Rethinking MSIs: Regulating Responsible Business Conduct

By Manon Wolfkamp, David Ollivier de Leth and Mariëtte van Huijstee

Between 2014 and 2019, Dutch businesses in garments and textile, banking, forestry, gold, food products, insurance, pension funds, metals, floriculture, and natural stones all entered into government-induced agreements to encourage responsible business practice. Over five years, eleven such agreements were completed. These multi-stakeholder, voluntary, sector level Responsible Business Conduct (RBC) agreements have been cornerstones of the Dutch government’s method to incentivize companies to respect human rights and the environment for years, and can be regarded as government-induced multi-stakeholder initiatives (MSIs). Inviting companies and business associations in high human rights risk sectors to enter into negotiations with civil society organizations (CSOs) and the government, RBC agreements aim to encourage companies to develop their own policies for promoting responsible business conduct. But are they effective?

The present Dutch governments’ coalition agreement agreed to evaluate this policy, which was executed by KIT Institute over the past few months and published in July 2020. The long-awaited evaluation shows that the Dutch policy promoting responsible business conduct by means of RBC agreements is insufficient.

The evaluation draws critical conclusions: only 1.6 percent of the companies active in high-risk sectors participate directly in the agreements. In addition, some sectors, such as the oil and gas sector, refuse to enter into any agreement at all. In other sectors, the share of companies reached is moderate (such as clothing and textiles and natural stone) to low (horticulture, metal). Substantial progress in the implementation of due diligence by participating companies was observed in only two out of 11 evaluated agreements (namely in clothing and textile and banking).

It is also noteworthy that various agreements lack independent monitoring (for example, food and wood), which creates a risk of greenwashing. Furthermore, there is no clear minimum standard that the agreements must meet. Commitments of companies in two RBC agreements are actually not in line with the international normative framework (wood and vegetable proteins). The evaluation also shows that the role of the Dutch government is inadequate. Especially during the negotiation phase, the business sector is in the lead: only the private sector can initiate negotiations, and critical CSOs can be replaced by more cooperative organisations in order to reach an agreement. The government can fix this imbalance by taking on a greater role itself during the negotiations, for example by not financing agreements that do not meet a set minimum standard.

The evaluation is positive about the role of the covenants as a means to connect companies to NGOs and trade unions, to facilitate exchanges and to develop a harmonized approach to due diligence.

When it comes to realising positive effects or reducing negative impacts on adversely affected rights holders in the targeted sectors, the KIT evaluation concludes: “Across the RBC agreements, progress on due diligence is largely too limited to identify concrete impacts”( p.8) and “Overall, we have not observed a reduction in negative impacts in global value chains as a result of the RBC agreements” (p.9). Furthermore, the research reports unresolved differences in expectations between companies and CSOs on the extent to which RBC agreements should function as platforms to hold companies to account.

All in all, the outcomes of the KIT evaluation show great similarity with the outcomes of MSI Integrity’s meta-analysis of MSI’s titled Not Fit-For-Purpose published in July, as is exemplified by this picture taken from the report: What are appropriate roles for MSIs?

Looking ahead, the KIT evaluation recommends the Dutch government to consider introducing legislation that requires compliance with the Organisation for Economic Co-operation and Development (OECD) guidelines. This would address several issues that emerge from the evaluation: legislation gives companies a much stronger incentive to comply with the international normative framework than is currently the case, and it sets a clear standard that applies to all companies.

Legislation also ensures that the “free rider” problem is addressed, so that companies that are committed to compliance with international norms have no competitive disadvantage compared to companies that do not.

Legislation and a renewed MSI policy could reinforce each other in a smart mix of measures to incentivise responsible business conduct. Thanks to such legislation, the RBC agreements might become an attractive instrument for many more companies and sectors who want to implement due diligence obligations.

Legislation also provides a clear standard, which might improve the quality of the agreements. The Netherlands can take a leading position in Europe by renewing its RBC policy to complement the introduction of mandatory human rights and environmental due diligence legislation with an improved MSI policy.

