How can responsible business authorities stay ahead of the curve?

In the fifth post of his Legacy Blog Series, Roel Nieuwenkamp looks at how the government authorities responsible for implementing the OECD Guidelines for Multinational Enterprises can be strengthened.

RN-Legacy-Blog-callout1Time to discuss procedures: not always the most inspiring theme in the field of corporate responsibility, but extremely important. There are many ways to set up National Contact Points (NCPs), which are the responsible business authorities that are established by the OECD Guidelines for Multinational Enterpirses. But many people have asked me the question: which NCP model works best?

The procedures that NCPs have to follow are in fact very good. They do not prescribe a specific institutional structure, but they are very clear about the binding criteria that all NCPs have to meet: i.e. be visible, accessible, transparent and accountable. Also, when NCPs handle cases/complaints – they have to do this in a way that is impartial, predictable, equitable and compatible with the OECD Guidelines.

The procedures also state that NCPs should ‘retain the confidence of social partners and other stakeholders’. They are also ‘expected, whatever their composition, to develop and maintain relations with representatives of the business community, workers’ organisations, other non-governmental organisations.’ Another essential element concerns resources: governments commit to make available human and financial resources to the NCP so they can effectively fulfil their responsibilities.

When the time comes for the next update of the OECD Guidelines, I have identified nine areas where procedures for NCPs can be improved and strengthened.

1. The structure of NCPs

So can governments choose the structure that best fits their national context? Yes and no. They can, as long as they comply with the binding criteria.

But now forget about all these rules. Which NCPs really do work well?

In fact, the following NCP structures have delivered the most in terms of mediated agreements in complaints procedures and general NCP activities:

  • The tripartite model consisting of government, employers’ and workers’ representatives around the table on an equal footing is the basis for the French, Belgian, Latvian and Swedish NCPs. This model has over the years delivered some good results. A potential downside of this model is that NGOs feel excluded from decision-making on cases.
  • The independent model has been followed by the Danish, Norwegian, Dutch and Lithuanian governments. Their NCPs are composed of independent experts (sometimes appointed by the government and sometimes nominated by stakeholders). Looking back at the specific instances handled by these NCPs in the last few years, they have achieved strong results not only in terms of attracting cases, but also in terms of helping parties reach agreement.
  • Some NCPs have adopted hybrid structures which have also delivered good results. The Swiss NCP, for instance, is located in government but with a diverse advisory body made up of independent experts. The UK NCP is also located in government, and has a steering board made up of representatives from government and external stakeholders. The UK steering board can review cases to check whether they comply with the UK NCP’s rules of procedure. Both NCPs also use professional mediators in their case-handling.
  • Some models of NCPs located within government with advisory boards can work well as long as the NCP has a strong inter-departmental set up and the advisory board is representative of diverse external stakeholders. This is the case for the US and German NCPs.

Is there a single best model? No, because success is highly dependent on a range of factors. In my experience, impartiality and resources are the two factors most critical for success. A lot also depends on the personal motivation and competences of the NCP secretariat,  staff turnover, a constructive relationship with civil society, etc. In fact the sentence in the Procedural Guidance about the ‘confidence of the social partners and other stakeholders’ sums it all up. All governments should find a way to ensure that confidence, knowing that any model is always a balancing act between stakeholders.

Is there a single worst model then? Yes: the ‘mono agency’ NCPs that are located in a single ministry and do not include other government departments or stakeholders in their institutional arrangements. Additionally, such NCPs are traditionally based in ministries with ‘economic’ portfolios such as economy or trade, or in “pro-business” investment agencies, thereby risking perceptions of bias amongst civil society stakeholders. This model should be phased out as soon as possible as it undermines the credibility of the whole system. There is also a tendency in those models to dedicate no resources to these NCPs. In other words: in the future a ‘whole of government’ approach, embedding other ministries in the NCP should be a condition for all NCPs. The involvement of other ministries is necessary to ensure that the NCP has expertise directly available in areas such as human rights, labour and the environment. Moreover,  the inclusion of various government departments in the institutional arrangements of the NCPs brings the necessary checks and balances and therefore strengthens impartiality. Finally, the inclusion of stakeholders in the NCP functioning, either through a multi-stakeholder advisory or steering board, or by including stakeholders as independent members of the NCP, should be made a requirement for effectively functioning NCPs.

2. NCP peer reviews

One of the hallmarks of progress made by the NCP system over the last few years has been the support of the G7 Leaders in 2015, indicating that they would ensure their own NCPs are effective and that they would “lead by example”. They also called on the OECD to promote peer reviews and peer learning. In a future update, it makes sense that the peer reviews become mandatory, something quite common in the context of other OECD policy areas.

