View this email in your browser

*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])

*The Columbia FDI Perspectives are a forum for public debate. The views
expressed by the authors do not reflect the opinions of CCSI or our
partners and supporters.*

No. 329   April 18, 2022
*They can run but they can’t hide: MNEs and responsible business conduct
Stephen Pursey* <#m_3009539867330053166__edn1>

The story of the past nearly 50 years of responsible business conduct (RBC)
codes is that of “irresponsible” companies trying to run and hide in
countries in which national laws do not meet international standards, and
of unions, civil society, most governments, and responsible companies
finding ways to expose them. To counteract such “free-riding”, RBC
instruments increasingly require countries and companies to provide
information on their efforts to implement their principles, making it ever
harder for rogue businesses to hide their behavior.

A notable example of how nominally non-binding instruments are becoming
more effective is the evolution of the ILO Tripartite Declaration of
Principles concerning Multinational Enterprises and Social Policy (MNE
In the heated discussions of the 1970s about global development, trade
unions (which represent workers in ILO member states) had pressed for an
ILO Convention on MNE labor practices. Because ILO Conventions bind
ratifying states and become part of their domestic legal framework,
employers and most governments benefitting from the bulk of FDI flows
opposed the idea. An important further consideration was that an ILO
Declaration, while voluntary, has global reach, while a Convention only
binds ratifying states.

With the likelihood that few governments would ratify a Convention, trade
unions accepted the compromise of a Declaration that included follow-up
mechanisms to deal with disputes, as well as information gathering and
research, promotional activities and company-union dialogues. These
follow-up mechanisms regularly alert MNEs and governments of their
responsibilities and support their efforts to meet them.

Today, countries wishing to attract socially responsible FDI can use the
MNE Declaration as a framework to strengthen their domestic labor and
social laws and policies based on the Conventions upon which the MNE
Declaration draws (e.g., the Fundamental Principles and Rights at Work
These principles are also incorporated or mirrored in most social
responsibility instruments.[1] <#m_3009539867330053166__edn2>

The authority of the MNE Declaration is further enhanced by its global
backing by host and home countries, as well as employers and unions. This
reinforces the reputational damage that exposure of abuses causes. The
International Organization of Employers works with its national members to
foster socially responsible business conduct. Likewise, the International
Trade Union Confederation and its partners in the Global Unions Federation
encourage their members to pressure companies to apply the MNE
Declaration’s principles. The latest version of the MNE Declaration
promotes company-union dialogue

The 2006 ILO Maritime Labour Convention
with the rights of seafarers—goes further in counteracting the attraction
of “social irresponsibility havens”. This Convention requires mandatory
inspections of foreign ships by port countries to enforce seafarers’ rights
(Regulation 5.2.1). Its ratification by the most important port countries
means that practically all ships have to comply with the Convention’s
requirements, even if the vessels are registered in non-signatory countries
where the protections for seafarers are weaker.

In a similar way, countries could require MNEs operating in their
territories to prepare global due diligence reports on their compliance
with internationally recognized principles and standards of responsible
business conduct, *wherever they are operating*.

Momentum is building in this direction. In 2017, the G20 committed “to
fostering the implementation of labor, social and environmental standards
and human rights in line with internationally recognized frameworks”.[2]
<#m_3009539867330053166__edn3> The UN, the ILO and the OECD have jointly
called on businesses to “undertake due diligence to identify, prevent and
mitigate their actual and potential negative impacts and account for how
those impacts are addressed”.[3] <#m_3009539867330053166__edn4> The
European Commission is preparing a legislative proposal on Sustainable
Corporate Governance
to introduce mandatory due diligence reporting by MNEs operating in the EU.
The current draft of a new UN instrument
on human, labor and environmental rights and MNEs would require MNEs in
ratifying states to undertake due diligence reporting.

Action along these lines would make it more difficult for irresponsible
companies to run and hide. However, the credibility of due diligence
reports will be suspect if MNEs prepared reports themselves or through
their accountants or ESG consultancies. Few of such ESG auditors are well
qualified to do workplace labor inspections, especially along supply
chains. Indeed, the people best placed to identify behavior contrary to RBC
labor principles are workers and their unions—but speaking out all too
often leads to dismissal. The protection of workers’ rights is fundamental.
As a next step, therefore, it would be important to establish ILO global
social and labor qualifications for auditors that make “running and hiding”
truly hard, not least by ensuring that the voice of workers is heard and
acted upon.

