26th May 2011

The Organization for Economic Cooperation and Development (OECD) has agreed new guidelines to promote more responsible business conduct by multinational enterprises, and a second set of guidance to limit the use of conflict minerals. Forty-two countries will commit to new, tougher standards of corporate behaviour in the updated Guidelines for Multinational Enterprises: the 34 OECD countries plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. The updated Guidelines include new recommendations on human rights abuse and company responsibility for their supply chains, making them the first inter-governmental agreement to target conflict minerals.

The Guidelines establish that firms should respect human rights in every country in which they operate. Companies should also respect environmental and labour standards, for example, and have appropriate due diligence processes in place to ensure this happens. These include issues such as paying decent wages, combating bribe solicitation and extortion, and the promotion of sustainable consumption.

“The business community shares responsibility for restoring growth and trust in markets,” said OECD Secretary-General Angel Gurría. “These guidelines will help the private sector grow their businesses responsibly by promoting human rights and boosting social development around the world.”

Ministers from adhering countries will also agree to a Recommendation designed to combat the illicit trade in minerals that finance armed conflict.

Illegal exploitation of natural resources in fragile African states has been fueling conflict across the region for decades. While data is scarce, it is estimated that up to 80% of minerals in some of the worst-affected zones may be smuggled out. The illegal trade stokes conflict, boosts crime and corruption, finances international terrorism and blocks economic and social development.

Recently in the U.S., the Frank-Dodd legislation was passed which requires U.S. companies to declare where their product supplies are sourced from. Critics are divided on the worth of that legislation with some saying it does not go far enough and others saying that the resultant defacto boycott of Congolese minerals will be disasterous for legitimate miners in the region. In Europe, two large NGO networks (EURAC and Fatal Transactions) have recently called on the EU to bring in legislation that addresses the trade in conflict minerals but that takes into account the negative economic affect on legitimate business.

The OECD recommendations proposes how companies can identify and better manage risks throughout the supply chain, from local exporters and mineral processors to the manufacturing and brand-name companies that use these minerals in their products.

The OECD supply chain guidelines can be found here