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OECD Guidelines for Multinational Enterprises

Introduction

People holding a globe, symbolising economic cooperation and development; Source: Ryan McVay - GettyImages

© Ryan McVay - GettyImages

The Organisation for Economic Cooperation and Development (OECD) is a multilateral organisation which monitors and analyses economic trends and developments in its Member States and the world. The aim of the OECD is to work towards a policy that increases economic prosperity and social well-being based on a democratically developed market economy. To this end, it provides independent analyses and forecasts as well as country studies and thematic reports on key economic policy issues. It focuses on the long-term challenges of economic policy. It is thus a central forum for the discussion of structural challenges.

Economic Policy Committee: Federal Ministry of Economic Affairs is providing important input

The Economic Policy Committee (EPC) is the OECD’s most important economic policy body and is concerned with these structural economic policy issues. Germany - represented by the Federal Ministry of Economic Affairs and Energy (BMWi) - provides one of the two vice-presidents of the committee. The Federal Ministry of Economic Affairs and Energy (BMWi) actively contributes to the international discussion on economic policy by feeding in its experience and recommendations.

The EPC focuses on current macro and structural policy issues on a transnational basis. It has various thematic working groups, such as a working group for macro and structural policy analyses and a working group dealing with financial, monetary and fiscal policy, and balance of payments imbalances.

In addition, the Economic Development and Reform Committee (EDRC) regularly compiles country studies on the individual OECD Member States together with the OECD Secretariat. It analyses specific economic policy challenges in individual countries and makes recommendations. Both working groups also engage in an intensive dialogue on current challenges and best practices in economic policy.

The main OECD publications include economic policy papers, forecasts of international economic development (World Economic Outlook), and policy recommendations based on country studies.

The OECD and its working groups maintain a close dialogue with international partners (such as the emerging economies) and the social partners.

Market liberalisation, lower transaction costs and increasingly powerful communications networks have made it much easier for companies to invest in other countries. Many companies invest locally to secure orders and to be close to the markets they are developing. The German economy also benefits from this thanks to its traditional strength in exports and to the investments by German firms in other countries. At the same time, however, there is the danger of negative economic, social and environmental consequences from such international activity.

OECD Guidelines for Multinational Enterprises

In order to counteract this, and to foster corporate social responsibility (CSR), the member states of the Organisation for Economic Cooperation and Development (OECD) adopted the OECD Guidelines for Multinational Enterprises. Leading business (BIAC), labour (TUAC) and non-governmental organisations (OECD Watch) helped to draft them and remain involved in their implementation. Since their adoption, twelve non-member countries signed to the guidelines: Argentina, Brazil, Colombia, Costa Rica, Egypt, Jordan, Lithuania, Morocco, Peru, Romania, Tunesia and Ukraine.

The OECD Guidelines form part of the OECD Declaration on International Investment and Multinational Enterprises and are based on the Universal Declaration of Human Rights, the ILO's core labour standards and the Rio Declaration on Environment and Development. They are addressed to every country operating in or from a participating country. Every German company operating abroad is called on by the German government to observe the OECD Guidelines and thus to help them have an impact and become a success. Compliance with the Guidelines by the companies is voluntary and is supplementary to compliance with local laws. However, the Federal Government regularly indicates its firm expectation that companies abide by the Guidelines.

The Guidelines are an important benchmark for corporate conduct relating to foreign investment. They can make a significant contribution to the general benefits deriving from direct investment and to sustainable development, particularly in developing countries. The intention is that awareness of these recommendations should become more widespread and help companies to realise how important their contribution is.

National Action Plan for Business and Human Rights

On 20 December 2016, the Federal Cabinet also adopted the National Action Plan for Business and Human Rights (NAP), which implements the UN Guiding Principles on Business and Human Rights at national level. By 2020 at least 50% of all companies based in Germany with over 500 employees are to have integrated the elements of human rights due diligence described in the NAP into their business processes. They are to develop procedures designed to identify adverse effects of their international activities on human rights and to take measures to prevent them. The development of the NAP will be tracked by means of a monitoring exercise.

