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The UN Global Compact and the OECD Guidelines for Multinational Enterprises and Their Enforcement Mechanisms



This chapter discusses the United Nations Global Compact as well as the Guidelines for Multinational Enterprises issued by the Organization for Economic Co-operation and Development (OECD). I start by providing the theoretical context in which both initiatives need to be discussed. I thereby highlight that both initiatives are part and parcel of a growing institutional infrastructure for corporate sustainability and responsibility. Next, I turn to a more practical discussion. I outline for each of the two initiatives: (1) its basic idea and history, (2) its relationship to the discussion of business and human rights, and (3) its enforcement mechanisms. Discussing these three issues helps to show the advantages and disadvantages of each initiative.
The UN Global Compact and the OECD Guidelines on Multinational
Enterprises and their Enforcement Mechanisms
Andreas Rasche
Copenhagen Business School
CBS Centre for Sustainability
Dalgas Have 15, 2000 Frederiksberg
Abstract: This chapter discusses the United Nations Global Compact as well as the Guidelines for
Multinational Enterprises issued by the Organization for Economic Co-operation and Development
(OECD). I start by providing the theoretical context in which both initiatives need to be discussed. I
thereby highlight that both initiatives are part and parcel of a growing institutional infrastructure for
corporate sustainability and responsibility. Next, I turn to a more practical discussion. I outline for
each of the two initiatives: (1) its basic idea and history, (2) its relationship to the discussion of
business and human rights, and (3) its enforcement mechanisms. Discussing these three issues helps
to show the advantages and disadvantages of each initiative.
Suggested Citation:
Rasche, A. (2021). The UN Global Compact and the OECD Guidelines on Multinational
Enterprises and their Enforcement Mechanisms. In I. Bantekas & M.E. Stein (eds.) The Cambridge
Companion to Business & Human Rights Law. Cambridge et al.: Cambridge University Press.
This chapter discusses the United Nations Global Compact (UNGC) and the OECD Guidelines for
Multinational Enterprises as voluntary standards for business and human rights. Both standards have
received significant scholarly attention.
Although both initiatives differ with regard to some
dimensions (e.g., in terms of their scope), they also share a number of similarities (e.g., their voluntary
and principle-based nature and their lack of monitoring). It is therefore appropriate to discuss both
initiatives and to also compare them with each other (whenever possible and feasible).
The discussion in this chapter proceeds as follows. The next section discusses the theoretical
background by emphasizing the rise of voluntary standards related to corporate sustainability and
responsibility. The following two sections provide a more practical discussion. Section three and four
take an in-depth look at the UNGC and the OECD Guidelines and discuss (a) the basic idea underlying
both initiatives, (b) their link to the business and human rights agenda, and (c) their enforcement
mechanisms. The discussion of both standards shows one important similarity: the lack of a robust
system to implement and enforce the promoted principles.
See e.g.
(a) L. Baccaro, and V. Mele, ‘For Lack of Anything Better? International Organizations and Global Corporate Codes’,
Public Administration, 89.2 (2011), 451–470.
(b) D. Berliner, and A. Prakash, ‘“Bluewashing” the Firm? Voluntary Regulations, Program Design, and Member
Compliance with the United Nations Global Compact’, Policy Studies Journal, 43.1 (2015), 115–138.
(c) J. Clapp, ‘Global Environmental Governance for Corporate Responsibility and Accountability’, Global
Environmental Politics, 5.3 (2005), 23–34.
(d) S. Khoury and D. Whyte, ‘Sidelining corporate human rights violations: The failure of the OECD’s regulatory
consensus’, Journal of Human Rights, 18.4 (2019), 363–381.
(e) A. Rasche, The United Nations Global Compact and the Sustainable Development Goals, In Research Handbook of
Responsible Management, ed by O. Laasch, D. Jamali, R. Freeman and R. Suddaby, (Cheltenham: Edward Elgar,
2020), pp. 228–241.
The UNGC and the OCED Guidelines belong to an evolving global institutional infrastructure for
corporate sustainability and responsibility.
Due to difficulties to directly regulate the conduct of
transnational corporations through national and international legal instruments, much of this
infrastructure remains voluntary and hence can be understood as relying on “standards”. In its most
general sense, a standard is “a rule for common and voluntary use, decided by one or several people
or organizations.
Standards differ from hard law insofar as they are not enforced through legal
sanctioning mechanisms; although voluntary standards can move into mandatory law and thus
become linked to legal action. However, in the corporate sustainability and responsibility domain,
such “hardening” of soft law remains the exception rather than the rule.
The literature about the
standards for corporate sustainability and responsibility focuses on three major themes (“the 3Is”):
(1) the input that different stakeholders give when designing relevant standards, (2) the
institutionalization of standards, and (3) the impact that standards create over time.
There are different types of standards for corporate sustainability and responsibility.
The vast
majority of standards aim at certification (e.g., the Forest Stewardship Council, Social Accountability
8000, the Marine Stewardship Council). Certification is based on monitoring and verification
A. Rasche and D. E. Esser, ‘From Stakeholder Management to Stakeholder Accountability’, Journal of Business
Ethics, 65.3 (2006), 251–267. See also S. Waddock, ‘Building a New Institutional Infrastructure for Corporate
Responsibility’, Academy of Management Perspectives, 22.3 (2008), 87–108.