The Not Fit-for-Purpose report and the KIT evaluation clearly highlight that a company’s participation in an MSI should not be considered a seal of compliance with the international normative framework. MSIs can help companies learn about their risks and responsibilities in dialogue with CSOs and rights holders, increase their leverage by collaborating in a sector and create synergy and scale effects. However, given the clear limitations of MSIs in protecting human rights, they should not be considered a sufficient means of discharging due diligence obligations.

If the purpose is to get all companies to conduct business responsibly, what is needed is the enforceable obligation for companies to conduct human rights and environmental due diligence in line with the normative framework. Such due diligence is not only focussed on identifying risks and preventing them from materializing, but also includes addressing harms that have occurred, including remedying harms companies have caused or contributed to (see step 6 of the OECD due diligence guidance). Enforcement of such an obligation by authorities should happen at the individual company level, making participation in MSIs a potential means but not an ‘ends’ for companies to comply with their obligation to conduct business responsibly.

This is the second in a joint blog series by the International Human Rights Clinic and MSI Integrity. The series will critically examine the role and value of MSIs in business and human rights; it coincides with a new report, Not Fit-For-Purpose, which compiles experience and insights over the last decade and explores cross-cutting trends and lessons learned about MSIs, as a field, from a human rights perspective. Read other blogs in the series here.

Zebras Unite: Pivot to People: It’s Time to Build the New Economy

“This month, researchers at MSI Integrity released “Not-Fit-For-Purpose,” their final report about these practices, and the culmination of a decade of analysis. The verdict? This experiment failed. Behind the external public relations campaign, power consolidated, and rights holders became disenfranchised. Not only did these efforts fail to address the root causes of abuse, but they cloaked and compounded them. The key takeaway: just because more people are invited to a company’s table doesn’t mean their voices are heeded, or their interests promoted. We are navigating a nearly identical bargain in big tech: a surge of voluntary, preemptive, symbolic gestures,” writes Zebras Unite.

Read Zebras Unite’s full “Pivot to People” proposal, which cited our latest report Not Fit-For-Purpose, here.

Executive Director of MSI Integrity, Amelia Evans, discusses new report on Radio FM4

“We need to shift away from this reliance on voluntary initiatives—period—and actually start to demand that our governments do what they’re supposed to do, which is to regulate—at the local, national and international levels—corporations,” says Amelia Evans, Executive Director of MSI Integrity, on Radio FM4’s You’re at Home, Baby! with Christian Cummins.

Listen to the full interview broadcast here.

Rethinking MSIs: Binding Brands to Create Change

by Christie Miedema, Campaign and outreach coordinator, Clean Clothes Campaign

When the COVID19 pandemic hit, garment brands and retailers around the world cancelled their orders. What was to them a logical risk and cost reducing measure, meant destitution for millions of garment workers around the world. Public outcry over corporate behavior led a range of brands to quickly mend their ways. However, the question remains why public outcry was even needed. Brands have spent years promoting programs they claim guarantee protection for their workers. So why couldn’t they rely on those?

In the 1970s and 1980s garment brands started to outsource production abroad. This was a step that seemed to have only advantages: lower prices, lax labor regulation, less risk. Reduced to a mere client of garment factories elsewhere in the world, garment brands and retailers could wash their hands of any responsibility for workers – or so they thought.

Enter the rules, but set and monitored by whom?

Following a series of exposés in the 1990s documenting horrific conditions in sweatshops, brands took action to curate codes of conduct and imposed them on supplier factories. This progressed to the emergence of a social auditing industry to oversee suppliers’ compliance, as well as social compliance initiatives to synchronize and oversee these codes, often in the form of voluntary, multi-stakeholder initiatives (MSIs). This all prompts the question: given the tools brands have created to regulate working conditions in the garment industry, why are workers being left to suffer during the pandemic?

The answer lies within the mechanism of these voluntary MSIs. Behind the façade of battling exploitation, MSIs have become little more than a fig leaf for fashion; a tool enabling brands to dictate the rules, while shielding the industry against responsibility and criticism, rather than protecting the workers.

