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Corporate Social Responsibility (IVOR nr. 77) 2010/6.13
6.13 The effectiveness of the regulation
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS367025:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
HiiL Conference Report, supra note 96, p. 25. Steenvoorde, supra note 23, p. 157.
Benseddik (Vigeo), supra note 46, and KPMG Survey, supra note 42. The Vigeo Research reveals that companies make reference in their sustainability reports to the codes of conduct or guidelines on which their CSR conduct is based or by which it is inspired.
OECD Watch, a coalition of civil society organisations, has highlighted a number of perceived deficiencies in the implementation of the OECD MNE. See e.g. OECD Watch, 'Guide to the OECD Guidelines for Multinational Enterprises', Complaint Procedure: Lessons from Past NGO Complaints', <http://oecdwatch.org/publications-en/Publica-tion_1664/at_download/fullfile> accessed 15 May 2009.
HiiL Conference Report, supra note 96, p. 26.
HiiL Conference Report, supra note 96, pp. 8 and 26. See F. Cafaggi, Reframing Self-Regulation in European Private Law (Kluwer Law International, Dordrecht, 2006); F. Cafaggi and H. Muir-Watt (eds.), Making European Private Law: Governance Design (Edward Elgar, Cheltenham, 2008).
J.P. Kesan, 'Private Internet Governance',in Loyola University Chicago Law Journal,^, 2003, p. 87.
University of Hamburg, Hans-Bredow Institute for Media Research (at the request of the European Commission), 'Final Report: Study on Co-Regulation Measures in the Media Sector', June 2006, at: http://www.hans-bredow-institut.de/en/node/877, accessed on 10 April 2010.
Ibid.
Human Rights Watch, 'Letter from Human Rights Watch to the Global Compact', 29 July 2000, at: http://www.hrw.org/, accessed on 10 April 2009.
Innovest, 'Innovest Launches Global Compact Assessment Tools', 2005, at: http://www.innovestgroup.com/pdfs/2005-09-23_Global_Compact.pdf, accessed on 21 May 2009. Innovest is now part of RiskMetrics Group. Innovest, a US-based strategic value advisor, has designed a tool to assist investors in assessing companies' capabilities in addressing the competitive risks, challenges, and opportunities posed by the ten Principles of the Global Compact.
Benseddik (Vigeo), supra note 46, p. 8.
OECD, supra note 11.
Benseddik (Vigeo), supra note 46, p. 8. See also P Hohnen, OECD MNE Guidelines: A responsible business choice', OECD Observer, at: http://www.oecdobserver.org/news/fulls-tory.php/aid/2689/OECD_MNE_Guidelines.html, accessed on 15 May 2009.
G. Schuler, Effective Governance through Decentralized Soft Implementation: the OECD Guidelines for Multinational Enterprises',in German Law Journal, 9l, 2008, p. 1774, referring to Report by the Chair, 2007 Annual Meeting of the National Contact Points', 2007, at: http://www.oecd.org.proxy.library.uu.nl/dataoecd/23/2/39319743.pdf, accessed on 10 April 2009. This study was based on an analysis of the most frequently addressed NCPs, in other words, the NCPs that have received the most complaints.
Ibid., referring to J.A. Zerk, Multinationals and Corporate Social Responsibility (Cambridge University Press, Cambridge, 2006), p. 243.
Benseddik (Vigeo), supra note 46, p. 13; KPMG Survey, supra note 42, p. 4.
