2009-10-22 - Letter from OECD Investment Committee to the Global Compact Office

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Letter regarding a consultation on the updating of the OECD Guidelines of Multinational Enterprises.
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    COMIT DE L’INVESTISSEMENT  INVESTMENT COMMITTEE Le PrésidentThe ChairInvestment Division, Organisation for Economic Co-operation and Development2, rue André-Pascal, 75775 Paris Cedex 16, FranceTél : +33 (0) 1 45 24 88 56,www.oecd.org/investment  INV(2009)33 22 October 2009Georg Kell,Executive DirectorUN Global Compact Office Subject: Consultation on the Updating of the OECD Guidelines of Multinational Enterprises Dear Mr. Kell,The purpose of this letter is to invite you, on behalf of adhering governments to the OECDGuidelines for Multinational Enterprises, to provide initial views on possible inputs in an update of theOECD Guidelines.At the June 2009 OECD Council Meeting at Ministerial Level, ministers from OECD and non-members countries welcomed “ further consultation on the updating of the OECD Guidelines forMultinational Enterprises to increase their relevance and clarify private sector responsibilities ” . Accordingly, at the meeting of the Investment Committee’s Working Party of 6 October 2009, adhering governmentsdeveloped a work plan (annexed) that foresees, in particular, consultations with concerned OECD bodiesand relevant international organisations.As you know, the recommendations for responsible business conduct in the ten chapters of theOECD Guidelines have often been inspired or even make a direct reference to the instruments orrecommendations that you have developed over the years under your respective mandates. Furthermore,many of you have actively contributed to the 2000 Revision of the Guidelines. However, it would not besurprising if policy developments since this last Revision of the Guidelines may point to needed updates orrevisions. As suggested by the attached consultation note, we would therefore appreciate at this stagereceiving an initial contribution on:(a) Needed technical updates to ensure that the references made in the text of the Guidelines andCommentary are accurate and up-to-date.(b) Preliminary thoughts on areas or issues for more substantive updates that might benefit fromyour work and experience and enhance the relevance and effectiveness of the Guidelines.(c) Preferred means for providing inputs during the consultation process or eventually in the contextof an update (i.e. written submissions, participation in OECD consultations or meetings,  joint work… ).We would very much appreciate it if you could transmit your suggestions and ideas to the OECDSecretariat(marie-france.houde@oecd.org,tel. 33 1 45 24 91 26) by Monday 16 November 2009 .    This would enable us to revise the consultation note in time for the first round of comprehensiveconsultation with stakeholders, Enhanced Engagement partners and other interested non-Membersplanned for 8 December 2009 back-to-back with the 2009 Global Forum on International Investment.A first discussion among representatives of adhering countries will take place immediately after theDecember consultations. The goal is to take a final decision on a possible update in March 2010.We look forward to your contribution and thank you in advance for the prompt attention that you willgive to our request. We also very much hope that you will be able to participate in the consultations of earlyDecember.Yours sincerely,Manfred SchekulinChair, OECD Investment Committee   www.oecd.org/investment   cc: Messrs Scholz, Sone, Colmer, MacKay, Nieuwenkamp    CONSULTATION ON AN UPDATEOF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISESI. Introduction 1. The OECD Guidelines for Multinational Enterprises are recommendations by 41 OECD and non-OECD governments covering all major areas of business ethics, including corporate steps to obey the law,observe internationally-recognised standards and respond to other societal expectations.2. Since the Review of the Guidelines in 2000, the landscape for international investment andmultinational enterprises has continued to change rapidly. The world economy has witnessed a greaterintegration of patterns of production and consumption. Non-OECD countries are attracting a larger shareof world investment and multinational enterprises from non-adhering countries have grown in importance.At the same time, the financial and economic crisis and the loss of confidence in open markets, the need toaddress climate change and green growth, and reaffirmed international commitments to development goalshave prompted renewed calls from governments and social partners for high standards of responsiblebusiness conduct.3. Against this background, at their Annual Meeting on 16-17 June 2009, National Contact Points(NCPs) recommended that under the auspices of the OECD Investment Committee, adhering countriesreview the experience gained with the implementation of the Guidelines with a view to defining terms of reference for a possible update of the instrument. 