N. Brunsson, A. Rasche and D. Seidl, ‘The Dynamics of Standardization: Three Perspectives on Standards in
Organization Studies’, Organization Studies, 33.5–6 (2012), 613–632 (p. 616).
For instance, Swedish state-owned enterprises (SOE) are legally required to prepare their sustainability reports in
accordance with the guidelines issued by the Global Reporting Initiative (GRI). See here for more information:
See literature review F. G. A. De Bakker, A. Rasche, and S. Ponte, ‘Multi-Stakeholder Initiatives on Sustainability: A
Cross-Disciplinary Review and Research Agenda for Business Ethics’, Business Ethics Quarterly, 29.3 (2019), 343–
See D. U. Gilbert, A. Rasche, and S. Waddock, ‘Accountability in a Global Economy: The Emergence of International
Accountability Standards’, Business Ethics Quarterly, 21.1 (2011), 23–44.
mechanisms that are applied to specific farms or factories. The main goal is to achieve a high level
of compliance with the standard and to identify non-complying organizations. Most certification
standards are used to govern global supply chains (e.g., in the textile or coffee industry). However,
research has revealed a number of problems related to social and environmental auditing,
such as a
lack of neutrality on the side of auditors, corruption and a deliberate lowering of standards in order
to attract clients.
Reporting standards provide a framework to disclose non-financial information to relevant
stakeholders (e.g., the Global Reporting Initiative and the Carbon Disclosure Project). Usually, these
standards do not verify the information that is provided in the reports. Rather, the goal is to offer
companies guidance in terms of understanding what information should be disclosed and how the
process of reporting should be managed. Reporting standards are often criticized for primarily aiming
at modifying the perception of legitimizing stakeholders.
Prior research has also criticized that
despite the standardized nature of reporting indicators, the non-financial disclosures of firms in a
given sector are still difficult to compare and benchmark.
Finally, principle-based standards offer guidance for defining firms’ activities vis-à-vis social and
environmental problems. These standards act as a starting point for defining the responsibilities of
companies towards society. Principle-based standards use enforcement mechanisms that reach
beyond monitoring (e.g., they can delist participants for failure to report on progress). Hence, these
See E. Fortin, and B. Richardson, ‘Certification schemes and the governance of land: Enforcing standards or enabling
scrutiny?’, Globalizations, 10 (2013), 141–159. See also D. O’Rourke, ‘Multi-stakeholder regulation: Privatizing or
socializing global labor standards?’, World Development, 34 (2006), 899–918.
See R. Hahn and R. Lülfs, ‘Legitimizing Negative Aspects in GRI-Oriented Sustainability Reporting: A Qualitative
Analysis of Corporate Disclosure Strategies’, Journal of Business Ethics, 123.3 (2014), 401–420.
See A. Fonseca, M. L. McAllister, and P. Fitzpatrick, ‘Sustainability reporting among mining corporations: a
constructive critique of the GRI approach’, Journal of Cleaner Production, 84 (2014), 70–83.
standards do not act as a basis for certification and they should also not be understood as a seal of
approval or product label. In this chapter, I characterize the UNGC as well as the OECD Guidelines
as principle-based initiatives, although, as I will show throughout the discussion, both initiatives
deviate from the “ideal principle-based standard” in some important ways.
Practically speaking, most firms use a portfolio of different standards.
For instance, the UNGC and
the OECD Guidelines are often used as basic commitments that are supposed to signal to stakeholders
the values that a firm publicly supports. Such principle-based standards are usually used in
combination with reporting initiatives and/or certification schemes. For instance, Nike has been a
founding signatory of the UNGC, while it also works closely with the Fair Labor Association for
factory monitoring along its global supply chain and the Global Reporting Initiative for disclosing
non-financial information. The different types of standards are therefore complementary and should
not be perceived as being mutually exclusive. The coexistence of standards is only problematic if
there are competing initiatives with very similar objectives and comparable underlying mechanisms
(e.g., in the case of certifications for coffee.
One important question that has been raised by prior research is: What motivates firms to adopt
standards for corporate sustainability and responsibility? Most studies emphasize a market-based
explanation and therefore highlight that standard adoption leads to economic advantages for firms,
for instance because consumer demand for certified products increases
or because firms can reap
See A. Rasche, ‘Collaborative Governance 2.0’, Corporate Governance, 10.4 (2010), 500–511.
See L. Fransen, A. Kolk, and M. Rivera-Santos, ‘The multiplicity of international corporate social responsibility
standards Implications for global value chain governance’, Multinational Business Review, 27.4 (2019), 397–426.
See J. Johansson, ‘Why do forest companies change their CSR strategies? Responses to market demands and public
regulation through dual-certification’, Journal of Environmental Planning and Management, 57 (2014), 349–368.
reputational benefits from participation.
In the context of the UNGC and the OECD Guidelines,
consumer-related arguments are less relevant, because both initiatives cannot be used as product
labels and are therefore usually unknown to end consumers. However, given that the UN as well as
the OECD are well acknowledged international organizations,
it is very likely that firms that
actively support both initiatives try to improve their overall business reputation (e.g., in a business-
to-business setting).
