In an effort to create more cohesive and practical approaches to our most pressing environmental, social, and governance issues, we look to corporate social responsibility initiatives. Government bodies and organizations around the world have formed commissions, funded studies, and tried to network their way into effective mitigation.
The result has been a flurry of international agreements focusing on setting guidelines that impact that world. Business and government leaders can follow these guidelines to address issues like poverty, health and mental health, global warming, waste management, and sustainable living.
This has led many business entities, public and private, to craft their own enterprise-wide guidelines and corporate missions. These are known variously as Environmental, Social, and Governance (ESG) or Corporate Social Responsibility (CSR) programs or agreements.
These two terms sound the same, but there are some subtle differences.
ESG provides a mission and a set of measurable goals for developing, implementing, and maintaining sustainable business practices. It focuses on quantitative analysis, measurable goals for sustainable business practices, and ESG programs that must follow certain criteria. You’ll often find a company’s ESG statement located on their website if they have one.
On the other hand, CSR provides a more relaxed set of guidelines for building a corporate culture. They aim to create a positive symbiosis between how a business operates and its broader societal and environmental impact.
There are no specific criteria to follow, and such programs are largely self-regulating. Often, such agreements are informed by the output of various international agreements.
How International Agreements Influence CSR Guidelines
There is no internationally agreed-upon definition of CSR. However, there is often an implicit agreement that CSR initiatives enable firms to integrate environmental and social dimensions in their business operations and interactions with their stakeholders.
International agreements play a significant role in shaping corporate governance practices, as well as social and economic responsibility, around the world. They establish guidelines, standards, and expectations for businesses to operate in a socially and environmentally responsible manner through:
- Developing frameworks for environmental regulations, such as those outlined in the Paris Agreement on climate change and the United Nations Framework Convention on Climate Change (UNFCCC)
- Setting human rights and labor standards, as outlined in documents like the United Nations Universal Declaration of Human Rights and the International Labour Organization’s (ILO) core standards
- Creating goals that meet the United Nations’ Sustainable Development Goals (SDGs), which provide a global framework for sustainable development and include poverty reduction, education, health, gender equality, and environmental protection
- Implementing supply chain transparency and accountability through documents like the United Nations Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises
- Standardizing reporting and disclosure standards through frameworks like the Global Reporting Initiative (GRI) and bodies like the Sustainability Accounting Standards Board (SASB)
- Forging voluntary initiatives and collaborations, such as the Extractive Industries Transparency Initiative (EITI)
Although such agreements are usually voluntary and non-binding, they create the framework for mandates and regulations in the future. At the very least, they set up a series of expectations and best practices for conducting business globally without contributing to global problems related to human health and wellness, income disparity, and environmental damage.
Key Agreements That Impact Corporate Social Responsibility
Several key agreements, although mostly voluntary, directly influence and shape corporate social responsibility (CSR) policies and guidelines. These agreements play a crucial role in promoting responsible business conduct and addressing environmental, social, and economic challenges on a global scale. Let’s explore some of the key agreements and their significance:
Adopted at the UN Climate Change Conference (COP21), the Paris Agreement sets individual and global targets for reducing carbon emissions. It aims to limit global warming to below 2 degrees Celsius above pre-industrial levels and encourages efforts to limit the temperature increase to 1.5 degrees Celsius. The agreement drives policy changes, regulations, and incentives that significantly impact the operations and investment decisions of energy and utility companies.
2. lISO 26000
This international standard helps organizations assess and address social responsibilities. It guides integrating social, environmental, and ethical considerations into business operations, ensuring that companies contribute positively to society while respecting human rights, labor practices, and environmental sustainability.
3. The 1977 Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
This declaration encourages governments to pursue policies that promote equality of opportunity and treatment in employment, aiming to eliminate discrimination based on race, color, sex, religion, political opinion, national extraction, or social origin. It emphasizes the importance of fair employment practices, equal opportunities, and decent working conditions.
Top 2 Most Positively Impactful Agreements
Various EC agreements and initiatives created by governing bodies include the International Labour Organization (ILO), the United Nations Industrial Development Organization (UNIDO), and the International Employer Organization (IEO). Of these, the two with the most positive impact on businesses and multinational enterprises (MNEs) are the OECD Guidelines and the International Labour Organization (ILO) Conventions.
