Responsible Business Conduct

International Organizations' Guidelines: The Importance of Responsible Business Conduct

What is Responsible Business Conduct (RBC)?

A company that adopts engages in business conduct commits to:

• comply with local, regional and international laws and regulations;
• respect the rights of various stakeholders;
• create new value through positive contributions; and
• protect existing value by managing risks and reputation.

The concept of RBC is embedded in internationally recognized standards such as (i) the United Nations Guiding Principles on Business and Human Rights (the "UN-Guiding Principles” or "UNGPs"), (ii) the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises (the "OECD Guidelines"), and (iii) the International Labour Organization (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. In 2014, the Council of Ministers of the Council of Europe adopted a declaration in support of said principles.

Taken together, the above mentionned guiding principles ("the International Guiding Principles") provide a set of recommendations aimed at promoting good corporate conduct in relation to society, respect for human rights, social norms, and environmental standards by involving all stakeholders in this process.

One of the main guiding  principles common to the various international texts, is that  companies must avoid, prevent, or mitigate any negative impacts their activities, products, or services may cause or to which they may contribute through  their business relationships that make up their supply chains. This only applies to significant contributions that promote or facilitate a negative impact. These negative impacts may affect people, the planet, or prosperity.

Companies are also need to conduct risk-based due diligence that extends beyond their traditional scope of responsibility to include the entire societal structure  and supply chain. This due diligence can be integrated into decision-making and risk management processes and aims to identify, prevent, and mitigate risks and negative impacts.

Countries adhering to the International Guidelines have committed to implementing them, in particular by addressing certain key issues through national legislation or in support of their international commitments. However, compliance with the International Guidelines is not legally binding for the companies concerned. Adopting responsible business conduct by complying with the International Guidelines provides a company with a number of benefits, including (i) effective risk and reputation management, (ii) operational efficiency gains, (iii) social license to operate, and (iv) compliance with internationally recognized principles and standards.

The European Union has also undertaken several initiatives to promote transparency and a long-term view of the financial and economic activities of companies within the single market and continues to pursue this work.

What are the United Nations Guiding Principles?

The UN Guiding Principles establish a link between corporate activities and respect for internationally recognized human rights. These principles encourage continuous due diligence in business activities, whether commercial, transnational, or otherwise, regardless of the company's size, sector, location, ownership, or structure.

The UNGPs are based on three fundamental pillars:

• Commitment and accountability at the government level  to establish and implement a legal framework that requires third parties, including business enterprises, to protect and respect human rights;
• Commitment and accountability at company level to respect human rights in all their activities and to take concrete measures to prevent any negative impact in this respect, notwithstanding cases where the host country is not up to date with legislation; and
• Opening up and facilitating access to effective judicial and other conflict resolution mechanisms in order to deal effectively with any complaints against a company that does not respect human rights, thus providing effective remedies for victims.

Since 2014, the United Nations Office of the High Commissioner for Human Rights (OHCHR) has been implementing a major project called the "Accountability and Remedy Project," aimed at strengthening accountability, access to remedies, and judicial and non-judicial mechanisms in cases of corporate human rights violations, as outlined in the UNGPs.

For further information, please visit the following page.

What are the OECD Guidelines for Multinational Enterprises?

The OECD Guidelines for multinational enterprises are recommendations designed to encourage multinational companies to conduct their business in a responsible manner. They were first adopted in 1976 through the OECD Declaration and Decisions on International Investment and Multinational Enterprises.

They where last updated in 2011, to reflect  the UNGPs on Business and Human Rights. Since then, a chapter on human rights protection has been included in the text.

On May 31, 2018, the OECD adopted the OECD Due Diligence Guidance for Responsible Business Conduct, which provides practical support for the implementation of the OECD Guidelines by multinational enterprises.

The OECD Guidelines are not intended to replace or supersede national laws or regulations.

Discussions on adapting and updating the OECD Guidelines are ongoing.

At the OECD level, the rules for National Contact Points (NCPs) are outlined in the OECD Guidelines. Each adhering country is required to establish an NCP, which is responsible inter alia for (i) promoting the Guidelines and (ii) handling complaints regarding non-compliance with these principles. The OECD Guidelines are the only international instrument on RBC that has an internal complaint mechanism for handling complaints described as "specific instances." Specific instances are not legal cases, and NCPs, which are not judicial bodies, seek to resolve issues by facilitating access to consensual, non-contentious procedures, particularly by acting as mediators or conciliators.

For further information, please visit the official website of the Luxembourg NCP.

What initiatives are being taken at the European Union level?

In 2011, the European Commission adopted a renewed strategy for Corporate Social Responsibility (CSR) and its impact on society. It combines a horizontal approach to promoting CSR with sectoral approaches such as environmental and trade policies, transparency reporting and public procurement, including a specific chapter on business and human rights. This strategy includes an action plan with commitments from the European Commission, as well as recommendations for companies, EU Member States, and other stakeholder groups.

On February 20, 2020, the European Commission launched a public consultation on the revision of Directive 2014/95/EU of the European Parliament and of the Council concerning the disclosure of non-financial and diversity-related information by certain large companies and groups. In Luxembourg, the law of July 23, 2016, transposing the said directive (the "NFR Law") requires companies concerned to publish in their annual report or in a seperate report, relevant information on their policies, related risks, and results achieved with regard to social, environmental, human resources, human rights, anti-corruption issues, as well as  diversityin their in the composition of their boards of directors or supervisory boards. In this context, the European Commission's publication of non-binding guidelines on the disclosure of environmental and social information provides a common framework to facilitate the comparison of such information at the European level.

In February 2020, the European Commission published a study on due diligence in supply chains and, in July 2020, a study on directors' duties and sustainable corporate governance. Both studies concluded that only a standard of conduct at European level is likely to enhance corporate responsibility for sustainable value creation and establish the necessary common basis needed to address  sustainability while avoiding market distortions. In October 2020, the European Commission also launched a public consultation to gather input from a wide range of stakeholders on sustainable corporate governance.

The announcement by the European Commissioner for Justice, Didier Reynders, of the publication of the draft directive on corporate due diligence along supply chains in June is crucial for establishing a binding due diligence obligation within the European Union. It sets the stage for negotiations to begin later this year. Luxembourg intends to actively participate in the negotiations of the European draft text to promote a binding and ambitious European framework, enabling the EU to play a credible pioneering role in the international community in the protection of human rights.

At the request of the EU Council, the EU Agency for Fundamental Rights (FRA) prepared the 2017 expert opinion which explores ways to reduce barriers to access to remedies at the EU level.

With the adoption in 2017 of Regulation (EU) 2017/821 of the European Parliament and the Council of May 17, 2017, setting out supply chain due diligence obligations for importers in the Union of tin, tantalum, tungsten, their minerals, and gold from conflict-affected or high-risk areas, the EU has applied due diligence to gold, tin, tantalum, and tungsten (3TG) minerals and metals. Since January 1, 2021, this regulation has been fully applicable throughout the EU. The Directorate for European Affairs and International Economic Relations at the Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade  serves as contact point  for any questions relating to the regulation's application.