History and Basic Idea
The UNGC needs to be understood against the background of historical shifts in UN-business
During the Cold War most international organizations remained neutral vis-à-vis business
actors. In some organizations even suspicion and distrust characterized relations with the private
The UN’s engagement with business actors was first institutionalized through the launch of
the UN Commission on Transnational Corporations (UNCTC) in 1974. One key concern of this
Commission was the negotiation of a code of conduct that would have regulated the practices of
transnational corporations.
Negotiations related to the code were difficult and lengthy, especially as
there was significant disagreement about its legal nature (Northern governments favoring a voluntary
solution, while Southern nations favored a more binding agreement). The code was ultimately
rejected by the General Assembly and hence did not come into existence.
See H.E.S. Nesadurai, ‘Food security, the palm oil-land conflict nexus and sustainability: a governance role for a
private multi-stakeholder regime like the RSPO?’, Pacific Review, 26 (2013), 505–529.
See Edelman Trust Barometer 2017, ed. by Edelman, (New York: Edelman, 2017).
See G. Kell, ‘12 Years Later: Reflections on the Growth of the UN Global Compact’, Business and Society, 52.1
(2013), 31–52.
See G. Kell, Relations with the Private Sector, in Oxford Handbook of International Organizations, ed. by J. Katz
Cogan, I. Hurd and I. Johnstone, (Oxford/New York: Oxford University Press, 2016), pp. 730–753 (p. 730).
See D. Coleman, ‘The United Nations and Transnational Corporations: From an Inter-nation to a “Beyond-state”
Model of Engagement’, Global Society, 17.4 (2003), 339–357. See also K. P. Sauvant, ‘The negotiations of the United
Nations code of conduct on transnational corporations: Experience and lessons learned’, Journal of World Investment
and Trade, 16.1 (2015), 11–87.
The launch of the UNGC in 2000 showed that the UN was able to reconsider its relationship with the
private sector. Because a legally binding solution was unlikely to emerge, Secretary-General Kofi
Annan’s strategy was to launch a multi-stakeholder initiative that remained voluntary. The basic idea
underlying the UNGC can be characterized by these four points:
Principle-based: It is an initiative which business and non-business actors can join on a
voluntary basis to improve their business practices related to ten universally recognized
principles (see Figure 1). The principles are derived from existing UN conventions and
Learning-Based: The initiative is not designed as a seal of approval or code of conduct against
which compliance can be measured. Rather, the idea is that firms engage in dialogue, learning,
and partnerships and thus improve their performance vis-à-vis the ten principles.
Global-Local: Participants can join local networks in countries where they operate. Such
networks can be understood as “clusters of participants who come together voluntarily to
advance the Global Compact and its Principles at the local level.”
Local networks are
embedded into the larger global structure of the initiative making the UNGC a “network of
See N. Whelan, Building the United Nations Global Compact Local Network Model: History and Highlights, in The
United Nations Global Compact: Achievements, Trends and Challenges, ed. by A. Rasche and G. Kell
(Cambridge/New York: Cambridge University Press, 2010), pp. 317–339 (p. 318).
See D. U. Gilbert and M. Behnam, ‘Trust and the United Nations Global Compact: A Network Theory Perspective’,
Business and Society, 52.1 (2013), 135–169.
Public-Private: The initiative acts as a platform in which actors from the public sphere (e.g.,
national governments, the UN system) can collaborate with private actors (e.g., businesses
and business associations).
Figure 1 About Here
In terms of numbers, the UNGC is a successful initiative: more than 10,000 companies and over 3,000
non-business actors are part of the initiative (as of February 2020). However, the precise impact of
the UNGC on its participants remains unclear and research results are mixed. Recent research by
showed that UNGC adoption had positive effects on firms’ sales growth and profitability,
while it had no significant impact on labor productivity. Not much different, Schembera
derived a positive impact of UNGC participation duration on the implementation level of the ten
principles. In other words, the longer firms are part of the initiative, the better they implement the ten
principles. By contrast, Berliner and Prakash
research argued that participants’ human rights and
environmental performance was worse than non-participants’ performance, especially in those areas
were firms had to make costly and fundamental changes to existing practices. Although no conclusive
results regarding the UNGC’s impact exist, it is clear that the initiative affects firms in unequal ways,
depending for instance on the size of companies.
See G. Orzes and others, 'The Impact of the United Nations Global Compact on firm performance: A longitudinal
analysis’, International Journal of Production Economics, forthcoming (2020), available at:
See S. Schembera, ‘Implementing Corporate Social Responsibility: Empirical Insights on the Impact of the UN
Global Compact on Its Business Participants’, Business and Society, 57.5 (2018), 783–825.
See Berliner & Prakash, 2015, pp. 115–138.
Ever since its launch, critics wanted the UNGC to be something it never intended or pretended to be:
a code of conduct against which compliance can be measured.
While monitoring and certification
certainly have their place in the corporate sustainability and responsibility landscape, the UNGC
promotes broad principles which are supposed to guide learning, dialogue and partnership.
