Global Policy Forum

By Daniel Knight

Companies worldwide have signed on to voluntary codes of conduct in a bid to mitigate globalisation's harmful aspects. Activists and executives agree the firms are falling short but disagree on the reasons and remedies. No scheme that relies solely on corporations themselves will successfully rein in corporate power, human rights and environmental groups say. Rather, governments must step in and enforce legally binding regulations on labour, environmental, and other protections. ''A new approach is needed,'' says Pieter van der Gaag, executive director of the Northern Alliance for Sustainability, a Netherlands-based coalition of European and US groups. ''The gap between words and actions still seems to be large."

US environmentalists, for example, are lobbying to have domestic environmental regulations extended to cover US firms' overseas operations. They also want legislation that would hold companies' feet to the fire and punish them for violations. Rep. Cynthia McKinney, a Democrat from Georgia, is promoting a Corporate Code of Conduct Act that would withhold government incentives from companies found in violation of the voluntary standards to which they subscribe. The International Chamber of Commerce counts more than forty codes of conduct designed to govern the activities of global corporations. These include the Global Sullivan Principles, the UN Global Compact, the Global Reporting Initiative, and the Organisation for Economic Cooperation and Development (OECD) guidelines on Multinational Enterprises.

Virtually none of these efforts include mechanisms to hold companies accountable when they fail to comply, critics say. Even some corporations complain the codes can be vague and confusing.

Thomas Delfgaauw, vice president of Shell International Ltd's sustainable development programme, says the oil company supports many codes but wonders if it is time to stop developing even more voluntary mechanisms. ''How does business deal with this plethora of codes?'' he asks. Compounding the problem, ''all these codes are mainly words when the government spends money on projects that directly contradict the guidelines,'' says van der Gaag.

The wealthy nations' Organisation for Economic Cooperation and Development, for example, in 1976 became one of the first official bodies to pass voluntary corporate guidelines on labour, the environment, corruption and human rights. The guidelines have been periodically updated and stand apart from most others because they include arrangements to investigate and punish violators. Nevertheless, some OECD governments themselves have underwritten projects targeted by critics as environmentally and politically damaging - China's Three Gorges Dam, for example - through state export credit and investment insurance agencies.

In January 1999, UN Secretary-General Kofi Annan challenged business leaders to enact nine core principles enshrined in the UN Global Compact, including labor and environmental protections. Many large companies responded, among them Procter & Gamble and DaimlerChrysler. Critics, however, say there is no assurance that the companies uphold the compact's principles. Indeed, some go so far as to suggest the effort mainly benefits the companies, whose reputations gain sparkle from association with the UN logo. ''The list of corporations involved in the Global Compact reads like a who's who of environmental culprits,'' says Joshua Karliner, executive director of the Transnational Resource and Action Centre, a California-based non-governmental organisation. Global Compact partners include Shell, which stands accused of reckless pollution and collusion with military dictators in Nigeria, and BP Amoco, assailed for drilling for oil in the Arctic.

Activists say imposing national laws on the companies' operations overseas could prevent such conduct by US firms. Polls conducted in recent years show growing public support for the idea. But for executives, the prospect amounts to a legal and regulatory can of worms being opened - with costly consequences and the risk that companies will be held liable for the misdeeds of outside suppliers and contractors.

''God help us if individual governments take different regulatory action regarding global corporate responsibility,'' says Shell International's Delfgaauw. ''That is the worst possible nightmare that can happen to a multinational company.''