Beyond the Law: Voluntary CSR Standards and Initiatives

Compliance with laws and regulations is a starting point for becoming a socially responsible company, not only because the legal standards are generally instructive minimum guidelines, but also because failure to adhere to laws and regulations will bring adverse public attention to the company and undermine any other efforts that the company might be making to be perceived as a socially responsible actor.  However, it should not be forgotten that laws are often at best minimum standards of socially responsible and ethical behavior and that the scope of the commitments and activities associated with any CSR initiative can be daunting and normally extend well “beyond the law” to include corporate governance and ethics; public health and safety; environmental stewardship; human rights (including core labor rights); sustainable development; working conditions (including safety and health, hours of work, wages); industrial relations; community involvement, development and investment; involvement of and respect for diverse cultures and disadvantaged peoples; corporate philanthropy and employee volunteering; consumer issues, customer satisfaction and adherence to principles of fair competition; anti-bribery and anti-corruption measures; accountability, transparency and performance reporting; and supplier relations, for both domestic and international supply chains.[1]

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This article is an excerpt from Responsible Business: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is published by the Sustainable Entrepreneurship Project and available for purchase at various online booksellers.

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Williams noted that since the late 1990s there has been a proliferation of transnational, voluntary standards for what constitutes responsible corporate action, including standards have been developed by states; public/private partnerships; multi-stakeholder negotiation processes; industries and companies; institutional investors; functional groups such as accountancy firms and social assurance consulting groups; NGOs; and non-financial ratings agencies.[2]  Notable multi-sector standards initiatives have included Social Accountability 8000 and the Ethical Trading Institute, and influential multilateral initiatives have included the OECD’s Guidelines for Multinational Enterprises, the ISO 26,000 Corporate Responsibility standards, the UN Global Compact and the “Protect, Respect and Remedy” framework in the UN’s Guiding Principles on Business and Human Rights that articulates the human rights responsibilities of states and companies.[3]

According to Williams, most of the corporate responsibility standards are voluntary, although India passed legislation in 2014 that required companies to establish a corporate responsibility committee at the board level and contribute 2% of net profits to corporate responsibility initiatives.[4]  It should not be forgotten, however, that many of the topics generally included within the general subject of CSR have been addressed to some degree in domestic regulations covering labor rights, environmental and consumer protection, anti-discrimination and anti-bribery.  Countries vary in the degree to which regulatory standards relating to corporate responsibility are relied upon and Williams noted that empirical evidence suggested that the underlying regulatory standards effectively shape the sustainability culture within countries, and have both a strong effect on how companies handle corporate responsibility issues and a strong effect on the sustainability.[5]  For example, Williams pointed out that Matten and Moon have argued that “in countries with stakeholder corporate governance systems and more expansive social welfare arrangements, corporate responsibility is ‘implicit’ in doing business according to law, so companies do not need to be as “explicit” about taking on social responsibilities, as do leading companies in more shareholder-oriented countries”.[6]

While there a large number and wide range of instruments and frameworks that companies can use as guides for developing their own goals and principles for responsible action, the principal points of reference are the United Nations Global Compact (“UN Global Compact”), the United Nations Guiding Principles on Business and Human Rights (“UN Guiding Principles”), the OECD Guidelines for Multinational Enterprises (“OECD Guidelines”) the ISO 26000 Guidance Standard on Social Responsibility (“ISO 26000”) and the International Labour Organization Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (“ILO MNE Declaration”).  In fact, in 2011 the European Union Commission invited all large European enterprises to make a commitment by 2014 to take into account at least one of the principles and guidelines among the UN Global Compact, the OECD Guidelines or ISO 26000 when developing their approach to CSR; all European based multinationals to commit by 2014 to respect the ILO MNE Declaration; and all European enterprises to meet their corporate responsibilities to respect human rights as defined in the UN Guiding Principles.  While companies may publicly commit to supporting one or more of these principles and guidelines, as well as others not mentioned above, they do not explicitly build their activities on such reference points but instead implement them through their specific CSR engagements and activities including their internal operations and their relationships with business partners in their value chains.[7]

UN Global Compact

The United Nations Global Compact (https://www.unglobalcompact.org/) is a voluntary initiative launched in 1999 under the inspiration of former UN Secretary-General Kofi Annan that is based on CEO commitments to implement universal sustainability principles and to take steps to support United Nations goals.  By encouraging companies to operate responsibly and take strategic actions that support society, the Global Compact works to ensure that business activity adds value not only to the bottom-line, but also to people, communities and the planet.  At the same time, businesses can help to improve the social and environmental framework that is necessary in order for them to have continued access to the open and free markets needed for their economic success.  The Global Compact is based on the proposition that companies should take a comprehensive approach to sustainability and must operate responsibly in alignment with universal principles, take strategic actions that support the society around them, commit to sustainability at the highest level, report annually on their efforts and engage locally where they have a presence.

