Report on EU standards for European enterprises operating in developing countries: towards a European code of conduct

Following a request by the Conference of Committee Chairmen of 10 March 1998, the President of Parliament announced at the sitting of 3 April 1998 that the Committee on Development and Cooperation had been authorised to draw up a report on EU standards for European Enterprises operating in developing countries.

Questions addressed:

• What are the existing agreements?: UN Centre for Transnational Corporations; ILO and OECD standards; EU codes of conduct; voluntary codes of practice adopted by companies and industry.
• To what extent are these codes implemented?
• Why should Europe act?
• What are the alternative ways forward?: Self-regulation; Action within international institutions; legal jurisdiction by European courts; new European legislation.

Findings:

• The ILO and OECD codes are the most authoritative internationally agreed definitions of responsible behaviour for multinational companies.
• Southern governments are sometimes the most vehemently opposed to social protection measures in international agreements, seeing them as either imperialistic or protectionist.
• The content of a code, the process by which it is determined and implemented, must involve and empower those in developing countries who are covered by it.
• There is a powerful case to answer that the EU should take a more active role in standard-setting for the conduct of its enterprises in developing countries.
• There are arguments for a binding regulatory system in which countries would commit themselves to withhold or withdraw registration in their country, and refuse to allow access to their markets, for any enterprise which breached certain social and environmental standards. There are also wider arguments for a social clause in trade and investment agreements.
• It can be argued that, rather than setting up special mechanisms for highlighting abuse of internationally agreed standards, such abuses should be able to be dealt with through the normal jurisdiction of the courts.
• It is further suggested that European legislation for competition and state aids be revised to ensure European-based companies be made accountable for complying with core standards in their operations overseas.

This report suggests that the approaches discussed are not alternatives, but part of a complementary set of actions which can contribute to an evolutionary approach to the whole subject of standard-setting for MNEs. It argues that voluntary regulation can do a great deal to promote better practice, but the worst offences will only ever be prevented through national and international laws and binding rules. Such systems can operate in parallel: binding rules to ensure minimum standards and voluntary initiatives to promote higher standards.

Recommendations:

• The creation of a Model European Code of Conduct, which should contribute to greater standardisation of voluntary codes of conduct, based on international standards: this would allow the impact of codes of conduct to spread beyond a limited number of companies with the necessary motivation and capacity to develop their own systems. It would provide the framework of reference for external monitoring and verification and could be based upon already existing international instruments.
• The establishment of a European Monitoring Platform, including provisions on complaint procedures and remedial action: this would contribute to granting workers anywhere in the world protection from oppression, abuse and exploitation and work towards socially and environmentally sustainable operation where national laws are inadequate or not enforced and international conventions are not ratified.