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Back | Programme Area: Special Events (2000 - 2009) | Event: Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

  • Date: 3 - 4 Feb 2002
  • Location: Porto Alegre, Brazil
  • Speakers: Deborah Eade, Peter Evans, Reinaldo Gonçalves, David Korten, Thandika Mkandawire, Peter Utting
  • Counterpart(s): Brazilian Institute of Social and Economic Analyses (iBASE)
  • Project Title: Geneva 2000: The Next Step in Social Development

New Forms of TNC Regulation: How Useful are Multistakeholder Initiatives?, Peter Utting

Since the 1980s, there has been a considerable shift in thinking regarding how to improve the social and environmental performance of transnational corporations. An earlier emphasis on governmental regulation ceded ground to “corporate self-regulation” and voluntary initiatives. This voluntary approach has evolved in recent years and assumed new institutional forms which attempt to overcome some of the limitations of company codes of conduct and other self-regulatory initiatives. This latest shift in approach involves the emergence of so-called “multistakeholder initiatives” where NGOs, multilateral and other organizations encourage companies to participate in schemes that set social and environmental standards, monitor compliance, promote social and environmental reporting and auditing, certify good practice, and encourage stakeholder dialogue and “social learning”.

Referring to 14 such schemes, this presentation identifies some of their strengths and weaknesses and concludes by questioning whether such approaches are likely to significantly advance the agenda of corporate social responsibility. The schemes referred to include AA1000, the Clean Clothes Campaign, the Ethical Trading Initiative, the Fair Labor Association, the Forest Stewardship Council, the Global Alliance, the Global Compact, Global Framework Agreements, the Global Reporting Initiative, ISO 14001, the Marine Stewardship Council, SA8000, WRAP, and the Worker Rights Consortium.

It is argued that such forms of “civil regulation” emerged partly in response to the growing awareness that codes of conduct that were unilaterally designed and implemented by companies tended to be weak and often aimed more at public relations than substantial improvements in social and environmental performance. However, the rise of civil regulation also reflects changes that are occurring in the balance of social forces—notably the growth of NGO and consumer pressures—and notions of “good governance”, which emphasize the importance of collaboration and “partnership”.

Regarding the strengths and weaknesses of multistakeholder initiatives, the following observations are made:

Multistakeholder initiatives have attempted to address some of the major weaknesses of codes of conduct associated with corporate self-regulation, notably aspects dealing with labour rights, the responsibilities of suppliers in commodity chains controlled by TNCs, and the need for independent monitoring. Some initiatives also aim to impose a degree of harmonization and standardization on what had become a confusing web of codes of conduct.

By their very nature, multistakeholder initiatives attempt to bring into decision-making processes a broader range of actors, but some initiatives have ignored or marginalized workers, trade unions, local-level monitoring and verification organizations in developing countries, and southern actors more generally. It is important to improve worker participation in monitoring and verification procedures. It is also crucial for multistakeholder initiatives to be more sensitive to the priorities and concerns of various actors in developing countries. Such a reassessment needs to give more thought to the cost and protectionist implications of CSR initiatives.

Despite the growth of multistakeholder schemes, the number of corporate sectors and companies involved remains relatively small. This is partly a function of the recent origin of such initiatives and the vast number of TNCs and suppliers. But it also reflects the difficulties of scaling up monitoring and verification procedures that are extremely complex and often costly. Not only is the range of data required quite broad (health, safety and environment conditions; hours worked, pay, worker-management relations, gender relations, company-community relations, etc.), but accessing and obtaining such information can be extremely difficult given the expertise required, the reluctance of both workers and management to communicate openly and honestly on certain issues, and the typically short timeframe of any monitoring exercise.

The ability of different schemes to effectively promote CSR varies considerably. Some adopt relatively weak criteria for assessing corporate management systems or performance. Several of those that have more effective methods reach very few companies. The reliance of some schemes on commercial auditing and consulting firms raises serious problems regarding quality and cost.

Given the complexity of multistakeholder initiatives associated with reporting, auditing, monitoring and certification, and the difficulty of scaling up such activities, other alternatives also need to be considered. It is important to pay more attention to procedures and institutions to detect breaches of agreed standards. Such “complaints-based systems” can assume numerous institutional forms involving, for example, judicial and parliamentary procedures, global collective agreements between TNCs and trade unions, and NGO watchdog bodies that attempt to “name and shame” companies in relation to specific abuses. In recent years there has been a diversification of complaints-based systems with the rise of “transnational litigation”, shareholder activism, consumer boycotts and ombudsman initiatives. Some multistakeholder initiatives have also included provisions for complaints procedures although such aspects have often remained fairly marginal. They have also tended to avoid tactics involving negative publicity or “naming and shaming”, which can be effective means of exerting pressure on large corporations.

Several multilateral organizations such as the World Bank, ILO, OECD and NAFTA have established complaints procedures. In practice, however, these tend to be very weak. Within the UN system there has been little attention to complaints-based systems although there may be some scope for developing such procedures via the human rights machinery of the UN.

Developments in the area of international regulation should avoid the implicit “northern bias” and “top-down” character associated with certain initiatives to promote CSR. They need to be more cognizant of Third World realities and based on consultative processes that include labour and southern actors as key participants. They also need to address the fact that global trade and policy regimes often restrict, rather than facilitate, the ability of developing countries to comply with higher labour and environmental standards.

Peter Utting is a research co-ordinator at the United Nations Research Institute for Social Development (UNRISD), Geneva.