The UN Global Compact encompasses ten principles which were derived from standards in four areas: human rights (the Universal Declaration of Human Rights, labor (the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work), the environment (the Rio Declaration on Environment and Development) and corruption (the United Nations Convention Against Corruption).  A European Union publication has explained that the Global Compact is not a legal instrument; it is aspirational, and that companies who become signatories to the Global Compact do so in order to make a public commitment that they are prepared to work towards the achievement of the Global Compact’s objectives by making the ten principles an integral part of their business strategies and day-to-day operations.  Signatories to the Global Compact have opportunities to engage in the exchange of information on initiatives undertaken in the course of the promotion of the principles, thus allowing the Global Compact to serve as a “learning model”.  Signatories can also develop networks at regional, national and sectoral levels to engage in dialogue, learning and projects that suit local contexts.  However, being a signatory to the Global Compact requires accountability and signatories must commit to issuing an annual Communication on Progress (“COP”), which is a public disclosure to stakeholders (e.g. investors, consumers, civil society, governments, etc.) on progress made in implementing the ten principles, and in supporting broader UN development goals.  If a signatory fails to communicate its progress by the deadline, it will be listed as “non-communicating” on the UN Global Compact website. If a further year passes without the submission of a COP, the company will be expelled.  The Compact reserves the right to publish the names of companies that have been expelled for failure to comply with this requirement.[8]

As of the end of 2018, there were over 13,000 signatories to the UN Global Compact in 170 countries, both developed and developing, representing nearly every sector and size, making it the world’s most popular multi-stakeholder CSR initiative.  While businesses were and remain the primary focus of the initiative, the Global Compact, which has its office in New York, has attracted support and involvement from a variety of non-business participants including trade unions and a number of human rights and environmental NGOs that are willing and able to bring their expertise and experience to the Compact, enhance its learning focus and thereby enhance the development of good practices.[9]

UN Guiding Principles

A series of international human rights treaties and other instruments that have been adopted since 1945 have expanded the body of international human rights law.  Of note for business enterprises are the “Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework” (“Guiding Principles”), which were developed by the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises after extensive consultation and were endorsed by the Human Rights Council in its resolution 17/4 of 16 June 2011.  The Guiding Principles were not intended to impose new legal obligations on business, or change the nature of existing human rights instruments, instead their aim is to articulate what these established instruments mean, for both States and companies, and to address the gap between law and practice.[10]  The Guiding Principles are organized into three parts, each of which represents an important general principle underlying the “protect-respect-remedy” framework that was endorsed by the UN Human Rights Council in 2008: all states have existing obligations to respect, protect and fulfil human rights and fundamental freedoms; business enterprises, both transnational and others, regardless of their size, sector, location, ownership and structure, have a role as specialized organs of society performing specialized functions and are required to comply with all applicable laws and to respect human rights; and the need for rights and obligations to be matched to appropriate and effective remedies when breached[11]

As for business enterprises, the Guiding Principles are clear about their responsibilities to respect all internationally recognized human rights including, at a minimum, as those expressed in the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.[12]  The responsibility to respect human rights requires that business enterprises avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; and seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.  In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances, including a policy commitment to meet their responsibility to respect human rights; a human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights; and processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.

OECD Guidelines

The OECD Guidelines for Multinational Enterprises (http://mneguidelines.oecd.org/) are the most comprehensive set of government-backed recommendations on responsible business conduct in existence today. The governments adhering to the Guidelines, all 34 OECD countries and 12 non-OECD countries, aim to encourage and maximize the positive impact multinational enterprises (“MNEs”) can make to sustainable development and enduring social progress.  The Guidelines were first adopted in 1976 and have been reviewed 5 times since then to ensure that they remain a leading tool to promote responsible business conduct in the changing landscape of the global economy.  The most recent update in 2011 took place with the active participation of business, labor, non-governmental organizations (“NGOs”), non-adhering countries and international organizations. The Guidelines are part of the OECD Declaration and Decisions on International Investment and Multinational Enterprises, and provide voluntary principles and standards for responsible business conduct by MNEs in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation.