The criterion of effectiveness concerns the question whether the regulation's goal has indeed been achieved: does the regulation actually work? Have the stakeholders succeeded in creating a working solution to problems in need of regulation? Is the private regulatory arrangement as effective as, or even better than, formal legislation? Relevant factors are: the normative strength of a regulation, transparency concerning its application and accountability. Effectiveness can be conceived as the degree to which norms succeed in regulating the conduct of a specific group of actors.1 As noted above, the preferred method for ascertaining a change in conduct is to assess the conduct itself by empirical research. In this section 6.13, we will therefore make use of the Vigeo Research, carried out in consultation with the OECD and the GRI, and of the KMPG Survey on corporate responsibility reporting.2 We eagerly await the results of the empirical studies of the HiiL research group, which will conduct research on Private Actors and Self-Regulation. Furthermore, we will take into consideration companies' own statements in their public reporting and website communications (see also section 6.5). Interestingly, the Vigeo Research revealed the trend of companies using more than one CSR instrument to develop their CSR approach, e.g. 30 per cent of the companies surveyed referred the OECD MNE Guidelines and the Global Compact in their sustainability reports. Also, using the GRI together with the OECD MNE Guidelines and/or the Global Compact is common. This shows a degree of normative strength.
Although many of the companies surveyed indicated that they use one of the three private regulatory regimes evaluated in the foregoing sections of this chapter, this is not an indication of the level of awareness on a worldwide scale or of how comprehensively these private regulations are adhered to.3
Effectiveness also focuses on the question whether the private norms strengthen or weaken the existing formal legal system.4 What are the relevant criteria?
As Cafaggi stressed, effectiveness is actually interlinked with the other pillars mentioned. In general, it should be measured in relation to different addressees: what is the ability of a regulation to solve conflicts of interest between different stakeholders? Moreover, what can be said about the cost-effectiveness of achieving regulatory goals, which is to say, can a regulation's objectives be attained in the most efficient way, thus at minimal cost?5
The effectiveness of private regulation - and its limitations - might be further revealed by the following characteristics: enforcement, government participation, user participation, international cooperation, independence from private firms, transparency, and political instruments.6
Regarding the effectiveness of a co-regulatory system, research conducted by the University of Hamburg (Germany) showed that the following assessment factors might be of relevance: regulatory culture within a State or among the industry (ie the general legal environment, the application of the Rule of Law); incentives for co-operation and enforcement; state resources used to influence the outcome of the non-state regulatory process; a clear legal basis and a clear division of work (between non-state regulators and state regulations); process objectives like proportionality, openness, clarity of regulation; and regulatory objectives suitable for co-regulation.7 Based on these factors, research has evaluated co-regulation measures in the media sector. As far as effectiveness is concerned, the study concluded that systems like the Netherlands' Institute for the Classification of Audiovisual Media (NICAM) show high ratings in the impact assessment. As an illustration, the following evaluation is useful:
NICAM is a highly reflective system internalized by the actors. Experts across all relevant groups of actors agree to a high degree on the way the NICAM system functions. [...] NICAM system provides for a good basis for regulation and supervision. [...] Only two experts see weaknesses in transparency and proportionality. No expert sees the pace of the decision making process as being inadequate. [...] the rules are sufficiently clear according to the expert survey. Judging by the experts' answers, the performance of the NICAM system is generally rated highly. This is true for both the outcome of avoiding generally the accessibility of content unsuitable for minors and for the consistency of rating. [...] 77 % of the parents use the advice of 'Kijkwijzer' [Guidance for TV watching] under the NICAM system. [...] Overall NICAM is seen as a co-regulatory system created by the state with inherent strengths and weaknesses.8
The three selected private regulatory systems will now be discussed from an effectiveness perspective:
UN Global Compact Principles: they can strengthen existing legal systems, especially in relation to sustainability reporting when encouraging participating companies to publicly communicate their progress in implementing the Principles on an annual basis (Communication on Progress). Companies can also be encouraged to take concrete steps in developing and implementing CSR policies. As the Global Compact also functions as a network, the number of users is recorded and can therefore be reasonably accurately monitored (whereas concerning other CSR initiatives like the OECD MNE Guidelines, it is difficult to obtain information on the number of users). Although some consider the UN Global Compact Principles to be lacking in clarity when it comes to the meaning of the standards,9 others believe that they are becoming the international gold standard for CSR perfor-mance'.10 The latter statement is based on the fact that the Global Compact enjoys a high level of participation - over 4,700 business participants worldwide and other stakeholders from over 130 countries - making it the largest voluntary corporate CSR initiative in history. This achievement, in terms of the numbers of addressees, tends to affirm its effectiveness. The Vigeo Research noted that 87 per cent of the respondent companies had stated that they make reference in their sustainability reports to the UN Global Compact Principles;11
