Rethinking MSIs: MSIs and the Search to Cure the Global Governance Gap

by Judy Gearhart

The phenomenon of multi-stakeholder initiatives (MSIs) has spread rapidly across the globe since the 1990s, with governments and multinational corporations (MNCs) alike promoting them as the new solution to the global governance gap even before they were fully road-tested. Civil society organizations (CSOs) saw them as a way to engage MNCs on the environmental and social problems exacerbated by global trade. MNCs saw a means to inoculate their global reputations from the risks of doing business in places where human rights scandals were greater than at home. Just as MNC staff required vaccines against tropical diseases before departing, the corporation needed to guard against the risk of coming into contact with the plagues of corrupt governments and abusive employers.

Yet MSIs, at least those focused on the impact of global supply chains, were only set up to address the symptoms, not the cause of these plagues. Most failed to recognize how MNCs were actually fueling corruption and employer abuse by constantly demanding lower prices and faster production times. Thus, the global governance gap grew wider as MNCs diversified their supply chains and effectively played one producer country against the other. When the scandals multiplied and children were found making clothing for Wal-Mart in Honduras or soccer balls for adidas and Nike in Pakistan, global brands sought help from MSIs.

The majority of MSIs are set up as public charities and their goals express the intent to protect a public good. This includes MSIs working with public sector institutions to improve accountability such as the Extractive Industries Transparency Initiative (EITI), those covering workers’ rights such as Social Accountability International or the Fair Labor Association, and environmentally focused groups such as Rainforest Alliance and Marine Stewardship Council. What nearly all of them have in common is a mission to address a lack of regulation or the weak legal protections of national resources, the environment, or workers. Yet MSIs focused on supply-chain monitoring—as distinct from MSIs engaging the public sector—have been largely silent or disengaged on advocacy for legal reforms and rule of law, often turning a blind eye as member MNCs’ suppliers pursue multi-year legal battles against whistle-blowers or worker organizers.

The recently released MSI Integrity report, Not Fit for Purpose, tracks the uptake of MSIs as a reference point for addressing gaps in global governance. MSI Integrity cites how the UN Guiding Principles (UNGPs) on Business and Human Rights extended legitimacy to MSIs by directly referencing them, and the 23 countries that have referred to MSIs in their National Action Plans for implementing the UNGPs. Yet most MSIs are a weak stopgap for failing legal protections. They are also poor exemplars of good governance given the extent to which they have eschewed the key elements of transparency, accountability, and participation.

Not Fit for Purpose could have distinguished more among distinct MSI approaches, e.g. supply-chain versus public governance-focused MSIs, and those treating symptoms through risk mitigation among suppliers versus Fairtrade’s work to gain more direct market access for small farmers. The report is very helpful though, especially in identifying patterns and quantifying how the majority of MSIs fall short on models of good governance:

  • Transparency: Less than one-third (as of July 20, 2019) of MSIs reviewed published monitoring reports and suspension decisions.
  • Accountability: 25% of those reviewed do not publicly prohibit a conflict of interest in grievance handling and only four in forty provide a complete list of complaints, their status, and outcomes.
  • Participation: Only 13% of MSIs include affected populations in their governing bodies, and none have a majority of rights holders on their boards.

Given the extent to which they have become embedded in multilateral and government efforts, MSIs may be around for a long time. So it’s worth calling out reforms needed. MSIs should be seen as a first-wave experiment in partially addressing the global governance gap. To see them as a cure, however, is to lose sight of the need to advance legal reforms and address the ways MNCs continue to create the very problems the supply-chain MSIs purport to fix.

Potentially the greatest contribution of MSIs has been to get MNCs to acknowledge they needed to address the problems in their supply chains and to reveal (through multiple failures) how ineffective voluntary compliance programs are. Also, the idea that solutions to intractable problems are more effective when crafted by people with diverse perspectives is still generally a good one—provided everyone has an equal voice.

Few rights holders have a seat at the table, however, because most MSIs are global in scope and they use CSOs as stand-in stakeholders. This is the fundamental flaw of MSIs: powerful actors are engaged in their design without ever being asked to cede any power, sit down with those affected, or submit to legal requirements. Rather than serve to improve rule of law and good governance, MSIs establish internal grievance systems that rarely include a wholly independent, external review, and remediation is decided under cover of confidentiality agreements. The result is the workers or communities the MSI aims to protect are marginalized from problem-solving and unable to build power.

MSIs’ failure to address the power imbalance between rights holders and MNCs has fueled growing demands for Worker-driven Social Responsibility (WSR) or enforceable brand agreements (EBAs)—models that are in effect new forms of collective bargaining designed to negotiate a contractual agreement between global brands and workers in their supply chain. These agreements have demonstrated an almost immediate positive impact, improving factory safety in the case of the Accord for Fire and Building Safety in Bangladesh or wages in the case of the Coalition for Immokalee Workers, and dramatically improved access to remedy and effective grievance handling for the workers covered by them. Although they include MNCs and workers’ organizations, these programs should not be confused with the MSIs discussed above. These are programs based on a binding agreement that was negotiated, much in the way collective bargaining agreements are negotiated. They are designed to address problems, secure benefits, and implement solutions identified by and developed with workers. Although these programs cannot replace the need for legally protected trade union representation, they are profoundly different from MSIs. Supply-chain MSIs work with MNCs to develop scalable, global supply-chain coverage—a design approach that makes meaningful participation by workers and other rights holders virtually impossible.

This raises the question as to how WSR or EBAs can scale up and benefit more people, while still ensuring the affected people are at the center of the solution. Driving to a global scale does not need to be the main goal, however, because the impact of these programs goes beyond workers directly benefiting to advance the pillars of good governance. First, they ensure there is a ground game; rights holders are able to join together to advance their views and are supported by basic legal protections for trade union organizers and other civil society freedoms. Second, they focus on rights holders’ access to legal remedy, both locally so that rights holders can speak out without fear of being sued and contractually so that MNCs don’t walk away at the first sign of a challenge. Third, there needs to be transparency so that participating MNCs are recognized for their commitment and their impacts are shared widely, including with local authorities, so they can be used to help set new standards of practice for other rights holders seeking remedy.

In short, if we are going to close the global governance gap, we need to support initiatives that advance effective legal remedies and models of good governance. Anything less is a distraction, like a painkiller that works by numbing your senses rather than alleviating the pain. The global governance gap needs a cure that addresses the root cause of the problem.

Judy Gearhart is a visiting scholar at the Accountability Research Center at American University and an adjunct professor at Columbia University. Previously she served nine years as the executive director at the International Labor Rights Forum and twelve as the programs director at Social Accountability International.

This is the sixth contribution 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.

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