OECD Guidelines for Multinational Enterprises Revised for 2011

Recently, 42 countries agreed to a revised version of the Organisation for Economic Co-operation and Development’s Guidelines for Multinational Enterprises. This group includes the 34 OECD countries plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. The Guidelines are a non-binding code of conduct aimed at promoting more responsible conduct among the international business community.

This latest update of the guidelines was prompted by the growing complexity and globalization of the world economy. Non-adhering countries, and multinational business enterprises in those countries, have become an increasingly important part of that economy. This, along with more pressing concerns, including the financial crises, concerns over climate change, and a renewed focus on international development, helped motivate a review of Guidelines, the fourth since their initial adoption in 1976 and the first since 2000.

The initial call for review came in 2009 at the annual meeting of National Contact Points, which are entities in each country responsible for implementing the Guidelines. Consultation took place with members of the business community, trade unions, non-governmental organizations, non-adhering countries, and international organizations. The final guidelines were adopted on May 25, 2011.

The new Guidelines include several notable additions. These include the incorporation of a new chapter dealing with human rights, which draws from the United Nations’ Guiding Principles for Business & Human Rights developed by United Nations Special Representative John Ruggie (click here to view the principles and more Forum articles from Mr. Ruggie). In addition, there is a new focus on the importance of exercising due diligence to mitigate potential negative impacts of business operations, including taking responsibility for operations conducted by enterprises’ supply chains. Other updates include a recommendation to promote Internet Freedom through respect of freedom of expression, assembly and association online.

While the agreement is non-binding, each adhering country agrees to establish a National Contact Point to raise awareness, investigate complaints, and mediate disagreements regarding the Guidelines. Companies that promise to abide by the Guidelines must comply with them in every country in which they operate. While there is no formal mechanism to sanction enterprises who fail to comply with the Guidelines – a fact that has garnered some criticism – the hope is that public disclosure following a compliance failure will motivate businesses to abide by the Guidelines.

More information about the 2011 update of the Guidelines for Multinational Enterprises can be found on the OECD’s website here; the full Guidelines are available here.