The circle is closed – speech by Herman Mulder

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KEYNOTE SPEECH BY: HERMAN MULDER
INDEPENDENT MEMBER DUTCH NATIONAL CONTACT POINT (2007-2016)
CHAIRMAN OF THE SDG CHARTER FOUNDATION
CHAIRMAN TRUE PRICE FOUNDATION
FELLOW NYENRODE BUSINESS UNIVERSITEIT

FOR THE SYMPOSIUM: “THE OECD MNE GUIDELINES, 40 YEARS: WHAT’S NEXT”
THE HAGUE, 3 NOVEMBER 2016

THE CIRCLE IS CLOSED

The OECD Guidelines for Multi-national Enterprises: “doing no harm”

Article 1 of the (2011) OECD Guidelines for Multinational Companies states: “The Guidelines aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis for mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises”.

The Guidelines are focusing on responsible business conduct by Multi-National Enterprises (MNE’s) in their entire value chain. The Guidelines are an example of “soft law” by the (46) governments as they are voluntary, yet not non-committal: governments may attach certain sanctions to non-compliance and, moreover, there is “no law-free zone” as the Guidelines reflect good business practice.
The Guidelines are comprehensive, as they include human rights, employment & industrial relations, environment, disclosure, corruption/bribery, consumer interest, taxation, science & technology, competition. Central themes are: initial and ongoing due diligence on own risks and on actual or possible adverse impacts on stakeholders and society-at-large; scoping the nature of responsibility of the MNE’s in their entire value chain (“cause, contribute or directly linked” to impacts); leverage (alone or with others) to prevent, reduce, mitigate adverse impacts.
The Guidelines offer the opportunity for affected people to seek remedy through the mediation process by the National Contact Point (NCP in each of the OECD (34) member and (12) adhering countries. This process also offers the opportunity for forward looking learning: “from accidental pain in the valuechain to systemic gain”, by improving practices and policies.
The Guidelines have been drafted and the performance thereon are being monitored on a multi-stakeholder basis, i.e. governments, business (BIAC), trade unions (TUAC), NGO’s (OECD Watch).
The Dutch Sector Covenant Process, initiated by the government for a number of high impact business sectors, lead by business, with active involvement of civil society organisations is based on the Guidelines (as well as on the UN Guiding Principles for Business & Human Rights).

The UN Sustainable Development Goals: “doing good”

The Sustainable Developments Goals (SDGs) were adopted by the UN General Assembly in 2015. With its 17 Goals it offers a wide-ranging aspiration (and commitment by governments) to create a more sustainable, inclusive and fair world by 2030.
Its scope is global (adopted by 198 countries), universal (setting national and international targets), with a range of (169) targets and (230) indicators for governments to act upon, and to report periodically in the UN fora.
The issues addressed in the Goals include: poverty, food security/nutrition, health, education, gender, water/sanitation, sustainable energy, economic growth & employment, inequality, cities, sustainable consumption and production, climate change, natural stewardship, institution building and, importantly, (multi-stakeholder) partnerships.
Although this is an agenda set by governments, it is recognised that the private sector must play a key role in the implementation of the SDGs. Some leading businesses have already committed to embrace the SDGs in their corporate strategies (and performance reporting), focusing in particular on a few Goals of their own, yet considering the other Goals as well. In the Netherlands already a number of (multi-stakeholder) private sector initiatives and solution partnerships have been taken, for instance the SDG Charter Coalition.

The Theory of Change: “a Shared Strategy for the Commons”

With the OECD Guidelines as normative baseline for business and the SDGs as aspiration (“for all, by all”), we now have a catalytic Agenda to address “the tragedy of the commons” by implementing together, through partnerships by public and private sectors, “the strategy for the commons”.
The combined, complementary frameworks will assist us in developing coherent and consistent supportive legislation and government policies; for business to sharpen their “purpose” in society, their governance and to “sustainabilise” and stabilise their value chains; for innovation in technology(-sharing) and business models by all, using i.a. better data and metrics; for civil society organisations to be more constructively engaged in government and business interventions.
Goal #17 is particularly important: “getting farther by going together”, with shared outcomes on all other 16 Goals. Matching the broad societal agenda with business objectives to realise shared outcomes will be our key challenge.
Also, the SDGs offer an opportunity to restore the core capital for government and business: societal trust

The role of Government: “stepping up to the plate as convener and facilitator”

Government has a key facilitating role to play in realising our 2015-2030 Agenda towards a better world. It should amend its more reactive “additionality-“ approach (acting when markets are failing) to a more pro-active catalysing “complementary” role, at least during the next 5-7 years, to create a pro-SDG environment for itself, business and civil society.