In an
early publication on the UNGC, Ruggie
pointed out that such a learning-based approach is not a
“second-best solution”. Monitoring would be difficult because the swiftly changing nature of
corporate strategies, structures and processes and the scope of UNGC participants makes the ex-ante
definition of a full range of performance criteria nearly impossible. Further, even if the UNGC would
opt for a monitoring approach, there would still be the question of (a) whether sufficient political
support for such a move existed and (b) whether the UN itself would have the necessary logistical
resources to monitor large, often network-based, companies. Both issues seem unlikely given the
current political climate as well as the financial and non-financial resources available within the UN
The UNGC’s Human Rights Principles
The UNGC’s human rights principles (see Figure 1) are derived from the Universal Declaration of
Human Rights (UDHR) and are therefore based on the assumption that the UDHR can be applied to
non-state actors. This is most clearly stated in the Preamble of the UDHR: “every individual and
every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and
See e.g.
(a) S. Deva, ‘Global Compact: A Critique of the UN’s “Public-Private” Partnership for Promoting Corporate
Citizenship’, Syracuse Journal of International Law and Communication, 34 (2006), 107–151.
(b) J. Nolan, ‘The United Nations Global Compact with business: Hindering or helping the protection of human
rights?’, University of Queensland Law Journal, 24 (2005), 445-466.
See A. Rasche, ‘“A Necessary Supplement” What the United Nations Global Compact Is and Is Not’, Business and
Society, 48.4 (2009), 511–537. See also The United Nations Global Compact: Achievements, Trends and Challenges,
ed. by A. Rasche and G. Kell, (Cambridge: Cambridge University Press, 2010).
See J. G. Ruggie, ‘Trade, Sustainability and Global Governance’, Columbia Journal of Environmental Law, 27
(2002), 297–307 (p. 303).
education to promote respect for these rights and freedoms and by progressive measures, national and
international, to secure their universal and effective recognition and observance, both among the
peoples of Member States themselves and among the peoples of territories under their jurisdiction.”
This language makes clear that businesses have responsibilities with regard to human rights.
Following its principle-based character, the UNGC does not outline any specific human rights
obligations. Rather, the two principles emphasize that firms should respect the protection of human
rights and that they should not become complicit in human rights abuses. Despite the vague nature of
these two principles and despite our lack of knowledge on their exact impact, the UNGC has
contributed to the business and human rights agenda in two important ways:
(1) Due to the high
number of participants in the initiative, the UNGC has familiarized many firms with the business and
human rights discussion (e.g., the need to design relevant policies). (2) The UNGC also had a more
indirect impact, because it legitimized the business and human rights agenda at a time when other,
more specific, policy frameworks (e.g. the UN Guiding Principles) were not yet available.
Enforcement of the UNGC
The UNGC is a voluntary principle-based standard and thus cannot be legally enforced. This,
however, does not imply that the initiative is completely without “teeth”, as some have argued.
UNGC uses a “softer” way to enforce its ten principles, although this “softer” enforcement
Emphasis added. See United Nations, The Universal Declaration of Human Rights (2020), available at: [Accessed 12 February].
See K. Leisinger, A. Cramer and F. Natour, Making sense of the United Nations Global Compact Human Rights
Principles, in The UN Global Compact: Achievements, Trends and Challenges, ed. by A. Rasche and G. Kell,
(Cambridge/New York: Cambridge University Press, 2010), pp. 23–43 (p. 26).
See e.g.
(a) Deva, 2006, pp. 107–151.
(b) S. P. Sethi and D. H. Schepers, ‘United Nations Global Compact: The Promise-Performance Gap’, Journal of
Business Ethics, 122.2 (2014), 193–208.
mechanism cannot fully ensure that all participants continuously improve their sustainability
Enforcement in the context of the UNGC rests on mandatory reporting. The UNGC has created a
Communication on Progress (COP) policy. This policy requires all business participants
to submit
an annual report that outlines implementation activities. The basic assumption behind this policy is
that corporate self-reporting acts as a proxy measure for the implementation of the ten principles,
and, of course, it can be debated whether this is actually the case. If a participant does not submit the
annual report, the firm will first be labelled “non-communicating” (for 12 months) and is then delisted
from the UNGC.
So far, the UNGC had to delist more than 12,800 companies for failure to comply
with its COP policy (as of February 2020).
A further 1,400 firms were non-communicating (as of
February 2020).
Figure 2 shows the number of active and delisted business participants.
Figure 2 About Here
See A. Rasche, S. Waddock and M. McIntosh, ‘The United Nations Global Compact: Retrospect and Prospect’,
Business and Society, 52 (2013), 6–30.
Non-business participants in the UNGC face a similar reporting requirement, backed by the so-called Communication
on Engagement (COE) policy.
See U. Hamid and O. Johner, The United Nations Global Compact Communication on Progress policy: origins,
trends and challenges, in The United Nations Global Compact: Achievements, Trends and Challenges, ed. by A.
Rasche and G. Kell, (Cambridge/New York: Cambridge University Press, 2010), pp. 265–280.
See Rasche, 2020, pp. 228–241.
