Corporate Accountability: Improving the OECD Guidelines for Multinational Enterprises

Recently in Paris, EarthRights International Senior Consultant Matthew Smith addressed the Investment Committee of the Organization for Economic Cooperation and Development (OECD) on the effectiveness of the OECD Guidelines for Multinational Enterprises. The June 30th event marked the launch of the OECD Investment Committee’s formal review of the OECD Guidelines, which are normative standards governing the conduct of multinational corporations from OECD countries covering environmental and human rights, and other basic standards for responsible business activity.

At issue for EarthRights International is whether the Guidelines can become relevant for communities and business activity, especially in repressive governance zones, such as military-ruled Burma.

The NGO network OECD Watch, which has official standing at the OECD Investment Committee, put EarthRights International forward as an official speaker at the event. As a new member of OECD Watch, EarthRights International’s presentation focused on how the OECD’s Specific Instance complaint mechanism has failed to work for the affected populations living in the shadow of the Shwe Gas Project in Burma, a large scale natural gas project being developed in part by two companies from OECD member state South Korea: Daewoo International and state-owned Korea Gas Corporation (KOGAS). Included in the address were concrete recommendations to the Investment Committee regarding substantive and procedural problems with the current Guidelines, problems the review process could go a long way to address.

The OECD is an inter-governmental economic organization comprising mostly high-income, developed countries that coordinate economic and development policies. In 2000, the OECD issued the OECD Guidelines for Multinational Enterprises; each OECD country has a National Contact Point (NCP) that is tasked with handling complaints against that country’s companies for specific instances of violating the Guidelines, no matter where the violations occur.

In 2008, EarthRights International, the Shwe Gas Movement (SGM), and nine other co-complainants filed a complaint with the Korean NCP against Daewoo International and KOGAS regarding violations of the Guidelines by the companies in Burma. As documented in the EarthRights International and SGM report A Governance Gap (2009), the Korean NCP categorically rejected the complaint in a decision that denied due process to the communities and complainants, and narrowed the principles of the Guidelines beyond meaningful recognition.

Since the NCP’s rejection, additional instances of land confiscation, arbitrary detention, torture, and other abuses connected to the project have been documented by EarthRights International and SGM. The evolution of this case is featured in the new OECD Watch report 10 Years On, which presents detailed recommendations for the update of the Guidelines.

At the Roundtable on June 30, 2010, the Investment Committee heard directly from EarthRights International on how communities are suffering because of the Shwe Project and how the Korean NCP denied them a fair hearing. ERI used the Shwe case to explain how the Guidelines could be improved to make a meaningful contribution to responsible corporate behavior in places like Burma. Those recommendations included:

  • Developing a specific human rights section of the Guidelines, encompassing the responsibility of companies for abuses committed by security forces providing protection for their operations.
  • Requiring companies to conduct due diligence, including human rights impact assessments, to prevent foreseeable abuses.
  • Setting basic functional standards for the performance of NCPs and their provision of dispute resolution services.
  • Improving the way NCPs handle complaints in specific instances to accord due process to both sides, including allowing both sides to review and comment on each other’s submissions, and requiring evidence of actual, practical compliance with the Guidelines (rather than simply accepting vague statements of corporate policy).
  • Establishing a process whereby civil society can participate in appeals of NCP decisions.

In the coming months, stay informed through EarthRights International and OECD Watch on the status of the Guidelines review.