MSIs, which come in different shades of brand-friendliness and ambition, have certainly played a role in normalizing ideas of supply chain responsibility, as well as facilitating discussions between brands, unions, NGOs and other stakeholders. However, as a recent report on supply chain transparency published by the Transparency Pledge Coalition has shown, many MSIs are no longer taking the lead in moving the more unwilling brands towards stronger politics, but are instead surpassed left and right by members who voluntarily go beyond what the MSIs prescribe. Only one MSI was willing to take the challenge of the Transparency Pledge coalition to actually take the lead and make transparency a membership requirement. Another recent report shows that a “soft measure” such as due diligence reporting, remains wanting. And although MSIs’ complaint mechanisms still remain useful avenues for workers and labor rights activists to appeal to if a member brand is unresponsive to resolve a case of labor rights violations, which continues to be tried again and again, the same limitations apply: the outcome is not binding.

Voluntary has failed, binding is the way forward

It is seven years after the Rana Plaza collapse in Bangladesh, whose factories were audited without noticing the death traps they posed; and eight years after the Ali Enterprises fire, certified as SA8000 compliant only weeks before over 250 workers got trapped behind closed exits and barred windows. By now, it must be clear to all that we have to leave the era of voluntary self-monitoring behind us. In April, Commissioner for Justice Didier Reynders announced the EU will be working towards mandatory due diligence legislation. Other countries, such as France and the Netherlands, already have legislation in place that holds companies to account for their supply chains. With these legislative initiatives, governments are showing businesses that the respect of human rights can no longer be a question of voluntary corporate social responsibility but is an obligation when doing business.

Even though legislation is the crucial next step, it would be too easy for brands and retailers to just wait for that. We have known for years that binding works and that there are ways to introduce it into how stakeholders change the industry together. Weeks after the Rana Plaza collapse, unions and brands signed a binding agreement to make factories in Bangladesh safe. The Accord on Fire and Building Safety in Bangladesh has made factories safer for over 2 million workers and provides workers a credible and transparent avenue to access remedy, which has prevented workers from having to enter unsafe factories and protects them against retaliation if they report safety violations. The program works, because member brands and retailers put their signature under a binding contract with extensive enforcement procedures that have eventually led to court cases against non-compliant brands. This has kept other brands in line and led to very real results for workers. The current Accord agreement is valid until June 2021, which makes it of extreme importance that a new, this time more international, binding agreement is negotiated that could roll out similar safety programs in other countries where unions have shown interest, such as Pakistan.

The Accord is not a mere anomaly in an industry still dominated by voluntary cooperation. Indonesia has had a binding protocol on freedom of association signed by sportswear brands, suppliers and unions since 2011. Last year in Lesotho, brands and unions signed a binding agreement to address gender based violence together. Last month, labor rights organizations presented model clauses for arbitration, to facilitate the creation of more binding agreements. We need regulation on government and international levels, but brands, retailers, and unions do not have to wait for that.

Real solutions

A paradigm shift from brands and retailers is needed, to recognize that lip service is not enough. Too often brands still give in to the reflex to hide behind an auditor, an MSI or even a binding agreement. When we wrote to brands asking them to speak up for higher wages in Bangladesh, many of them responded that they signed the Bangladesh Accord, apparently believing that by signing one agreement they were off the hook on other issues as well. It is paramount to realize that no initiative is a “get out of jail free” card. They cannot be shields against criticism or real responsibility. We have to rethink what MSI’s actually contribute to workers’ rights. Stakeholder cooperation to improve labor rights can be meaningful only if the agreement is concrete, the implementation is transparent, and the commitments are binding. If we truly want to leave the lawlessness of early globalization behind us, concrete binding regulations and agreements making due diligence mandatory are the way forward. The time to act is now.

This is the first in a joint blog series by the International Human Rights Clinic and MSI Integrity. The series will critically examine the role and value of MSIs in business and human rights; it coincides with a new report, Not Fit-For-Purpose, which compiles experience and insights over the last decade and explores cross-cutting trends and lessons learned about MSIs, as a field, from a human rights perspective. Read the introduction to the series by Amelia Evans and Tyler Giannini now on our blog.

Coalition of Immokalee Workers: New Study Confirms: All social responsibility programs NOT created equal!