The OECD Guidelines are voluntary; however, observance of the OECD Guidelines by MNEs is generally expected and governments adhering to the OECD Guidelines are required to set up a National Contact Point (“NCP”) whose main role is to further the effectiveness of the OECD Guidelines by undertaking promotional activities, handling enquiries, and contributing to the resolution of issues that may arise from the alleged non-observance of the guidelines in specific instances.  NCPs assist enterprises and their stakeholders to take appropriate measures to further the observance of the OECD Guidelines. They provide a mediation and conciliation platform for resolving practical issues that may arise with the implementation of the OECD Guidelines.[13]

ISO 26000

Organizations interested in improving their practices with respect to social responsibility, including engagement with their stakeholders, may refer to ISO 26000.  ISO 26000 defines “social responsibility” as the responsibility of an organization for the impacts of its decisions and activities (i.e., products, services and processes) on society and the environment through transparent and ethical behavior that contributes to sustainable development, including the health and welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior, and is integrated throughout the organization and practiced in its relationships, which includes all of the organization’s activities within its sphere of influence (i.e., relationships through which the organization has the ability to affect the decisions or activities of others).

ISO 26000 provides guidance to all types of organizations, regardless of their size or location, on concepts, terms and definitions related to social responsibility; the background, trends and characteristics of social responsibility; principles and practices relating to social responsibility; the core subjects and issues of social responsibility; integrating, implementing and promoting socially responsible behavior throughout the organization and, through its policies and practices, within its sphere of influence; identifying and engaging with stakeholders; and communicating commitments, performance and other information related to social responsibility.  ISO 26000 is built on a foundation of seven principles (i.e., accountability, transparency, ethical behavior, respect for stakeholder interests, respect for the rule of law, respect for international norms of behavior and respect for human rights) that are intended to establish the underlying framework for socially responsible decision making and link each user of ISO 26000 to a global community of those who share the principles.

ISO 26000 is intended to assist organizations in contributing to sustainable development; however, although it draws on principles included in the management systems developed by the ISO it is not itself a management system standard and is not intended or appropriate for certification purposes or regulatory or contractual use.[14]  Instead, ISO 26000 sets out certain core principles and explains the core subjects and associated issues relating to social responsibility including organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues and community involvement and development.  For each core subject, information is provided on its scope, including key issues; its relationship to social responsibility; related principles and considerations; and related actions and expectations.  For example, with respect to labor practices, one of the core subjects, organizations are reminded to integrate consideration of the following issues into their policies, organizational culture, strategies and operations: employment and employment relationships; conditions of work and social protection; social dialogue; health and safety at work; and human development and training in the workplace.[15]

Recommended steps for using ISO 26000 include the following:

• Setting the direction from the top by building social responsibility into governance and procedures and integrating social responsibility throughout the organization by using mission and vision statements to define values
• Identifying relevant social responsibility issues, determining relevance and significance of the identified issues and establishing priorities such as gap analysis (i.e., identify gaps between current and desired position)
• Assessing the organization’s responsibilities and potential impact in its sphere of influence (e.g., decisions regarding product design can impact suppliers and the resources/raw materials that are used in the manufacturing process)
• Performing “due diligence” (i.e., the process of identifying the actual and potential negative social, environmental and economic impacts of an organization’s decisions and activities, with the aim of avoiding and mitigating those impacts) by reviewing the legal requirements and context of activities and involving relevant stakeholders throughout the organization’s sphere of influence
• Setting short-term and long-term goals and applying social responsibility to decisions on purchasing, investing, hiring and promoting, advertising, community relations etc.
• Identifying current weaknesses and the causes behind them; identifying the resources needed to overcome the weaknesses (i.e., personnel, time, money, partners etc.); and developing a timeline and action plan to bridge the gaps
• Incorporating transparency and accountability at all levels through reporting and other communications with stakeholders that describe the organization’s activities on relevant issues within each of the seven core subjects and establish a continuing dialogue based on honest disclosure and meeting the specific needs of each stakeholder group with respect to the tone and content of communications
• Continuously reviewing and improving social responsibility performance through monitoring and measuring and making improvements in the reliability of information and management processes

