Comments by EMF – DGB Conference on „Strengthening social dialogue by applying CSR tools“

1. The OECD Guidelines for Multinational Enterprises: Are they a powerful tool for advancing corporate accountability? Comments by EMF – DGB Conference on „Strengthening social dialogue by applying CSR tools“ Istanbul, 25 April 2007

2. TUAC – what is it all about? TUAC, the Trade Union Advisory Committee to the OECD is an international trade union organisation; financed by ist membrs; affiliation fees allow TUAC to run a small Secretariat in Paris; independent from the OECD, however, having consultative status; TUAC is the interface of the trade unions with the OECD, its tasks are to inform affiliates about what is coming up on the OECD agenda (reports, surveys, policy recommendations) and to provide an input into the work of the OECD

3. FDI Inflow: South-East Europe and the Commonwealth of Independent States FDI inflows to the 19 countries of South-East Europe and the Commonwealth of Independent States (CIS) in 2005 remained at $40 billion, almost at the same level as in the previous year (figure). The share of inward FDI in gross fixed capital formation declined from 21% in 2004 to 17% in 2005, as domestic investment grew faster than FDI. In each of three main recipients – the Russian Federation, Ukraine and Romania – FDI inflows exceeded $5 billion (more than $10 billion in the Russian Federation alone)

4. Corporate social responsibility There is no universally accepted definition of CSR. According to the OECD, it relates to a set of policies often voluntarily adopted by an enterprise in order to reinforce the enterprise’s ability “to comply with the law and with other societal expectations that might not be written down in law books.” At the most basic level, socially responsible business behaviour means refraining from doing harm. The main areas considered under the umbrella of CSR include, in particular, environmental protection, human rights and labour practices. The main responsibility for ensuring that companies comply with internationally agreed standards and conventions rests with governments. Most international conventions contain obligations for States, but few legally binding obligations for TNCs

5. Multilaterally agreed CSR principles International organizations, often in cooperation with States or companies, also have an important role to play in facilitating consensus building and promoting universally accepted principles that can serve as guidelines for TNCs investing in other developing countries. Prominent initiatives in this regard include the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (MNE Declaration) of the ILO and the OECD Guidelines for Multinational Enterprises, the United Nations’ Global Compact. The ILO’s MNE Declaration is a non-binding universal instrument that articulates a set of principles to guide the global operations of enterprises and their social policies. The OECD Guidelines for Multinational Enterprises, originally adopted in 1976 and revised in 2000, are a comprehensive and detailed CSR instrument of interest to developed and developing countries alike. The Guidelines provide government-backed recommendations covering such broad areas as human rights, supply chain management, labour relations, the environment, combating bribery, technology transfer, consumer welfare and taxation.

6. Nowadays the guidelines are fairly well known and easily to Web Results 1 - 10 of about 280.000 for "OECD Guidelines for Multinational Enterprises". (0,08 Seconds) Text of the revised OECD Guidelines for Multinational Enterprises which were adopted on 27 June 2000.www.oecd.org/document/28/0,2340,en_2649_34889_2397532_1_1_1_1,00.html- 53k The OECD Guidelines for Multinational Enterprises (MNEs) are recommendations to enterprises, made by the Governments of OECD Member countries. ...www.itcilo.it/english/actrav/telearn/global/ilo/guide/oecd.htm - 47k -

7. Nn TUAC is conducting a project aimed to contribute to the implentation of the Guidelines The flagship publication of the project is the „User‘s Guide“, available in more then 12 languages, including besides English, French and German also Russian, Chinese, Bulgarian, Portugese, Spanish and Arabic.

8. As an instrument to strengthen corporate social responsibility in a broad sense and to make companies accountable, the Guidelines promise much. By moving beyond ill defined unilateral codes of conduct, they provide a multilateral code governing business conduct. They extend the responsibility of contractors across the supply chain If properly implemented, they offer a monitoring mechanism that brings business operations under government scrutiny. The Guidelinesprovide an accessible way for trade unions and NGOs to raise their concerns regarding the conduct of globally operating corporations. Regrettably however, operational problems do limit their effectiveness.

