What is OECD Guideline for Multinational Enterprises on Responsible Business Conduct
The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (the Guidelines) are guidelines made for multinational companies to promote sustainable development and address the negative impacts of business on people, the planet, and society.
The Guidelines offer voluntary principles and standards for responsible business conduct, aligning with applicable laws and internationally recognized standards. While some topics covered by the Guidelines may already be addressed by national laws and international commitments, they provide recommendations that go beyond legal requirements. It's important to note that the government's recommendation for companies to follow the Guidelines is separate from matters of legal liability and enforcement.
Since their introduction in 1976, the Guidelines have been periodically updated to address changing societal challenges and the evolving landscape of international business. The 2023 update, which comes after the previous update in 2011, reflects insights gained from experience and responds to pressing social, environmental, and technological priorities that societies and businesses face today.
What is being updated?
The update process involved the 51 Adherents to the OECD Declaration on International Investment and Multinational Enterprises and multiple key stakeholders from the private and public sectors. The updates involve two public consultations open to stakeholders from all countries, representing the diverse perspectives of businesses, workers, and civil society.
The overall key updates are as follows. For more detailed updates, you can visit OECD’s official page.
Encouraging enterprises to align with internationally agreed goals on climate change and biodiversity.
Introducing recommendations for risk-based due diligence regarding technology, including data collection and utilization, throughout its development, financing, sale, licensing, trade, and use.
Providing guidelines on how enterprises should conduct due diligence concerning the impacts and business relationships associated with their products and services.
Enhancing protection for vulnerable individuals and groups, including those who voice concerns about business conduct.
Updating recommendations on disclosing information related to responsible business conduct.
Expanding due diligence recommendations to address all forms of corruption.
Recommending that enterprises ensure their lobbying activities align with the Guidelines.
Strengthening procedures to ensure the visibility, effectiveness, and functional equivalence of National Contact Points for Responsible Business Conduct.
Key Areas that Impact Global Buyers with Complex Supply Chain
The updates have a broad impact across various aspects of the original Guideline. The following two areas; General Policies + Employment + Industrial Relations Specific Policies, may have the highest impact on the global buyers with complex supply chain.
What it means for Global Buyers
Due diligence should be risk-based and proportionate to the severity and likelihood of adverse impacts, recommending enterprises to prioritize actions based on their significance.
Specific geographies, commodities or industries have known risks – take immediate actions to educate + prevent on these issues.
Conduct thorough and regular risk assessments that help you prioritize improvement and remediation actions based on the potential impact.
Expectation for enterprises to engage in meaningful consultation with individuals or groups who may be adversely affected by their activities.
Continuous engagement channels with stakeholders; including your suppliers, workers’ representatives and other stakeholders to prevent + remediate risks.
Responsibility for adverse impacts should not be shifted from the entity causing them to the enterprise with which it has a business relationship.
Buyers can no longer shift responsibility to supplier, meaning that implementing a system with mechanism + tools to educate, prevent, remediate, and improve the supply chain is a key success factor.
Responsible engagement, rather than disengagement, should be pursued when there is a realistic prospect of improvement over time, with disengagement only being considered responsibly if necessary.
A systematic identification process + improvement plan that encourages ongoing collaboration to drive positive change throughout the supply chain.
Prevent reprisals against individuals investigating or raising concerns about their operations, products, or services, and foster a safe environment for voicing concerns.
The mechanism + channels that protect individuals who raise concerns or report issues, then address those accordingly.
Employment + Industrial Relations Specific Policies:
What it means for Global Buyers
Respect for workers' rights to freedom of association and collective bargaining.
Educate suppliers, and their line managers to uphold and respect workers' rights to freely associate and engage in collective bargaining.
Obligation for enterprises to provide a safe and healthy working environment, aligning with the ILO Declaration on Fundamental Principles and Rights at Work.
Ensure that suppliers create and maintain a safe and healthy working environment for their employees by supporting them with tools + education programs.
Preventing human trafficking, forced labor, and coercive practices, while promoting transparency in addressing forced labor risks associated with operations, products, and services.
Actively educate on and prevent human trafficking, forced labor, and coercive practices through education + prevention methods.
The need for training programs that anticipate future changes, such as societal, environmental, and technological shifts, automation, digitalization, just transition, and sustainable development.
Training programs that prepare workers for future changes and challenges.
Stressing that enterprises should prevent reprisals against individuals investigating or raising concerns about their operations, products, or services, and foster a safe environment for voicing concerns.
Mechanisms + tools for confidential reporting, whistleblower protection, and grievance redressal to encourage open communication and ensure that concerns are addressed promptly and effectively.
Clarifying that providing reasonable notice to worker representatives and relevant authorities about major operational changes includes automation-related collective or large-scale layoffs or dismissals.
Continuous engagement to keep workers informed on significant operational changes, particularly those involving automation that may result in collective or large-scale layoffs or dismissals.
As most Human Rights Due Diligence laws and regulations are based on the UN Guiding Principles on Business and Human Rights, the OECD Guidelines, it is important for global buyers to keep informed and update their processes to meet these guidelines. By incorporating such guidelines into supply chain, global buyers can mitigate legal risks, protect their reputation, and align with global expectations for responsible business conduct.
If you are interested in learning more about how to take your first step in making your supply chain sustainable – download our eBook on Strategies for Effective HRDD in Your Supply Chain.