6.14 Concluding observations and remarks

In this chapter 6, the spectrum of existing private regulations in the field of CSR has first been outlined, followed by an explanation of the exponential growth of new private regulations and initiatives aimed at influencing responsible corporate behavior. For various reasons, public regulation does not seem adequate to govern responsible corporate conduct at an international level. Also, a strong political will is lacking for the most part. There is a tendency for national governments, as well the European Union, to consider CSR a voluntary practice that should not affect the competitiveness of our' companies in the globalised economy.

As a consequence, international and national public norms on sustainability reporting by multinational companies are poorly regulated, if there is any regulation at all. Despite the near absence of public regulation in this field, sustainability reporting is increasing notably among the largest multinational companies in terms of the quantity and quality of information provided, as a result of (mostly) private regulation, in particular the GRI Guidelines. The positive impact of this development is not limited to shareholders; a myriad of stakeholders also benefit from sustainability reporting in accordance with the GRI Guidelines. CSR reporting facilitates increase access to corporate information, thereby improving the tools for risk management, at the same time creating new opportunities for evaluating investments as well as offering a more informed basis for tailoring an efficient dialogue for NGOs and other groups in society which are affected by the operations of companies. It is also considered particularly helpful by stakeholders that a number of sustainability reports make reference to other private regulatory regimes that the company adheres to. However, sustainability reporting should not be considered a magic wand' for controlling the behavior of companies, but it can certainly have a positive impact by encouraging companies to adopt policies and to set concrete targets (eg water use, the amount of recycled materials, waste management, etc.). Interestingly, the government of Sweden has recently made use of a cross-reference' to the GRI Guidelines to implement its newly developed legislation on non-financial reporting.1

These types of tangible impacts of private regulation give rise to the question of how to measure the successfulness of a private regulatory regime or how to ensure its effectiveness. The financial turmoil and scandals have shown - to a certain extent - the risks imposed by a private regulation-based system.2

In light of existing international private norms, this chapter 6 has proposed to define and analyse certain major elements that have an impact on compliance with private regulation, namely: quality, legitimacy, enforcement and effectiveness. These elements have been applied to three private regulatory regimes that have reached a certain level of maturity - the Global Compact, the OECD MNE Guidelines and the GRI Guidelines. Generally speaking, these initiatives have demonstrated a certain degree of flexibility in adapting to new societal needs, thereby increasing the quality level of the regulation. All three regimes are based on values which are in large measure derived from existing international treaties and principles, which in turn enhances their quality and legitimacy. They have involved an important number of addressees and stakeholders concerned with the norms ensuring their legitimacy; each has created an internal mechanism to improve compliance with the norms and has, in practice, strengthened the existing formal legal system. Although, with respect to the GRI Guidelines, the connection between financial and non-financial reporting still needs be more firmly established.

Even though a respectable number of companies are using the three private regimes discussed in the previous sections of this chapter, it should be pointed out that the majority of the companies worldwide are still not using any CSR regulation at all. This raises the question of whether - even when existing public and private regulation is regarded as being complementary - we will succeed in avoiding various menacing global implosions in the field of biodiversity and ethics, and explosions of poverty, pollution and climate change impacts. This is the central policy issue of the century for governments, and one that cannot be put off for much longer. One might therefore wonder why the private norms covered in this chapter have not yet moved to the sphere of public regulation considering the vital social, environmental and governance-related issues involved.3 Should governments wait for the front-runners to request the incorporation of the best practices currently embodied in private regulation into formal legislation, in order to create a level playing field?4

This stage will probably come as a natural' step within the next five years. The best illustration is probably the GRI Guidelines which have started to be integrated in public norms.5 As an intermediate step to 'full' legislation, a government can use the 'comply-or-explain' mechanism.6 This is a hybrid constellation whereby private actors set up certain rules and the State provides them with support in the area of enforcement. The Swedish government did so with respect to the GRI Guidelines which are to be used by state-owned companies in their CSR reporting: these companies are obliged to disclose in their annual reports or on their websites whether, and, if so, to what extent, they follow the GRI Guidelines. This disclosure will facilitate the dialogue with their stakeholders about CSR matters.

An example of integration in public policies was presented in section 6.12 in respect of the OECD MNE Guidelines, pointing to the fact that these have been cross-referenced in the national export credit facilities of the Dutch and German governments.7

These types of co-regulation will stimulate the further development of best practices in industry and international trade. Generally, it can be argued that the development and acceptance of non-mature initiatives - as is often the case with CSR instruments - profit best from trial and error in a non-formal setting as are the private regulatory regimes. After an experimental phase in which best practices can be developed, the results can be included in formal legislation. This will then contribute to a level playing field and deter free-riders.

The initial development of the three private regulations discussed in this chapter, involving multiple stakeholders coming from various regions of the world and different industry sectors, would probably have been impossible without the effectiveness and openness of a private initiative. The most important role of private regulation, then, seems to be the development of internationally adhered-to best practices.