3. Content of the OECD Guidelines
Human rights are addressed in two chapters of the OECD Guidelines: Chapter II on General Policies and Chapter IV on Human Rights.
Chapter II, “General Policies”, contains one specific recommendation on human rights and other general provisions relevant to the respect and protection of human rights by multinational enterprises in their operations.
Chapter II provides for broad General Policies, demanding business to take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. 1 More specifically, they call upon enterprises to […]:
- Respect the internationally recognised Human Rights of those affected by their activities.
- Carry out risk-based due diligence, for example by incorporating it into their enterprise risk management systems, to identify, prevent and mitigate actual and potential adverse impacts […].
- Avoid causing or contributing to adverse impacts on matters covered by the Guidelines, through their own activities, and address such impacts when they occur.
- Seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship. […]
- Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of responsible business conduct compatible with the Guidelines.
- Engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning and decision making for projects or other activities that may significantly impact local communities.”
Commentary on General Policies
The Guidelines makes clear that the respect for human rights by businesses is understood “within the framework of internationally recognised human rights, the international human rights obligations of the countries in which they operate as well as relevant domestic laws and regulations (…)” 2 . The Guidelines’ “specific instance” grievance mechanism can thus be used to address violations of civil and political rights as well as economic, social and cultural rights.
The OECD Guidelines’ grievance mechanism has previously been used to address, among others, violations of the following rights:
- Right to form or join a trade union
- Right to collective bargaining
- Right to enjoy just and favourable conditions at work
- Right to non-discrimination in employment and occupation
- Right to an adequate standard of living
- Right to safe and healthy conditions at work 3
- Right to health 4
- Right to life and prohibition of torture and arbitrary arrests 5
- Right to health, food, housing, education and standard of living 6
- Right to receive and share information and freedom of expression 7
- Right to non-discrimination, rights of indigenous peoples and prohibition of forced evictions 8
- Prohibition of child labour, elimination of forced labour, right to education and non-discrimination 9
- Children’s rights, prohibition of arbitrary detention and rights of asylum seekers 10
- Access to effective remedies 11
- Crimes against humanity and war crimes committed by a private security company 12
- The right to culture and/or the right to cultural heritage 13
- The right to live in a clean environment 14
- The rights of indigenous peoples, including the right to free, prior and informed consent 15
The Guidelines also include a Chapter IV on Human Rights that reaffirms and details the content of these norms.
The content of Chapter IV is based on Pillar II of the UN Guiding Principles on Business and Human Rights. Chapter IV, dealing specifically with Human Rights, affirms that enterprises should:
- Respect Human Rights, which means they should avoid infringing on the Human Rights of others and should address adverse Human Rights impacts with which they are involved.
- Within the context of their own activities, avoid causing or contributing to adverse Human Rights impacts and address such impacts when they occur.
- Seek ways to prevent or mitigate adverse Human Rights impacts that are directly linked to their business operations, products or services by a business relationship, even if they do not contribute to those impacts.
- Have a policy commitment to respect Human Rights.
- Carry out Human Rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse Human Rights impacts.
- Provide for or co-operate through legitimate processes in the remediation of adverse Human Rights impacts where they identify that they have caused or contributed to these impacts.
Commentary on Chapter IV
With regard to Human Rights due diligence, the Commentary on Chapter IV, explains that “the process entails assessing actual and potential Human Rights impacts, integrating and acting upon the findings, tracking responses as well as communicating how impacts are addressed” 16 . It is also established that “Human Rights due diligence can be included within broader enterprise risk management systems provided that it goes beyond simply identifying and managing material risks to the enterprise itself to include the risks to rights-holders. It is an on-going exercise, recognising that Human Rights risks may change over time as the enterprise’s operations and operating context evolve”. 17
On 31 May 2018, the OECD Ministerial Meeting at Council level adopted The OECD Due Diligence Guidance for Responsible Business Conduct, which provides “practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain-language explanations of its due diligence recommendations and associated provisions.” 18
The introduction of Chapter IV on Human Rights is a major improvement to the Guidelines, however some NGOs, including FIDH, have expressed their concerns on several aspects. 19 The text remains weak with regard to consultation of affected communities in particular of indigenous peoples and no explicit reference is made to indigenous peoples’ right to free, prior and informed consent. However, the commentary to Chapter II does refer to other “UN instruments” when dealing with indigenous peoples’ rights. UN instruments could be interpreted as including the UN Declaration on the rights of indigenous peoples and ILO Convention no.169.
Fundamental labour rights
Labour rights are covered by Chapter IV on Human Rights. Respect for the Human Rights of workers is also addressed in Chapter V on Employment and Industrial Relations.
In accordance with the obligations specified by the relevant ILO conventions, Chapter V establishes four basic obligations toward workers:
the right to form or join a trade union, the right to collective bargaining and the right to the participation and consultation of workers (including those practices which facilitate the exercise of those rights, such as: encouraging the negotiation of collective agreements, the provision of information as to the conditions of employment, and a guarantee against the use of employee transfer as a threat, etc.) 20
Abolition of child labour 21
Elimination of all forms of forced or compulsory labour 22
Non-discrimination in employment and occupations (notably in hiring, dismissal, remuneration, promotion, training and retirement) 23
In addition, companies are called upon to take the necessary measures to ensure that the health and safety standards of the workplace are “not less favourable than those observed by comparable employers in the host country.” 24 Under another set of provisions businesses are expected to employ local personnel and provide, without discrimination, training with a view to improving skill levels. 25 They should also work with trade unions and government representatives to mitigate the adverse impacts of closures and other changes in operations which have major employment effects and refrain from threatening to transfer production or workers in order to hinder the right to organise.
