This year’s OECD Global Forum on Responsible Business Conduct kicked off last week, focusing on responsible business conduct in the COVID-19 world. This annual event was held virtually for the first time, with more than 2,500 stakeholders from businesses, governments, international organisations, trade unions and civil society registered to attend. Panellists discussed the moral and financial imperatives arising from the pandemic, and discussed a range of new legislative, commercial and policy-based responses. The Forum demonstrated that there are new opportunities and increased urgency for legislative initiatives. It also became clear that the need for enormous amounts of capital for the economic recovery provides policy makers with much greater leverage than before the crisis.
Commitment to EU supply chain regulation re-affirmed by EU Commissioner
At the Opening Session of the Forum, EU Trade Commissioner Phil Hogan and Steve Waygood, the Chief Responsible Investment Officer for Aviva Investors, emphasised that the COVID-19 crisis represents both an opportunity and a responsibility to rebuild a more resilient economy through long-term sustainable development.
Commissioner Hogan made clear that part of the EU’s ambitious global strategy to ensure sustainable development, as outlined in the European Green Deal, is centred upon the need to examine options for regulating supply chain due diligence. In his view, redesigning the legislation to eliminate overlapping regulations and remove red tape will strengthen supply chains, make companies more resilient and prevent damage to developing countries that depend on trade. Whilst the exact shape of this proposed legislation is yet to be decided, nothing is off the table; it seems a single cross-sectoral standardised EU regime is under active consideration. Commissioner Hogan also confirmed that he would work closely with the EU Justice Commissioner, who recently announced that the European Commission will present a legislative proposal on mandatory human rights and environmental due diligence in early 2021.
Commissioner Hogan also mentioned the EU Conflict Minerals Regulation that largely takes into account the requirements of the relevant OECD Due Diligence Guidance as an example of how legislation can be combined with international guidelines and existing schemes to ensure that these are applied consistently by all.
Steve Waygood stressed the importance of a green recovery after COVID-19 and reminded that we should not forget that the current COVID-19 crisis is still “eclipsed by” the challenge of climate change. He also calls for establishing a well-funded and well-maintained collaborative worldwide mechanism bringing together multilateral institutions, including the World Bank, IMF, OECD, UN as well as Member States and important banks and financial institutions to foster climate finance in a way that enables reaching the goals of the Paris Agreement.
Creating more resilient supply chains
Another session looked specifically at how responsible business conduct can help create more resilient and responsible supply chains. John Morris, CEO of the Institute for Human Rights and Business, highlighted that businesses that have performed better on responsible business conduct standards before the crisis are also generally doing better during the crisis. However, he mentioned that the crisis has also shown new areas of vulnerabilities in supply chains and that collective action is needed in a way never seen before.
Panellists also highlighted the significance of multi-industry cooperation and the maintenance of close engagement and cooperation with trusted business partners. Supply chain due diligence is central to this, particularly in ensuring flexibility in the supply chain, re-directing sourcing and maintaining responsible sourcing practices. One participant suggested businesses could consider providing pre-shipment financing programmes to help strategic business partners address cash flow problems.
Martina Kampmann from Transparency International Germany warned that the current COVID-19 crisis can also be a gateway for corruption because oversight by institutions tends to be weaker. It is therefore imperative to identify corruption risks at an early stage and in this respect mandatory due diligence for global supply chains is essential.
The role of responsible business conduct in government support and recovery packages
It became clear from this session that it is important for governments, when framing their support packages, to put a special focus on responsible business conduct. Brian Wessel, Deputy Permanent Secretary at the Danish Ministry of Industry, Business and Financial Affairs discussed the Danish approach during the crisis. He described the Danish bailout schemes which exclude businesses that pay out dividends or are based in tax havens, while making reference to the states enumerated on the EU list of non-cooperative tax jurisdictions. These responsible business conduct requirements set by Denmark have now been copied by other EU member states and integrated into their financial aid programs.
International development institutions are also playing an important part in pushing for responsible business conduct. Larissa Luy, Senior Environmental and Social Specialist at the International Finance Corporation (IFC), presented the financial aid measures carried out by the IFC for its clients. For example, the IFC launched a fast-track financial support of $8bn USD in order to keep companies solvent during the crisis and preserve jobs; but there are strings attached: companies must be compliant with the IFC’ s ESG requirements and be in general good standing with IFC.
Responsible business conduct in times of crisis
The final session suggested that international expectations continue to apply and that there is no “light” version in times of crisis. Although challenging, these standards contribute to resilience which is key in recovering from the crisis and preventing future crises. However, policy coherence in implementing these standards across sectors and jurisdictions is crucial.
Helen Mountford, VP for Climate and Economics of the World Resources Institute, said that we should take the current situation as an opportunity for change towards a sustainable economy where states should invest in economies that are more inclusive, low-carbon and resilient.
Participants generally expressed hope that the recovery of the crisis will build a world in which human rights, the protection of vulnerable workers and women as well as the fight against climate change will be a priority.
The second part of the OECD Global Forum will take place on 17 June 2020 on the topic of access to remedy.
Nele Lagler assisted in the drafting of this post.
We discuss these and related issues further in our Business as Unusual blog: