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*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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 "The Rise of Self-judging Essential Security Interest Clauses in IIAs",
Can host countries have legitimate expectations?", "The Next Step in
Governance: The Need for Global Micro-regulatory Frameworks", "How
International Investment Agreements can Protect Free Media", "China, the
G20 and the International Investment Regime", "The Evolving International
Investment Law and Policy Regime: Ways Forward", "China's Outward FDI and
International Investment Law", and  "Policy Options for Promoting FDI in
the LDCs" *are* available at http://papers.ssrn.com/sol3/results.cfm and
http://www.works.bepress.com/karl_sauvant/.



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哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看:http://ccsi.columbia.edu/
publications/columbia-fdi-perspectives.


*Columbia FDI Perspectives*

Perspectives on topical foreign direct investment issues
No. 189  December 19, 2016
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Daniel Allman ([log in to unmask])



*Broadening the Global Compact agenda*
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=a6fa80a6ab&e=4cc18e0040>
by
Robbie Schwieder* * <#m_-7659674187099383265__edn1>*


The UN Global Compact provides “a framework of reference and dialogue”
designed to encourage firms to embrace “a set of core values in the areas
of human rights, labour standards, and environmental practices.”[1]
<#m_-7659674187099383265__edn2> However, critics argue that the Compact’s
corporate social responsibility (CSR) measures fail adequately to address
certain development issues. To that end, this *Perspective* proposes adding
two development-oriented principles to the Compact,[2]
<#m_-7659674187099383265__edn3> dealing with poverty reduction and
taxation. The new principles strike a balance between encouraging
multinational enterprises (MNEs) to act within their sustainable
self-interest and introducing new guidelines for socially responsible
business that comport with today’s development agenda, as conceived by the
UN’s 2015 Sustainable Development Goals (SDGs).

*Principle #1: “Businesses should assess their impact on poverty as a
component of corporate performance and publicly undertake to maximize their
positive impact on poverty reduction.” *Poverty reduction is a central
hallmark of modern sustainable development initiatives. The SDGs represent
only the most recent program aimed at permanently lifting individuals out
of poverty. However, CSR measures have as yet failed to address the impact
of business activities on impoverished individuals and communities. This
deficiency remains despite recent literature backing the “business case”
for poverty-related CSR measures, which suggests that “[b]usinesses can
gain three important advantages by serving the poor—a new source of revenue
growth, greater efficiency, and access to innovation.”[3]
<#m_-7659674187099383265__edn4>

The proposed language accommodates short-term profitability concerns while
encouraging corporate leaders to tackle the poverty agenda head-on.
Simultaneously, it addresses differences in MNEs’ areas of operation,
business sector focuses and internal structures by calling on MNEs to
evaluate the unique impact of their corporate strategies on poverty. Among
other things, these analyses might consider the effects of technology
transfer and engagement with local suppliers/partners on impoverished
individuals and communities. Critics might still attack such a principle as
vague and easily contravened by resourceful corporations. However,
requiring internal poverty assessments will, at the very least, spur
corporate dialogue on poverty reduction. Moreover, mandating that a
business publicly disclose its attempts at maximizing its positive impact
on poverty reduction could indicate to global consumers the depth of that
organization’s commitment to the poverty agenda.

*Principle #2: “Businesses should work against tax evasion in all its
forms, including dishonest tax reporting and tax sheltering.”* In recent
years, scholars and non-governmental organizations have become increasingly
skeptical of firms that claim to be socially responsible while
simultaneously “employing an army of accountants to try and avoid paying
their full social and economic duty.”[4] <#m_-7659674187099383265__edn5>
The failure of businesses to shoulder their “fair” tax burden depletes
governments’ ability to provide citizens with essential educational,
healthcare and security services. By mirroring one of the Compact’s
existing tenets, the proposed language would equate tax evasion with
corruption, encouraging businesses to ensure that they help finance the
public benefits they enjoy as global citizens.

Importantly, the principle proscribes only tax evasion (i.e., the use of
extralegal means to avoid paying owed taxes), not tax avoidance (i.e.,
employing legal strategies available under existing tax codes to minimize
tax liabilities). This distinction could be attacked as too narrow, but it
would be little use for the Compact to denounce what countries have
purposefully allowed.[5] <#m_-7659674187099383265__edn6> Plus, an
avoidance-inclusive principle would face substantial enforcement
challenges, since determining whether MNEs have shouldered their full tax
burden would require an enormous amount of data/manpower.

The Global Compact represents an extraordinary opportunity for encouraging
corporate leaders to adopt CSR initiatives, but has so far overlooked the
development impacts of corporate behavior. By adopting principles like
those proposed above, the UN could start bridging that gap while securing
the Compact’s position at the forefront of the CSR movement.

------------------------------

* <#m_-7659674187099383265__ednref1> Robbie Schwieder (
[log in to unmask]) is a J.D. Candidate at Columbia Law School. The
author is grateful to Klaus Leisinger, Peter Muchlinski and Rob van Tulder
for their helpful peer reviews. *The views expressed by the author of this *
*Perspective** do not necessarily reflect the opinions of Columbia
University or its partners and supporters. **Columbia FDI Perspectives**
(ISSN 2158-3579) is a peer-reviewed series.*

[1] <#m_-7659674187099383265__ednref2> Kofi Annan, “Address of the
Secretary-General to the World Economic Forum in Davos, Switzerland,” Feb.
1, 1999, available at http://www.un.org/press/en/1999/19990201.sgsm6881.html
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7c328b7355&e=4cc18e0040>
.