The UNGC maintains a list of all expelled participants on its website:
The list of non-communicating companies can be accessed here:
The analyze,
of which type of firms were likely to be delisted, shows that (a) smaller firms (i.e.
businesses with less than 250 employees) face a much higher likelihood of being delisted than larger
companies and (b) that late adopters (i.e. participants that joined after 2008) face a higher likelihood
of leaving the initiative. These results show that the UNGC remains an attractive initiative for larger
and publicly listed firms, while many smaller firms struggle to make use of the initiative. There are
at least two reasons for this. First, larger firms usually have well institutionalized structures around
non-financial reporting and hence possess the necessary resources to produce the required reports.
Second, larger firms are more visible to critical stakeholders and hence need to actively manage their
reputational risk, while smaller enterprises can “afford” to be delisted as they do not have to fear any
negative publicity.
In particular publicly traded companies can be expected to comply with the COP policy. If such
companies fail to submit a report they are penalized by financial markets with an average cumulative
abnormal return of -1.6% over a period of 5 trading days.
As the status of COP reports is available
to investors through the Bloomberg Professional service, these results are not surprising. Publicly
traded firms therefore have financial incentives to align their strategies and operations with the
The high number of delisted firms creates a challenging situation for the UNGC. On the one hand,
the initiative wants to be inclusive, especially as the UN would not favor an approach towards
corporate responsibility and sustainability where only a few big firms participate in the UNGC. The
A. Rasche and others, Which firms leave multi-stakeholder initiatives? A Resource Dependence Perspective on the
UN Global Compact, paper presented at ‘The Annual Meeting of Academy of Management (AOM)’ (Chicago, IL,
For the source see E. Amer, ‘The Penalization of Non-Communicating UN Global Compact’s Companies by
Investors and Its Implications for This Initiative’s Effectiveness’, Business and Society, 57.2 (2018), 255–291.
spirit underlying the UN system is one of inclusiveness and universality (i.e. promoting universal
values for all types of organizations). Hence, the UNGC needs broad quantitative growth in order to
fulfil its mission. On the other hand, the UNGC has to do something about the high number of delisted
firms. If the number of delistings remains high, the initiative risks losing legitimacy in the eyes of
those corporate participants that actively support it. Reconciling quantitative and qualitative growth
is therefore a key strategic challenge for the initiative.
Resolving the tension between quantitative and qualitative growth is not easy. However, there are
some things that can be done. Currently, the UNGC sees COP reporting as an outcome of
participation. However, it is equally possible to require firms that want to join the initiative to submit
a short report about their current actions and future plans vis-à-vis the ten principles. This would
make COP reporting a precondition for joining the initiative. It would expose participants to reporting
before entering the initiative and hence reduce the likelihood that new members are “surprised” about
the work and resources that have to go into the COP report.
Another measure could be to scan
participants more carefully before they enter. Currently, the initiative remains very open and there is
no vetting mechanism to check in how far participants can live up to the expectations set out in the
COP policy. Both measures would require the UNGC to rethink the level of its entry barriers.
History and Basic Idea
See also the freely available case study: “The UN Global Compact: Advancing or Impeding Corporate
See A. Rasche, UN Global Compact Expels More Participants than New Participants Join (2015), available at:
[Accessed: 27 March 2020].
The OECD Guidelines for Multinational Enterprises (hereafter: the Guidelines) are currently
implemented by 48 signatory nations to the OCED’s Declaration on International Investment and
Multinational Enterprises (as of February 2020). Since their launch in 1976 the Guidelines have been
amended several times (in 1979, 1982, 1984, 1991, 2000, and 2011). Much like the UNGC, the
Guidelines are based on voluntary principles and are not directly legally binding on corporations. The
OECD itself sees the Guidelines as providing “non-binding guidance for responsible business conduct
in a global context.”
Compared to the UNGC, states and governments play a more prominent role.
They are directly signatories and hence are expected to ensure implementation. This makes the
Guidelines the “only corporate responsibility instrument formally adopted by state governments.
Historically speaking, the Guidelines emerged at a time (in the 1970s) when the responsible conduct
of transnational corporations was called into question. While the UN system reacted to this growing
skepticism by setting up the UNCTC, the OECD favored an approach which ultimately aimed at
treating corporations in a way that is consistent with international law. Although the Guidelines are
not binding, they still reflect adhering nations’ expectations vis-à-vis the behavior of (multinational)
corporations. While the UNGC relies on ten rather broadly defined principles, the principles brought
forward by the Guidelines are (a) more specific and (b) broader in their scope (e.g., also including
areas like taxation and competition). Even though both initiatives reflect principle-based standards
(see above), their precise nature still differs. The Guidelines are more focused on compliance with
Organization for Economic Co-operation and Development (OECD), Structures and Procedures of National Contact
Points for the OECD Guidelines for Multinational Enterprises, (Paris: OECD Publishing, 2018), p. 9.
J. L. Černič, ‘Corporate Responsibility for Human Rights: A Critical Analysis of the OECD Guidelines for
Multinational enterprises’, Hanse Law Review, 3.1 (2008), 71–100 (p. 71). Although the UNGC is supported and
endorsed through a UN resolution (latest see: General Assembly resolution A/RES/73/254), states cannot directly
become a signatory of the initiative. The full text of the UN resolution can be accessed here:
the defined principles (however without any monitoring or verification requirements), while the
UNGC uses its principles more as a basis for dialogue, learning, and partnerships.