The Guidelines request that multinational enterprises publish “timely and accurate information”, which shall be made available to employees, local communities, special interest groups, and the public at large. However, this disclosure “should be tailored to the nature, size and location of the enterprise, with due regard of costs, business confidentiality and other competitive concerns.”
- Financial disclosure: The Guidelines assert that companies “should” disclosein a timely manner accurate and relevant information on all material matters regarding the corporation, including the “financial situation, performance, ownership, and governance” of the company. 26
Non-financial disclosure: Meanwhile, the Guidelines “encourage”companies to report issues of a non-financial nature, especially in areas where “reporting standards are still evolving”.
This includes disclosures regarding:
- the company’s aims;
- social, environmental and risk reporting;
- risk management systems;
- other critical issues concerning employees and other stakeholders connected to the company.
This may include, for example, “information on the activities of subcontractors and suppliers or of joint venture partners .” 28 Companies are also encouraged to publicly state principles or rules of conduct, including information on their social, ethical and environmental policies and other codes of conduct to which the company subscribes (with respect to the countries or entities to which they apply). 29
Companies are also encouraged to report on their performance measured against these standards. Enterprises are encouraged to provide easy and economical access to published information and to consider making use of information technologies to meet this goal. enterprises may take special steps to make information available to communities that do not have access to printed media, especially “ poorer communities that are directly affected by the enterprise’s activities. 30
Companies are encouraged to inform workers (Chapter V, §6) when they envisage making changes to their operations that may have a significant impact on the livelihoods of their employees (for example, in the case of closure of an entity involving collective redundancies). In particular, they should provide reasonable notice to representatives of employees and, where appropriate, to the relevant government authorities; co-operating with them “so as to mitigate to the maximum extent practicable adverse effects” 31 and, ideally, giving stakeholders prior notice before a final decision is taken.
With regard to corporate transparency, the Guidelines unfortunately do not include recommendations on country-by-country reporting and social and environmental disclosure requirements in line with international best practice. 32 Indeed, the differentiation between the disclosure enterprises “should” make, versus what they are only “encouraged” to make is problematic, especially since many of the information that normally fall within ESG disclosure (Environmental, Social and Governance), is only “encouraged”. Also, the Guidelines miss requiring disclosure of profits earned and taxes paid, as well as beneficial ownership (versus ownership). Finally, companies are not required to disclose the steps taken with regards to their due diligence processes.
Three distinct axes structure the principles in the field of environmental protection (Chapter VI): 33
Environmental management system
The Guidelines adopt a three-pronged approach that encourages multinational enterprises to establish an environmental management system, which should feature: 34
- Collection and evaluation of adequate and timely information regarding the environmental, health, and safety impacts of their activities;
- Establishment of measurable objectives and, where appropriate, targets for improved environmental performance, including periodically reviewing the continuing relevance of these objectives;
- Regular monitoring and verification of progress toward environmental, health and safety objectives.
Additionally, companies are requested to provide adequate education and training to employees in environmental health and safety matters. enterprises are also encouraged to work to raise the level of environmental performance in all parts of their operations, even where “this may not be formally required by existing practice in the countries in which they operate.” 35
Communications on environmental matters
Companies are also required to be transparent in their communication of information including: 36
- Providing the public at large and employees with adequate information concerning the environmental, health and safety impacts of their activities;
- consulting, in a timely manner, the relevant stakeholders (employees, clients, suppliers, contractors, local communities and the public at large) as regards the company’s policies on the environment, health and safety. 37
The precautionary principle
Invoking the precautionary principle that emerged from the Rio Declaration 38 in 1992, the Guidelines call on companies to:
- assess and address in decision-making, the environmental, security and health impacts of the proposed activities, where appropriate via the preparation of a suitable environmental impact assessment ; 39
- Adopt effective measures to prevent or reduce the threat of serious harm to the environment and to health and safety (noting that the lack of full scientific certainty should not be a reason for postponing cost-effective measures to prevent or minimise such damage); 40
- Maintain contingency plans to prevent, mitigate and control serious environmental and health damage from their operations, and adopt mechanisms facilitating prompt reporting to the competent authorities. 41
These three axis or principles, however, do not impose clear expectations on corporations to prevent, mitigate, and remedy harm to the environment. Differently to the Human Rights chapter (IV), which does include these expectations, the environmental chapter calls upon companies to follow these processes (in positive terms) but does to require them to actually prevent, mitigate, and remedy harm. Moreover, it does not identify the negative environmental impacts that corporations should prevent, mitigate and remedy, such as: deforestation, climate change, pollution or harmful use of pesticides, among others.
The chapeau of chapter VII states that “enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. enterprises should also resist the solicitation of bribes and extortion” 42 . The Guidelines refer to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and its commentary as well as the UN Convention against Corruption. 43 The Guidelines’ commentary draws recommendations regarding anti-bribery policies and good governance practices. 44 The Guidelines, however, are overly narrow in their scope, since they focus on only two types of corruption (bribery and extortion), missing many other types of corruption (graft, embezzlement, inappropriate lobbying, etc).
Companies are encouraged in this area to comply with fair and honest practices 45 in their commercial business, marketing and advertising activities, and to take all reasonable steps to ensure the safety and quality of goods or services they provide. 46 enterprises are urged to develop honest business practices 47 and respect the right of consumers to privacy and the protection of their personal data. 48 More specifically, the Guidelines develop the obligation to inform consumers, and to make available transparent and effective means 49 to ensure the health and safety of consumers so as to allow them to make informed decisions. For more information regarding legislation protecting consumers, see section V of this guide on the use of voluntary commitments for greater corporate accountability.