#15 responsibility
Friedel Hütz-Adams

A Call for Guidelines

While in the past most companies were lobbying against any state regulations, the mind-set has changed. CSR departments demand for stronger policies.

In recent years, debate has intensified over whether we need more corporate legal guidelines in our present globalised economy. The collapse of a factory in Bangladesh that killed more than 1,100 people was a wake-up call for many sectors. Companies are now wondering if they can ensure that a similar tragedy does not happen in their own supply chains, whether in factories or mines. And who is responsible when farmers can no longer feed their families due to rapidly falling prices, although they are growing products for the world market, for consumers here?

In their day-to-day business dealings, companies must ensure that they comply with national laws and human rights.

Then there are the studies published by John Ruggie, the UN Secretary-General’s Special Representative on Business & Human Rights from 2008 to 2010, which refocused the spotlight on corporate global responsibility along supply chains. Ruggie argues for due diligence: In their day-to-day business dealings, companies must ensure that they comply with national laws and human rights. Access to legal recourse and restitution should be simplified for victims of human rights abuses. To this end, and to more clearly define the responsibility of corporations, two new sets of guidelines were passed in 2011: the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Corporations. These guidelines expand on the existing International Labour Organisation (ILO) conventions, sometimes decades old, and the social and environmental conventions passed by the United Nations and other institutions.

Regulating quality

Unlike the guidelines regarding product quality and consumer health where violations are punishable by law, these human rights guidelines are not enforceable. Any company that can be shown to have knowingly imported tea polluted with pesticides into the EU, thus showing wanton disregard for endangering consumers’ health, is subject to prosecution. In contrast there is no law that prohibits the sale of imported tea grown in conditions that violate the most elementary labour rights. The situation is similar in other business areas. An automobile built in Germany, for example, has to comply with a whole host of safety standards. But the social and ecological standards under which the raw materials used to make the automobile were produced are of no consequence.

Should it all just be voluntary?

It is no accident that we do not have stricter guidelines at the moment. Companies have lobbied hard against the introduction of internationally legally binding standards, often claiming that labour and human rights are the legal jurisdiction of governments in the production countries or that suppliers there must bear responsibility. Others insist on their right to entrepreneurial freedom and voluntary internal company guidelines.

…the CSR department continues to wield considerably less power than the purchasing department.

Many large corporations have set up entire departments in an attempt to demonstrate their commitment to corporate social responsibility (CSR). Some firms have actually made changes to their supply chains, but in many others the CSR department continues to wield considerably less power than the purchasing department, whose primary focus is on prices and quality.

The call for guidelines

At the beginning of 2011, a round table discussion on the effectiveness of CSR guidelines was held in Cologne. A representative of a DAX corporation, two corporate consultants, an NGO representative and a member of the North Rhine-Westphalian state government took the podium. The politician was the only panellist who continued to insist on voluntary measures. The corporate consultants joined the company representative in expressing the conviction that the voluntary approach had been unsuccessful. The later demanded legally binding standards to create a “level playing field”, noting that his company invested in more sustainable supply chains while the competition did not, which meant his company faced a price disadvantage on the market.
A few months later at an event on sourcing metals, a representative from an SME internationally involved in mining called for legally anchored and globally applicable ecological and social standards. He too mentioned the extra cost of sustainability, which could not be realised on the current market.

The law had been more effective than ten years of reports from the UN on gruesome acts committed there (Congo).

At a conference at the end of 2013, a representative of a large telecommunications firm praised the legal framework adopted for dealing with so-called conflict raw materials from the Democratic Republic of Congo in the USA (Dodd Frank Act 1502). The law had been more effective than ten years of reports from the United Nations on gruesome acts committed there, and the resulting voluntary commitments from industry that were never really put in place. Appalled, an industry association representative asked if he was speaking for the business policies of the (very large) corporation he represented. The speaker backtracked a bit, noting this was simply his personal opinion, before adding that everyone in his company familiar with the material agreed with his stance. At the end of 2014, a round table event was organized in Berlin to talk about sustainability in meat production. One company representative explained how complicated and difficult it was to convince the entire supply chain down to the farmers to implement the improvements suggested by retailers. An employee from the Ministry of Agriculture praised the firm, claiming this approach proved that industry was voluntarily doing more than legal guidelines required and implementing changes. The corporate representative disagreed, noting that the process was very complicated and the solutions were still not enough. The government, he noted, could easily amend the existing law only slightly to achieve the desired effect.

Politics has to rethink

These are just a few anecdotal reports from individual events. But the content of discussion at these public events and statements made by companies at background talks clearly show that policy is lagging behind current development. A process of rethinking the voluntary standards approach has already begun in some parts of industry, while many politicians continue to insist on maintaining the system demanded by the private sector decades ago: Allow the economy to regulate itself, as far-reaching ecological and social standards could damage competitiveness. The government needs to critically examine its position, as do industry organisations, which many firms feel no longer accurately represent their interests. They cannot understand why the large industry organisations like the BDI lobby so massively against more powerful regulations while their company is spending money to set up more sustainable supply chains it cannot translate into higher prices because the competition is not playing along.

…policy is lagging behind current development.

At the EU level, there are a number of initiatives pushing for more exact corporate responsibility guidelines. At a convention in Brussels at the beginning of February 2015, multinational corporations came together to argue in favour of initiatives for a clearer definition of corporate responsibility at the EU level. We can hope that this type of rethinking finally happens in German policy, so that export leader Germany implements binding ecological and social quality standards to go along with the excellent product quality standards. This would ensure that pioneers in industry are no longer face market disadvantages.

Further Informations

The article was first published in German in Welt-Sichten. Online here:

Photo: “Trade” by Hadi
2014 - licenced under Creative Commons Attribution (2.0)

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