Governments have an obvious role to play in ensuring businesses — and countries — can't compete on weak governance and standards in other jurisdictions. The OECD's motto is
better policies for better lives, and we help level the international playing field for business through international instruments like the OECD Anti–Bribery Convention and the OECD
Recommendation on Public Integrity. But for individual business, the fact that good conduct is simply good for business extends to multinational operations. Participating in the global
economy means navigating a complex legal, social and regulatory environment, where laws, community expectations and enforcement may differ geographically. Reputational risks can flow right
through the value chain.
At the OECD we see Responsible Business Conduct as a particularly powerful framework to manage cross-border business risks. Responsible Business Conduct is a catch-all term which
encompasses the kinds of corporate culture and practices that ensure multinational enterprises do no harm, and make a positive contribution to economic, environmental and social progress.
The OECD Guidelines for Multinational Enterprises is the international gold–standard for Responsible Business Conduct – and should be of particular interest to general counsel.
The guidelines are a way for governments to communicate to business that they are serious about building responsible business conduct in their jurisdictions. Forty–eight countries
are signatories to the guidelines But importantly, these are business focused guidelines. Businesses need not depend on governments to sign up in order to use them.
In particular, the guidelines recognise the important role of due diligence in helping drive Responsible Business Conduct by identifying, assessing and mitigating adverse impacts
in operations, supply chains and business relationships. We have specific due diligence guidance for:
Responsible mineral supply chains;
Stakeholder engagement in extractives;
Garment and footwear supply chains;
Responsible agriculture supply chains;
Responsible business conduct by institutional investors in the financial sector;
And just last week, the OECD launched General Due Diligence Guidance for Responsible Business Conduct across all sectors of the economy.
Multinational Enterprises are increasingly turning to the OECD standards to establish trust and meet the terms of their social license right through their operations.
To give just three examples:
Apple uses the guidelines to ensure its minerals supply chain does not fund conflict or have a negative impact on human rights.
Hugo Boss uses them to address the risk of poor labour practices, including child labour, in the cotton supply chain.
The London Metals Exchange announced in April that it will require all brand-listed producers to comply with the OECD Guidance for all metals traded on the
exchange — which covers 75 percent of worldwide trading for those metals.
I want to mention briefly the value of emerging technologies — particularly blockchain — in managing cross-border business risks in the international supply chain.
Blockchain is the technology behind bitcoin, but its real value has little to do with these kinds of cryptocurrencies.
Blockchain allows information to be securely validated, stored and transferred in a way that is both transparent and cannot be tampered with. The potential for due diligence in global
supply chains is enormous.
In the case of Hugo Boss, they are looking at blockchain to capture an auditable trail of information about suppliers from the individual cotton picker to the final product in
store — and making this information available to customers through QR codes.
De Beers is now using blockchain to track diamonds sourced from artisanal and small–scale mining — which have particular risks — all the way from the miner to
the consumer's finger.
In China, companies are using blockchain to bridge the trust divide between consumers and food providers, for example by providing proof of the provenance and treatment of
organic chickens — again through QR codes.
Blockchain is set to become a powerful tool to build trust and manage reputational risks, and something legal departments should be looking into.
Sustainable business today is not only about the quality of the product or service delivered. It is also about the quality of an organisation's conduct. Because conduct depends so much
on culture, general counsel must play a role in guiding culture in their organisations. They also have a role to play in extending good culture and conduct into their businesses'
interactions with the global economy.
This can be supported by the principles of Responsible Business Conduct, and the international standards, guidance and technologies available to help implement it.
In these ways, general counsel can make a strong contribution to securing the trust that is necessary in meeting the evolving social license to operate, and the good conduct which is
central to business success over the long term.