The Guidelines define recommendations for responsible business conduct in eight areas: (1) human
rights, (2) employment and industrial relations, (3) environment, (4) combating bribery, bribe
solicitation and extortion, (5) consumer interests, (6) science and technology, (7) competition, and
(8) taxation (OECD, 2011). Similar to the UNGC, the principles are based on a number of
international conventions (e.g., the UN Convention Against Corruption), declarations (e.g., the
UDHR), covenants (e.g., the International Covenant on Civil and Political Rights), and voluntary
standards (e.g., ISO 14001). The OECD emphasizes that the Guidelines are neither a substitute for
domestic laws nor that they should override such laws in any way.
However, in those situations
where corporations face a conflict between domestic law and the Guidelines, it is expected that firms
honor the “principles and standards to the fullest extent which does not place them in violation of
domestic law.”
The Guidelines are applicable to multinational enterprises that either work in or from the countries
that adhere to its regulations;
they have an extraterritorial character as alleged violations can happen
outside of the adhering country. Consider the following example.
In 2007, the NGO “Global
Witness” filed a complaint against the British company Afrimex Ltd under the UK National Contact
See Rasche, 2009, pp. 511–537.
See Organization for Economic Co-operation and Development (OECD), OECD Guidelines for Multinational
Enterprises 2011 Edition. OECD Guidelines for Multinational Enterprises 2011 Edition, (Paris: OECD Publishing,
2011), p. 17.
Ibid, p. 17.
See E. Van der Zee, ‘Incorporating the OECD Guidelines in International Investment Agreements: Turning a Soft
Law Obligation into Hard Law?’, Legal Issues of Economic Integration, 40.1 (2013), 33–72.
For the example see J.L. Černič, Global Witness v. Afrimex Ltd: Decision Applying to OECD Guidelines on
Corporate Responsibility for Human Rights (2009), available at:
corporate#_edn1 [Accessed: 20 February 2020].
Point (NCP). The NGO argued that the company violated the Guidelines because it (a) paid bribes to
a rebel group in the Democratic Republic of Congo (DRC) and (b) purchased minerals from mines in
the DRC that employ children and practice forced labor. The UK NCP concluded that Afrimex failed
to comply with the Guidelines and made a number of recommendations to the company on how to
improve its human rights track record. While prior to the 2011 update of the Guidelines the supply
chain provisions focused on business relationships in which an investment relation was present, the
revised version extends this responsibility to all business relationships that are directly linked to a
firm’s operations, products or services.
One important difference between the UNGC and the Guidelines is the nature of corporate
engagement. Firms have to join the UNGC actively and thus become part of a “club” of likeminded
companies. The UNGC also maintains an infrastructure to actively engage those corporations that
want to partner with other stakeholders or that want to learn about corporate sustainability and
responsibility. By contrast, firms cannot join the Guidelines (although they can publicly support
them). The Guidelines are therefore not a “club” that a firm chooses to be part of. Governments adhere
to the Guidelines and thus are the signatories. This difference is important, at least from the
perspective of corporations. Firms can use the UNGC more strategically, for instance to send signals
about their aspired level of corporate responsibility to relevant stakeholders
Human Rights Obligations Under the OECD Guidelines
Compared to the rather broad nature of the two human rights-related UNGC principles, the Guidelines
outline more specific recommendations. For instance, they recommend firms to actively seek ways
See Van der Zee, 2013, pp. 33–72.
See Rasche and others, 2018
to mitigate or prevent adverse human rights impacts
and to cooperate whenever remediation
processes become necessary.
The Guidelines also show a much closer alignment with the UN
Guiding Principles (UNGP) for Business and Human Rights. In the commentary to the human rights
principles, the Guidelines state:
This chapter opens with a chapeau that sets out the framework for the specific
recommendations concerning enterprises’ respect for human rights. It draws upon the United
Nations Framework for Business and Human Rights ‘Protect, Respect and Remedy’ and is in
line with the Guiding Principles for its implementation.
Human rights designates the area within the Guidelines that leads to the highest number of complaints
regarding corporate non-compliance (see also discussion below). As Khoury and Whyte note: “by far
the largest single category of cases dealt with through the NCPs complaints procedure relate to human
rights abuses.”
This may be due to the wide spectrum of internationally recognized human rights
and it is also likely to be influenced by the focus that many NGOs and unions put on this issue area.
The OECD Guidelines explicitly require firms to publicly express their commitment to the human
rights agenda.
Such public commitment is helpful as it can create accountability relationships. A
firm that makes a public commitment towards human rights will have a harder time to deny any
wrongdoing than a firm that did not make any public commitments at all. However, as in the case of
See OECD, 2011, section IV, para 3.
Ibid, section IV, para 6.
Ibid, p. 31.
See Khoury and Whyte, 2019, p. 367.
See OECD, 2011, section IV, para 4.
the UNGC, it is likely that “naming and shaming” mostly works for larger and publicly listed
companies which would face reputational risks in the case of complaints.