“This exciting new study underscores the unprecedented effectiveness of the the Fair Food Program, and the urgency of the need to expand the broader WSR model to millions of workers in industries across the globe.  The evidence is clear, yet far too many corporations remain slow to recognize the model’s unique efficacy, and continue to partner with, and invest in, the dozens of demonstrably ineffective MSI programs in agriculture, apparel, and other key industries,” writes the Coalition of Immokalee Workers.

Read the full post about our latest report, Not Fit-For-Purpose, here.

Rethinking Multi-Stakeholder Initiatives Blog Series

by Tyler Giannini and Amelia Evans

Ten years ago, our clinic was asked to figure out a way to evaluate whether multi-stakeholder initiatives—or MSIs for short—were helping to advance human rights or whether in fact they were doing precisely the opposite.

MSIs are voluntary governance efforts that bring together corporations, civil society, academics, and in some cases governments and rights holders themselves to (privately) govern thorny human rights issues, and by 2010, they had proliferated in the business and human rights field.

The allure was (and still is) obvious. If we bring the right players together, they can learn from each other and solve a given problem by setting up a democratic institution that can prevent future abuses and sanction violators, and governments will not have to pass hard laws and unnecessary regulations. The potential flaws were (and remain) just as obvious—the power imbalances amongst the players are acute and asking industry to voluntarily give up power and self-regulate is a fool’s errand that puts the fox in charge of the chicken coop.

Thus, we set out to look at which way the institutions had gone—had they filled their promise or had the inherent flaws gotten the better of them? Little to no systematic work on the question had been done at the time, and what started as a one-semester project turned into a non-profit—MSI Integrity—and a decade of work.

Today, MSI integrity is publishing its new report, entitled ”Not Fit for Purpose,” which compiles its experience and insights over the last decade. The report explores cross-cutting trends and lessons learned about MSIs, as a field, from a human rights perspective. MSI Integrity’s assessment is clear: “While MSIs can be important and necessary venues for learning, dialogue, and trust-building between corporations and other stakeholders—which can sometimes lead to positive rights outcomes—they should not be relied upon for the protection of human rights. They are simply not fit for this purpose.

To coincide with the report’s release and to commemorate ten years of engagement, our Clinic and MSI Integrity are partnering to launch a blog series to critically examine the role and value of MSIs in business and human rights. This series is set up so that contributors will be in dialogue with one another on a central question: do we need to rethink the role of MSIs? For us, underpinning this question is a more fundamental one: are MSIs working for rights holders? Some contributors will examine the landscape in which MSIs operate, while others will offer critical reflections or consider ways forward for these institutions–or for alternative ones (which you are invited to explore further during our live-illustrated discussion exploring worker-driven governance arrangements on July 30).

To kick-off this series, we pose three critical considerations that we suspect might recur (as they have in the past) when contributors ask whether MSIs are working for rights holders and if their role and place in human rights needs to be considered.

First, where and how is power situated within MSIs? Alongside the question how power is situated, comes the question of who controls that power and, with it, the institution. In the context of business and human rights, on one side of the spectrum, there are arrangements where industry controls the entire process, such as an industry association; and then there are community-controlled governance regimes, such as worker-controlled bodies. MSIs were supposed to be somewhere in the middle of the spectrum both in terms of who controlled the institution and in terms of who benefited. Ten years ago, the questions of power and where on the spectrum did MSIs actually lie were front and center in debates—and that remains the case today.

Second, MSIs raise a host of questions around notions of accountability and democratic governance. When you first engage with the term “MSIs,” it may connote promises of inclusion, equality, representative governance, and the rule of law. Indeed, the governance arrangement has the tenor of a social contract in democratic societies (though here between private actors rather than between the state and its citizens.) For example, when we think of the rule of law, democratic principles like “no one is above the law” come to mind. That translates here to be the norm that “no corporation is above the law.” Have MSIs upheld such norms? Do MSIs need to be held to such norms?

Finally, there are questions about what value MSIs provide and how that is provided. In other words, who are they good for and who benefits most from these institutions? Are they tools of accountability and compliance, or are they more limited in the value add–to encouraging better practices, fostering learning, and giving stakeholders opportunities to convene and build relationships that would not otherwise develop? Depending on what value they bring, what does that mean for the promise of tackling human rights issues created by businesses?

