Our key takeaway: The OECD Guidelines for Multinational Enterprises and their application, supported by specific tools, and guidance and National Contact Points, remain more relevant than ever. However, the world has how they are applied will need to evolve along these changes. This includes the need to clarify expectations of companies when it comes to their environmental impacts (e.g. related to climate change, biodiversity, and animal welfare); climate mitigation, adaptation and just transition principles; and the interlinkages between business-related impacts on people, planet and society.
The OECD Secretariat has compiled its ‘Stocktaking report on the OECD Guidelines for Multinational Enterprises’ (April 2022), based on inputs from National Contact Points for Responsible Business Conduct; inputs from the Institutional Stakeholders BIAC, TUAC and OECD Watch; consultations with OECD Committees; and inputs received during a public consultation. The purpose of the stocktaking is “to i) obtain a clearer picture as to whether the OECD Guidelines for Multinational Enterprises remain fit for purpose; and ii) to provide a basis upon which to discuss potential options for moving forward”.
- A changing world: The report refers back to the last update of the Guidelines in 2011, and highlights the many ways in which the world has changed since then. This includes the fact that “[c]ontinued progress in human development is increasingly circumscribed by the climate and biodiversity crisis.” We have seen “trust in leaders and societal institutions including government, business, NGOs and media” decline, “while at the same time sustainability has been established as a mainstream business agenda.” “Sustainable business practices are increasingly seen as a precondition for long-term value creation, and action on climate change mitigation and adaptation is increasingly framed as a business opportunity.” There is growing discussion “on the role of regulation in creating a level playing field incentivising sustainable business and investment.” The report discusses “trends towards a weakening of labour, with a decline in trade union and worker freedoms, a declining labour share of income, and persistent high levels of informality.” “The fourth industrial revolution has accelerated”, and “civic space for speaking out against corrupt business practice and adverse business impacts on human rights, labour standards, or the environment remains curtailed.” The “supply chains of the future present a rapidly changing context” (with increasing protectionism, increased regionalisation, decoupling of some supply chains, near-shoring trends, and additive manufacturing). And the “Covid-19 pandemic together with conflicts and climate change has led to an increase in extreme poverty for the first time in decades.”
- Need for focus on environmental impacts; interlinkages between people and planet; and just transition: The stocktaking finds that the “Guidelines and their application have been able to adapt to changing business models and impacts”, in particular thanks to its “strong alignment … to key instruments such as the UN Guiding Principles on Business and Human Rights and the ILO Tripartite Declaration”, as well as the development of specific guidance. “At the same time, in terms of being fit for contemporary and likely future [Responsible Business Conduct – RBC- issues, the stocktaking exercise finds that since 2011 there have been significant developments in terms of the environmental, social and societal impacts associated with business activities. These developments include accelerating concerns related to climate and environment, persistent human rights challenges, and increasing awareness of the risks posed by digitalisation and technology.” Specifically, “the stocktaking exercise identifies opportunities for clarifying expectations related to environmental impacts of business activities including climate change, biodiversity, and animal welfare that are currently not well-addressed in the Guidelines. In particular, the Guidelines are seen to lack clear expectations on climate mitigation, adaptation or just transition principles.” Finally, “the stocktaking exercise points to the need for more clarity in addressing interlinkages between business-related impacts on people, planet and society.”
- NCPs represent both achievements and challenges: The report finds that “[t]he system of National Contact Points for Responsible Business Conduct is seen as among the most important achievements of the Guidelines but also as their most significant challenge.” The report provides “a number of opportunities for further leveraging the unique capabilities of the NCP system, for achieving more coherence across the network, and has also confirmed a number of challenges that risk undermining the effectiveness and credibility of this system.”