The United Nations Guiding Guiding Principles on Business and Human Rights also form the basis for Chapter IV of the OECD Guidelines for Multinational Enterprises, which refers to human rights. In this respect, the appeal mechanism of the National Contact Point for the OECD Guidelines for Multinational Enterprises, which is located at the Federal Ministry of Economic Affairs and Energy, also serves to implement the UN Guiding Principles.

For more information on the NAP, please click here.

The OECD Guidelines consist of objectives and the main, fundamental recommendations for corporate conduct. These refer to ways to promote sustainable development, local capacities and human capital. Specifically, they address the following points:

  • Information policy
    The requirement to disclose information is an important confidence-building measure. Companies should inform the public not only about their financial performance, but also about social and environmental issues and foreseeable risks in good time and on a regular basis.
  • Human rights
    Irrespective of their size, sector, operational context and structure, the companies are charged to respect human rights. Furthermore, violations of human rights and contributions towards such violations should be avoided and prevented, and negative repercussions should be reviewed in detail as part of due diligence.
  • Employment policy
    This chapter covers the internationally recognised core labour standards, including freedom of association and free collective bargaining, the abolition of all forms of forced and child labour, and the elimination of discrimination in working life. Companies and employees' organisations should work constructively together and promote the conclusion of effective agreements on pay and conditions. Potential consequences resulting from changes in commercial activity should be discussed in advance; where possible, local workers should be employed and their skills enhanced.
  • Environmental protection
    With regard to environmental protection, the companies are recommended to introduce an efficient internal environmental management system and transparent environmental reporting, to orient themselves to the precautionary principle, and to have effective contingency plans ready should damage to the environment occur. They should be constantly endeavouring to improve their environmental performance.
  • Fight against corruption
    In order to fight corruption, companies should not offer, promise, grant or demand bribes directly or indirectly, and should reject demands for bribes. Also, they should make activities to combat corruption transparent (e. g. management control systems).
  • Consumer interests
    In order to take account of consumer interests, companies are called on to apply fair business, marketing and advertising practices and to guarantee the safety and quality of their goods and services. This includes aspects like adequate product information and the protection of personal data.
  • Science and technology
    Companies are called on to apply procedures which - whilst giving appropriate consideration to the protection of intellectual property rights - permit the transfer and rapid dissemination of technologies and expertise.
  • Competition
    In order to protect competition, companies are expected to observe the rules of fair competition and not to form anti-competitive cartels. They are expected to comply with the rules on competition in the respective countries.
  • Taxation
    Finally, in the field of taxation, companies should make their contribution to the public finances of the host countries, should comply with the tax rules and regulations of the countries in which they operate, and should co-operate with the tax authorities.

Further information

In view of rapid changes in the nature of international investment and multinational enterprises, the increased share of non-OECD countries in international investment, the global economic crisis, climate change and the international commitment to development goals, a decision for a renewed review was taken in 2010.

The aim was to ensure that the OECD Guidelines remain one of the world's leading instruments for corporate social responsibility. The review process was officially launched at the annual meeting of the national contact points in Paris on 29 June 2010. The new version of the Guidelines was presented on the 50th anniversary of the OECD on 25 May 2011.

In addition to adjustments to developments that had taken place over the preceding years, some fundamental changes were also made in order to modernise the technical and substantive aspects of the Guidelines:

  • Human rights, which previously had only been touched on in various chapters, are covered in a separate chapter in the new version. The aim is to help multinational enterprises to identify, prevent and stop violations of human rights in their activities.
  • Due diligence was explicitly included in the chapter on General Policies. Companies should now give active consideration to the potential negative effects of their actions. The aim is not only to avoid damage, but also to take active steps to tackle the causes and to take preventive measures. Also, relevant stakeholders should be included in decision-making processes and should be provided with appropriate information about the effects of corporate activities.
  • The OECD Guidelines are the first international agreement to make specific mention of companies' supply chains. The citing of these in the General Policies extends the scope of the Guidelines beyond the field of investment itself to cover other business relations, e. g. with suppliers and other partners, to the extent that the company can exert the appropriate influence on these.
  • The complaints procedure has been stipulated in more detail: firstly, as the national contact points are required to observe greater transparency (more precise stipulations regarding the final statements), and secondly, as they are called to be neutral and to treat all cases equally and to build up appropriate capacities.