The latest revision of the Guidelines (in 2011) has explicitly highlighted the role of human rights due
diligence. It requires firms to “carry out human rights due diligence as appropriate to their size, the
nature and context of operations and the severity of the risks of adverse human rights impacts.”
Based on the UNGPs, the Guidelines require firms to assess actual as well as potential impacts on
human rights and to integrate such assessments into existing risk management systems. The focus on
due diligence is a much-welcome development for at least two reasons. First, it aligns the Guidelines
with other human rights instruments (e.g., the UNGP) and hence shows that different standards and
policy frameworks interact with each other (and do not just exist side by side). Second, it puts more
emphasis on management practices (e.g., related to tracking human rights responses along a firm’s
value chain) and thus moves the Guidelines closer to implementation. One long-standing critique of
voluntary principles is that they do not provide enough guidance on how firms can implement them
in practice.
Enforcement of the Guidelines
The Guidelines are enforced through so-called National Contact Points (NCPs). Once a nation signs
up to the Guidelines it is expected to set up a NCP. However, NCPs do not act as a monitoring
organization which could sanction corporate non-compliance. The Guidelines themselves mention:
Ibid, p. 31.
See the discussion in Rasche, 2009, pp. 511–537.
The National Contact Point will contribute to the resolution of issues that arise relating to
implementation of the Guidelines in specific instances in a manner that is impartial,
predictable, equitable and compatible with the principles and standards of the Guidelines. The
NCP will offer a forum for discussion and assist the business community, worker
organisations, other non-governmental organisations, and other interested parties concerned
to deal with the issues raised in an efficient and timely manner and in accordance with
applicable law.
The Guidelines therefore favor a rather “soft” regulatory approach; NCPs rely on persuasion,
bargaining and compromise between different stakeholder groups.
Although it can be argued that
this approach is a little “harder” than the self-reporting method favored by the UNGC, it is ultimately
corporations themselves that need to ensure compliance with the Guidelines. NCPs only become
relevant if complaints are lodged against a particular corporation. Most complaints are either lodged
by unions directly concerned with labor rights or by NGOs. The NCP, then, first assesses the
complaint and, if relevant, moves towards mediation. In cases where no agreement can be found, the
NCP will issue a public statement on the specific case.
As the Guidelines are not very specific when it comes to defining processes and operations of NCPs,
the latter perform unevenly across signatory countries.
There are a number of reasons for this
uneven performance,
for instance related to (a) different levels of institutionalization of NCPs, (b)
Emphasis added. See OECD, 2011, p. 72.
See Khoury and Whyte, 2019, pp. 363–381.
See Baccaro & Mele, 2011, pp. 451–470.
See J. C. Ochoa Sanchez, ‘The Roles and Powers of the OECD National Contact Points Regarding Complaints on an
Alleged Breach of the OECD Guidelines for Multinational Enterprises by a Transnational Corporation’, Nordic Journal
of International Law, 84.1 (2015), 89–126.
According to Baccaro & Mele, 2011, pp. 455.
different levels of political will by national governments to strengthen the work of NCPs, and (c)
different levels of available resources for NCPs’ work. It is therefore not surprising that impact
assessments of the Guidelines’ enforcement mechanism have painted a rather sobering picture. Only
one in eight complaints yielded a positive outcome (i.e. an outcome to which all parities mutually
What prevents NCPs to reach more positive outcomes? One important reason is the lack
of enforcement power. NCPs have no legal mandate and thus they cannot force companies to
participate in the dispute settlement process. Much like the UNGC, this makes the Guidelines
dependent on the willingness of corporations to implement the underlying principles.
Another, and
related, explanation for the lack of positive outcomes is the often difficult relationship between
companies, NGOs, and unions. A high number of complaints remained unresolved because
corporations either completely refused to become involved in a dispute settlement process or there
was a lack of cooperation during the mediation.
A further problem related to NCPs is their politicized nature. Most NCPs are based in business-related
departments of governments (e.g., the UK’s NCP is hosted by the Department for International
Trade). Naturally, these departments are less willing to intervene in ways that would be challenging
for corporate actors.
NCPs are often not neutral platforms for the mediation process to happen. This
lack of neutrality can lead to a number of practical problems, for instance that NGOs and unions are
asked to always substantiate their claims with a lot of effort, while corporations’ claims are accepted
Found by Khoury and Whyte, 2019, pp. 363–381.
See J. G. Ruggie and T. Nelson, ‘Human Rights and the OECD Guidelines for Multinational Enterprises: Normative
Innovations and Implementation Challenges’, working Paper No. 66 at Kennedy School of Government (Harvard
University, 2015).
See Khoury and Whyte, 2019, pp. 363–381.
See Černič, 2008, pp. 71–100.
at face value.
The literature discussing multi-stakeholder engagements has highlighted that such
unequal power relations undermine the perceived legitimacy of relevant standards.
The UNGC and the Guidelines can be viewed as principle-based standards for corporate sustainability
and responsibility. Both initiatives are widely used and especially large corporations are aware of
their existence. Although both initiatives are similar insofar as they promote voluntary principles,
there are important differences in terms of the mechanisms that underlie corporate engagement. The
UNGC is based on the assumption that firms partner with the UN and other interested organizations.