More specifically it should:
1. strengthen the “do no harm”- Guidelines, by introducing selective legislation, such as on mandatory due diligence in the valuechain, human rights (such as the UK Modern Slavery Act), greenhouse gas emissions;
2. change existing legislation, regulations, policies, subsidies which are counter-productive to the SDGs;
3. improve the effectiveness of the Guidelines by applying it to all businesses (including SME), including the government in its role as “market actor”; also, access to remedy need to be strengthened (adding a voluntary “tribunal” process);
4. strengthen the OECD Guidelines process through much improved functional equivalence among countries, more coherence on policies and outcomes, guidance papers and linkage papers on topical issues;
5. develop, in cooperation with business, new coherent and consistent enabling policies and instruments to “crowd in” business into the SDG Agenda, provided business adheres to the Guidelines’ framework.

The role of Business: “no planet, no people: no profit”

Business should recognise that it should redefine its role in society through redefining its purpose: create value for customers, wealth for investors, long term value for its stakeholders, while adopting ethical standards, doing no harm to social wellbeing, natural ecosystems and biodiversity, climate. Its governance structure and public accountability processes should reflect this approach.
“Nothing is impossible, particularly when it is inevitable”: reading the signs on the wall and take early action is part of effective leadership.
It should also consider that preventing potential costs of conflict with stakeholders, the arising of new societal liabilities, “stranding” of assets, the loss of reputation/brand/value are important business case factors.

More specifically it should:
1. explicitly adopt the OECD MNE Guidelines framework as baseline and the SDGs as important factors in its strategy, and report thereon (eg. by applying GRI Standards and Compass);
2. measure, monetise and effectively address all material externalities (both negative impacts and positive effects, without undue “netting”) in its value chain: true pricing, true Profit & Loss;
3. enter into “solution partnerships” to realise SDGs;
4. stimulate consumers to buy “sustainably and responsibly”.
5. actively participate in national and international sector-/theme- “tables”.

The role of Civil Society Organisations: “activism & constructivism”

NGO’s and trade unions should recognise that, notwithstanding serious negative impacts for which case-specific “naming & shaming” is justified, the concept of “knowing & showing and, even, joining” the broader Agenda (as described herein) in a diverse and dynamic world in which no one is perfect, deserves a fair chance and a constructive approach. Civil society organisations play an even more important role in keeping the normative baseline during the implementation of the SDG “promise” with speed and scale.

The special role of the Financial Sector: “restoring trust by embracing the societal agenda”

Next to adopting the roles of business mentioned above the financial sector should play, in serving society, a particularly important role as “gate-keeper” of high standards, and as ambitious and responsible “enabler” by its capital-mobilisation role.

More specifically it should:
1. pro-actively engage with its business relationships in its valuechain on adopting the OECD Guidelines and embracing the SDGs;
2. contributing to “making markets fit for sustainable and responsible purpose” by raising the disclosure standards of its business relationship;
3. consider impact investing “the new normal”, rather than a new asset class.

Where is the Consumer: “the hidden change-maker”?
The Consumer is the big absentee in the Agenda. Through his conscious choices he may make major contributions. He needs to be more aware of the intrinsic value of products (or, rather, the lack thereof).

More specifically he should:
1. require more information about origin, externalities embedded in a product
2. make informed and responsible decisions, including paying a higher “true price”

Closing Comment
Our mission is now well defined: we have “do no harm”-framework (through the 2011 OECD MNE Guidelines) and a “doing good”-agenda (through the 2015-2030 SDGs). Collective action with ambition is now of the essence. We have no excuse anymore not to adopt, embrace and act upon this.

The Circle is closed!

It Pays to Be Transparent

2016-05-25 10_55_12-Final Report Green Deal on Transparency in Natural and Social Capital - EN.pdf -

22 companies have experimented the past two years with making the influence of their products on people and society transparent, from sourcing to end user. For example, ABN AMRO mapped the social and environmental effects of cocoa financing and DSM looked at the impact of OatWell, an innovative oat product. They did this while they were participating in the Dutch partnership ‘Green Deal on Collaborating on Transparency of Natural of Natural and Social Capital’, which has now ended. The end report was offered today to European commissioners and directors at the 18th European Corporate Governance Conference. The report includes inspiring examples which other companies can use to take similar steps.

Please find the Dutch press statement here and the report here. Find more information on the European Corporate Governance Conference here.