Goals and Principles of OECD Guidelines
The OECD Guidelines for Multinational Enterprises provide recommendations to MNEs on responsible business conduct. These are voluntary principles that aim to promote sustainable development, respect for human rights, and responsible business practices through:
- General policies that encourage MNEs to contribute to economic, social, and environmental progress in the countries where they operate
- Disclosure and transparency surrounding operations, structure, financial situation, and performance relative to related to the environment, labor, human rights, corruption, and taxation
- Human rights advocacy and avoidance of abuses or adverse social impacts
- Employment and industrial relations, stressing the importance of fair employment practices, non-discrimination, equal opportunities, and decent working conditions
- Environmental protection and sustainable development that prioritizes resource efficiency and addresses climate change, pollution, and biodiversity conservation
There are additional guidelines that govern issues related to how multinationals handle bribery, corruption, and taxation, as well as emphasizing the importance of acting in consumer interest.
International Labour Organization (ILO) Conventions
The ILO Conventions play a significant role in influencing corporate social responsibility (CSR) policies. As a specialized agency of the United Nations, the ILO sets international labor standards and promotes decent work worldwide through:
- Defining fundamental labor rights
- Establishing a legal framework through national laws and regulations regarding business operations
- Encouraging supply chain due diligence regarding sustainable practices
- Supporting social discourse and collective bargaining
- Creating guidelines for impact assessment and reporting
By integrating the principles and provisions of ILO Conventions into their CSR policies, companies can demonstrate their commitment to upholding labor rights, promoting decent work, and contributing to sustainable development.
Adherence to ILO standards helps businesses build trust with stakeholders, ensure compliance with national labor laws, and create positive social and labor impacts throughout their operations and supply chains.
Industry Sectors Most Affected by International Agreements
2. Manufacturing and heavy industries, which are impacted by international agreements addressing environmental protection, resource efficiency, and emissions reduction.
3. Extractive industries, which are affected by international agreements like the Extractive Industries Transparency Initiative (EITI) that address environmental protection, indigenous rights, and revenue transparency.
4. Agriculture and food production, which is impacted by agreements like the Convention on Biological Diversity, the International Plant Protection Convention, and other international agreements related to sustainable agriculture, biodiversity conservation, and food safety.
5. Pharmaceutical and healthcare, which is governed by agreements related to intellectual property rights, access to medicines, and public health. These include the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement and the WHOs Global Strategy and Plan of Action on Public Health, Innovation, and Intellectual Property.
6. Technology and telecommunications, which are covered by international agreements related to data protection, privacy, and cybersecurity. One of the largest and most impactful for MREs is the EU’s General Data Protection Regulation (GDPR), which can result in multi-million dollar fines and censure for non-compliance.
It’s important to note that while these industry sectors are most commonly affected by international agreements, many other sectors are also impacted in various ways depending on the specific agreements and regulations that govern their activities.
The influence of international agreements on industries continues to evolve as new agreements are developed, and existing ones are updated to address emerging challenges.
Challenges Faced by Industry Players
As with many regulations and guidelines, there are certain barriers to compliance. This is especially true for startups and SMBs, who may lack the funding needed to transform systems, upgrade equipment, and retrain staff.
In addition, further roadblocks are put into place that hinder fully implementing CSR policies, including:
- Lack of enforcement mechanisms
- Supply chain complexity
- Balancing CSR with profitability
- Lack of uniformity across industries, regulatory bodies, and borders
The good news is that for every challenge, there lies an opportunity. Embracing international agreements allows you to benefit from:
- Enhanced reputation and stakeholder trust
- Access to new markets and investment opportunities
- Long-term sustainability and resilience
- Reduced risk of fallout from non-compliance when guidelines become mandates
International agreements and individual corporate CSR policies work hand-in-hand to improve the state of global industry and the lives it affects. By using various international agreements as a baseline for developing your own policies, you’ll ensure your efforts are aligned with your impact investing initiatives and critical missions of organizations around the world.
Failing to heed these guidelines could adversely impact your business socially and financially through damaged reputation, loss of financial incentives like grants and tax credits, and in terms of fines and other punitive costs for non-compliance.
You could even find that your company is losing contracts or blocked from doing business in certain countries for repeated non-compliance.
If you want to learn more about combining compliance with international agreements with your own CSR policies, or you want to show your support, get in touch with us to learn more about sustainable, environmentally, and socially conscious business practices.