It therefore assumes a certain level of interest on the side of the company (i.e. the participant) to
become engaged in discussions around corporate sustainability and responsibility. By contrast, the
Guidelines do not interact directly with corporations because governments are the adhering bodies.
Firms can therefore only support or endorse the Guidelines, but they cannot directly sign up to them.
This makes the UNGC a more proactive set of principles than the Guidelines.
See Khoury and Whyte, 2019, pp. 363–381.
See e.g.
(a) D. U. Gilbert and A. Rasche, ‘Discourse Ethics and social accountability: the Ethics of SA 8000’, Business Ethics
Quarterly, 17.2 (2007), 187–216.
(b) A. G. Scherer and G. Palazzo, ‘The New Political Role of Business in a Globalized World: A Review of a New
Perspective on CSR and its Implications for the Firm, Governance and Democracy’, Journal of Management Studies,
48.4 (2011), 899–931.
Tables and Figures
Figure 1: The UN Global Compact’s Ten Principles
Business should support and respect the protection of international human rights; and
make sure they are not complicit in human rights abuses.
Business should uphold the freedom of association and the effective recognition of the right to
collective bargaining;
the elimination of all forms of forced and compulsory labor;
the effective abolition of child labor;
the elimination of discrimination in respect of employment and occupation.
Business should support a precautionary approach to environmental challenges;
undertake initiatives to promote greater environmental responsibility; and
encourage the development and diffusion of environmentally friendly technologies.
Business should work against all forms of corruption, including extortion and bribery.
Figure 2: Active and delisted business participants in the UNGC (2000-2017)
Sources: UN Global Compact (2017). Total Delisted Companies retrieved from own data (2005–
2009) and UNGC Monthly Bulletins (2009-2017)
... Finally, Carbon Disclosure Project, an element of cooperation between SASB and GRI (Weber & ElAlfy, 2019), focuses on the disclosures related to the climate issues of companies and cities. Another important example is the OECD Guidelines for Multinational Enterprises that provide the legal background for the actions against multinational companies violating certain aspects of sustainability; these actions resulted in clarifications of the guidelines, setting certain ESG standards for the affected companies (Lauesen, 2017;Rasche, 2021). UN Guiding Principles on Business and Human Rights (endorsed by the UN in 2011) is a further example of the international imitative which in some way has become linked to the financial sector and, as a result, sustainable investingdone of its most recent recommendations is the inclusion of the financial institutions to reach the stated aims, referring in particular to human rights (SSF, 2021; Weber & ElAlfy, 2019); as already mentioned the principles already affect the ESG investing sector as they are a common part of the norms-based screening. ...
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... Finally, Carbon Disclosure Project, an element of cooperation between SASB and GRI (Weber & ElAlfy, 2019), focuses on the disclosures related to the climate issues of companies and cities. Another important example is the OECD Guidelines for Multinational Enterprises that provide the legal background for the actions against multinational companies violating certain aspects of sustainability; these actions resulted in clarifications of the guidelines, setting certain ESG standards for the affected companies (Lauesen, 2017;Rasche, 2021). UN Guiding Principles on Business and Human Rights (endorsed by the UN in 2011) is a further example of the international imitative which in some way has become linked to the financial sector and, as a result, sustainable investingdone of its most recent recommendations is the inclusion of the financial institutions to reach the stated aims, referring in particular to human rights (SSF, 2021; Weber & ElAlfy, 2019); as already mentioned the principles already affect the ESG investing sector as they are a common part of the norms-based screening. ...
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Voluntary programs have emerged as important instruments of public policy. We explore whether programs lacking monitoring and enforcement mechanisms can curb participants’ shirking with program obligations. Incentive-based approaches to policy see monitoring and enforcement as essential to curb shirking, while norm-based approaches view social mechanisms such as norms and learning as sufficient to serve this purpose. The United Nations Global Compact (UNGC), a prominent international voluntary program, encourages firms to adopt socially responsible policies. Its program design, however, relies primarily on norms and learning to mitigate shirking. Using a panel of roughly 3,000 U.S. firms from 2000 to 2010, and multiple approaches to address endogeneity and selection issues, we examine the effects of Compact membership on members’ human rights and environmental performance. We find that members fare worse than nonmembers on costly and fundamental performance dimensions, while showing improvements only in more superficial dimensions. Exploiting the lack of monitoring and enforcement, UNGC members are able to shirk: enjoying goodwill benefits of program membership without making costly changes to their human rights and environmental practices.
This paper analyses the two most important international programmes for the voluntary regulation of corporate behaviour: the OECD Guidelines for Multinational Corporations and the UN Global Compact. It argues that international organizations adopted them mostly for reasons of political feasibility: by imposing minimal constraints on constituents the codes circumvented the most pressing problems of political acceptability associated with standard setting. It finds no clear evidence, however, that the network solutions adopted are technically more effective than traditional forms of regulation. The paper concludes that while it is unlikely that corporate behaviour will change simply as a result of participation in these programmes, if the programmes increase their ability to consistently discriminate between good and bad performers, the resulting ‘soft’ sanctioning power has the potential to alter corporate behaviour in the long run