1. GLOBALIZATION AND CORPORATE RESPONSIBILITY Rising Expectations: Taking Stock of the Global Sustainability Evolution WEC 2nd Sustainability Forum April 26-27 2001 Adam B. Greene U.S. Council for International Business

2. Sustainability “Sustainable development is a very simple idea. It is about ensuring a better quality of life for everyone, now and for generations to come.” “Opportunities for Change” UK Strategy for Sustainable Development, Feb. 1998

3. USCIB Activities l Promote responsible business practices l Contribute to the development and implementation of codes, standards, and principles l Raise awareness of the positive contributions made by business.

4. “The plain truth is that market liberalization by itself does not lift all boats, and in some cases, it has caused severe damage. What’s more, there’s no point denying that multinationals have contributed to labor, environmental, and human-rights abuses.” Business Week, Nov. 6, 2000

5. Context: Corporate Power l Do companies seek out countries with weak governments and low standards? –OECD share of world trade fell from 80% in 1984 to 70% in 1998 –OECD countries account for 90% of FDI outflows and 75% of FDI inflows –Non-OECD trade and FDI concentrated in Latin America and East Asia/Pacific –Trade between developing countries rose from 25% of exports in 1980’s to 40% in 1998

6. Context: Race to the Bottom l Do trade and investment lead to lower labor or environmental standards? –International trade and investment concentrated in countries with high standards –On average, foreign companies pay higher wages and have superior environmental performance than domestic companies –Share of sales in local markets ~ 60-80%

7. Context: Trade Impacts l Do international rules for trade and investment undermine national standards? –No conflicts between WTO rules and an MEA –Trade rules recognize the right of governments to set standards at levels they deem appropriate –Disputes between countries have focused on discriminatory administrative measures

8. Context: National Factors l Democracy and individual liberty l Good governance and the rule of law l Sound monetary and fiscal policies l Implementation and enforcement of sound environmental and labor laws l Secure property rights and transactions

9. Measuring One Factor l Real estate assets held extra-legally: (US$ Billion) è Haiti:$5 è Peru:$90 è Philippines:$133 è Egypt:$240 è Mexico:$315 è World:$9.3 trillion Institute for Liberty & Democracy, Peru

10. “A more realistic view is now gaining hold…Trade and inflows of private capital are still essential to achieving strong, sustainable growth and to reducing poverty. But it acknowledges that multinationals…have social responsibilities in nations where the rule of law is weak.” Business Week, Nov. 6, 2000

11. Drivers for Corporate Responsibility l Globalization l Trade & investment liberalization l Privatization l Global communications l Government corruption l NGO/Activist pressure l Government mandates l Company reputation l Crisis incidents l Customer expectations l Investment screens l Shareholder initiatives l Codes of conduct l Acquisitions and growth

12. Impacted Business Practices l Corporate governance l Products / Services l Marketing l Ethics l Environment, Health & Safety l Community relations l Philanthropy / Grants l Human resources l Workplace diversity l Compensation / Benefits l Human / Indigenous rights l Religious Freedom l Contracts / Supply chain management l Communications l Public policy

13. Key Management Issues l Appropriate role of the company in non- business activities l Determining audience l Scope of one’s “sphere of influence” l Supply chain management l Internal coordination among functions l Implementation options

14. Management Tools l Training l Operations manuals l Internal monitoring l Benchmarking l Reports to Boards of Directors l External communications l External monitoring and verification

15. Codes of Conduct l Voluntary expressions of commitment that set standards and principles for business conduct l Vary greatly depending on: –objectives, issues covered, audience, partners l Main Issues Addressed: –fair business practices, compliance, ethics –environment, labor policy, human rights –customer/supplier and community relations

16. Alignment l Value-added of a code will depend on the objectives of the company l The primary audience will vary: employees, host governments, local communities, customers and suppliers l Potential for partnerships/collaboration l Multiple codes are creating redundancies for companies, primarily in reporting

17. OECD Guidelines for Multinational Enterprises l Adopted in 1976 and revised in 2000 as voluntary recommendations to companies l Part of the OECD Declaration on International Investment and Multinational Enterprises: –National Treatment, Conflicting Requirements, Incentives and Disincentives l Main objectives are to encourage positive contributions of MNEs and minimize and/or resolve “difficulties.”

