A reinvigorated instrument for global investment

The review of the OECD Guidelines for Multinational Enterprises concluded in 2000 was two years in the making. It was a difficult challenge, 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 technology firms into the international marketplace, while a more favourable policy 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 environment 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 changing global economy. The review sought to ensure their continuing relevance and effectiveness in this context.

The Guidelines now comprise recommendations, to multinational corporations, from 33 governments 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 economy.

The revised Guidelines for the first time include references to protection 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 internationally recognised core labour standards.

The environment section now encourages multinational enterprises to raise their environmental performance, through such measures as improved internal environmental management, stronger disclosure of environmental information, and better contingency planning. And the chapter on disclosure and transparency has been updated to reflect the OECD Principles on Corporate Governance and to recognise and encourage progress in enhancing firms’ social and environmental accountability.

Many businesses have established their own codes of conduct which are publicly available, but the Guidelines are the only multilaterally endorsed and comprehensive code that governments are committed to promoting. And the signatory governments – the 30 industrial countries in the OECD plus Argentina, Brazil and Chile – are the source of most of the world's direct investment flows and home to most multinational enterprises. The Guidelines aim to promote their positive contributions to economic, environmental and social progress.

The Guidelines are part of the OECD's Declaration on International Investment and Multinational Enterprises which also contains commitments by governments to provide national treatment for foreign-controlled enterprises, to avoid conflicting requirements on enterprises and to co-operate regarding investment incentives and disincentives.

In response to increasing public concern about the impact of globalisation on society and the environment, both in MNEs' home countries and in other territories where they operate, the OECD countries ensured that the 2000 review of the Guidelines was as transparent and open as possible. To do this, the OECD consulted with the business community, labour representatives, non-governmental organisations and non-member governments. In addition, draft revisions 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 implementation. 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 implementation 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 activities to the OECD's Committee on International Investment and Multinational Enterprises (CIME), which is responsible for overseeing implementation of the Guidelines. The CIME can provide clarifications of the meaning of the Guidelines if necessary, 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 individual host countries need to be taken into account and that implementation 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 particularly important in achieving the Guidelines' objectives (see article “Leading from the front”). The continuing support of business associations, employee organisations and non-governmental 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 players.

The co-operation of all these participants in the Guidelines Review 2000, together with the constructive input of the OECD member countries, are good reasons indeed to be optimistic about the positive role the Guidelines can play in furthering social, environmental, and economic progress, wherever MNEs invest.

©OECD Observer No 225, March 2001 

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