Specific sectoral guidances

  • Supply chains of minerals from conflict-affected and high-risk areas

The "OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas" was drawn up in a two-year process involving governments, the business community and civil society, including participation from the eleven countries in the International Conference on the Great Lakes Region and from international organisations. It contains detailed recommendations for companies, the intention being to prevent the extraction and trading of minerals from being used to foster conflicts and human rights violations in the relevant areas. The guidance is addressed to all companies involved in extracting raw materials in conflict-affected and high-risk areas.

  • Agricultural supply chains

The Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization of the United Nations (FAO) presented the Guidance for Responsible Agricultural Supply Chains on 11 March 2016. The OECD-FAO Guidance for Responsible Agricultural Supply Chains was elaborated by the OECD and the FAO in the context of a multistakeholder procedure together with government representatives, the social partners and non-governmental organisations. The work started in October 2013. The German government supported the work to draw up the Guidance. The recommendations contained in the Guidance aim to help companies in supply chains for agricultural products meet their corporate social responsibility, comply with existing standards in terms of human rights, workers’ rights, health, the right to food, land rights, the environment and the sustainable use of natural resources, good corporate governance, animal welfare, and technology and innovation, and prevent or reduce the negative consequences of their business activities.

  • Stakeholder engagement in the extractive sector (mining, oil and gas industries)

The OECD Due Diligence Guidance for Meaningful Engagement in the Extractive Sector was elaborated together with government representatives, social partners and non-governmental organisations in the context of consultations that lasted for more than two years. It addresses the dialogue with and the involvement of interest groups and parties concerned in the extractive sector (exploration and exploitation of oil, gas and mineral resources). It aims to prevent and reduce detrimental effects of business activities in the sector, particularly by including stakeholders in the project planning and in regular operations, and by developing a strategy for the involvement of stakeholders.

  • Supply Chains in the Garment and Footwear Sector

The OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector (PDF: 2 MB) was drawn up by governments, companies and civil society over a period of two years under German chairmanship. It provides companies with recommendations on how to implement due diligence in the garment and footwear sector. The Guidance offers detailed help with identifying specific risks for the sector like child labour, forced labour, problems with health and safety at work, and dangerous chemicals. The Federal Government also supported the drafting of the Guidance in the context of its work in the Partnership for Sustainable Textiles.

  • Responsible business conduct in the financial sector

On 28 March 2017, the OECD adopted a specific guidance to promote responsible business conduct for institutional investors (2MB). The recommendations were drawn up in cooperation with a group of more than 50 stakeholders. The document offers institutional investors help with implementing the OECD Guidelines for Multinational Enterprises in their specific sector and thus prevents investments from having detrimental effects, e.g. on human and workers’ rights, the environment, or corruption. The Guidance addresses individual stages of a company’s due diligence process and describes specific measures to prevent and alleviate negative effects of business activities. It therefore contributes to foster responsible business conduct in the financial sector which is indispensable for the creation of a sustainable global economy.

Further information

Pursuant to the OECD Guidelines, each government which has signed up to the Guidelines is required to establish a National Contact Point (NCP). The tasks of the NCP are:

  • To raise awareness of the Guidelines with employers and employees and civil society, and to promote their application.
  • To work together with other NCPs and other governments, and to respond to the procedures which fall within the responsibility of the NCPs of other member states.
  • To answer general inquiries and specific questions arising from the application of the Guidelines.
  • To act as mediators between the different parties in the case of complaints and indications regarding breaches of the Guidelines.

The German NCP is based in the Federal Ministry for Economic Affairs and Energy (BMWi).