18. Issues Covered l Sustainable Development l Human rights l Corporate Governance l Suppliers and Contractors l Disclosure l Employment l Environment l Bribery l Consumer Interests l Science and Technology l Competition l Taxation

19. “Cases” under the Guidelines l “Implementation in specific instances” l NCP offer a forum for discussion among the parties involved l Assess the issues and, where merited, help the parties resolve the issue: mediation/arbitration l If unresolved, issue a statement and make recommendations to the parties l Include in annual NCP reports to CIME

20. The Rev. Leon H. Sullivan 1922-2001

21. "The objectives of the Global Sullivan Principles are to support economic, social and political justice by companies where they do business; to support human rights and to encourage equal opportunity at all levels of employment, including racial and gender diversity on decision making committees and boards; The Global Sullivan Principles

22. to train and advance disadvantaged workers for technical, supervisory and management opportunities; and to assist with greater tolerance and understanding among peoples; thereby, helping to improve the quality of life for communities, workers and children with dignity and equality.” The Rev. Leon H. Sullivan The Global Sullivan Principles

23. l Support for human rights l Equal opportunity l Voluntary freedom of association l Compensation to meet basic needs, opportunity to improve l Safe workplace, protect environment l Promote fair competition, oppose corruption l Work with others to improve quality of life l Promote the application of these principles with business partners l Be transparent in our implementation

24. UN Global Compact l Compact between the UN and the private sector to promote human rights, improve labor conditions and protect the environment: –Companies will become public advocates for the Global Compact. –Companies will post annual examples of progress made on the principles of the Compact on the UN web site. –Companies will join the UN in partnership projects.

25. Next Steps l UN agencies working on implementation l Annual policy dialogues: –Role of business in zones of conflict l Company postings - “learning examples” l Partnership projects l National & regional “Compacts” l Recruitment

26. Ongoing Development l Ownership / Direction l Interpretation of the nine principles l Linkages with other initiatives l Role of non-business partners l The nature and scope of partnerships l Monitoring

27. Code of Conduct for European Enterprises l EP resolution supporting a code of conduct for European enterprises operating in developing countries l Monitoring mechanism with EP tribunals where companies would defend their conduct l Combines environmental, social, and economic standards l On-going discussions in EU

28. McKinney Code of Conduct l Would require U.S. companies that employ more than 20 people in a foreign country to implement a corporate code of conduct including labor rights, human rights, and environmental provisions. l Would require companies to submit an annual and public report to the departments of State, Commerce, Labor, and EPA. l Would reward companies with preference for government contracts.

29. Extractive Industry Initiative on Human Rights and Security l In coordination with the U.S. and U.K. Governments: –Engage in an open and substantive dialogue with human rights and development NGOs –Raise human rights and other governance issues directly with host government –Consider the human rights aspects of their security arrangements

30. SA 8000 l Commercial venture developed by the Council on Economic Priorities. l Auditing and certification of compliance with ILO labor standards and UN human rights conventions. l Provides fee-based monitoring by an independent auditor and gives oversight responsibilities to NGOs and labor unions.

31. ISO Business Conduct Management System Standard? l Single set of voluntary, internationally recognized standards and tools to manage corporate ethics, compliance, and business conduct programs l Framework to measure, evaluate, and audit programs l Allow for self-declaration or third-party certification

32. Conclusions l Effective national governance is critical l Growing expectations for companies to assume social responsibilities l Proliferation of Codes and Initiatives l No “one-size” approach or response l Real value in internal process changes l Key issues: areas of influence and monitoring/verification