A review of 40 standard-setting multi-stakeholder initiatives shows that such initiatives can play the role of bringing stakeholders together to influence norms and laws, but are failing to strengthen corporate accountability, transparency and access to remedy for human rights impacts (MSI Integrity)

Week of 20 July 2020

A review of 40 standard-setting multi-stakeholder initiatives shows that such initiatives can play the role of bringing stakeholders together to influence norms and laws, but are failing to strengthen corporate accountability, transparency and access to remedy for human rights impacts (MSI Integrity)

The Institute for Multi-Stakeholder Initiative Integrity (MSI Integrity) released its report Not Fit-for-Purpose: The Grand Experiment of Multi-Stakeholder Initiatives in Corporate Accountability, Human Rights and Global Governance following a decade of analysis on “whether, when and how multi-stakeholder [corporate responsibility] initiatives protect and promote human rights.”  The report concludes that “MSIs are not effective tools for holding corporations accountable for abuses, protecting rights holders against human rights violations, or providing survivors and victims with access to remedy.”

MSI Integrity examined 40 standard-setting multi-stakeholder initiatives (MSIs) in 7 sectors and categories across the globe (agriculture, forestry & fishing; consumer goods; consumer services; industrials; mining & energy; technology, and all industry). MSI Integrity relies on stakeholder interviews, research and analysis of MSI procedures and policies, observation of MSI meetings, individual MSI assessments, and public stakeholder engagement through panels and workshops.

The report identifies six core insights into the effectiveness of MSIs:

1. Influence: “MSIs have been influential as human rights tools, but that influence, along with their credibility, is waning.”

    • When MSIs began proliferating in the 1990s and 2000s as a response to business and human rights crises, they were championed by multilateral organizations, civil society organizations and companies alike, and gained significant influence as a result.
    • However, “growing skepticism among some civil society actors has resulted in a retreat from MSIs, allowing corporate interests to increasingly dominate the field” and resulting in the loss of their value as a space for civil society organizations to hold companies accountable.

2. Stakeholder Participation: “MSIs entrench corporate power by failing to include rights holders and by preventing civil society from acting as an agent of change.”

    • MSI Integrity observes that “in practice, MSIs generally exclude rights holders from governance and implementation processes, relying instead on CSOs to counterbalance corporate power.” Only 13% of the initiatives reviewed by MSI Integrity “include affected populations in their governing bodies, and none have a majority of rights holders on their boards.”
    • The report concludes that most MSIs are not adequately reflecting the perspectives of rightsholders in the governance, or the design and implementation of monitoring, compliance and remedial mechanisms. 
    • Further, other stakeholders, such as civil society organizations—particularly those from developing countries—may be limited from meaningfully participating in MSIs due to a lack of financial or technical resources.

3. Standards & Scope: “Many MSIs adopt weak or narrow standards which risk creating a misperception that abuses are being effectively addressed or that overlook the root causes of abuse.”

    • MSI Integrity finds that many MSIs fail to develop strong standards that meet their obligations under international human rights laws and norms.
    • In some cases, MSIs shift the burden of action by “set[ting] standards that assign responsibility to less-resourced actors—mainly producers and entities in the Global South—while ignoring more powerful actors in the Global North.” The report finds that this approach can fail to address the root causes of issues that often arise many layers down in the supply chains of large corporations. For example:
      • Raw materials certified at the point of origin, like palm oil, wood or coffee, may be associated with human rights abuses after the materials pass into refining and processing stages;
      • Only 2 out of 8 supply-chain MSIs analyzed by the report address the need for responsible purchasing practices by corporations.

4. Monitoring & Compliance: “MSIs employ inadequate methods to detect human rights abuses and uphold standards.”

    • The report finds that, while many MSIs put resources towards developing human rights standards, few of these have “developed effective mechanisms for detecting abuses, enforcing compliance with those standards, or transparently disclosing levels of compliance.”
    • For example, “in reviewing the monitoring procedures of the 10 newest and 10 oldest MSIs, [MSI Integrity] found that no single MSI had procedural requirements that address the spectrum of issues rights holders may face when attempting to speak out about abuses, such as offering protection against reprisals or ensuring evaluators speak local languages/use an independent interpreter.”
    • The report underscores that this is particularly concerning in light of the “many well-documented failures to detect violations that have resulted in harm or abuse, such as audited factories collapsing or catching fire, or the documentation of severe labor abuses in farms or factories that have been certified by MSIs.”

5. Remedy: “MSIs are not designed to provide rights holders with access to effective remedy.”

    • One-third of the MSIs analyzed by the report do not have a grievance mechanism. For those MSIs that do have a grievance mechanism, MSI Integrity reports that the majority of these do not meet “internationally recognized criteria for effective access to remedy.”
    • For example:
      • Fewer than half of the 27 MSIs with a grievance mechanism provide access “in a language other than English, and even fewer MSIs offer translation or require that their members publicize the existence of the MSI’s grievance mechanism to rights holders.”
      • Only 6 MSIs offer formal assistance to rightsholders to file a grievance, such as support in preparing a complaint or an advocate to help navigate the process. 
      • Seven MSIs publicly share the outcomes of grievances; only 4 MSIs share the total number of grievances received and the number of those grievances resolved.
      • Remedies are often directed from the top, with little input from impacted rights holders: “Only 3 MSIs have procedures that specifically require input from harmed rights holders when determining the appropriate remedy.”

6. Impact: “There is little evidence that MSIs are meaningfully protecting rights holders or closing governance gaps.”

    • MSI Integrity finds that many MSIs do not share evidence of their impacts on people and communities, making it difficult to tell whether a particular MSI has been effective or where it has gaps: “Only 5 of the 20 oldest MSIs have conducted any direct measurement of their impacts on rights holders in the last five years.”
    • Further, the report points out that even when MSIs do provide evidence of their impact, “systematic reviews … by academics and other researchers point to sparse, limited, and often context-specific benefits for rights holders—if any.” The report highlights three particular evidence gaps:
      • Effectiveness of voluntary standards and audits to improve labor conditions
      • Effectiveness of MSIs focused on government transparency
      • Lack of research on MSIs outside of agriculture and forestry sectors

MSI Integrity offers two primary recommendations.

First, rethink the role of MSIs. MSI integrity finds that many MSIs do serve as a “powerful space for dialogue, learning and knowledge-exchange, experimentation, and relationship-building that make membership in an MSI worthwhile.” MSI Integrity recommends that, rather than expecting MSIs to close governance gaps, they would better serve the more narrow purpose of bringing stakeholders together to influence norms and laws. “By bringing together the companies and/or governments that are willing to commit to better practices—even if without robust accountability or enforcement mechanisms to uphold them—MSIs can contribute to establishing norms of good practice for an industry.” MSI Integrity highlights that the presence of an MSI signals to governments that a governance gap exists, and therefore that there is a need for public regulation – rather than being viewed as a replacement of regulation.

Second, challenge the corporate form. MSI Integrity observes that “the failure of MSIs is inextricably linked to the corporate form itself” because corporations traditionally seek to serve their shareholders and to accumulate profit, rather than seeking to “shar[e] power with other stakeholders—such as rights holders and affected communities.” The report concludes that “the most significant and transformative human rights project” would be “challenging the corporation itself and reimagining our economic enterprises.” MSI Integrity proposes that this can be accomplished by (1) centering workers and affected communities in decision-making processes that impact them, and (2) making workers and affected communities the primary economic beneficiaries of corporate activity, in recognition of their role in creating value for companies and the disproportionate burden of negative impacts that they bear.