9. According to the revision, the Guidelines now relate to many aspects of business operations, including: information disclosure employment and industrial relations the environment bribery consumer interests science and technology competition and taxation The Guidelines apply to both the domestic and foreign business operations of multinational companies with an home base in an OECD country respectively in an adhering country. However, the Guidelines do not cover companies operating from and within countriesthat have not signed up to them, like Malaysia (Petronas), South Africa (SAB Miller), India (TATA) and China (Lenovo, SINOPEC), to name but a few. However, if these companies are operating in OECD / adhering countries, they have to comply with the guidelines.

10. IV. Employment and Industrial Relations Enterprises should (…): 1. a) Respect the right of their employees to be represented by trade unions and (…)and engage in constructive negotiations (…); b) Contribute to the effective abolition of child labour. c) Contribute to the elimination of all forms of forced or compulsory labour. d) Not discriminate against their employees (…). 2. a) Provide facilities to employee representatives (…) to assist in the development of effective collective agreements. b) Provide information to employee representatives (…) needed for meaningful negotiations (…). c) Promote consultation and co-operation between employers and employees and their representatives (...) . 3. Provide information to employees and their representatives (…). 4. a) Observe standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country. b) Take adequate steps to ensure occupational health and safety in their operations.

11. 5. In their operations, to the greatest extent practicable, employ local personnel and provide training (..) in co-operation with employee representatives and, where appropriate, relevant governmental authorities. 6. In considering changes in their operations which would have major effects upon the livelihood of their employees, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of their employees, (…) and co-operate with the employee representatives (…) so as to mitigate to the maximum extent practicable adverse effects. (…), it would be appropriate if management were able to give such notice prior to the final decision being taken.(...) 7. In the context of (..) negotiations with representatives of employees on conditions of employment, or while employees are exercising a right to organise, not threaten to transfer the whole or part of an operating unit from the country concerned nor transfer employees from the enterprises’ component entities in other countries in order to influence unfairly those negotiations or to hinder the exercise of a right to organise. 8. Enable authorised representatives of their employees to negotiate on collective bargaining or labour-management relations issues and allow the parties to consult on matters of mutual concern with representatives of management who are authorised to take decisions on these matters.

12. Promotion and implementation of the guidelines The ultimate responsibility for implementing the Guidelines lies with governments. They must appoint a national contact point (NCP). NCP’s are obliged to promote and encourage compliance with guidelines. The NCP must respond to any allegations of company misconduct. Governments / NCP’s must establish a forum where complaints can be lodged directly against MNE’s that violate the Guidelines. Thus, a company may find its operations examined – whether or not it has endorsed the Guidelines.

13. Based on the new complaints mechanism, subsequent to the revision of the Guidelines, trade unions have filed 66 complaints More than half of the cases concern violations of trade union rights and roughly one quarter concerns restructuring (mostly company closures respectively lay offs) A few cases refer to other issues such as, health and safety, disclosure of information, environment. Only one case, a complaint against the Liberian Ship and Corporate Registry (LISCR), involved allegations regarding bribery and corruption. The complaints filed by trade union’s concerned companies such as Marks & Spencer, Bosch, Siemens, Bata, Continental, Parmalat, Nestle, Honda, BAT, Swatch, Saint-Gobain, Bayer, General Motors (Brasil), Toyota, Bridgestone, Wackenhut, PepsiCo, Addidas and Ryan Air. By the end of September 26 cases remained to be resolved. 40 had been closed, not all of them in a satisfying way.