[2] <#m_-7659674187099383265__ednref3> While the Compact’s signatories may
protest the adoption of new principles (especially given the UN’s 2004
pledge not to amend the instrument further), the UN can and should update
the Compact when necessary to address “the most pernicious obstacles to
growth and development”: Kofi Annan, “Experience shows that voluntary
initiatives ‘can and do work’,” Jun. 24, 2004, available at
http://www.un.org/press/en/2004/sgsm9387.doc.htm
<http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8dca9a0c95&e=4cc18e0040>.
If not, the Compact will become obsolete, given the ever-changing corporate
landscape.

[3] <#m_-7659674187099383265__ednref4> C.K. Pralahad and Allen Hammond,
“Serving the world’s poor, profitably,” *Harvard Business Review*, vol. 80
(2002), p. 51.

[4] <#m_-7659674187099383265__ednref5> Eddy Rich, cited in UNRISD,
“Corporate social responsibility and development: towards a new agenda”
(Geneva: UNRISD, 2004), p. 5. Indeed, scholars have called for a
tax-focused Compact principle since at least 2011. *See* Lorraine Eden and
L. Murphy Smith, “The ethics of transfer pricing,” p. 27, available at
*https://business.ualberta.ca/-/media/business/research/conferences/fraudinaccountingorganizationsandsociety/documents/eden-smith-ethics-of-tp-aos-uk-final.PDF
<https://business.ualberta.ca/-/media/business/research/conferences/fraudinaccountingorganizationsandsociety/documents/eden-smith-ethics-of-tp-aos-uk-final.PDF>.*

[5] <#m_-7659674187099383265__ednref6> Some countries have introduced laws
to reduce tax avoidance (e.g., transfer pricing controls, anti-offshoring
provisions), and some administrative bodies have called for more aggressive
anti-avoidance CSR measures (e.g., the Principles for Responsible
Investment’s 2015 Engagement Guidance on Corporate Tax Responsibility). But
adopting a too-strong anti-avoidance principle when no international
consensus about the legality of tax avoidance exists risks rendering it
(and possibly the Compact itself) quixotic and impracticable.



*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Robbie Schwieder, ‘Broadening the Global Compact
agenda,’ Columbia FDI Perspectives, No. 189, December 19, 2016. Reprinted
with permission from the Columbia Center on Sustainable Investment
(www.ccsi.columbia.edu <http://www.ccsi.columbia.edu>).” A copy should
kindly be sent to the Columbia Center on Sustainable Investment at
[log in to unmask] <[log in to unmask]>*



For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Daniel Allman, [log in to unmask]

   - No. 188, Karl P. Sauvant*, *Mevelyn Ong, Katherine Lama, and Thor
   Petersen, “The rise of self-judging essential security interest clauses in
   international investment agreements,” December 5, 2016.
   - No. 187, Jan Knoerich, “Why some advanced economy firms prefer to be
   taken over by Chinese acquirers,” November 21, 2016.
   - No. 186, Jose Guimon, “From export processing to knowledge processing:
   upgrading the FDI promotion toolkit,” November 7, 2016.

*All previous **FDI Perspectives** are available at
**http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/
<http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/>**. *

*Other relevant CCSI news and announcements*

   - CCSI is pleased to announce a call for papers for Part Two of the
*Yearbook
   on International Investment Law and Policy
   <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=6d90339c4d&e=4cc18e0040>*
published
   by Oxford University Press (OUP). The *Yearbook* monitors current
   developments in international investment law and policy. Part One focuses
   on trends in foreign direct investment, international investment
   agreements, and investment disputes. Part Two looks at central issues in
   the contemporary discussions on international investment law and policy.
   The chapters in Part Two may be detailed analyses or short think-pieces.
   All papers must be original texts and are subject to double-blind peer
   review. Original contributions to be considered for publication in the
   *Yearbook* are accepted on a rolling basis until January 15, 2017;
   please send submissions to [log in to unmask] Please include an
   abstract; a table of contents is also recommended. Footnotes should conform
   to guidelines available here
   <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=adba083b67&e=4cc18e0040>
   .
   - In November 2016, CCSI sent a submission to Overseas Private
   Investment Corporation
   <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=25196a9a1d&e=4cc18e0040>
(OPIC)
   regarding its draft revised Environmental and Social Policy Statement
   (ESPS). CCSI’s input focused on two discrete issues on which CCSI has been
   working: (1) contract transparency
   <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b58c1584bb&e=4cc18e0040>
for
   natural resource and infrastructure projects, and (2) redress for harms
   <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=4f01b9ddb0&e=4cc18e0040>
in
   the context of project abandonment or failure. The submission urged OPIC to
   add into the ESPS a requirement regarding public disclosure of
   investor-state contracts related to OPIC-supported projects. CCSI’s
   submission also suggested that OPIC incorporate into the ESPS a requirement
   for closure plans that would cover harms to Project Affected People and
   would apply in the case of both anticipated and unanticipated project
   closure, along with financial assurances to guarantee performance of
   closure plan provisions. The full submission is available here
   <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=2eb25fd4fc&e=4cc18e0040>
   .
   - *June - August 2017:* We are accepting applications for our three
   upcoming executive trainings: on Extractive Industries and Sustainable
   Development
   <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=8b75192322&e=4cc18e0040>
   (June 5-16, 2017), Sustainable Investments in Agriculture
   <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=8972669c00&e=4cc18e0040>
   (July 12-21, 2017), and Investment Arbitration for Government Officials
   <http://columbia.us6.list-manage2.com/track/click?u=ab15cc1d53&id=94b9d7a3c0&e=4cc18e0040>
   (July 31-August 10, 2017). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. * More information about
   each training, including brochures and applications, is available at the
   links above.* Applications are accepted on a rolling basis. Participants
   will receive a Statement of Attendance from Columbia University.



Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946

*Copyright © 2016 Columbia Center on Sustainable Investment (CCSI), All
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