1 Shortly thereafter, at the 24-25 June 2009 OECDCouncil Meeting at Ministerial level, ministers from OECD and non-member countries welcomed “ furtherconsultation on the updating of the OECD Guidelines to increase their relevance and clarify private sectorresponsibilities ”. Periodic review of this instrument is provided for in the OECD Declaration on International Investment and Multinational Enterprises and the 2000 Council Decision on theImplementation Procedures of the Guidelines.4. This document provides a list of issues - concerning both content and procedures of theGuidelines - that have been identified since the 2000 Review, in order to assist adhering governments indetermining areas deserving special attention in the context of consultations on an update of the Guidelines(Section II). In addition, the Note identifies options for consultation prior to an updating exercise as well asmodalities for conducting this update, should it be decided by adhering governments (Sections III-V). Alist of references is annexed to the document, as a further resource to delegations.5. A first version of the document was discussed by the adhering countries at the meeting of the Investment Committee’s Working Party on 6 October 2009 and at a consultation on 7 October with BIAC, TUAC and OECD Watch. TUAC and OECD Watch also submitted written comments[DAF/INV/RD(2009)10]. The present document has been revised in light of these preliminary discussions.6. Following the discussions in October, on behalf of the adhering countries, the Chair of theInvestment Committee wrote to relevant OECD bodies and inter-governmental organisations such as   ILOand UN, to seek their views on their possible inputs in an update of the Guidelines by 16 November 2009.7. The list of proposed issues deserving special attention will be further revised in light of the viewsreceived under the guidance of the Bureau with the view to forming the basis of a broader consultationwith stakeholders at a session back-to-back with the 2009 Global Forum on International Investment on 8December, as well as a dedicated consultation with Enhanced Engagement partners which have notadhered to the Guidelines. 1   Draft Report by the Chair of the 2009 Annual Meeting of the National Contact Points,DAF/INV/NCP(2009)1/FINAL    8. On the basis of the consultation document and further inputs gathered in December, a note onproposed terms of reference for a possible update could be prepared for discussion by the Working Party inMarch 2010 and then revised as needed for approval by adhering countries at Investment Committee level.The OECD hopes to be in a position to be in a position of taking its decision on the official launch of anupdate at the OECD Ministerial Meeting in June 2010. II. Substantive provisions of the Guidelines 9. This section lists issues identified in discussions within NCPs, the Investment Committee and itsWorking Party, during consultations with BIAC, TUAC and OECD Watch and discussions of the OECDSecretary-General with leading business organisations, as well as communications by John Ruggie, the UNSecretary-General's Special Representative for Business and Human Rights, on the merits of updating the Guidelines’ recommendations and/or the Commentaries.  10. Technical updates appear to be needed to ensure that the instruments cited in the Guidelines orthe Commentaries are accurate and up-to-date. Selected examples include: new United Nations   instruments   such as the Convention against Corruption adopted in 2003; the OECD Principles of Corporate Governance revised in 2004; or the recent  Recommendation on Tax Measures for further Combating Bribery of Foreign Officials in International Business Transactions entered into force in 2009.Relevant international organisations and OECD bodies will be consulted to ensure that the references totheir instruments are appropriate. 2  11. Supply chain . Several stakeholders consider that it would be important to give clearer guidanceregarding the application of the Guidelines to supply chains. The discussion within the InvestmentCommittee in 2003 focused on the influence   of multinational enterprises on the conduct of their businesspartners using the presence of an “investment nexus” as a definition of their sphere of influence for the purpose of the Guidelines. More recent discussions, including by Professor Ruggie 3 , have shifted the focus from the sphere of influence toward the concept of “due diligence” that companies are expected to perform in light of their own circumstances in order to do no harm along their supply chains. A “due diligence” approach is used in the Environment Chapter of the Guidelines and is applicable to other areas, includinghuman rights (see below).12. Issues of a similar nature, and where “due diligence” may have relevance, have also arisen in the context of specific instances relating to lending and investing activities of financial institutions. Newinstruments or tools have also emerged on responsible lending or investment by financial institutions suchas the  IFC Policy and Performance Environmental and Social Standards (last revised in 2006), the  Equator Principles (2003, 2006), and the UN Principles of Responsible Investment (2005) and OECDGuidelines for Pension Fund Governance (2009).13.  Human rights . Human rights are covered in several ways throughout the Guidelines, includingcore international labour rights under Chapter IV on Employment and Industrial Relations. Leadingbusiness organisations and commentators, including Professor Ruggie, have considered that the referenceto respecting human rights consistent with the host government's international obligations andcommitments in Chapter II on General Policies does not appear to provide sufficient guidance tocompanies in the event of supposed conflicting requirements between internationally-recognised standardson human rights and host country policies, including situations where the host country has not ratified a 2   The Inventory of Possible Policy Instruments jointly developed by the OECD and other internationalorganisations in March 2009 as a contribution to the discussion on the Lecce Framework and a Global Charterprovides an updated list of instruments contributing to the more stable and sustainable development of the globaleconomy.http://www.oecd.org/dataoecd/35/63/42393042.pdf.  3 Clarifying the Concepts of “Sphere of Influence” and “Complicity,” 2008, A/HRC/816, 15 May 2008.
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