OECD MNE Guidelines: as already mentioned, these Guidelines were created by governments which set voluntary recommendations for multinational companies operating in or from OECD countries. Although governments and businesses were initially involved, the OECD is also seeking the support of labour representatives and NGOs in order to increase the Guidelines' effectiveness.12 The Vigeo Research indicated that 39 per cent of the respondents made reference to the OECD MNE Guidelines in their sustain-ability reports. One quarter of the companies listed at the Dow Jones Sustainability Indices refer to the guidelines in their sustainability reports.13 However, an analysis by Schuler of the implementation of the OECD MNE Guidelines in the US, the Netherlands and France concluded that implementation in areas outside of labour relations was not substantial.14 This explains why the implementation of the Guidelines has been depicted as piecemeal and inconsistent' in its impact.15 Nevertheless, it is noteworthy that labour relations represent a very significant chapter in the context of multinational companies' behaviour during investment activities. The fact that the Guidelines are regularly cited by businesses leads to the assumption that they have some inherent business value as well as a recognised special status; and
GRI Guidelines: the aim of the GRI is to promote transparency and accountability by organisations. The Guidelines are intended to provide guidance to organisations in disclosing their sustainability performance and to provide stakeholders with a universally applicable, comparable framework from which to understand disclosed information. Consequently, one should not expect the GRI Guidelines to be more than a sustainability reporting tool: they cannot replace regulation of CSR practices. The addressees are companies and other stakeholders. However, the fact that more and more organisations follow the GRI Guidelines directly, shows its effectiveness in this case. The Vigeo Research showed that 8 per cent of the surveyed companies use the framework of the GRI Guidelines for their CSR/sustainability reporting while the KPMG Survey indicated that 75 per cent of the Fortune Global 250 companies use the GRI Guidelines for their sustainability reporting.16 Both studies concluded that the GRI Guidelines have become the leading standard for reporting. In addition, the contribution of the GRI Guidelines to the application of public regulation, as was mentioned with regard to the Danish and Swedish legislation of CSR reporting, underlines their potential to augment the existing system. Besides, the GRI Guidelines represent a cost-effective solution; the cost of the further development of the framework and the Guidelines is supported by the GRI's global network of Organisational Stakeholders as well as by an impressive list of donors coming from foundations, international organisations and governments. The cost is then shared among different stakeholders around the globe rather than being strictly assumed at the national level by individual governments and companies.
In short, the level of compliance with a specific private regulation depends on various circumstances. Each regulation can be examined for its quality', legitimacy' and enforcement' in a theoretical way, as suggested, and in relation to its effectiveness' in an empirical way. Applying the criterion of effectiveness to the three elected regimes, we could state that the Global Compact seems highly effective measured by its high number of participants. However, at the same time, the generality of this principle-based instrument undermines its effectiveness since that makes it difficult to ascertain the precise degree of compliance. Regarding the OECD MNE Guidelines, one could conclude that they seem quite effective in view of their wide spectrum of clearly formulated norms, most of them derived from international treaties, hence reflecting internationally accepted normative values. The provisions also relate to existing local laws in the countries where the investments are made, which is an important effort to avoid a divergence of norms. In addition, the OECD recommends that its members promote these Guidelines and integrate them into government policies, which has occasionally been done. Furthermore, the new enforcement mechanism, ie the NCPs' complaint procedure, offers an interesting non-legal incentive for compliance which enhances effectiveness as well. Concerning the GRI Guidelines, they seem to be the most effective: not only are many stakeholders involved in their development, but a substantial number of large multinational companies actually use them. Furthermore, governments and the financial sector support their further development and expansion of their usage. Effectively, they are currently the only standard for sustainability reporting that is promoted internationally, and they have now also been referred to by some European legislators.