MNE Guidelines: A reinvigorated instrument for global investment

The recently concluded review of the OECD Guidelines for Multina-tional Enterprises was two years in the making. It was a difficult chal-lenge, but a nonetheless successful one. There are several reasons for this.

To many people, international investment by multinational enterprises (MNEs) is what globalisation is all about. The rise of service and knowledge-intensive sectors has been associated with a push by service and technol-ogy firms into the international marketplace, while a more favourable pol-icy environment means countries now compete actively for international investment almost everywhere. MNEs have become an integral part of the international economy, bringing investment and technology as well as tax revenue to their host countries.

But the rise of this corporate activity has also resulted in an increase in public concern at the effect of businesses on the people and the environ-ment of the countries where they operate. The OECD's Guidelines for Multinational Enterprises aim to address these concerns by helping to forge a framework for responsible business conduct in a rapidly chang-ing global economy. The review sought to ensure their continuing rele-vance and effectiveness in this context.

The Guidelines now comprise recommendations from 33 governments to multinational corporations covering areas from respect of human rights to environmental protection wherever companies operate. First issued in 1976, they have been revised in 2000 to bring them up to date in the rapidly-changing global econ-omy. The revised Guidelines for the first time include references to pro-tection of human rights, combating bribery and protecting consumers. And although the Guidelines are not legally binding, the latest version strengthens signatory governments' responsibility for promoting and implementing them.

The addition of recommendations relating to the elimination of child and forced labour means that the Guidelines now cover all interna-tionally recognised core labour standards. The environment section now encourages multinational enterprises to raise their environ-mental performance, through such measures as improved internal envi-ronmental management, stronger disclosure of environmental infor-mation, and better contingency planning. And the chapter on disclo-sure and transparency has been updated to reflect the OECD Princi-ples on Corporate Governance and to recognise and encourage progress in enhancing firms' social and envi-ronmental accountability.

Many businesses have established their own codes of conduct which are publicly available, but the Guide-lines are the only multilaterally endorsed and comprehensive code that governments are committed to promoting. And the signatory gov-ernments – the 29 industrial coun-tries in the OECD plus Argentina, Brazil, Chile and Slovakia – are the source of most of the world's direct investment flows and home to most multinational enterprises. The Guidelines aim to promote their pos-itive contributions to economic, environmental and social progress.

The Guidelines are part of the OECD's Declaration on International Investment and Multinational Enter-prises which also contains commit-ments by governments to provide national treatment for foreign-controlled enterprises, to avoid con-flicting requirements on enterprises and to co-operate regarding invest-ment incentives and disincentives. In response to increasing public con-cern about the impact of globalisa-tion on society and the environment, both in MNEs' home countries and in other territories where they oper-ate, the OECD countries ensured that the 2000 review of the Guide-lines was as transparent and open as possible.

To do this, the OECD consulted with the business community, labour rep-resentatives, non-governmental organisations and non-member gov-ernments. In addition, draft revi-sions were posted on the Internet for public comment. These sources all provided essential input to the development of the revised text and procedures to enhance implementa-tion. This process of consultation was crucially important to building momentum for the Review's success.

When it comes to implementing the Guidelines, National Contact Points (NCPs) remain the key government institution responsible. But the review sharpened and clarified their role and responsibilities to ensure their effectiveness. The NCPs will continue to undertake promotional activities, handle enquiries on the Guidelines and discuss matters related to them, including imple-mentation in specific instances.

But they will now also hold annual meetings to share their experiences in promoting the Guidelines and to encourage full implementation of the Guidelines. Each NCP will also submit an annual report of its activi-ties to the OECD's Committee on International Investment and Multi-national Enterprises (CIME), which is responsible for overseeing imple-mentation of the Guidelines. The CIME can provide clarifications of the meaning of the Guidelines if nec-essary, and can call in experts to assist.

The revised Guidelines make it clear that the recommendations represent good practice wherever enterprises operate, not just within the OECD area. But the text recognises that the particular circumstances of individ-ual host countries need to be taken into account and that implementa-tion procedures need to be adapted to the greater difficulties that arise for NCPs when looking into matters relating to the Guidelines in non-adhering countries.

Given the non-binding nature of the Guidelines, and the fact that they are recommendations to enterprises, co-operation from business will be par-ticularly important in achieving the Guidelines' objectives (see next arti-cle). The continuing support of busi-ness associations, employee organisations and non-governmen-tal organisations will also enhance the effectiveness of the Guidelines. Responsible business conduct is in everyone's interest. That is why non-signatory governments will also have an important role to play in reinforcing and complementing the co-ordinated efforts of all these play-ers. The co-operation of all these participants in the Guidelines Review 2000, together with the con-structive input of the OECD member countries, are good reasons indeed to be optimistic about the positive role the Guidelines can play in fur-thering social, environmental, and economic progress, wherever MNEs invest. 

Other articles in this series:

Leading from the front, Bruno Lamborghini, Chairman, Olivetti Lexikon S.p.A

Putting the Guidelines to work, John Sweeney, President of the AFL-CIO and TUAC

A view from the South, Lauro Eduardo Soutello-Alves, Chief Negotiator for Brazil in the Working Party on the Guidelines

The trust business, Patricia Feeney, Human Rights Adviser, Oxfam, United Kingdom

References

• “Convention on Access to Information, Public Participation in Decision-making And Access to Justice in Environmental Matters” (1998 Aarhus Convention) at www.unece.org/env/download/ cep43e.pdf.

• Deciphering Codes of Corporate Conduct: A Review of their Contents (March 2000), working paper available at: www.oecd.org/daf/ investment/working-papers.htm#1999/2. 

• Even-Granboulan, Geneviève, Ethique et Economie - Quelle morale pour l'entreprise et le monde des affaires? L'Harmattan (Paris), 1998.

• ILO, Declaration on Fundamental Principles and Rights at Work, 1998, at www.ilo.org/public/english/ standards/relm/ilc/ilc86/com-dtxt.htm. 

• North American Agreement on Environmental Co-operation at: www.cec.org/english/resources/ agreement/.

• North American Agreement for Labour Co-operation (NAALC): www.naalc.org/english/infocentre/ NAALC/NAALC3.htm. 

• Office of the Compliance Advisor Ombudsman of the International Finance Corporation (of the World Bank Group), at: www.ifc.org/cao/. Draft Operational Guidelines at: www.ifc.org/cao/guidelines/ GUIDELINES.PDF.

• Thomas, Terry, and Eyres, Bill, "Why an Ethical Business is Not an Altruistic Business" in Visions of Ethical Business, no. 1, Oct. 1998, Financial Times Management, London. 

• World Bank Inspection Panel - Operating Procedures at: www.worldbank.org/html/ins-panel/ operating_procedures.html#IIA.

©OECD Observer December 2000 




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