An economic activity can only be deemed sustainable if it incorporates both environmental and social considerations. While environmental aspects are evaluated at the activity level, social aspects are assessed at the company level and referred to as the "minimum safeguards."
The core elements of the minimum safeguards include:
Human rights
Anti-corruption practices
Taxation
Fair competition
To comply with the minimum safeguards, a company must meet the standards set forth by the OECD guidelines for multinational enterprises and the the UN Guiding Principles on business and Human Rights (UNGP). Non-compliance occurs if any of the specified criteria are breached. Compliance can be restored by demonstrating that robust processes have been implemented or enhanced to prevent such breaches from occurring in the future.
Human rights
Human rights due diligence (HRDD) processes are at the heart of the minimum safeguards. The HRDD should adhere to the requirements outlined by the UNGP and OECD.
There are two expectations from business:
(a) Undertakings should respect human rights, that is, they should avoid infringing on human rights and address adverse human rights with which the undertaking is involved.
(b) In order to meet the expectations set out in (a), companies should establish a due diligence process to continuously identify, prevent, mitigate, track, and account for actual and potential adverse impacts on human rights in their own operations, supply chains, and other business relationships.
The process of a HRDD should include the following six steps:
Establishing and integrating a commitment to human rights due diligence (HRDD) into organizational policies and processes.
Identifying and evaluating potential and actual adverse impacts, incorporating input from relevant stakeholders.
Implementing measures to stop, prevent, mitigate, and address negative impacts.
Monitoring the effectiveness of these measures and evaluating their outcomes.
Publicly sharing information on the HRDD approach and the steps taken to prevent and address negative impacts.
Facilitating or engaging in remediation efforts, including participating in or creating grievance mechanisms to allow affected individuals and groups to raise their concerns.
The two recommended criteria that would indicate non-compliance with the minimum safeguards are:
1. The company has not established adequate human rights due diligence processes, as outlined in the UNGPs and OECD Guidelines for MNE.
2. There are clear indications that the company does not adequately implement HRDD resulting in human rights abuses. Data on breaches should be generated from sources with a high level of independence and impartiality. The suggestion is that:
a) The company has finally been held liable or found to be in breach of labour law or human rights in certain types of court cases on labour law or on human rights.
b) The following two indicators signal that the company does not engage with stakeholders, although this is an integral part of the UNGPs:
• A National Contact Point has accepted a case, however the company refuses to engage with the party which has initiated it, or the company has been found non-compliant with the OECD guidelines by an NCP.
• The Business and Human Rights Resource Centre (BHRRC) has taken up an allegation against the company, and the company has not answered it within 3 months. The BHHRC manages a public data base containing data on 20 000 companies. Not answering an allegation would constitute non-compliance only if these letters are less than 2 years old.
Corruption
The OECD guidelines require the following statements and measures from companies on corruption:
a) Corporate undertakings “should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. Enterprises should also resist the solicitation of bribes and extortion.”
b) In order to meet the expectation in (a), undertakings should “develop and adopt adequate internal controls, ethics and compliance programmes, or measures for preventing and detecting bribery, developed on the basis of a risk assessment addressing the individual circumstances of an enterprise, in particular the bribery risks facing the enterprise (such as its geographical and industrial sector of operation)”
Based on these guidelines, the following two criteria were formulated for non-compliance:
1. The company has not developed and adopted adequate internal controls, ethics and compliance programmes, or measures for preventing and detecting bribery.
2. The undertaking or senior management, including the senior management of its subsidiaries, has been finally convicted on corruption or bribery.
Taxation
The OECD guidelines holds two expectations from companies:
(a) Undertakings should comply with the letter and the spirit of tax laws and regulations of the countries in which they operate. Complying with the spirit of the law is defined as “discerning and following the intention of the legislature”, which in turn is supposed to guide the determination of the tax amount legally required.
(b) In order to meet the expectation set out in (a), undertakings should “treat tax governance and tax compliance as important elements of their oversight and broader risk management systems and “(…) adopt tax risk management strategies to ensure that the financial, regulatory and reputational risks associated with taxation are fully identified and evaluated.”
Based on these guidelines, the following two criteria were formulated for non-compliance:
1. The company does not treat tax governance and compliance as important elements of oversight, and there exists no adequate tax risk management strategies and processes as outlined in OECD MNE Guidelines covering tax.
2. The company has been found guilty of tax evasion. In the future it might be necessary to further qualify the kind of court cases.
Fair competition
The OECD guidelines requires the following procedures from companies:
a) Undertakings should “carry out their activities in a manner consistent with all applicable competition laws and regulations, taking into account the competition laws of all jurisdictions in which the activities may have anticompetitive effects (…)” and “refrain from entering into or carrying out anti-competitive agreements among competitors.”
b) In order to meet the expectation in (a), undertakings should “regularly promote employee awareness of the importance of compliance with all applicable competition laws and regulations, and, in particular, train senior management of the enterprise in relation to competition issues.”
Based on these guidelines, the following two criteria were formulated for non-compliance:
1. The company does not promote employee awareness of the importance of compliance with all applicable competition laws and regulations and does not train senior management in relation to competition issues.
2. The company or its senior management, including the senior management of its subsidiaries, has been found in breach of competition laws.