Federal ministries with a particular interest in the Guidelines form the Interministerial Steering Group for the OECD Guidelines which meets on a regular basis; in this body, all decisions and measures of the NCP are coordinated in detail and current issues relating to the OECD Guidelines and their further dissemination and the working methods of the NCP are discussed. The members of the group at present are, alongside the Federal Ministry for Economic Affairs and Energy: the Federal Foreign Office, the Federal Ministry of Labour and Social Affairs, the Federal Ministry of Food and Agriculture, the Federal Ministry of Finance, the Federal Ministry of Justice and Consumer Protection, the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety, and the Federal Ministry for Economic Co-operation and Development. If necessary, additional ministries may be called upon to provide specific expertise.

Finally, the Working Group on the OECD Guidelines includes representatives of the federal ministries, the social partners, the business associations and non-governmental organisations; it meets regularly to discuss fundamental issues relating to the Guidelines and to cooperate on promoting the application and dissemination of the Guidelines.

The OECD Investment Committee in Paris provides overarching support to the NCPs; it is responsible for interpreting the Guidelines and monitoring their effectiveness, facilitating a general exchange of experience and information, and coordinating the work of the National Contact Points.

The current addresses and contact details of the NCPs can be found here.

Complaints procedure

Every individual or organisation can submit a complaint against an alleged violation of the OECD Guidelines by a company to the relevant NCP. The NCP of the country in which the alleged violation took place is responsible for handling the complaint. If there is no NCP in this country, complaints should be submitted to the NCP in the country in which the company is headquartered.

Once a case has been received for consideration, a decision is taken following a careful evaluation drawing on detailed comments from the parties to the procedure as to whether the case justifies more in-depth examination. This is done in close cooperation between the NCP and the relevant ministries and the Interministerial Steering Group for the OECD Guidelines. For the case to be accepted for consideration, both parties must be capable of being a party to the proceedings, the NCP must be geographically responsible, and the complaint must fall within the scope of application of the Guidelines. If a case is inadmissible, both parties are informed of the reasons, and a summary of the grounds for the decision is published.

If the case is admissible, a mediation procedure takes place with a view to a constructive and joint solution. In this phase, the NCP provides a neutral discussion forum; with the aid of confidential separate and joint hearings and consultations, the aim is to work with the parties to find a solution. The procedure is based on comments from the complainant and the respondent, and if necessary on information from relevant agencies, experts, business representatives, NGOs and other NCPs. Furthermore, the Investment Committee can be asked to resolve questions of interpretation.

If an agreement is reached, the NCP publishes a final report outlining the course and resolution of the procedure. Even if no agreement can be reached via the mediation, the NCP publishes a final statement outlining the procedure and assessing the alleged violation of the Guidelines. Since the Guidelines are of a voluntary nature, this is not a judicial procedure; it is not possible to enforce compliance with the Guidelines or with the components of the final report in court.

The duration of the procedure depends on the special features of the case and is co-determined by a large number of players and factors beyond the NCP's sphere of influence. However, the NCP endeavours to undertake the initial assessment of the admissibility of the complaint and the applicability of the Guidelines within three months. Within the next six months, there should be clarity about the prospects for success of any mediation, and hopefully an agreement. Finally, the aim is for the NCP to publish a final statement within three months. The aim is to conclude the entire process within about a year. However, the special features of a case, and factors beyond the NCP's control, can mean that some cases last longer.

Contact in the Economic Affairs Ministry

Complaints must be submitted by email to the Federal Ministry for Economic Affairs and Energy, National Contact Point for the OECD Guidelines for Multinational Enterprises, at buero-nks@bmwi.bund.de, and if possible be submitted in parallel by post to the

Federal Ministry for Economic Affairs and Energy
National Contact Point for the OECD Guidelines in Germany (NKS)
Scharnhorststr. 34-37
10115 Berlin
Germany

Tel.: +49 30 18 615 - 7521
E-Mail: buero-nks@bmwi.bund.de

You can find further explanations in the "Procedural Notes" (PDF, 562KB) for the complaints procedure.

The wording of the principles governing the procedure in the OECD Guidelines can be found here (PDF, 81KB).

Cases dealt with and completed by the German National Contact Point

Cases accepted for consideration

Cases not accepted for consideration

Further information