4. Guidance on application of the guidelines
One of the main challenges when discussing the implementation of the Guidelines is that they can be interpreted in different manners according to the institution (NCP, see following chapter) tasked with their implementation. That is to say, a similar factual case brought to two different NCPs may achieve very different results. Moreover, an additional challenge is that NCP practices – i.e. rules on confidentiality, timelines for processing initial assessments, approaches to substantiation and investigation – vary significantly (see following chapter).
Finally, it should be noted that there is no “precedence” in the NCP system in that NCPs are not bound to follow each other’s decisions. For example, an interpretation made by the Swedish NCP does not oblige the UK NCP to come to the same conclusion, and vice versa. It is however expected that an NCP will respect its own interpretation and NCPs are encouraged to consider how other NCPs have handled similar complaints and maintain coherence in interpretation of the Guidelines to the greatest extent possible. Civil society organisations are calling on the harmonisation of the Guidelines’ interpretation.
The following section should therefore be seen as a reference to concepts and issues that may arise when submitting a complaint, which may differ depending on where the complaint is brought.
For a helpful updated analysis and overview of recent NGO cases submitted under the OECD Guidelines, please visit the website of the international network of civil society organisations called OECD Watch. 1
Whilst they are addressed to multinational enterprises, the Guidelines do not provide a precise definition of the term. 2 Chapter I, section 4 merely states that in general these usually comprise: “Companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, state or mixed. The Guidelines are addressed to all the entities within the multinational enterprise (parent companies and/or local entities).” 3 NCPs have been called upon to consider if the Guidelines apply to government agencies, such as central banks, sovereign wealth funds and export credit agencies, and to a range of non-traditional MNE’s, such as trade unions, NGOs, and letterbox companies. In practice, each NCP has used slightly varying methods to answer this question. For example, the Swiss NCP has examined how the Guidelines apply to various types of corporate actors, including FIFA (the international football federation), WWF International and The Roundtable for Sustainable Palm Oil (RSPO), a multi-stakeholder initiative promoting sustainable palm oil 4 The differences between the interpretation that NCPs make of what “multinational enterprises” are, call for the harmonization of the definition of this concept.
The Guidelines and supply chains
The Guidelines include a far-reaching approach to due diligence and responsible value chain management. In Chapter IV paragraph 3, the Guidelines require multinational enterprises to “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.” 5 As per the Commentary of the Guidelines, the term ’business relationship’ includes “relationships with business partners, entities in the supply chain and any other non-State or State entities directly linked to its business operations, products or services.” Multinational enterprises are therefore responsible for avoiding and addressing adverse impacts in their activities, including in their value chains. The requirement to undertake due diligence to identify, prevent and (in some cases 6 ) remedy actual and potential adverse impacts also applies to a company’s value chain.
Paragraph 13 of Chapter II of the Guidelines also addresses the issue of supply chains, and demands enterprises to “encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines.” 7
The Commentary pertaining to this recommendation does however recognise practical limitations in the capacity of enterprises to influence the conduct of their business partners: these limitations are “related to product characteristics, the number of suppliers, the structure and complexity of the supply chain, the market position of the enterprise vis-à-vis its suppliers or other entities in the supply chain.” 8
However, the Commentary specifies that “enterprises can also influence suppliers through contractual arrangements such as management contracts, pre-qualification requirements for potential suppliers, voting trusts, and licence or franchise agreements” 9 . Thus, the responsibility of an enterprise will be determined by its relationship to an adverse impact: to meet its responsibility to prevent or mitigate adverse Human Rights impacts, the enterprise is expected to use its leverage – alone or in co-operation with other entities- to influence the entity causing the adverse Human Rights impact 10 .
This influence can assume several forms:
- Through direct influence, expressed via command: this concept affirms that an enterprise bears a responsibility to ensure that every entity which it either de jure or de facto controls respects the Guidelines to the same extent as the enterprise itself;
- Stemming from other business practices, namely those pertaining to structural characteristics: such as leveraging market power 11 or other market arrangements (for example, accreditation programmes and product tracing systems that ensure supplier accountability for particular aspects of their performance). 12
Assessments may vary between NCPs and are established on a case-by-case basis. Consult the website of OECD Watch, who publishes case updates and analysis of different NCPs, in order to get an updated overview over recent cases. 13
Guidance on application of the guidelines to specific industrial sectors
The Guidelines state explicitly that they apply to all sectors of the economy, including the financial sector. 14 The OECD has recently started sector-specific projects to clarify and elaborate on how exactly the Guidelines apply to specific industrial sectors. One of the first projects concerns due diligence in the financial sector. As part of this project, the OECD Working Party on Responsible Business Conduct confirmed that the Guidelines apply to minority shareholders in companies and/or projects that may be causing adverse impacts. 15
Sector-specific initiatives based on the Guidelines are being developed and used to promote, in specific sectors, what the OECD refers to as “responsible business conduct” (RBC). The OECD has developed or is in the process of developing sector specific due diligence guidance for agricultural supply chains, garment and footwear supply chains, meaningful stakeholder engagement in the extractive sector, and the financial sector. The OECD also completed Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas providing recommendations to help companies respect Human Rights and avoid contributing to conflict through their mineral purchasing decisions and practices.
Moreover, in 2018, the OECD adopted the 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” 16 .