, i.e. not mandatory.  One would think the matter settled.

When examined more closely, the matter can be seen as a bit more complicated.  For one, the Guidelines clearly state that they are to be understood as consistent with international law and human rights standards.  While not binding in themselves, the Guidelines embody many of those laws and standards, which are binding.

On one level, not every CFS member endorsing the Guidelines has joined all of the agreements that the Guidelines reflect, but many have.  At a minimum, states that are parties to relevant agreements risk challenges that might arise from noncompliance with any relevant treaty obligation reflected in the Guidelines.  Also, as a practical matter, states that act inconsistently with the Guidelines could face adverse publicity.

Yet from the standpoint of practicing lawyers, the Guidelines raise somewhat different considerations.  Even if they do not require states to change their laws, should lawyers advise clients to follow them?  Are private organizations and businesses obligated to adhere to the Guidelines?

This is one of the questions I and my co-authors addressed in the recent book Responsible Governance of Tenure and the Law:  A Guide for Lawyers and Other Legal Service Providers published by FAO in May 2016.  

While the Guidelines themselves may be a voluntary instrument, many their elements involve matters of obligation for lawyers.  Specifically, in many jurisdictions lawyers have professional responsibility obligations to uphold the rule of law.  Not only do the Guidelines affirm the rule of law, but many elements of the Guidelines embody its core elements.  Examples include ensuring access to justice and effective means of dispute resolution, access to effective remedies, transparency in legal rules and tenure transactions, and fairness in consultation with affected communities.  The Guidelines call for professional associations to “develop, publicize and monitor the implementation of high levels of ethical behavior” and for professionals to adhere to those standards or face disciplinary measures.

The International Bar Association reached similar conclusions in its recently released Practical Guidance on Human Rights and Business for Business Lawyers.  Recognizing that the UN Guiding Principles on Business and Human Rights are a voluntary instrument, the IBA found that

“Much of its content was already legally required before the UNGPs were endorsed; that is, the domestic law of many States had already required business to respect human rights in numerous areas, such as antidiscrimination, workers’ rights, workplace and public health and safety, and privacy. And […], the content of the UNGPs have in fact become increasingly reflected in legislation and regulation, in commercial and financial transactions and agreements, and in the advocacy of civil society.”

The development of instruments such as the Guidelines or UN Guiding Principles provide needed clarity on these crucial subjects.  Lawyers should avoid mistaking their voluntary nature with grounds to discount their normative weight.