ILO MNE Declaration

The Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (“ILO MNE Declaration”) was first adopted by the International Labour Organization (www.ilo.org) Governing Body in November 1977, updated in 2000 to incorporate the 1998 Declaration on Fundamental Principals and Rights at Work and further revised in 2006 and 2017.  The ILO MNE Declaration provides guidance to governments, employers’ and workers’ organizations, multinational enterprises and national enterprises and is not mandatory, nor is it a code of conduct for business.  Instead, it can be used as a reference for companies with respect to social policy and inclusive, responsible and sustainable workplace practices.  The ILO MNE Declaration sets out principles built on international labor standards in the areas of employment, training, conditions of work and life, and industrial relations as well as general policies. These include the fundamental principles and rights at work but also guidance on many other facets of decent work.  The 2017 revisions were intended to respond to new economic realities, including increased international investment and trade, and the growth of global supply chains, and to take into account new labor standards adopted by the International Labour Conference, the Guiding Principles on Business and Human Rights endorsed by the Human Rights Council in 2011 and the 2030 Agenda for Sustainable Development.  Specifically, new principles were added in 2017 to address decent work issues related to social security, forced labor, transition from the informal to the formal economy, wages, access to remedy and compensation of victims.  Guidance on “due diligence” processes was also added, consistent with the UN Guiding Principles on Business and Human Rights.[16]

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This article is an excerpt from Responsible Business: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is published by the Sustainable Entrepreneurship Project and available for purchase at various online booksellers.

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Notes

[1] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 4-5, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784.

[2] Id. at 7.

[3] Id. at 8-9.  See also the appendices to P. Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), which includes a list of national CSR guidance and suggestions for further reading.

[4] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 13, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784.

[5] Id.

[6] Id. (citing D. Matten and J. Moon, “Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility”, Academy of Management Review, 33:2 (2008), 404).

[7] Handbook on Corporate Social Responsibility (CSR) for Employers’ Organizations (European Union CSR for All Project, April 2014), 14-15.  For resources on additional CSR and sustainability topics including anti-corruption, child labor, forced labor and human trafficking, non-discrimination, remedy and grievance processes, responsible supply chain management, stakeholder engagement and transparency and reporting, see Handbook on Corporate Social Responsibility (CSR) for Employers’ Organizations (European Union CSR for All Project, April 2014), 51-62.

[8] Handbook on Corporate Social Responsibility (CSR) for Employers’ Organizations (European Union CSR for All Project, April 2014), 17-18.

[9] Id.

[10] Handbook on Corporate Social Responsibility (CSR) for Employers’ Organizations (European Union CSR for All Project, April 2014), 18.

[11] The description of the Guiding Principles that follows is adapted from Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (United Nations Human Rights Office of the High Commissioner, HR/PUB/11/04, 2011).

[12] The Commentary to Guiding Principle 12 notes that depending on circumstances, business enterprises may need to consider additional standards applicable to specific groups or populations that require particular attention, where they may have adverse human rights impacts on them (e.g., United Nations instruments on the rights of indigenous peoples; women; national or ethnic, religious and linguistic minorities; children; persons with disabilities; and migrant workers and their families), and standards o international humanitarian law in situations of armed conflicts.

[13] http://www.oecd.org/investment/mne/ncps.htm

[14] See International Organization for Standardization, ISO 26000 Guidance on Social Responsibility: Discovering ISO 26000 (2014) and Handbook for Implementers of ISO 26000, Global Guidance Standard on Social Responsibility by Small and Medium Sized Businesses (Middlebury VT: ECOLOGIA, 2011).

[15] ISO 26000 Guidance on Social Responsibility: Discovering ISO 26000 (International Organization for Standardization, 2014) and Handbook for Implementers of ISO 26000, Global Guidance Standard on Social Responsibility by Small and Medium Sized Businesses (Middlebury VT: ECOLOGIA, 2011).  The discussion of ISO 26000 in this section is adapted from ISO 26000 Basic Training Manual (ISO 26000 Post Publication Organization, March 15, 2016).  ISO 26000 is available for purchase from ISO webstore at the ISO website (www.iso.org) and general information about ISO 26000 can be obtained at www.iso.org/sr.

[16] ILO Revises Its Landmark Declaration on Multinational Enterprises (March 17, 2017), https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_547615/lang–en/index.htm