TOWARDS BINDING REGULATION OF TRANSNATIONAL CORPORATIONS

By Gunhild Orstavik and - - Reprint | | Print |

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OSLO, Mar 3 2007 (IPS) - Politicians have not taken the necessary measures to regulate the negative impacts of rapid economic globalisation, writes Gunhild Orstavik, senior adviser at the Norwegian Forum for Environment and Development (ForUM). In this article, the author writes that there are no international agreements that effectively regulate the activities of corporations today, although the United Nations is working to establish such regulations. In the meantime, the UN encourages states to draw up national guidelines. ForUM\’s goal is the establishment of legally-binding international guidelines with built-in mechanisms for sanctions. This would increase the pressure on the worst offenders that have not been influenced by the UN Global Compact, OECD guidelines, or other voluntary initiatives to change their behaviour, and which for various reasons have not been targeted by criminal laws. Further work on this in the UN should be given high priority, and at the same time states should respond to the challenge from the UN to work out national guidelines. The more countries that have national guidelines, the greater will be the impact on global environmental and development problems.

Capital, labour, technology, and other resources are, at a gradually increasing tempo, being transferred back and forth between those geographical places offering the greatest profit. Many countries lack the competence and capability to control this development to provide the best care and protection for their citizens and broader public interests. The result has been an accumulation of economic and political power in large-scale companies and other powerful financial concerns, as well as an undermining of sustainable development and basic human rights. In almost every instance labour rights have been weakened.

In spite of the resolution at the World Summit on Sustainable Development (Johannesburg 2002) to develop a global and obligatory framework for Corporate Social Responsibility, politicians have not taken the necessary measures to regulate the negative impacts of rapid economic globalisation.

Domestically Norway has adopted a range of measures to regulate and sanction undesirable corporate behaviour, but for Norwegian companies operating in countries with weak or non-existent national regulation, a great deal is left to the companies’ own ethical assessment. This also applies to companies operating within areas of territorial conflict, or where company activities have environmental and/or other consequences.

There are no international agreements that effectively regulate the activities of corporations today, although the United Nations is working to establish such regulations. In the meantime, the UN encourages states to draw up national guidelines. Norway has, after a major political battle, established ethical guidelines for the foreign investments of the Government Pension Fund, the world’s largest pension fund.

The OECD Guidelines for Multinational Enterprises constitute at present the only framework of social responsibility for multinational corporations that places obligations on the state. Though they are broad and couched in rather vague terminology, these guidelines do oblige endorsing countries to create National Contact Points, though there is no mechanism that provides for independent investigation or the imposition of sanctions or compensation. The OECD guidelines’ effect on corporate behaviour has so far been unconvincing.

In 2005 the Norwegian National Contact Point received its very first case. The Norwegian Forum for Environment and Development (ForUM) accused Aker Kvaerner of lack of respect for human rights in its contract at the Guantanamo base. After two hearings, the National Contact Point elected to support the accusation, but had no means of sanctioning Aker Kvaerner.

The UN Global Compact (UNGC) consists of 10 principles. Membership of the UNGC is attained by writing a letter to the UN General Secretary Kofi Annan, signed by the top leadership of the company, stating that the company supports the Global Compact and will contribute to promoting its 10 principles. Member companies are expected to actively communicate and promote the UNGC and its principles, and publish annual reports or equivalent “Communications of Progress” based on the 10 principles.

Many countries have attempted to promote corporate social responsibility through various measures. In November 2006 the UK passed The Companies Act, which was an important step towards better corporate transparency and accountability in terms of directors’ duties, mandatory reporting on social and environmental impacts, and access to adequate redress provisions.

In France there is a reporting law, which, inter alia, obliges companies to report on the degree to which their subsidiaries abroad live up to the ILO convention, while in the Netherlands export guarantees are linked to an evaluation of environmental considerations of the company’s investments.

Thus what began as voluntary initiatives are being taken up by authorities seeking to make corporations responsible by requiring transparency regarding environmental and social concerns connected to their activities, and by making specific demands for environmental responsibility in export subsidies.

The Norwegian research institution FAFO has investigated the connection between the private sector and conflict. They have mapped the applicability of national criminal law in connection with the activities of private companies abroad. These are complex legal questions that receive different treatment in different countries. Existing laws make it possible to deal with situations where private companies are accused of directly or indirectly contributing to a breach of international law. There are few court rulings in this area, but this is changing as both the prosecuting authorities and human rights groups see the possibilities offered by existing laws. Recently a Dutch businessman was sentenced to 15 years in prison for having sold poisonous gas to Saddam Hussein’s regime.

ForUM’s goal is the establishment of legally-binding international guidelines with built-in mechanisms for sanctions. This would increase the pressure on the worst offenders that have not been influenced by the UN Global Compact, OECD guidelines, or other voluntary initiatives to change their behaviour, and which for various reasons have not been targeted by criminal laws. Further work on this in the UN should be given high priority, and at the same time states should respond to the challenge from the UN to work out national guidelines. The more countries that have national guidelines, the greater will be the imprint on global environmental and development problems. (END/COPYRIGHT IPS)