3. Monitor implementation

A challenge that many NCPs face today is that they do not measure the success of their promotional work, in terms of business awareness or uptake of the OECD Guidelines. Therefore it would make sense that NCPs regularly monitor at a minimum awareness of the Guidelines in their business community. NCPs in Switzerland, the Netherlands, Denmark and Ukraine are already engaging in such activities. The Dutch NCP introduced a target of a 90% level of awareness by companies.  Following a letter by the Dutch Minister of Foreign Trade and Development to the CEOs of the biggest multinationals, calling their attention to the importance of the OECD Guidelines, the Dutch NCP found that awareness and commitment dramatically improved.

4. Complaint mechanism evidence threshold

One of the regular bones of contention about the complaints mechanism is the “evidence threshold”. Some NCPs in the past have dismissed cases because a complaint could not be fully substantiated. Civil society and trade unions have expressed concern that the threshold of substantiation in NCP cases can end up being even higher than for judicial proceedings. This is not an ideal status for a problem solving mechanism that is not legally binding. During the 2010-11 negotiation of this issue, the intention was for the threshold to be reasonable plausibility and not full proof. I remember summarising the discussion at the time:  no angry emails or newspaper article clippings, but no full proof either.

5. Government buy-in

Over the years we have seen some countries becoming adherents to the Investment Declaration and thus the OECD Guidelines only to then do little with the RBC work. Frankly speaking, such countries represent a reputational risk to the whole system. Therefore in the future my proposal would be that only countries with a functioning NCP should be able to adhere to the Investment Declaration. It should not be enough to present a nice plan to make an NCP. We have been disappointed by those plans too many times.

6. Improving transparency

As transparency is such an important part of the complaint mechanism, I would make the publication of an initial assessment mandatory unless there is a very important confidentiality issue at stake which warrants protection of either the complainants or the companies. In addition, many NCPs follow up on the recommendations they make in the final  statement. For example, they can monitor to what extent the company has implemented the recommendations. Often the monitoring takes place within a year. This is essential to find out whether companies follow the recommendations made by the NCP. As this is really good practice, I suggest such follow up also becomes mandatory.

7. Policy coherence

Which minister would want to give a subsidy to a company that is not prepared to engage in an NCP case? Which Minister wants go on a trade mission with a company that has ignored retreated recommendations made by an NCP? If a company isn’t respecting human rights, it seems illogical to award it a big government contract. Canada has been leading the way on such policy coherence by denying trade support to companies that refuse to participate in NCP cases. Others are following suit. The OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (also known as the “Common Approaches”) encourages members, via their Export Credit Agencies (ECAs), to promote the OECD Guidelines, consider the outcomes of NCP cases when undertaking project reviews, as well as to give consideration to policy coherence with the OECD Guidelines. Obviously for reasons of policy coherence, governments should also make a link to public procurement and economic diplomacy instruments. Codifying these good practices further would be a major step towards policy coherence on RBC.

8. NCP appeal mechanism

The “substantiated submission” procedure provides some sort of an appeal mechanism on process. This was used for the first time in 2017 when OECD Watch asked the OECD Investment Committee to review the Australian NCP. Substantiated submissions can be made by other NCPs, business (through BIAC), trade unions (through TUAC) and NGOs (through OECD Watch). It is not intended to second guess an NCP on the substance of a case – it is all about process. It is however an important mechanism to make sure that NCPs handle cases in conformity with the Procedural Guidance. I like this process but there are still improvements to be made as to how these issues are handled. At the very least, if a case is brought by one NCP against another NCP, it needs to be decided on the basis of consensus minus 2 (i.e. the involved governments would be excluded from the decision-making process). In cases where just one NCP is involved, it makes sense to follow a consensus minus one rule. An even better and more efficient option would be for an independent panel of (former) NCP experts to take a look at a case and make recommendations to the NCP.

9. Multi-NCP complaint procedure

A long-term solution needs to be found for the handling of complaints involving many different NCPs and where coordination is a huge challenge. To enable the diligent handling of such cases, an international mechanism –something like a Global Contact Point – could be useful. The Global Contact Point could be an international panel of experts that could handle the case and provide mediation and recommendations on behalf of the NCPs that are involved Only cases that are of a certain level of complexity with  an international dimension would be dealt with by such a panel. This option would only be activated at the request of the NCPs involved.

Stronger NCPs mean better business conduct

With these nine recommendations, I hope to have given some food for thought on how the procedures for NCPs can be improved, to make sure these important responsible business authorities stay ahead of the curve.

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