The True Price of Cotton from India

2016-04-29 Cotton Report

Today True Price and IDH Sustainable Trade Initiative release a new report on: The True Price of Cotton from India. This report contains the results of a study on the external costs of the cotton supply chain (smallholder cultivation in India). The external costs of conventional cotton were compared to certified cotton. Companies can now use this information to reduce their costs with intervention projects, like training farmers on water saving techniques or gender equality.

India is one of the largest producers of cotton in the world, producing about 25% of global cotton production. This poses a threat to the environment, specifically in terms of water use, biodiversity and pollution. The study shows that the cultivation phase accounts for about 30% of total societal costs in the supply chain. Approximately 75% of which are environmental costs. In the last decade, several sustainable interventions have improved the livelihood of cotton farmers. However, there is still room to further decrease societal costs.

Other interesting findings from the study, are for example that certified cotton farms are on average about 50% more profitable than conventional farms. Moreover, certified cotton was found to have 25% lower external costs of cultivation than conventional cotton. This is mainly because of higher productivity. Interventions that reduce scarce water use and eliminate income discrimination have the potential to further decrease the external costs of certified cotton.

2016-04-29 Interventions Cotton

This study was part of a project to investigate the true prices of four soft commodities: cocoa from Ivory Coast, coffee from Vietnam, tea from Kenya and cotton from India. This allows for interesting comparisons of external costs between sectors, which IDH, the Sustainable Trade Initiative and other stakeholders can use to inform decisions. Compared to other sectors, the external costs of cultivation are about 3 to 5 times higher for seed cotton than coffee beans and tea leaves respectively, but about 1.5 times lower than cocoa beans. Cocoa cultivation in Ivory Coast has the highest ratio of social to environmental costs. For coffee cultivation in Vietnam and cotton cultivation in India, environmental issues predominate.

2016-04-29 Comparison Commodities

Find and download all released reports on the true price of soft commodities on our publications page.

The True Price of Tea from Kenya

2016-04-21 Tea Report

Today True Price and IDH, the Sustainable Trade Initiative launch the report The True Price of Tea from Kenya. Kenya is the third largest tea producing country in the world. About 10% of the global tea production comes from Kenya. For Kenya itself, this represents approximately 25% of its total agricultural export income. Tea production in Kenya is predominantly in the ownership of smallholders. Around 550.000 smallholders produce 60% of the total tea production of the country.

Many societal costs occur during production, such as use of scarce water and forced adult and child labour. This study shows that the majority of the external costs of conventional tea cultivation exists of social costs (79%), of which 29% are due to underpayment of hired and family workers.

 

2016-04-22 Conventional FFS Tea Difference

IDH, Rainforest Alliance (RA), Unilever and the Kenyan Tea Development Agency (KTDA) aim to transform the Kenyan tea sector through training and certification of smallholder tea farmers in the Farmer Field School (FFS) program. Key findings include that external costs of tea cultivation from an FFS farm are about 29% lower than conventional tea. 40% of this change is due to higher productivity of FFS farms, 10% due to improved environmental conditions and 50% due to improved social conditions. There are demonstrably higher wages, less accidents and reduced fertilizer use on FFS farms. Nonetheless, this study identified that interventions, such as raising wages up to living wage and using a net-zero deforestation strategy, can still further decrease the external costs of FFS tea cultivation.

This report is a publication in a series of reports about the true price of soft commodities (cocoa from Ivory Coast, coffee from Vietnam, tea from Kenya and Cotton from India). For more information on the true price and potential interventions to reduce the external costs of global commodities, click here to download the report.

The True Price of Coffee from Vietnam

2016-04-15 Coffee Report

True Price and IDH, the Sustainable Trade Initiative are happy to announce the report The True Price of Coffee from Vietnam. This is a publication in a series of reports about the true price of soft commodities. The report quantifies the societal costs of coffee production in Vietnam. Key findings of the study include that 95% of the total external costs of cultivation are environmental costs, of which 28% are caused by scarce water use from over-irrigation. In addition, certified coffee has 20% lower external costs of cultivation than conventional coffee.

2016-03-24 TP Coffee Interventions

The results are used to inform decision making in programs designed to contribute to more sustainable coffee supply chains. By making the external costs visible for all stakeholders engaged in the Vietnamese coffee supply chain, it is possible to identify interventions that reduce external costs. This study showed that most impact can be realized by (i) improving irrigation practices to reduce scarce water use, and (ii) improving fertilizer application rates to reduce water pollution and energy use. The external costs of cultivation are relatively low for green coffee beans compared to cocoa beans (Ivory Coast) and seed cotton (India), and slightly higher than for green tea leaf (Kenya).

For more information on the true price of global commodities, click here to download the report.