After 10 years, to us it has become alarmingly clear that MSIs are not working for rights holders. The power in MSIs lies predominantly with corporate actors, not with rights holders. Thus, while the name “multi-stakeholder” persists, in reality these institutions work best not for multiple stakeholders, but for one stakeholder: the corporation. In this way, MSIs should be thought of as corporate associations with some representation of other actors, rather than as institutions that change the power dynamics in favor of protecting rights holders. In other words, the fox has gained the upper hand in managing the chicken coop.

(Tyler will have more to say on that in a blog later on in the series when he gives his take on how the fox gained the upper hand).

Tyler Giannini is the board treasurer and co-founder of MSI Integrity. He is a Clinical Professor of Law and directs the Human Rights Program and International Human Rights Clinic at Harvard Law School.

Amelia Evans is the executive director and co-founder of MSI Integrity. She is an international human rights lawyer and an Open Society Fellow on Economic Inequality.

BHRRC: MSI Integrity report finds corporate oversight initiatives fail to detect & remedy abuses; calls for more effective regulation of corporations

“The Institute for Multi-Stakeholder Initiative Integrity (MSI Integrity) […] released a report concluding that global efforts by some of the world’s largest multinational corporations, governments, and civil society organizations have failed in their goal of protecting against human rights abuses by corporations,” writes the Business & Human Rights Resource Centre.

See the Business & Human Rights Resource Centre’s full write-up of our new report, Not Fit-For-Purpose, here.

The Guardian: Ethical labels not fit for purpose, report warns consumers

“The study of 40 global voluntary initiatives, including emblematic on-pack labelling schemes such as the Forest Stewardship Council (FSC) and Fairtrade International, identifies multiple failures in what it refers to as a ‘grand experiment’ in corporate accountability,” writes Oliver Balch in The Guardian.

Read The Guardian‘s full coverage of MSI Integrity’s new report, Not Fit-For-Purpose, here.

JULY 30 EVENT: Beyond Business-As-Usual: Lessons from Workers, Communities and the Failed Experiment of Multi-Stakeholder Initiatives

For the past three decades, the corporate accountability and business and human rights communities have been in a process of experimentation, searching for interventions that protect people and the environment from corporate abuse. From treaties and due diligence, to naming-and-shaming and direct engagement, the efforts underway span far and wide.

MSI Integrity’s recent report examines one such experiment—international standard-setting multi-stakeholder initiatives (MSIs)—and provides a cautionary tale to guide present and future processes. MSIs emerged in the 1990s as an exciting proposition: civil society organizations would work alongside businesses to design novel systems of multi-stakeholder governance that aimed to protect rights holders from corporate abuse. Yet, after a decade of research and analysis, MSI Integrity has concluded that this experiment has failed in its goal of effectively protecting rights, and in its place, human rights initiatives and businesses with worker/community-centered governance and ownership models must become the norm to root out abuse.

This discussion will unpack the lessons from the failed MSI experiment and explore alternative business and human rights intervention models developed by rights holders and workers themselves. What makes them different and what considerations are prioritized? What are the impediments and obstacles for these initiatives, and how might they scale and grow? How can we promote more people-powered solutions to challenging corporate power?

On July 30, 10–11am ET, join the International Human Rights Clinic at Harvard Law School and MSI Integrity for a discussion with workers and their allies from the Coalition of Immokalee Workers, a worker-based human rights organization, as well as two members of the wider solidarity/new economy movement: Obran, an industrial conglomerate of worker-owned cooperatives, and Equal Exchange, a Fairtade worker co-op. The discussion will be facilitated by Krizna Gomez, Director of Programs at JustLabs, and live-illustrated by Sita Magnuson, Experience Designer & Educator at dpict.

Speakers will include:

– Joseph Cureton, Chief Coordinating Officer at Obran Cooperative
– Dr. Surya Deva, Member, UN Working Group on Business and Human Rights
– Amelia Evans, Executive Director, MSI Integrity
– Daniel Fireside, Capital Coordinator, Equal Exchange
– Tyler Giannini, Co-Director and Clinical Professor, International Human Rights Clinic and Human Rights Program, Harvard Law School
– Gerardo Reyes Chavez, a key leader from the Coalition of Immokalee Workers

Register for the event here.