Christine Kaufmann explains in an interview how the OECD’s guidelines for responsible business conduct are important.
Responsible business conduct is all about businesses making a positive contribution toward sustainable development and preventing their activities having any negative effects. The focus is therefore on the positive and negative effects of business activities. This means responsible business conduct goes further than traditional CSR concepts based on philanthropy or voluntary action and is not limited to respecting statutory provisions or compliance. So, according to this view, it is not just an “add-on”, but forms an integral part of a company’s core business and risk management – including in supply chains and business relationships.
Collaboration and dialog with all stakeholders, which includes the private sector, are critically important to the OECD and count among its greatest strengths. One example of this is the “Business and Industry Advisory Committee to the OECD”, or BIAC for short, which gives the private sector a voice in discussions. Another is the way the various instruments to promote responsible business conduct have been developed in consultation with the wider economy, trade unions and civil society.
The guidelines expect businesses to embrace their responsibility by identifying, avoiding and addressing the negative consequences of their activities. This encompasses the effects produced by a business itself, those to which it contributes and those with which it is directly linked by virtue of its business relationships. The tool for meeting this expectation is due diligence applied across the entire supply chain, or “supply chain due diligence” for short. The OECD has written various guidance documents to give businesses tangible support in understanding what due diligence means in practice. These explain the precepts set out in the guidelines with the help of specific examples and are written in “non-technical” language that is easy to understand. Besides sector-specific guidance documents on clothing and shoes, conflict minerals, raw materials, agriculture and institutional investors, general guidance on due diligence at all kinds of companies was also issued in 2018.
As negative effects cannot always be avoided, the guidelines require businesses to make some contribution to remedial or restorative activities depending on how involved they are or were.
The reasons are largely historical. The guidelines were originally devised in 1976 as part of a range of tools concerned with investors’ rights and obligations. They took the form of recommendations, which made it easier to get all stakeholders on board and facilitated their ongoing evolution. This is a different type of approach to, say, the one the UN is currently adopting as it works on a binding treaty on business and human rights. With the guidelines, the OECD member states have reached a consensus on joint recommendations for businesses – after various revisions. These countries, and any others that have subscribed to the guidelines, undertake to formulate clear expectations for their businesses as regards compliance with them and to establish complaints procedures involving the so-called National Contact Points. So, despite the apparently voluntary nature of the guidelines, the reality for businesses is rather different, as any person or organization may file a complaint with a National Contact Point if they feel a business is contravening them. Non-compliance may have further consequences too depending on the country in question. Another indication that the guidelines are more than just voluntary standards is the increasing tendency for them to be incorporated into legally binding instruments.
The guidelines represent the only internationally recognized standard for responsible business conduct that enjoys broad support from all stakeholders and covers all areas where a business interacts with wider society. The guidelines are also designed to complement other international instruments such as the UN Guiding Principles on Business and Human Rights. So a business following the guidelines can be confident it is operating on the basis of a coherent instrument that sets the standard on an international scale for a comprehensive approach to responsible business conduct. Another incentive for businesses is the highly practical nature of the guidelines, which is particularly apparent in the associated guidance documents.
In the current debate, two different issues are often conflated, namely due diligence obligations and liability. With the OECD guidelines, we now have an internationally recognized and widely supported standard for due diligence. It is up to politicians to decide whether this standard should be made binding on businesses by making it law or incorporating it into the constitution. As regards the liability of businesses for breaches of their duty of due diligence, however, the different approaches at international level can vary greatly, including in terms of how far they go. This is why it is important to establish very clearly what any proposed liability regulation is intended to achieve and how it would compare in international terms given that global supply chains are involved here. Also, the relationship between proceedings brought before the Swiss National Contact Point and any liability proceedings brought later on or simultaneously before a court is not exactly clear. So far, all businesses that have had proceedings instigated against them before the Swiss National Contact Point have voluntarily cooperated with these. Would they do the same if a liability action were possible at the same time? A great many things still need to be clarified in relation to this issue.
I have three main objectives. The various National Contact Points in the member states are critical to the visibility of the OECD guidelines. As well as having different setups, however, they also differ in terms of their effectiveness. So for the guidelines to be credible and gain acceptance, it is essential that those National Contact Points that are still lagging behind start to raise their game. The second major issue is policy coherence. This may sound abstract, but the practical importance for businesses cannot be overestimated. Government policies for promoting investment or implementing sustainability and environmental objectives, for example, really need to complement those for responsible business conduct set out in the OECD guidelines if businesses are to implement these too. And this ties in with my third priority, implementing responsible business conduct in a digital world. We are only beginning to understand how digital developments such as artificial intelligence are impacting on responsible business conduct. It starts right at the recruitment stage. For example, how can we ensure that an automated initial assessment of application forms based on machine learning will not lead to any discriminatory outcomes? And key questions concerning risk evaluation also arise if we consider the kind of requirements that are to apply to reviewing risk assessments based on big data analytics.
The OECD guidelines are inspired by the OECD motto of “Better Policies for Better Lives”. And this is ultimately what motivates me too: to contribute to the practical implementation of the guidelines and so improve, to some degree at least, the lives of those concerned.