Remarks by Angel Gurría
11 March 2015
(As prepared for delivery)
Minister Nahles, Minister Mueller, Ladies and Gentlemen,
Sustainable supply chains can transform global trade and development by ensuring that businesses behave responsibly even in countries where social, environmental and human rights standards are weak or not adequately enforced. We have witnessed too often the disastrous consequences that can result if this is not done.
But before elaborating on those critical aspects, let me recall briefly the backdrop of this important work – and, therefore, the extreme relevance of the decision by the German Presidency of the G7 to make it a priority.
We have seen over the last two decades a paradigm shift in the organisation of production globally, which the OECD has abundantly documented: the spread of ever-fragmented regional and global value chains. This has been a source of tremendous opportunities for countries, notably in the developing world, and a major driver of economic efficiency globally.
But with their development, the organisation of production has also reached an unprecedented level of complexity, interconnectedness and mutual reliance. As well as a source of efficiency, this has been a challenge for multinational enterprises which are sourcing inputs globally. A company like Walmart, for instance, has more than 100.000 suppliers all over the world! In this context, the multiplication of “blind spots” along the value chains - with respect to human and labour rights, occupational and heath safety standards, environmental requirements, corruption, and so on – has become a real risk that needs to be addressed.
There is no shortage of instruments out there - that promote standards in supply-chains. The OECD itself has been an active and longstanding standard-setter in this key area: The OECD Guidelines for Multinational Enterprises provide a common agreed framework for supply-chain due diligence. The result is a more predictable framework for businesses on how to meet their responsibilities and for stakeholders to hold businesses accountable to reasonable standards. The OECD is also developing sector specific guidance on supply chain due diligence for the textile and garment, agriculture and extractives sectors.
The real challenge, as often, is implementation. There is cause for optimism in this regard, as these standards are starting to have an impact on the ground. For example, we have seen financial flows to armed groups derived from exploitation of natural resources decreasing due implementation of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The same instrument has improved international market access for 70,000 artisanal miners in the Democratic Republic of the Congo and Rwanda. In other words, responsible supply chains ultimately produce win-win results for governments, business and local populations.
By the same token, the National Contact Points, associated to the OECD MNE Guidelines, constitute a very powerful mechanism to offer access to remedy and to hold business accountable. So far, 300 specific instances have been submitted to NCPs, dealing with alleged business-related impacts, covering cases in 89 countries, including emerging economies such as China, India, Indonesia and Russia. Almost half of them were submitted to the NCPs of G7 countries.
This system is not only unique - it is also very effective: in 2014, the complaint brought by the World Wildlife Fund (WWF) before the UK NCP against an oil company, SOCO which was doing oil exploration in Africa’s oldest national park, Virunga, in the Democratic Republic of Congo proved successful: SOCO stopped its explorations in Virunga and the parties agreed to work together to ensure that future development benefits both the people and the environment. This is one among several positive outcomes.
These outcomes are encouraging but should not leave room for complacency. We need to be proactive and restlessly promote the use of these instruments. G7 support will be key, just as initiatives taken by its members: In France, the government is considering a legislative proposal to mandate supply chain due diligence in accordance with the OECD Guidelines. The UK has a proposal pending to compel businesses to report on how they ensure that slavery and human trafficking is not taking place within their supply chains. These are very positive steps. They need to be scaled up.
At our end, we need to make sure that these instruments remain current and in tune with the reality of business operations; are practical, accessible and simple, operational and visible. Hence the new initiative that the OECD has just launched - called the Trust and Business Project – that aims to work with governments and business to close the gap between OECD standards for business—including the MNE Guidelines and guidance on due diligence—and their implementation.
We have also proposed to support the G7 in implementing concrete action to promote responsible business conduct, drawing on the OECD ‘s expertise in providing access to remedy. This would include setting-up a peer review process for the National Contact Points to ensure a level playing field for businesses.
Ministers, Ladies and Gentlemen, if this globalisation process that I described at the start of my talk, with all its positive aspects, is to continue, global operators - such as the multinational national enterprises, which are organising those value-chains - as well as governments, that are setting the rules of the game, need to act decisively. This is an ethical and social imperative, just as an economic requirement. The OECD stands ready to work with them, as well as with trade unions and civil society, to promote this agenda further and to find global solutions to this global challenge.