* <#m_3009539867330053166__ednref1> Stephen Pursey ([log in to unmask]) is
a visiting fellow at Newcastle University and a former official of the ILO
and the ICFTU. The author wishes to thank Peter Muchlinski, Marie-Estelle
Rey and Githa Roelans for their helpful peer reviews.
[1] <#m_3009539867330053166__ednref2> The OECD Multinationals Guidelines
the UN Global Compact
are examples. Delegates are currently discussing the inclusion of a
reference to the MNE Declaration in the WTO’s Investment Facilitation
Framework for Development
similar to the European Council Conclusions on Human Rights and Decent Work
in Global Supply Chains
[2] <#m_3009539867330053166__ednref3> See Hamburg Leaders’ Declaration
p. 4.
[3] <#m_3009539867330053166__ednref4> ILO, UNHR and OECD, *Responsible
business – Key messages from international instruments* (Geneva: ILO, 2019)
p. 4.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Stephen Pursey, ‘They can run but they can’t
hide: MNEs and responsible business conduct,’ Columbia FDI Perspectives No.
329, April 18, 2022. Reprinted with permission from the Columbia Center on
Sustainable Investment (***
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,
Riccardo Loschi, [log in to unmask]; Luca Jobbagy,
[log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 328, Roger Strange, “The future of global value chains: Key
   issues,” Columbia FDI Perspectives, April 4, 2022
   - No. 327, Ucheora Onwuamaegbu, “A managed dispute-resolution insurance
   scheme for countries in investor-state arbitration: Ensuring early legal
   representation of respondents,” Columbia FDI Perspectives, March 21, 2022
   - No. 326, Meg Kinnear, “The launch of a new generation of the ICSID
   Rules,” Columbia FDI Perspectives, March 7, 2022

*All previous FDI Perspectives are available at

*Other relevant CCSI news and announcements*

   - *Job Opening: Senior Legal Researcher, Investment Law and Policy: *This
   position will collaborate with CCSI’s Director and Research Staff to
   execute the Center’s applied research agenda on the laws, policies, and
   practices that shape international investment and its alignment with
   sustainable development and human rights. *Please see here
   more details and to apply by April 21, 2022.*
   - *Job Opening: Senior Legal Researcher, Land, Agriculture and Food
   Systems: *CCSI is seeking a Senior Legal Researcher to work on our Land,
   Agriculture & Food Systems
   of projects. The position will support research, advisory work, and the
   organization and delivery of capacity building programs related to CCSI’s
   work on strengthening the governance of land-based investment (including
   agriculture, extractive industries, renewable energy projects, and
   nature-based solutions). *Please see here
   more details and to apply by May 30, 2022.*
   - *Job Opening: Program Associate: *Reporting to the Director of CCSI,
   the Program Associate will support a wide range of research, operational,
   and administrative responsibilities. This position is ideal for graduating
   students. *Please see here
   more details and to apply.* Interested candidates are encouraged to
   apply soon; applications will be reviewed on a rolling basis.

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 © 2022 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
[log in to unmask]

*Our mailing address is:*
Columbia Center on Sustainable Investment (CCSI)
Columbia Law School - Earth Institute, Columbia University
435 West 116th Street
New York, NY 10027

Add us to your address book

unsubscribe from this list
update subscription preferences

[image: Email Marketing Powered by Mailchimp]

*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
| p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
| w: | t: @CCSI_Columbia

"How Would a Future WTO Agreement on Investment Facilitation for
Development Encourage Sustainable FDI Flows, and How Could it be Further
Strengthened?”, "What Foreign Investors Want: Findings from an Investor
Survey", "Incentivising Sustainable FDI", "Leveraging Digital FDI for
Capacity and Competitiveness", "Green FDI: Encouraging Carbon-neutral
Investment", "Facilitating Sustainable Investment to Build Back Better",
"Extending International Legal Aid from Trade to Investment: An Advisory
Centre on International Investment Law", "Increasing Transparency in
Investment Facilitation: Focussed Support is Needed", *Investment
Facilitation for Development: A Toolkit for Policymakers*, "More Attention
to Policies! Improving the Distribution of FDI Benefits. The Need for
Policy-oriented Research, Advice and Advocacy", "More and Better Investment
Now!", "Facilitating Sustainable FDI in a WTO Investment Facilitation
Framework: Four Concrete Proposals", "An Inventory of Concrete Measures to
Facilitate the Flow of Sustainable FDI: What? Why? How?", are available at .

AIB-L is brought to you by the Academy of International Business.
For information:
To post message: [log in to unmask]
For assistance:  [log in to unmask]
AIB-L is a moderated list.