6.9 Successfulness of private regulation

The question posed in section 6.8 above, whether it is correct for public regulators to rely on private regulatory regimes to ensure sustainable economic development,is also connected with the question of whether private norms are generally successful in regulating corporate conduct. Although, arguably, this matter should be addressed on a case-by-case basis, some general criteria have been identified as conditions for the regulation to be efficient and effective, i.e. successful.

HiiL has been developing a theoretical model as part of its research programme on Private Actors and Self-Regulation, which the author helped found.1 This model aims to assist governmental policy-makers as well as private regulators in assessing the appropriateness of public or private or, rather, co-regulation in different contexts. Some main principles, also referred to as 'pillars', have been identified for measuring the success of regulation, namely:

(1) quality, (2) enforcement, (3) legitimacy and (4) effectiveness.2 Each code of conduct or other type of regulation can be examined in relation to each of the pillars. Concerning the criteria of quality, enforcement and legitimacy, a theoretical analysis can be used. With respect to the effectiveness criterion, an empirical analysis would better serve the purpose of measuring the impact on compliance. An empirical study could consist of performing an analysis of existing practices of companies that claim to adhere to specific private regulation. This could be done by means of questionnaires, conducting interviews with company employees and stakeholders, conducting due diligence investigations, and examining publicly available information concerning the private actor's behavior, such as websites, sustainability reports or stakeholder comments.

All of the pillars influence the level of compliance with a specific norm. Some of them overlap to a greater or lesser degree.All are interrelated: when the quality of regulation is poor, its enforcement will be difficult. Also, when regulation is not perceived as being legitimate, effectiveness will be difficult to establish. Consequently, all four pillars deal with compliance in a broad sense; ie not only compliance with the provisions of the regulation (out of fear of enforcement measures), but also compliance because the regulation is legitimate, workable and enforceable because of its sufficient quality.

A complicating factor in the analysis of the successfulness of private regulation is the fact that compliance with a private regulatory regime might depend on the area or subject addressed, eg on the degree of internationalisation of the subject, or on the urgency in finding solutions to international societal and environmental problems. The more urgent the problem, the higher the level of compliance that can be achieved. Examples of such international problems that presently cannot be fully resolved by formal national legal systems are raised by the UN Millennium Development Goals (MDGs) and by the current change to our climate.

Evaluating the success of a private regulation regime is also made more challenging by the phenomenon of public regulation and private regulation influencing each other. Some are of the opinion that the pressure of law being developed would encourage the private sector to adopt self-regulation in a certain field, for instance, in order to avoid detailed and complicated public legislation. It has been stated that self-regulation has its foundation in the possibility or fear of government regulation'.3 Moreover, private regulation may also eventually lead to incorporation in public legislation. Thus, approaches based on public law and private regulation are not mutually exclusive.4

Another complicating issue is that private and public norms dealing with the same subject matter often coexist. It would be relevant to research this phenomenon, especially considering the increase of private regulation promoted by globalisation and raised awareness relating to CSR. This is, however, the object of a different study and is outside the scope of this chapter.

The following sections discuss the main criteria and elements that should be considered when examining each of the afore-mentioned pillars, e.g. quality, enforceability, legitimacy and effectiveness. In order to demonstrate their application, certain recognised and mature private norms will be examined:

the UN Global Compact Principles, the OECD MNE Guidelines and the GRI

Guidelines. Since the HiiL research programme is work in progress', many questions relating to each of these four pillars remain open to discussion.