14. How to make use of the Guidelines? How to proceed if a company violates the Guidelines? First, a resolution should be sought at the enterprise or company level; If a Guidelines-related problem cannot be resolved directly with the company, the trade union should contact its national centre and the related Global Union; In a second step, evidence must be collected and documented in order to substantiate the allegation of a violation and to facilitate the process of filing a complaint against the company with the NCP; Subsequently, the trade union should officially approach the NCP in the country where the violation is taking place. If it is happening in a non-adhering country, it would than be the NCP in the country where the company is headquartered.

15. The number of cases is inappropriate to assess the usefulness of the Guidelines The process of resolving problems does not necessarily lead to a complaint The fact that companies facing potential damage to their reputation causes them often to change their conduct and to respect the Guidelines However, there are serious obstacles regarding an effective implementation of the Guidelines: the business uptake of the guidelines has been very disappointing; according to a survey conducted in 2003 only 12 out the FTSE 100 actually referred to the Guidelines. Business federations like the CBI in the UK or BDI in Germany have played their part in slowing down company uptake. most governments fail the acid test: implementation of the Guidelines has remained half-hearted, many NCPs are lacking the will as well as the ability to act. Voluntarism, despite its limits, is not at the roots of the problem Are the Guidelines an effective tool for advancing corporate accountability? Or are they a failure?

16. Analysis assessing how effectively the Guidelines have been implemented can be summarised as follows (I): 1) There is a lack of due process: Procedures for the consideration of complaints are anything but clear (complainants must be given the opportunity to respond to comments on the case received by the NCP, the decision making process must be clarified, NCPs must maintain impartiality) Often complaints are not resolved in a timely and transparent manner (on average, NCPs take 13 month to deal with a case), companies have tried to delay and obstruct the handling of complaints NCPs don’t always act as a honest broker, the parties involved in a case are not treated equally (if a complaint has been filed, many NCPs would approach the company first in order to discuss an initial assessment and only then with the complainant) In investigating seriously guidelines-related issues, some NCPs don’t act independently of other government interests.

17. Analysis assessing how effectively the Guidelines have been implemented ….(II) 2) The applicability of the guidelines has been narrowed The scope of the guidelines has been limited to an investment link. That is in a contrast to the underlying principles. They apply to all business operations, including the supply chain. Many NCPs are reluctant to declare violations of the guidelines. NCPs are not sufficiently prepared to use the guidelines as an instrument for holding companies to account for breaches of the guidelines.

18. What needs to be done in order to resolve operational problems? Above all, governments and NCPs must make greater efforts to promote and implement the Guidelines. They must ensure that NCPs are adequately funded; that NCPs must not operate as virtual entities but as a permanent interdepartmental office with stakeholder participation; that NCPs have the ability to mobilise adequate expertise in order to conduct thorough investigations regarding alleged violations of the guidelines; that clear timeframes for an initial assessment of cases as well as for the process of issuing a final statement and recommendations are established; that complete and accurate records of all complaints cases are published annually.

19. How and where to learn more about the OECD Guidelines? Global Union Research Network – GURN http://www.gurn.info/topic/oecdgdl/index.html News March 2006:Training material on the OECD Guidelines for Multinational EnterprisesTUAC has with the support of the European Commission developed a training material on the OECD Guidelines for Multinational Enterprises for European Works Councils. It can be downloaded from this web site and is available in English, French, German and Czech. TUAC List of cases raised with National Contact Points, Feb 06English Key Reading TUAC's User's GuideBulgarian / Chinese / Croatian / Czech / English / French / German/ Latvian / Lithuanian / Macedonian / Portuguese / Russian / Spanish(The Czech, Croatian, Lithuanian, Macedonian and Russian versions are without pictures)TUAC List of cases raised with National Contact Points, Feb 06EnglishNEW!

20. TUAC-Contact on the OECD Guidelines Ms. Veronica NilssonTUACTrade Union Advisory Committee to the OECD15, rue Lapérouse75016 ParisFrancePhone: +33 1 55 37 37 37Fax: +33 1 47 54 98 28http://www.tuac.org