Key Takeaways from the Updated OECD Guidelines for Multinational Enterprises in June 2023

(written by Mackenzie Kern, Junior Consultant, Ardea International)

Key Takeaways from the Updated OECD Guidelines for Multinational Enterprises in June 2023

Taking effect on 8 June 2023, the Organization for Economic Cooperation and Development (OECD) released an updated version of its Guidelines for Multinational Enterprises on Responsible Business Conduct. These guidelines serve as an internationally recognized standard for responsible business conduct and provide valuable recommendations to multinational enterprises (MNEs) on how to operate in a manner that promotes sustainable development, respects human rights, and contributes to the welfare of societies. The 2023 update reflects a decade of experience since the last update in 2011 and responds to the resulting and urgent environmental, social, and technological priorities facing businesses and societies.

These are our key takeaways:

1. Strengthened Human Rights Due Diligence:

The guidelines place a stronger emphasis on human rights due diligence, underscoring the need for MNEs to assess and mitigate potential adverse human rights impacts throughout their value chains. The updates clarify that the due diligence should be “risk-based, commensurate to the severity and likelihood of the adverse impact and appropriate and proportionate to its context.” It also clarifies that the scope of business relationships includes relationships beyond the contractual “first tier” or immediate relationships within the supply chain.

2. Further Protection of Human Rights

Along with encouraging businesses’ human rights due diligence, the updated guidelines emphasize that businesses should pay special attention to any particular adverse impacts on at-risk individuals and groups. These include human rights defenders, Indigenous Peoples, and within the context of armed conflict or heightened risk of gross abuses.

3. Employment and Industrial Relations

With the aim to protect employment and promote healthy industrial relations, the guidelines encourage businesses to respect the International Labour Organization (ILO) fundamental principles and rights at work (ILO core conventions). This includes ensuring fair wages, reasonable working hours, safe working conditions, and non-discrimination in employment practices. The updated guidelines stress that businesses should respect the right of all workers to freedom of association and collective bargaining. Further, they emphasize that businesses should take steps to prevent human trafficking, forced labour and coercive means, and bolster transparency around actions taken to address risks of forced labour associated with their operations, products, and services.

4. Environmental Considerations and Climate Action:

In response to pressing environmental challenges, the updated guidelines recommend for businesses to align with international agreed goals on climate change and biodiversity, such as the UN’s Sustainable Development Goals (SDGs). They also highlight the significance of environmental due diligence to assess and address environmental impacts. The updates provide a non-exhaustive list of environmental impacts that may be associated with their activities including (a) climate change; (b) biodiversity loss; (c) degradation of land, marine and freshwater ecosystems; (d) deforestation; (e) air, water, and soil pollution; (f) mismanagement of waste, including hazardous substances.

5. Enhanced Access to Remedy and Grievance Mechanisms:

The guidelines underscore the importance of establishing accessible and transparent grievance mechanisms for affected stakeholders, including local communities and workers. In the context of the National Contact Points (NCPs), agencies established by governments to promote the OECD Guidelines and handle cases as non-judicial grievance mechanisms, the updates strengthened their procedures to ensure the effectiveness, visibility, and functional equivalence.

Conclusion

The release of the updated OECD Guidelines for Multinational Enterprises in June 2023 marks a significant milestone in promoting responsible business conduct. As businesses increasingly recognize their role in creating positive societal impacts, the updated guidelines provide a roadmap for businesses to align their operations with the broader goals of sustainable development and respect for human rights. By adhering to these guidelines, businesses can contribute to building a more equitable, inclusive, and sustainable global economy.

How Can Ardea International help?    

Ardea International understands that businesses must ensure that they establish robust due diligence procedures. We support our clients by helping them identify how to manage human rights impacts and risks, ensuring they meet legal compliance obligations and integrate best practices into their policies and procedures.

Ardea International has developed a number of effective compliance solutions, including a human rights and environmental disclosure legal register. The legal compliance due diligence register allows businesses to track incoming legislation as well as current laws they may be subject to. We can also assess your business’s compliance with human rights regulations, including preparedness to comply with new legislation. In addition, Ardea can examine your business’ due diligence procedures and provide priority steps to improve performance.

We have an upcoming workshop on Developing an environmental and human rights mandatory due diligence framework.  This course will equip you with an understanding of the key legislative developments and how to develop a due diligence framework to implement in the business.

We also have a range of free and paid resources on our website and we hope that you will enjoy browsing!

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About Ardea    

We are a specialist sustainability, business and human rights consultancy with expertise in modern slavery.

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